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The Importance of Due Diligence For Early-Stage Mining Projects

The document discusses the significance of due diligence in early-stage mining projects, emphasizing its role in identifying risks and opportunities. It outlines the necessary steps and considerations for conducting effective due diligence, including the involvement of various consultants and the importance of addressing potential red flags. The document also highlights the typical team composition and workflow required for a successful mineral resource assessment.

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Alvaro Madrid
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15 views11 pages

The Importance of Due Diligence For Early-Stage Mining Projects

The document discusses the significance of due diligence in early-stage mining projects, emphasizing its role in identifying risks and opportunities. It outlines the necessary steps and considerations for conducting effective due diligence, including the involvement of various consultants and the importance of addressing potential red flags. The document also highlights the typical team composition and workflow required for a successful mineral resource assessment.

Uploaded by

Alvaro Madrid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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The Importance of Due Diligence for

Early-Stage Mining Projects


6th annual Current Trends in Mining Finance Conference
New York, NY | May 1, 2018
Meet Our Panelists

Dr. Neal Rigby (Chair) Ben Parsons Rick Trotman


Corporate Consultant (Mining) Principal Resource Geologist President and CEO
SRK Consulting (US) Inc. SRK Consulting (US) Inc. Barksdale Capital Corporation

Henrique da Silva Nick Michael


Director of Geostatistics and Technology Technical Director
Newmont Mining Corporation Orion Resource Partners
What Defines Early Stage Mining
Projects?

Source: Level of Activity KPMG, CTMF Conference 2013

Source: Relative Value - Brent Cook’s Exploration Insights life cycle of a Junior Miner
Why do Due Diligence?
• There are two kinds of money
– Money
– My Money
• What is the purpose of project level due diligence
• When should you complete due diligence on early stage mining
projects?
• How does the cost of due diligence compare to the size of the deal?
The anatomy of a due diligence
• How do you ensure that your diligence efforts are fit-for-
purpose?
• When do you bring in Consultants?
• The Project just has Mineral Resources so I only need a
geologist, right?
• What base-level diligence points need to be addressed for
every project, irrespective of its place on the development
curve?
Red Flags
• What keeps us up at night during a diligence
review?
• What constitutes a red flag at an early stage?
– Technical
– Financial
– Social
– Other

• Is there a difference depending on Risk Tolerance?


What are outcomes of Due Diligence
• Identification of Risks and Opportunities of a Project
• Obtain critical data/information needed to support sound financial decisions
• What are the possible outcomes:
– Fatal Flaw
– Proceed with caution (phased approach)
– Green Flag
Some Insights
• Specific Gravity: 1-4
• Units: g/tonne → oz/ton
• RC vs. DD: Contamination
• Smelter Terms
• Environmental Assessment
• Legal impediments
• Fraud/Delusion
Due Diligence is the only endeavor where both “boxers” get
to hit the referee.

Dr. Neal Rigby, Corporate Consulting


[email protected]
Appendix
Typical Team Composition
• Project Manager • Hydro / Hydrogeologist
• Reserves Geologist • Cost Estimator
• Mining Engineer • EPCM Contract Manager
• Metallurgist • Infrastructure/Civil Engineer
• Rock Mechanics Engineer • Engineers
• Tailings Engineer
• Environmental Scientist
• Mineral Economist
Appendix
Generic Workflow For a Mineral Resource
HIGH POTENTIAL FOR SIGNIFICANT ERRORS

Firm understanding
of the Geology and Data Quality Domaining Sample
Data Validation Geological Modelling
controls of Assessment Data
Mineralisation

High/Outlier Grade Quantitative Kriging Selection of


Geostatistical
Capping & Statistical Analysis Neighbourhood Appropriate
Analysis
Compositing Analysis (QKNA) Estimation Method

Mineral Resource Reporting with Compliant Mineral


Model Validation
Classification Economic Potential Resource Statement

11

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