World Mining and Energy Expo
14 August 2013 – Miami
CHALLENGES, RISKS, & OPPORTUNITIES
FOR THE MINING INDUSTRY
IN THE AMER...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• Our expertise, integrity, and adherence to highest e...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear
• Our clients include mining, banking, investment, leg...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Mining is a Long Term Business
With Many Risks
• Recent and current ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Current Environment for Miners and
Investors
• Recent economic data ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Metals and Mining Equities Reflect Recent
Weaker Prices, Profits, an...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Metal Prices Are Down Since Last Year
2006
Avg
Prices
2007
Avg
Price...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
0
1,000
2,0...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Asia, Africa, LatAm Want a Better Quality of
Life; On Average Did Be...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
More Consumers, More Money, and Minerals
This Curve May Flatten Too
...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
China’s Growing Urban Population
Continues at Scale Hard to Comprehe...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
World’s Largest Mass Migration Continues,
Next, the World’s Middle C...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
China Consumes About Half the
World’s Metals, Energy, etc.
Source: U...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
As China’s GDP Growth Eases, Its Share of
Consumption May Level Off:...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Gold Is Not an Industrial Metal
Driven by Investor Sentiment, Price ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Recent Global Gold Investment Trend*
Source: GFMS, Thomson Reuters
*...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
China’s Appetite for Gold is Rising –
Will This Trend Continue for N...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Today Gold Supply is From Mines
and Scrap
Source: GFMS, Thomson Reut...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Gold as a Share of the Pool of
Global Financial Assets is Small
Sour...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Gold Prices and Costs Rose;
Margins are Less at $1,350/oz
Source: BM...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Not All Resources Are Golden Or Economic
• Markets are not static, n...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Today – Less Investor, Lender Interest
• A Risk-off attitude is plag...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Sector Has Shifted From Growth Paradigm
to Cost and Capex Control
• ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Reasons to be Optimistic – Longer Term
• Urbanization and industrial...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Caution Always Best: Mining is
Cyclical and Impacted by Many Risks
•...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear’s Country Risk Survey
Focuses on Political Risk, Not G...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear’s Annual Ranking of
25 Countries for Mining Investment...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear’s Annual Ranking of
25 Countries for Mining Investment...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
The Americas Rank High in Our Survey
• Brazil, Chile, Colombia, Mexi...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear’s 2013 Ranking of
25 Countries From Safest to Riskiest...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
The Americas is a Favorite
Mining Investment Destination
As shown in...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Attracting Investment is Competitive
• Government officials at the l...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Finding An Economic Resource
Is Expensive and Risky
33
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Exploration is Very Risky and Expensive,
From Discovery to Start Up ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Balancing Expansion with Local
Development is Needed
• After discove...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Investments Are Long Term
• To be successful projects and investors ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Top Ten Risks Facing the Mining and Metals
Industry Over Five Years ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Trained, Independent Eyes Are Best to
Evaluate Geo Technical Issues
...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
When to Call Independent Experts
• Resources are not a curse, they a...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Miners, Geologists Are Trained to Find,
Explore – Core to the Busine...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Goal is to Realize Value: How? When?
Chart is Not Reality, Nor a Giv...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Our Role as Independent Experts
Whether we are advising mining compa...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Economic Worthiness of a Property
Is Impacted By Many, Many Variable...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Three Levels of Engineering Studies
Used to Define Economic Worthine...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Engineering Studies – Scoping Study
• aka Conceptual Study, Prelimin...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Engineering Studies – Pre Feasibility Study
• aka PFS or Pre-Feasibi...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Engineering Studies – Feasibility Study
• Feasibility Study or Defin...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Definition – Feasibility Study
“A comprehensive study of a mineral d...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Ten Types of Project Risk to Examine
• Geological
• Mining
• Metallu...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
1. Geological
• Geological Risk
Reserves
Reserves
Reserves
50
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
In Best Case: Accepted Resource – Reserve
Classification System Can ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
2. Mining
• Mining Risks
Surface versus underground
Drilling/blast...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
3. Metallurgical Processing
• Metallurgical/Processing Risk
Recover...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Deeper Dive: Issues To Examine
• How much? What is head grade %
• Wh...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Where Is the Metal?
How Hard Will it be to Separate?
