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

 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

 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

 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

 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

 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

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:

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The life Cycle Of A Gold Mine

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The life Cycle Of A Gold Mine