The life Cycle Of A Gold Mine
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Transcript of The life Cycle Of A Gold Mine
The Life Cycle Of A Gold Mine
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
PART 1: STAKING THE CLAIM
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
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
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
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
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
PART 2: REGIONAL EXPLORATION
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
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.
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
Part 3: RESOURCE DEFINITION + FEASIBILITY
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
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
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
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
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
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
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
PART 4: ASSESSMENT AND APPROVAL
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
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
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
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
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
PART 5: MINE CONSTRUCTION
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
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
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
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
PART 6: OPERATING A MINE
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
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
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
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
PART 7: REHABILITATION
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
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
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
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
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
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