po, pyrrhotite;...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Steps to Process Minerals
• Size Reduction: crushing and grinding
• ...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Typical Gold Processing Circuit
57
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Mills Are Large and Costly
58
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
5. Human Resources
• Human Resource Issues
Management
Organization...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
6. Market
• Market Risks
Who will buy product/marketability
Smelte...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
7. Operating and Capital Costs
• Operating and Capital Costs
Operat...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
8. Company Risk
• Financial strength
• Mining experience
• Managemen...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
9. Country Risk
• Political stability
• Tax regime
• Attitude toward...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
10. Financial Institution
• Experience in country
• Presence in coun...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Highlighting Four Issues Impacting
Project Success Today
Four issues...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
1. Social License and Environmental Issues
• Social opposition to mi...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
2. Cost Control is Essential
Recent trends became intolerable:
• Cap...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Building Mines – Capital Costs
• Capital costs are primarily depende...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Different Geology; Different Economics
• Of the world’s gold product...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Many Issues Can Go Wrong When
Estimating Mine Operating Costs
• VAT/...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Recent Examples of Capital Costs
Rising Above Plan (US$ Billions)
Pr...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
3. Increased Government Take Occurring
• Changing rules and Governme...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
4. Access to Capital
• Currently, equity and debt difficult to obtai...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Recent Capital Markets Trends
• Metals markets in 2012 - 1H13; turbu...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
More Consolidation in Mining is Likely
• Alternative and strategic i...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Of the Top Ten Commodities by Global
Projects in 2011: Gold Was #1
•...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
In 2011 China M&A Focused on Gold
Source: Ernst and Young
78
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
In 2012 Coal, Gold, Copper M&A Was High
21.4
17.9
14.2
13.4
7.3
5.3
...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Recent China Acquisition Trend By Region –
USA and Canada = Small Sh...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Mining in the Americas Has an
Excellent Future
• Mining has a long h...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Prepare for the Best and Worst
Check and Double Check
• While mining...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
The Behre Dolbear Group
• We perform technical, operating, financial...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
The Behre Dolbear Group
• To meet client requirements, we select, in...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
The Behre Dolbear Group
85
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Appendix
Characteristics of 3 levels of engineering studies –
Not ex...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
BEHRE DOLBEAR
founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility,
and Feasibility Studies...
Upcoming SlideShare
Loading in …5
×

Challenges, Risks & Opportunities For the Mining Industry in the Americas

435
-1

Published on



While optimistic about the longer term outlook, 2013 has been tough for investors and managers. Rising costs, lower prices, slower growth in China, etc. and non-technical risks such as changing government regulations, social license and NIMBY have hurt returns, investment and interest.

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
435
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
47
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Challenges, Risks & Opportunities For the Mining Industry in the Americas

  1. 1. World Mining and Energy Expo 14 August 2013 – Miami CHALLENGES, RISKS, & OPPORTUNITIES FOR THE MINING INDUSTRY IN THE AMERICAS Tim Alch V.P & Senior Minerals Business Analyst Behre Dolbear & Company (USA), Inc. +1.845.480.1434
  2. 2. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear • Our expertise, integrity, and adherence to highest ethical and professional standards has earned the respect of the industries we have served since 1911 creating value for clients with independent advice • Our reputation stems from our global approach, best-in-field consultants’ experience, expertise and matchless integrity supporting reliable and truly independent recommendations • We have 12 offices in 8 countries and completed 210+ projects in 55+ countries in each of the last 5 years using our global network of 125+ professionals that includes work experience throughout the Americas • We advise clients to optimally plan, manage, and operate in the mining and minerals processing of base and precious metals, coal, uranium, ferrous, fertilizer, and industrial minerals, gemstones, construction materials, etc. 2
  3. 3. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear • Our clients include mining, banking, investment, legal, accounting firms, and state-owned mineral producers, government agencies, non-traditional providers of mining finance, multi-lateral-export credit agencies, sovereign wealth funds, private capital pools, family offices, trading companies, and strategic mineral consumers that sponsor mineral development  We have conducted extensive technical and financial due diligence on copper-polymetallic base, precious metals, etc. projects in the Americas  Behre Dolbear was engaged by the Board of Governors of the Hong Kong Stock Exchange to review Listing Rules for Mining Companies  In 2012, our Capital unit advised Hong Kong Exchanges & Clearing Limited on its US$2.1B acquisition of the London Metal Exchange  We regularly write and review Independent Technical Expert reports  Our capabilities span managerial, technical and financial issues • Additional information about Behre Dolbear is shown at the end herein 3
  4. 4. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Mining is a Long Term Business With Many Risks • Recent and current trends • The significance of mining • Country, political risks, et al. • All resources are not golden • Being prepared is always best 4
