The Life Cycle of a Gold Mine series educates investors about the distinct phases in successful mine development from finding and outlining a mineral reserve, through mine construction, mining, and post-mining reclamation. The focus of the series is on the operational and financial hurdles that exploration companies must overcome in order to develop a successful mine and maximize shareholder value.
2. THIS PRESENTATION
Aims to educate Investors about the distinct phases in
successful mine development. Namely:
Outlining a mineral reserve
Mine construction
Mine operation
Post-mine reclamation
We will focus on operational and financial hurdles that
exploration companies must overcome
4. PART 1: STAKING THE CLAIM
Step #1 is selecting an area for prospecting
This is the very foundation of a mining venture
An error at a crucial time in this process can cause major
headaches later on
An educated investor should understand the basic
process for staking a mine
5. Part 1a: Background Research
Market research is an important factor in mineral
exploration
Different forms or research are conducted
through the life cycle of a gold mine
Determines how much gold must be found to
make a project economically feasible
Miners also consider factors including: local
taxes, regulations and infrastructure
6. Part 1b: Leasing Politics
How mineral rights are leased depends on the
country or state where the property is located
Investors should be mindful of the political
climate in the region the miner is prospecting
Pro-mining countries offer “split-estates” where
mineral and surface rights can be separated
Separate mineral/land rights save money and
require shorter-term commitments
7. Part 1c: Choosing A Site
Miners must usually be granted mineral rights before
they have physical access to the land
In some “Hot spots” miners will decide to lease land
without performing preliminary data collection
Likelihood of a mineral deposit is based on regional
geology
Geologists use this data to narrow down the
search area for a potential deposit
8. Part 1d: The Lease
After an area of interest is found, the company
will apply for a mineral lease, permit or license
Generally only companies that hold a
prospector license can apply for a mineral lease
This entitles the company to conduct surface
exploration
Companies are usually required to submit proof
of exploration to keep their lease
10. PART 2: REGIONAL EXPLORATION
The next phase in the life cycle of a gold
mine (exploration) is the longest and riskiest
The goal of this phase is to collect data
regarding the potential of a mineral
reserve
Essentially the company is trying to decide
whether the property has a feasible gold
deposit
11. Part 2a: Regional Analysis
Many properties have a history of exploration work
Drilling is conducted with the purpose of furthering
the knowledge about a mineral deposit.
Investors should pay attention to average grades
and drill cores that “start and end in mineralization”.
If the company finds evidence of a deposit they will
continue exploring. If not, they may abandon the
property all together.
12. Part 2b: Financing
The cost of exploration can easily run up to
one quarter of what actual mining costs
Most mining companies will try to raise
capital during the exploration phase
As a shareholder, you don’t want the
company to dilute shareholder value
But you do want to ensure they have
enough money to conduct exploration
14. Part 3: RESOURCE DEFINITION + FEASIBILITY
The processes in resource definition are similar to
primary exploration
In this phase the company will spend more money
as they anticipate a higher chance of success
Not only is the size and grade of the reserve tested
but engineering studies are performed to establish
mining method and extraction cost
15. Part 3a: The Feasibility Study
The feasibility study is the key development in this phase
This study analyzes sampling, test work and engineering
analysis to determine whether a project has the right
economics to be developed into a mine
While data collection is left up to the company, the
validity of the data is measured against SEC guidelines
Not all projects make it through this phase
16. Part 3b: Scoping Study
This involves analyzing drilling and sampling to
define a resource and determine the best
mining method
Scoping studies typically identify technical
issues that will require additional examination
Generally, the result of this study is an order of
magnitude assessment of capital and
operating costs
17. Part 3c: Preliminary Feasibility
Preliminary Feasibility involves using engineering
studies for a more in-depth look at resource extraction
The company will examine environmental and
permitting issues during this phase
Reserves can sometimes be declared at this point
depending on the level of detail in the study and the
securities exchange that is involved
18. Part 3d: Feasibility
This is a more comprehensive preliminary feasibility study
In this phase, mine design, production schedule, gold
recoveries, plant design and expenses are considered
During a feasibility study gold reserves can be declared
After the feasibility study, the company will decide
whether or not to proceed with mine development
19. Part 3e: Bankable Feasibility Studies
A Bankable Feasibility Study is often misunderstood
as to mean the project is feasible
Adding the term means that the study is sufficient
for outside financing provided the project is feasible
To be clear; “bankable” only describes the level of
accuracy of the analysis and has no relation to the
project’s feasibility
20. Part 3e: Importance Of Feasibility Studies
Scoping and prefeasibility are important because
they can identify potential problems
Once a company announces a feasibility study
there is pressure for them to see this to conclusion
Companies who abandon projects that are
unfeasible should not be looked at unfavourably
If the economics are not there, the company is
best off pursuing another project
22. PART 4: ASSESSMENT AND APPROVAL
