Developing a Minerals Projects- What Are the Reports Used to Get There

In the past 12 months the Directors of Ellenkay Gold, have assisted a number of clients with a variety of studies related to mineral projects that are in various stages along the development path to production. The type of reports he has been involved in, include the following.

One of the key types of studies done during the life of a mineral project is a Competent Person’s Report (CPR). This report is prepared to a defined standard like the JORC code and the author of the report is recognized under the code as being a Competent Person. These reports provide an update on a project and bring all the known data to date into a single point highlighting the status of the project. They provide a great benefit in that they detail the strengths of the project and where there is the highest degree of technical and non-technical confidence. Conversely the CPR is often the determinant of where there are gaps in the project and additional resources are required to upgrade the knowledge and confidence in a particular discipline. For example, a CPR may determine there is insufficient metallurgical testing to validate the mineral processing flow sheet and recommend a corrective course of action. These reports are used for both development and operating projects.

Most mineral projects start their journey to development with a Preliminary Economic Assessment (or a Concept Study). This report’s aim is to give a very early stage indication of the economic attractiveness of a mineral exploration project to justify further expenditure. Benchmark prices are used for capital and operating costs, existing flow sheets and processing plants are used for conceptual designs and assumptions are made around the potential size of the ore body against its current status in respect of the geological resource. If the report does its job, it should identify the key potential ‘fatal flaws’ that could sink the project. During the next round of work resources can be directed to ensure these can be mitigated at this early stage. The accuracy of these reports is in the order of +/- 30%.

After the Preliminary Economic Assessment is completed and a lot more detailed drilling and technical work completed a Pre-Feasibility Study (PFS) is done. In the PFS ideally all options are evaluated to determine their appropriateness for the project. For example, for a coal project the route to market could be trucking, rail or barging. The PFS role is to determine the most suitable alternative and its associated capital and operating cost implications. Plus, it must consider the impacts to surrounding communities and the environment whilst ensuring government permits can be secured to achieve the mode of transport. At the end of a PFS, a single ‘go forward’ case must be identified that ensures the best options have been chosen in light of any restrictions. A much higher accuracy of capital and operating cost is achieved using supplier and contractor supplied data and first principle build ups of costs.

The final report prepared is the Definitive Feasibility Study (DFS), also known as the Bankability Feasibility Study. Its role is to take the DFS ‘go forward’ case and prepare a comprehensive study to a sufficient level of detail that financier’s and their advisors have sufficient confidence to recommend it for funding. Capital and operating cost builds up will use more detailed mine and processing designs and costs generated from tender responses from suppliers and contractors. Fine tuning of capital and operating costs with a suitable allocation for contingency are a key requirement for the DFS combined with certainty of achieving regulatory permitting upon funding.

The DFS provides the template that financing agreements are based on and conditions for financing are prepared. These reports are almost always done to the standard required by the Equator Principles. The Equator Principles are requirements that major funding institutions have agreed to implement that specifically detail how a mining company must develop its project whilst interacting with communities, government and the environment.

Once funding is in place, the construction of the project can commence.

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