  5. 5. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Current Environment for Miners and Investors • Recent economic data less robust with conflicting global indicators  Waning growth in China reflects shifting priorities versus continued global urbanization and industrialization in populous developing countries  Regulatory, political, and resource nationalism risks rising • Investors want returns on investments. Reserve replacement and production growth at any and all cost, is not enough  Major, large and small mining companies are writing down assets  Expansion plans, new projects are being curtailed indefinitely  Many Junior miners lack adequate development capital • Margins are under pressure as are Boards and Executives  Commodity prices are off from recent highs  Costs are up, project overruns have become common  Optimizing operating properties, strengthening cash flow is goal • A chorus of actions to cut operating costs, sell marginal assets, and reduce capital expenditure commitments is being heard 5
  6. 6. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Metals and Mining Equities Reflect Recent Weaker Prices, Profits, and Growth Since 4Q2011, investors show less interest in Global and North American mining equities and favor broad general market indices 6 ACWI = iShares MSCI ACWI ETF (worldwide equity index) BWMING = Bloomberg LP worldwide mining index 0 20 40 60 80 100 120 140 160 180 0 5 10 15 20 25 30 35 1/1/2010 1/1/2011 1/1/2012 1/1/2013 S&P 500 vs. TSX Global Mining ETF TSX Global Mining Index ETF S&P500 ETF 0 10 20 30 40 50 60 0 50 100 150 200 250 300 350 400 450 500 1/1/2010 1/1/2011 1/1/2012 1/1/2013 World Mining Index BWMING Index ACWI
  7. 7. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Metal Prices Are Down Since Last Year 2006 Avg Prices 2007 Avg Prices 2008 Avg Prices 2009 Avg Prices 2010 Avg Prices 2011 Avg Prices 2012 Avg Prices Prices as of July 26, 2013 July 26, 2013 vs. Avg 2012 Aluminum ($/lb) 1.16 1.21 0.83 0.83 0.99 1.09 0.93 0.79 -15% Copper ($/lb) 3.05 3.25 1.62 2.34 3.42 3.99 3.61 3.10 -14% Lead ($/lb) 0.58 1.18 0.56 0.78 0.97 1.09 0.94 0.93 -1% Nickel ($/lb) 11.01 17.25 4.62 6.65 9.87 10.38 7.96 6.21 -22% Zinc ($/lb) 1.48 1.50 0.52 0.75 0.98 0.99 0.89 0.82 -8% Gold ($/ounce) 603.46 695.39 736.0 972.91 1,225 1,573 1,669 1,331 -20% Silver ($/ounce) 11.55 13.38 9.31 14.64 20.10 35.12 31.15 20.02 -36% 7
  8. 8. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 $PerTonneNickel $PerTonne(Copper,Lead,Zinc,Aluminum) Nominal Industrial Metal Average Prices 1970 – 2012 Aluminum Copper Lead Zinc Nickel The Recent Metals Price Spike Follow a 30 Year Period of Capital Destruction Data Source: USGS and LME Capital Destruction Capital Creation Capital Destruction ? 8
  9. 9. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Asia, Africa, LatAm Want a Better Quality of Life; On Average Did Better Since 2002 9
  10. 10. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS More Consumers, More Money, and Minerals This Curve May Flatten Too 10
  11. 11. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS China’s Growing Urban Population Continues at Scale Hard to Comprehend 11
  12. 12. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS World’s Largest Mass Migration Continues, Next, the World’s Middle Class Rises • In the next 20 years, another 320 million Chinese people will move to urban areas and its middle class may double to 600+ million by 2020 • Similar changes are occurring elsewhere in Emerging Markets worldwide • China’s changing priorities may soften its metals demand growth and GDP 12
  13. 13. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS China Consumes About Half the World’s Metals, Energy, etc. Source: UBS 13
  14. 14. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS As China’s GDP Growth Eases, Its Share of Consumption May Level Off: At High Levels Source: The Economist and UBS 14
  15. 15. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Gold Is Not an Industrial Metal Driven by Investor Sentiment, Price is Now ~$1,300 http://www.kitco.com/charts/historicalgold.html 15
  16. 16. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Recent Global Gold Investment Trend* Source: GFMS, Thomson Reuters * Global Gold Investment is the sum of implied net investment, physical bar investment, and all coins and medals 16
  17. 17. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS China’s Appetite for Gold is Rising – Will This Trend Continue for Next 10 Years? Source: Frank Holmes, CEO and President of US Global Investors' July 2013 article 'The Asian Giant Stampeding Into Gold' 17
  18. 18. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Today Gold Supply is From Mines and Scrap Source: GFMS, Thomson Reuters 18
  19. 19. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Gold as a Share of the Pool of Global Financial Assets is Small Source: CPM Group 19
  20. 20. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Gold Prices and Costs Rose; Margins are Less at $1,350/oz Source: BMO Research 20
  21. 21. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Not All Resources Are Golden Or Economic • Markets are not static, nor are prices and cost of doing business, etc. There are many variables and a long period of time is involved • If it sounds too good, it likely is. Inexperience, misleading statements, and questionable practices require knowing who, what you are dealing with • There is no good substitute for an independent technical review by qualified experts about the geologic, business potential of the resource • Investors want independent verification 21
  22. 22. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Today – Less Investor, Lender Interest • A Risk-off attitude is plaguing mining equities • Economic growth in China, EU, etc. is slower • Investor outlook is more cautious with GFC, Euro Crisis, Cyprus, China slowing, etc. • Metals prices and valuations are down • Many ‘Juniors’ are short of capital • Many Juniors’ existence is issue • There is less speculative interest • Cash and Cash Flow is King 22
  23. 23. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Sector Has Shifted From Growth Paradigm to Cost and Capex Control • Executives are cutting capex, refocusing on higher quality assets, suspending projects, and partnering on certain projects • Alternative, non-traditional investors SOE, SWF may strategically, opportunistically fill the gap • Private equity may capitalize on low valuations • Strategic transactions may drive M&A • Tough markets may continue in 2014 23
