Tuesday, January 21, 2014

Feasibility stages of a mining project


To help you understand how a mining project, in which you might wish to invest, unfolds, here is an explanation of the various stages, from the discovery of mineral occurrences to mining operations. This shows all the work a mining company has to perform to assess the feasibility of its project.

The first objective to be met after a mineral occurrence is discovered is to obtain a wider range of samples through drilling. The goal is to estimate the quantity and quality of mineralization, i.e. the mineral resource.
Once drilling has revealed the presence of a mineral resource, the next step is to determine whether the deposit can actually be mined.

Preliminary economic assessment and feasibility studies

The mining company will conduct a preliminary economic assessment, a pre-feasibility study or a feasibility study for analyzing and evaluating the economic, technical and geological factors that will determine whether the mining project can go forward.
The results of the preliminary economic assessment will tell investors whether a mining project has the potential to be viable. At this stage, the mineralization, regardless of its quantity and quality, is always considered to be a mineral resource.
The pre-feasibility and feasibility studies are more detailed. Their results will show with more certainty whether the mining project is viable. At this point, the mineral resource, or a portion thereof, becomes a mineral reserve.

Is the project profitable?

The company must evaluate the economic profitability of the project, including whether the price of the ore on world markets will justify the investment. Uncertainty about the future price of ore could make it more difficult to obtain funding for the project. In addition, the company must take the project's environmental and social aspects into account. Is the project being accepted by the nearby communities? How far away is the nearest road?
The mining company must clearly evaluate the technical feasibility of the project. What infrastructure will be needed for extracting and concentrating the ore? Is the deposit easily accessible? Have the technologies been proven?
Throughout the assessment process, the company's officers and experts must determine whether the project justifies the large sums of money that will be needed to carry out subsequent phases of work. At each stage, the officers may put the project on hold until optimal conditions materialize (such as increased demand for the ore), or even abandon it altogether.

Mining operations

Once it has determined that the project would be profitable, the company must obtain the funding required for the development, infrastructure and mining of the deposit. Such work can take a long time and cost a lot of money. For example, it often takes 12 to 36 months for such work to be completed, and more than $500,000,000 in capital may be required to do so.
The success of a mining project depends to a large extent on the quality, integrity and competence of the mining company's officers, but luck also plays a role. For example, an unexpected drop in the price of ore could compromise the mining operations, despite the sums of money already invested.

"Most exploration projects will not generate any revenue, even after large sums of money are invested in them. This is one of the inherent risks of this industry."

Before you invest, get informed.

Here are some questions to help you start your research:
  • What are the stages involved in carrying the project to a successful conclusion?
  • How much time and money will it take to complete these stages? How will these costs be funded?
  • Do the promoters have experience and expertise in the mining industry? Have they previously carried out a mining development project successfully?
  • Are the estimates (quality of the mineral reserves or resources, production volume, costs, timeframes) presented in detail in a technical report prepared by an independent, qualified person?
  • What terms and conditions must be met in order for the company to keep its rights in the project? Are they difficult to meet?
  • What risks might impede the execution of the project?
  • Have other mining companies attempted to develop this deposit in the past, and abandoned it? Why did they abandon it? What will this company do differently?
  • How much money has been raised for, and spent on, this project?
  • Is the project located in a politically stable country?

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