No matter the value of a mineral deposit, the
company must properly present the economic and
socio-economic impacts of the mine
The goal of the assessment phase is to investigate
how mining will affect environment and
community
As mining is overseen by the govt. precise
assessment steps are determined by the
govt. in the country the mine is to be built
23. Part 4a: Permitting
The entire life cycle of a mine is laden with permits
During this process, the company will present to the
required agencies comprehensive documents outlining
impacts and how these will be mitigated
The nomenclature of this study varies but is generally
known as an Environmental Impact Study
24. Part 4b: The Environmental Impact Study
The EIS must be completed before a miner
can be granted a license to build a mine
In this study impacts on
wildlife, habitats, noise, air and water
pollution are tested
The EIS is disclosed to agencies making the
decision about permission to build
If the EIS is rejected, the company is usually
given the chance to make adjustments
25. Part 4c: Reclamation
Reclamation is a separate process but is always
considered as part of the assessment process
Mining companies must address how they will
reclaim the land when the mine closes
Govts. are extremely interested in and pay
close attention to reclamation plans
Many govts. require the company to provide
collateral towards reclamation
26. Part 4d: Financial Considerations
In order to build a mine, a mineral deposit must
be valuable enough to cover the costs of:
Design
Construction
Operation
Closure
Reclamation
While the assessment can seem tedious, it also
provides a sense of security to the investor
28. PART 5: MINE CONSTRUCTION
Once the company obtains the right
permits and approval, construction starts
Mine construction generally takes a few
years, depending on the mine location,
complexity and regulations
While investor might see the “risky” phase
as being over, they should still keep an
eye on development reports
29. Part 5a: Preliminary Construction
After approval, but before construction, the
mine must be prepared for development
Pre-construction steps include removing old
buildings, developing infrastructure and
building camps for workers
Miners must adhere to the environmental
standards laid out in their permits during this
phase of development
30. Part 5b: Mine Construction
Mines can grow large enough to support towns, with
schools, medical facilities and recreation areas
In terms of Gold mines, there are two main type to
consider: open pit (surface) and underground
Open pit mining is the most common and produces
about 85% of the minerals
Many mines are a hybrid of both types
31. Part 5c: Regulation
Once construction has begun, there are still pitfalls
that can delay the company moving to operation
Construction requires huge capital expense and
strict adherence to guidelines
Protests can be a major threat to the timely
development of mining sites
Even if the Govt. hears these concerns, this can
result in substantial delays
33. PART 6: OPERATING A MINE
Operation is a dynamic and exciting phase
in the life cycle of a mine
The operation phase is complex and
requires a great deal of management
The miner puts considerable effort into
implementing and adjusting key
operational strategies when extracting ore
34. Part 6a: Mining Has Started, Now What?
During this phase, miners rely on their strategy to
determine how profitable the mine will be
Important considerations during operation include:
Resource expansion ahead of mining
Minimum cut-off grade of gold
Overall macro-economic picture for gold
In line with this, the company must keep a keen
eye on the market price of gold
35. Part 6b: Profitability
Factors that influence a mine’s profitability are
either controllable or “uncontrollable”
Controllable factors include; waste rock
extraction and operating costs
Uncontrollable factor are either; geological,
like depth + grade or financial like the market
price of gold
36. Part 6b: Social + Environmental Concerns
By following sound environmental and social
practices miners develop a good reputation
A good reputation is important for securing
permits on future projects
By not following environmental best-
practices, miners open themselves up to legal
issues
38. PART 7: REHABILITATION
Once a gold reserve has been exhausted, the
owner must rehabilitate the site
Mining is contingent on the miner providing a
feasible rehabilitation program
Most governments require the miner to
provide some kind of financial assurance to
cover the costs of rehabilitation
39. Part 7a: Objectives
A properly laid out rehabilitation program has many
clearly stated objectives. Potentially including:
Ensuring public health and safety
Minimizing environmental effects
Removing waste and hazardous material
Preserving water quality
Stabilizing land to protect against erosion
Establishing new landforms and vegetation
40. Part 7b: The Significance of Rehabilitation
While the investor might not see this phase as
being important, it can have huge impacts
on the long-term success of a mining
company
Companies that do not follow proper
rehabilitation program face costly lawsuits
A company with a poor history of correct
rehabilitation may have difficulty obtaining
future permits
41. Part 7a: Underground Rehabilitation
Underground mining results in significantly less
surface disturbance than open-pit mining
Care is taken to relocated stream and wildlife
Rehabilitation will be undertaken as the
operational phase is winding down
Drainage is carefully designed to make the
new land surface as stable and resistant to
soil erosion as possible
42. Part 7a: Open-Pit Rehabilitation
Rehabilitation of an open-pit mine is a significantly
more involved process than underground mining
The land’s post-mine end use dictates what is
done in the rehabilitation process
In many cases, mine sites are not returned to
a natural state but are instead turned into
recreation sites and farmland
43. More about
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