  24. 24. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Reasons to be Optimistic – Longer Term • Urbanization and industrialization in China, Asia, India, South America, Middle East, Africa, etc. continues to drive industrial metals and energy demand • Security and stability of supply are a concern in China, Korea, Japan, Middle East, etc. and of some industrial companies e.g., energy fuels (coal, uranium), fertilizer minerals, technology/critical metals, etc. • Constraining new supply are: Declining ore grades and spending; Higher costs; Fewer large deposits; Larger ‘takes’ by Governments; Changing political winds; etc. • Metals supply longer term may struggle to meet demand. Sporadic price spikes may/can occur • Prices may stay above long term averages 24
  25. 25. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Caution Always Best: Mining is Cyclical and Impacted by Many Risks • What happened since 2002 is in the past – the near term may/can be very different • You can lose a fortune being optimistic about the near term – some already have • Behre Dolbear does not forecast metals prices • We focus on geo-technical, operating, business, and financial issues impacting exploration, development and operations in mining • We do conduct an annual Survey about Where to and Not to Invest in the Mining Sector 25
  26. 26. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear’s Country Risk Survey Focuses on Political Risk, Not Geotechnical • Since 1999, Behre Dolbear conducts an annual survey of country risk for mining investments to assist potential investors in 25 of the most active mining markets around the world • Countries that stifle mining with detrimental political, economic, financial, and regulatory policies should be challenged to make changes that are more accommodative to its success 26
  27. 27. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear’s Annual Ranking of 25 Countries for Mining Investment • Our view is there is positive correlation between the growth of a nation’s wealth and prosperity of its mining and minerals processing industry • Only when a country recognizes critical need to adapt and restructure burdensome policies – will it truly optimize its economic potential • Our survey does not focus on geology and or geo-technical risk 27
  28. 28. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear’s Annual Ranking of 25 Countries for Mining Investment • We evaluate these criteria as they pertain to the exploration, development, operation of and investment in mines, and rank each country by: Economic system Political system Degree of social issues affecting mining Permitting process and other delays Degree of corruption Stability of the currency Tax regime • All criteria are weighted equally on a 10-point scale, with 70 total possible points 28
  29. 29. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS The Americas Rank High in Our Survey • Brazil, Chile, Colombia, Mexico, Peru, Canada, and USA consistently rank high to operate in and for investment • Countries perceived to have the lowest political risk, all other things being equal, are able to attract more of the global mineral investment and realize a premium for resources over countries where perceived instability exists. Attracting capital investment is competitive • Mining companies and investors, shareholders, and project stakeholders require confidence they are in stable agreements and able to accommodate variable market conditions over extended periods of time 29
  30. 30. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Behre Dolbear’s 2013 Ranking of 25 Countries From Safest to Riskiest 30 1. Australia 2. Canada 3. Chile 4. Brazil 5. Mexico 6. United States 7. Colombia 8. Botswana 9. Ghana 10.Peru 11.Namibia 12.Mozambique 13.Tanzania 14.Philippines 15.Argentina 16.China 17.India 18.Indonesia 19.Mongolia 20.Zambia 21.South Africa 22.Papa New Guinea 23.Kazakhstan 24.D. R. Congo 25.Russia
  31. 31. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS The Americas is a Favorite Mining Investment Destination As shown in the International Council on Metals and Mining (ICMM) Oct 2012 article ‘Mining’s Contribution to Sustainable Development’ about Regional Project Investments in 2011 (based on Raw Materials Advisory Group data) 31 Region Investments (US$ Billions) Share (%) Lain America 192 28 North America 124 18 Oceania 113 17 Africa 99 15 Europe 75 11 Asia 73 11 Total 676 100
  32. 32. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Attracting Investment is Competitive • Government officials at the local, state and federal levels should work with and know operators and investors respond to stakeholder expectations • Changing taxes, royalties, etc. deters investors that require stability and consistency to earn a return and retain access to capital markets • Investors can feel stymied by inconsistent, convoluted and changes in mining policy and terms and require trust with local stakeholders • To increase investment consistent, efficient enforcement of law is best:  Certainty – Security of Title/Tenement  Confidence – Development Approvals  Confidence – Social and Environmental Issues  Confidence – Tax/Royalty Regime  Acceptable Level of Sovereign Risk 32
  33. 33. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Finding An Economic Resource Is Expensive and Risky 33
  34. 34. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Exploration is Very Risky and Expensive, From Discovery to Start Up is About 17 Years 34Source: Stephen Enders from Eurasian Minerals at SME Current Trends in Mining Finance Conference April 2013
  35. 35. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Balancing Expansion with Local Development is Needed • After discovery is development and mineral processing – an energy intensive stage of the production chain – from milling, grinding, processing to smelting and refining • All jurisdictions face more than geotechnical challenges, such as infrastructure, water, power, human, and financial capital. A balanced approach is best and works • In remote, less developed regions projects require proper long term plans and cooperative support of stakeholders, local communities, and all levels of government • There are many examples of successful projects benefiting local economies and communities and other stakeholders 35
  36. 36. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Investments Are Long Term • To be successful projects and investors need to have confidence that stable, consistent rule of law exists in order to earn competitive returns and maintain access to capital through cyclical and volatile market conditions • Investment trends are competitive and reflect variable economic trends as are the expectations and risks of project owners, shareholders, lenders, investors, etc. • Stakeholders evaluate projects in a risk-adjusted manner seeking to reduce risk exposure • Planning for different, changing risks is difficult 36
