The life Cycle Of A Gold Mine

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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.

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The life Cycle Of A Gold Mine

  1. 1. The Life Cycle Of A Gold Mine
  2. 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
  3. 3. PART 1: STAKING THE CLAIM
  4. 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. 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. 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. 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. 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
  9. 9. PART 2: REGIONAL EXPLORATION
  10. 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. 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. 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
  13. 13. Part 3: RESOURCE DEFINITION + FEASIBILITY
  14. 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. 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. 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. 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. 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. 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. 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
  21. 21. PART 4: ASSESSMENT AND APPROVAL
  22. 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. 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. 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. 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. 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
  27. 27. PART 5: MINE CONSTRUCTION
  28. 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. 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. 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. 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
  32. 32. PART 6: OPERATING A MINE
  33. 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. 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. 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. 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
  37. 37. PART 7: REHABILITATION
  38. 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. 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. 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. 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. 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. 43. More about To read a full overview of the life cycle of a gold mine checkout: the full blog series on our website. Or for more information about investing in exploration companies you can:  Follow Us: Twitter.com/DigGold  Like Us: Facebook.com/GoldInvestingNews  Read Us:

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