  37. 37. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Top Ten Risks Facing the Mining and Metals Industry Over Five Years – By E&Y 2008 2012 1. Skills shortage 2. Industry consolidation 3. Infrastructure access 4. Maintaining social license to operate 5. Climate change concerns 6. Rising costs (cost inflation) 7. Pipeline shrinkage 8. Resource nationalism 9. Access to secure energy 10. Increased regulation 1. Resource nationalism 2. Skills shortage 3. Infrastructure access 4. Cost inflation 5. Capital project execution 6. Maintaining social license to operate 7. Price and currency volatility 8. Capital management and access 9. Sharing the benefits – new 10. Fraud and corruption 37Red = Remained in the Top Ten Over Five Years Source: E&Y Business Risks Facing Mining and Metals 2012 - 2013
  38. 38. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Trained, Independent Eyes Are Best to Evaluate Geo Technical Issues • Simply, best projects are low cost, in stable regions and likely today are expansions/extensions of existing mines • Resources are concentrations, occurrences of minerals in such form, quantity and of such grade or quality they have reasonable prospects for economic extraction • Qualified management and officials are essential to realize project value as are understanding markets, definitions, methods to describe a resource that can vary by user and jurisdiction BEWARE OF RULES OF THUMB 38
  39. 39. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS When to Call Independent Experts • Resources are not a curse, they are essential • Failure to properly manage is not good • Expert advice early on is best, if you are an owner, investor, and or an official evaluating policy • All too often experts are called upon when: A property, project, transaction is off course Lenders and investors are out of patience Company and owners are out of money Despair has set in 39
  40. 40. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Miners, Geologists Are Trained to Find, Explore – Core to the Business Mining companies and management feel obliged to find and develop new competitive, low cost resources, i.e., their Life Blood, to replace reserves – that are diminishing assets MANAGEMENT & INVESTORS BEWARE! Once a Fido = Dog, Always a Phydeaux = A Higher Class Dog is Still A Dog! Less capital is available today for exploration 40
  41. 41. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Goal is to Realize Value: How? When? Chart is Not Reality, Nor a Given. It is Theory 41
  42. 42. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Our Role as Independent Experts Whether we are advising mining companies, investors, lenders, or government stakeholders, all benefit from our qualified expertise to: • Evaluate the inherent risks • Act as resident skeptic • Hear our view about project risk(s):  High Risk: A factor poses an immediate danger of a failure, if uncorrected, may have a material effect (>15%) on the project cash flow and performance and could lead to project failure  Moderate Risk: A factor, if uncorrected, could have a significant effect (10%) on the project cash flow and performance unless mitigated by some corrective action  Low Risk: A factor, if uncorrected, may have little or no effect on project cash flow and performance 42
  43. 43. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Economic Worthiness of a Property Is Impacted By Many, Many Variables Study these and many other items with discerning, trained eye: • Property Information and Stable Regulatory Environment • Geology and Resources • Mining • Mineral Processing and Metallurgy • Infrastructure • Products, Markets, and Sales • Environmental and Permitting • Financial Issues • Development Costs and Schedule • Political and Social Considerations • Market • Project Economics – Opex and Capex 43
  44. 44. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Three Levels of Engineering Studies Used to Define Economic Worthiness Conceptual Study/Scoping Study Pre-feasibility Study Feasibility Study 44
  45. 45. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Engineering Studies – Scoping Study • aka Conceptual Study, Preliminary Economic Analysis • First engineering study to compile all elements of a project into one evaluation and apply economic tests • Its accuracy is based on first principles, knowledge, and experience and is generally +50% / -25% • This is the least expensive engineering study and is usually completed in 90 days or less 45
  46. 46. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Engineering Studies – Pre Feasibility Study • aka PFS or Pre-Feasibility Study • Accurate to +25% / -15% • May take 6 to 18 months to complete • Engineering evaluation applied to key elements, such as: • The caliber of the resource estimate • The mine design • The process design • Mineralogical analysis • Metallurgical testing • Soil and rock engineering tests • Smelting/refining and marketing • Environmental work – the EIA is completed during the PFS • Cash flow analysis, sensitivity analyses, and economic tests 46
  47. 47. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Engineering Studies – Feasibility Study • Feasibility Study or Definitive Study • The document upon which mine is approved by the Board of the mining company developing the mine • If financing is required, this is the document evaluated by financial institutions in their decision-making process • The Feasibility Study is also the document to which the completed and commissioned mine plan is compared to determine its commercial status 47
  48. 48. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Definition – Feasibility Study “A comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.” - Canadian National Instrument 43-101 48
  49. 49. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Ten Types of Project Risk to Examine • Geological • Mining • Metallurgical/processing • Environmental and social issues • Human resource issues • Market • Operating and capital costs • Company • Country • Financial Institution 49
  50. 50. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 1. Geological • Geological Risk Reserves Reserves Reserves 50
  51. 51. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS In Best Case: Accepted Resource – Reserve Classification System Can Be Used Australia JORC Code Canada CIM 2000 / NI 43-101 Europe PERC South Africa SAMREC Code United States SME / SEC Industry Guide 7 Russia A, B, C, D, E China Traditional and New (1999) 51
  52. 52. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 2. Mining • Mining Risks Surface versus underground Drilling/blasting Rock hardness Dilution Mine plan Cut-off grade 52
  53. 53. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 3. Metallurgical Processing • Metallurgical/Processing Risk Recovery method Adequacy of testing Representativeness of samples Contractor/mill constructor 53
  54. 54. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Deeper Dive: Issues To Examine • How much? What is head grade % • What is the valuable mineral? • What is the particle size of the mineral relative to all of the other minerals in the ore? • What are the relative specific gravities of the valuable minerals and gangue? • What is the overall competence or hardness of the rock containing the ore? • Magnetism, radioactivity, electrostatic response • Color, reflectivity, UV response, chemistry 54
  55. 55. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Where Is the Metal? How Hard Will it be to Separate? po, pyrrhotite; py, pyrite; cpy, chalcopyrite) Au – Gold; BI – Bismuth 55
  56. 56. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Steps to Process Minerals • Size Reduction: crushing and grinding • Sizing: screening • Classification: by gravity and size • Separation or Concentration: use any one or a combination of mineral processing steps available to produce a concentrate • Dewatering of Tailings or Concentrates: via settling, filtration, and drying, for example 56
  57. 57. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Typical Gold Processing Circuit 57
  58. 58. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Mills Are Large and Costly 58
  59. 59. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 5. Human Resources • Human Resource Issues Management Organization Union contracts Pension liabilities Social issues/local peoples MIS/IT systems 60
  60. 60. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 6. Market • Market Risks Who will buy product/marketability Smelter availability How many smelters? Contract (Good for both parties) Hedging/forward sales 61
  61. 61. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 7. Operating and Capital Costs • Operating and Capital Costs Operating Costs − Dramatic recent increases due to higher fuel costs, higher wages, higher supply costs, and delays in deliveries of supplies Capital Costs − Increases in steel and equipment costs have affected all proposed operations and expansions of existing operations − “Blowouts” are now frequent 62
  62. 62. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 8. Company Risk • Financial strength • Mining experience • Management experience 63
  63. 63. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 9. Country Risk • Political stability • Tax regime • Attitude toward mining • Nationalization/privatization history • Foreign exchange controls/currency stability 64
  64. 64. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 10. Financial Institution • Experience in country • Presence in country • Experience in industry • Financing capability 65
  65. 65. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Highlighting Four Issues Impacting Project Success Today Four issues impacting the mining industry today that operators, investors, regulators, and officials need to understand and manage properly • Social license and environmental issues • Controlling operating and project costs • Higher government take/resource nationalism • Access to capital 66
  66. 66. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 1. Social License and Environmental Issues • Social opposition to mining and environmental issues are causing project delays and cost increases at mining projects • Striving to be compliant with regulations and NGO agitation, etc. are contributing to higher project costs and delays • Gaining confidence of a local community is as essential as it can be expensive for a mining company to gain a Social License to operate 67
  67. 67. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 2. Cost Control is Essential Recent trends became intolerable: • Capex rose in recent years • Capex lags metal prices • Over runs are an issue • Investments are at risk • Projects being idled • High grading ores Per Unit of Annual Production (US$) Gold $1,250 to $2,500 per oz of annual production Copper $3.50 to $4.50 per lb of annual production Elevated Indicative Capital Costs 68
  68. 68. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Building Mines – Capital Costs • Capital costs are primarily dependent on  Location, political situation, skilled labor availability  Depth of ore zone and mining horizons  Shaft and or adit/ramp access  Plant size − Equipment fleet size and material handling capacity − Processing plant capacity to match mining rate − Shaft size and hoisting capacity  Mining method − Level of mechanization and automation − Productivity per man shift 69
  69. 69. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Different Geology; Different Economics • Of the world’s gold production the bulk is from sulphide ore rather than oxide ore • Project and operating economics are different • Representative indicative measures: Sulphide Ore: Capex low grade $300 to $700+ million; minimum 2 to 5m oz Oxide Ore: Capex is scalable with Opex =1/5 of Sulphide; minimum scale can be small 70
  70. 70. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Many Issues Can Go Wrong When Estimating Mine Operating Costs • VAT/sales tax, not included and import duties neglected • Improper cycle times and haulage distances used • Fuel and electricity costs under estimated • Ground control under estimated • Mining sequence and methods • Poor waste dump design • Inadequate pre-stripping • Poor haul road design • Pit slopes • Dilution • Etc. 71
  71. 71. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Recent Examples of Capital Costs Rising Above Plan (US$ Billions) Project Original Current Pueblo Viejo 2.5 3.5 Galore Creek 2 5+ Cerro Casale 2 6 Pascua Lama 3 8+ 72
  72. 72. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 3. Increased Government Take Occurring • Changing rules and Government ‘take’ at local, state, and federal levels are today’s reality • aka resource nationalism is an issue raising project risk and investor uncertainty • In normal mining cycles, a project will fail if Government take exceeds 50% • Over time investors, lenders, owners, and local stakeholders bear the brunt • Miners take all the risk 73
  73. 73. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS 4. Access to Capital • Currently, equity and debt difficult to obtain • New sources of funding need to be found • Private Equity, State Owned Enterprises, etc. may play a larger role 74
  74. 74. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Recent Capital Markets Trends • Metals markets in 2012 - 1H13; turbulent at best • A long term perspective is needed in mining • Banks, investors, operators are risk adverse • Management, employees, partners, customers, i.e., all stakeholders need to be realistic • Uncertainty may continue into 2014 75
  75. 75. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS More Consolidation in Mining is Likely • Alternative and strategic investors, private equity, SWFs, and SOEs may opportunistically step in • Valuations are less than greenfield investment • Consolidation likely to form Super and Larger Majors • SOEs, SWFs, e.g., Japan, Korea, India likely to continue to acquire strategic metals and energy fuel resources • Strategic M&A may buoy asset and share prices 76
  76. 76. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Of the Top Ten Commodities by Global Projects in 2011: Gold Was #1 • Investors, lenders, and speculators were attracted to precious metals • What will 2013/4 look like? Source: Intierra 77
  77. 77. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS In 2011 China M&A Focused on Gold Source: Ernst and Young 78
  78. 78. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS In 2012 Coal, Gold, Copper M&A Was High 21.4 17.9 14.2 13.4 7.3 5.3 4.0 3.9 3.6 2.3 10.6 0 5 10 15 20 25 $Billions 2012 M&A Activity by Target Commodity Source: Ernst and Young 79
  79. 79. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Recent China Acquisition Trend By Region – USA and Canada = Small Share By Value 1st Half 2012 80
  80. 80. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Mining in the Americas Has an Excellent Future • Mining has a long history in the Americas • Geology, location, and labor are excellent • Economic benefits from mining are real including royalties, taxes, employment, etc. • Best to continue providing stable business friendly policies, invest in infrastructure, safety, education, and training, as needed • The market this past year changed considerably which officials should be mindful of 81
  81. 81. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Prepare for the Best and Worst Check and Double Check • While mining has a favorable outlook, it is competitive and capital intensive with the recent 10 years largely impacted by China • Projects in the first cost quartile will be funded • Partner with skilled, business managers • Moderate country risks of doing business • Expect continued volatility and cycles • Investors do carefully weigh costs of doing business and political country risk 82
  82. 82. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS The Behre Dolbear Group • We perform technical, operating, financial issues and valuations studies advising clients in the mining, banking, investment, financial, legal and accounting sectors and government agencies around the world • Our group of experts provides a reservoir of proven expertise and experience in all disciplines related to the mining of base, precious and ferrous metals, coal, uranium, fertilizer and industrial minerals, gemstones, construction materials including cement, dimension stone, sand, and gravel • Behre Dolbear Group consists of a five operating divisions, each offering a range of highly specialized and complementary services. They are:  Technical Consulting  Engineering Services  Behre Dolbear Capital (Financial advisory)  Management Consulting  Environmental Services 83
  83. 83. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS The Behre Dolbear Group • To meet client requirements, we select, integrate and manage our highly qualified and experienced specialists drawn from the appropriate division.  Each are selected for their particular skill-set and ability to provide the highest levels of insight, advice and recommendation  They have experience in many transactions involving brown and green field projects requiring lender due diligence and project monitoring.  If other skills and experience are required, our flexibility and depth of resource allows us to deliver them swiftly and efficiently • We have 12 offices in 8 countries, completed 210+ jobs in 55+ countries in each of the last 5 years using our global network of 125+ professionals Tim Alch V.P. & Senior Minerals Business Analyst Behre Dolbear & Company (USA), Inc. 100 Park Avenue, New York, New York 10017 +1.845.480.1434 Tim.Alch@dolbear.com 84
  84. 84. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS The Behre Dolbear Group 85
  85. 85. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Appendix Characteristics of 3 levels of engineering studies – Not exhaustive, rather indicative checklists that require trained, qualified experts’ review: Conceptual/Scoping Study Pre-feasibility Study Feasibility Study 86
  86. 86. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A1 Potential Areas of Investigation for Proposed Mining Projects PROPERTY INFORMATION Location, topography and climate Land ownership and royalties Property history Current status GEOLOGY AND RESOURCES Geological description Mineralogy Drilling, sampling and assaying Evaluation techniques Mineral resource estimate MINING Ore reserve estimate Mining method and plans Mining equipment Material handing Material handling equipment Historical and forecast production Consumables Mining capital estimates Mining operating cost estimates PROCESSING Ore sampling and testwork Processing method Other required processes Process equipment Historical and forecast production Consumables Processing capital estimates Processing operating cost estimates INFRASTRUCTURE Industrial infrastructure facilities Social infrastructure facilities Utilities, power, water Infrastructure capital estimates Infrastructure operating cost estimates MANAGEMENT AND LABOR Management organization requirements Labor requirements PRODUCTS, MARKETS AND SALES Products Markets Prices Sales ENVIRONMENTAL AND PERMITTING Permit list Environmental impact Compliance costs Compliance cost timing Reclamation expenses FINANCIAL ISSUES Taxes Royalties Fees Licenses DEVELOPMENT COSTS AND SCHEDULE Development cost estimate Development schedule Development methodology POLITICAL & SOCIAL CONSIDERATIONS Economic benefits and costs Government considerations Other issues  PROJECT ECONOMICS Economic parameters Discount rate determination Cash flows Investor returns Debt analysis Sensitivities 87
  87. 87. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A2 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY INTRODUCTION Location, Topography, and Climate Site location map Ownership and Royalties Claims list Claims map Current Status and History Historical chronology Information on past production, if any •Yes •No No No No •Yes •No Yes No No •Yes •Yes Yes Yes Yes GEOLOGY AND RESOURCES Geological Description Geological map Geological cross-sections Drilling, Sampling, and Assaying Parameters Drill hole location map Sampling/assaying flow diagram and assessment Assay check assessment and graph Mineral Resource Estimate Resource methodology determination and approach Geologic model limits Lithology/tonnage factors/code Cumulative frequency of samples verses grade Variograms Resource Estimate Yes No Yes Yes No No Yes Yes No No No Industry Standards (NI 43- 101, JORC, etc.) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Industry Standards (NI 43- 101, JORC, etc.) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Industry Standards (NI 43- 101, JORC, etc.) 88
  88. 88. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A3 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY MINING Ore Reserve Estimate Reserve and resource calculation parameters Cutoff grade equations Reserve and resource estimate Mining Method and Plans Mining parameters Hydrology/geotechnical parameters Mining equipment list Consumables list Material handling systems Material handling equipment Personnel list Surface mining Final pit and dump outlines Incremental pit and dump outlines Underground mining General mine development Mining approach (stoping, cut and fill, etc.) Production Schedule Historical production, if any Annual ore and waste tonnage and grade Mining Capital and Operating Cost Estimates Mining operating cost estimates Mining capital cost estimates Assumed Values No Industry Standards Yes, minimal engineering basis No No No No No No No Yes, simple outline No Yes, general outline Yes, general approach Yes Yes, division of total Yes, factored ±45% Yes, factored ±45% Test-Based Values Yes Industry Standards Yes, some geotechnical data Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes, ±30% Yes, from engineering manuals ±30% Test-Based Values Yes Industry Standards Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes, ±15% Yes, from vendor quotes and take-offs ±15% 89
  89. 89. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A4 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY PROCESSING Ore Sampling and Test Work Test work data Processing Methods and Plans Processing methods Processing parameters Equipment list Consumables list Personnel list Material balance Flow diagram Site plan General arrangement drawings Production Schedule Historical production, if any Annual production tonnage and grade Off-site Processing Cost Estimates Concentration charges Smelting and refining charges Other charges Material handling and transport Insurance and sales charges Processing Capital and Operating Cost Estimates Processing operating cost estimates Processing capital cost estimates No, assumed values Yes, general approach Yes, minimal engineering No No No No No Yes, simple block diagram No No Yes Yes, division of total No No No No Yes, factored ±45% Yes, factored ±45% No, preliminary data Yes Yes Yes No Yes Yes Yes Yes No Yes Yes Yes, preliminary estimate Yes, preliminary estimate Yes, preliminary estimate Yes, preliminary estimate No Yes, ±30% Yes, from engineering manuals ±30% No, preliminary data Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes, quote Yes, quote Yes, quote Yes, quote Yes, quote Yes, ±15% Yes, from vendor quotes and take-offs ±15% 90
  90. 90. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A5 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY INFRASTRUCTURE Industrial Infrastructure Facilities Facilities list Power and water parameters Full site plan Social Infrastructure Facilities Facilities list Housing Schools Hospitals Other Infrastructure Capital and Operating Cost Estimates Consumables list Personnel list Infrastructure operating cost estimates Infrastructure capital cost estimates Yes, with minimum detail Yes, preliminary No Yes, with minimum detail No No No No No No Yes, factored ±45% Yes, factored ±45% Yes Yes Yes Yes Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary Yes Yes Yes, ±30% Yes, from engineering manuals ±30% Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes, ±15% Yes, from vendor quotes & take-offs ±15% MANAGEMENT, LABOR & ADMINISTRATION Personnel Personnel lists Training requirements Personnel Capital & Operating Cost Estimates Consumables list Personnel operating cost estimates Personnel capital cost No No No Yes, factored ±45% Yes, factored ±45% Yes Yes No Yes, ±30% Yes, ±30% Yes Yes •Yes Yes, ±15% Yes, ±15% 91
  91. 91. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A6 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY MARKETS, PRODUCTS AND SALES Markets, Products and Sales Products Volume Prices Sales organization Sales Related Capital and Operating Cost Estimates Personnel list Consumables list Sales related operating cost estimates Sales related capital cost estimates Yes, preliminary Yes, preliminary Yes, preliminary No No No Yes, factored ±45% Yes, factored ±45% Yes Yes Yes Yes, preliminary Yes No Yes, ±30% Yes, ±30% Yes Yes Yes Yes, preliminary Yes No Yes, ±15% •Yes, ±15% ENVIRONMENTAL AND PERMITTING Environmental Permit list Environmental Impacts Environmental Compliance Cost Estimates Personnel list Environmental related operating cost estimates Environmental related capital cost estimates No Yes, preliminary No Yes, factored ±45% Yes, factored ±45% Yes Yes Yes Yes, ±30% Yes, ±30% Yes Yes Yes Yes, ±15% Yes, ±15% 92
  92. 92. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A7 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY DEVELOPMENT SCHEDULE AND COSTS Development Schedule Development methodology Development schedule Development Costs Personnel list Development related operating cost estimates Development related capital cost estimates •Yes, preliminary Yes, preliminary No No No •Yes Yes Yes Yes, ±30% Yes, ±30% •Yes Yes Yes Yes, ±15% Yes, from vendor quotes & take-offs ±15% PROJECT ECONOMICS Financial Issues Taxes Royalties Fees Licenses Economic Issues Economic parameters Discount rate determination Cash flows Investor returns Debt analysis 1.Sensitivities Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary Yes, preliminary No No Yes Yes Yes Yes Yes Yes Yes Yes No Yes, preliminary Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 93
  93. 93. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS Characteristics of Scoping, Pre-Feasibility, and Feasibility Studies – A8 (continued) CATEGORY CONCEPTUAL STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY SUMMARY AND RECOMMENDATIONS Operational Parameters Title and ownership Geology Ore reserves Mining and processing rates Development period and mine life Metal/mineral recoveries Sales Operating cost estimates Capital cost estimates Financial Parameters Cash Flows NPV, IRR, and ROI Mostly assumed and factored Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Some engineering basis Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Some engineering basis Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 94
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×