I was reviewing a project this week, a Cu-Ni-PGE advanced stage project in North America. On my way to their NI 43-101 technical report I had to wade through what is the usual marsh of marketing rubbish that is known as the “junior explorer website”. I review a lot of early and advanced stage projects and I can count on my one hand websites that I have come across that are actually attempting to present their results in a truthful and conservative (wise) way.
Today was the first day of the 20th Investing in Africa Mining Indaba. This year will once again see the influential mining houses, government, labour and other stakeholders converge in Cape Town until Thursday this week. If you have any interest in the African mining industry, companies that operate in Africa or you are an African it will do you well to keep at least one eye on proceedings this week. After all, many, if not most African economies are dominated by natural resource-based contributions to GDP. Therefore, what affects mining in Africa will probably affect Africa as a whole.
The Union Platinum Mine, South Africa. (Photo: Flickr Anglo American Feed)
This year is already in full swing and I managed to enter it in style! My new year’s eve party went something like this: On the morning of the 31st we woke up in our tent, pitched in an alpine forest, at the foot of a glacial valley. We then spent the day trekking through deciduous Beech forests, rolling shrub-land, flanked by the spires of the Paine Massif on our left and turquoise blue glacial lakes on our right. By late afternoon, with icy winds carrying light snow, we slogged into the next camp site, welcomed by a Chilean meat buffet next to the fire place! Bubbly cider, hats, wigs and even the Chilean national anthem at the base of the Torres! A spectacular setting close of 2013 and greet 2014!
The spectacular spires of the Torres del Paine National Park. Cuernos Norte can be seen on the right.
So far we have looked at the scoping and the pre-feasibility phases of the feasibility process. Of all the possible scenarios considered during the pre-feasibility study, the best scenario is selected and only it is then taken forward as the foundation for the final (a.k.a. definitive) feasibility study. This scenario will include the best understanding of the geological model and the accompanying resource estimation, details around the mining and recovery method, to which then a more accurate costing estimation, market understanding and execution strategy is applied to answer the fundamental question: “What will it be?” What will this resource be? What will this investment be? This question is broad (covering all aspects of the project in as much depth as possible) yet singular in focus (all things considered, including unconsidered things!, is this a feasible investment?).
It just seemed very feasible to include this awesome photo in this post!
The feasibility study process is critical in mineral exploration as it is the best opportunity the project owner will have to define what the project could, should and will be. In my previous post, we looked at the scoping phase of the feasibility process and how it is responsible for answering the question: “What could the project be?”. The next phase of the process is known as the pre-feasibility study and addresses the question: “What should the project be?” This is arguably the most important study in the feasibility process for any organisation. I will explain why I hold this opinion, but let’s first define the practicalities of the pre-feasibility study.
The feasibility assessment process is important as it is the fundamental way in which project potential, and essentially, value is assessed and further more allows the quantification of risk associated with this value. Importantly, each step of the study process, from scoping and desk study phase through to final bankable feasibility, should incrementally and realistically add value to the project and so secure potential for return on investment. When the process is not well defined, adhered to, or critical decision gates held in low regard, value can either be destroyed or value can be misrepresented (inflated).
El Soldado ( The Soldier) is a peculiar copper deposit in the Chilean Andes with mineralization believed be associated to primary lithological factors (such as composition and porosity), structure, metamorphism, granitic intrusion, petroleum, yes, petroleum and bacteria. I will get into the details of the interesting and debatable geology in a next post but first let me show you what it looks like there. Chile and its Andes mountains are special, and it was a fantastic experience to visit such an interesting and historic mine above the clouds.
I have made mention of this mine in a previous post (here) before. It is an Anglo American operation situated 130 km north of Santiago and at 600 m above sea level. This operation produces around 50 000 t of copper per year and has around 175 Mt in reserves @ 0.8 % Cu.
A beautiful setting for the core yard and sampling facilities with the Andes canvassing the background.
Geological continuity in the context of resource modeling and estimation usually refers to the lithological (sometimes structural) features that define the ore zone with a defined consistency. This might be defined, for example, by a particular sandstone unit which consistently hosts uranium mineralization over a certain area, a vein (ore shoot) hosting gold mineralization or even a contact area between to rock types (skarn deposit). Value continuity however, is defined as the degree of consistency with which the value of the mineralization itself is consistent within a particular deposit. This value speaks of grade, thickness and could even be extended to geo-metallurgical consistency (the continuity of similar mineralogy). But why do we need to differentiate between these two concepts as opposed to just pure continuity?
Image of the El Soldado pit from the viewing platform. This image from the mintecminesite blog
Rick Menell gives an interview and chats about the birth and development Anglo Vaal Corporation, how he became a geologist, his stint as a Wall Street banker, outlook on South Africa and some advice to young geologist. The interview is shared here as a play list of short videos. He is a 35 year mining veteran that headed the Anglo Vaal Corp and Teal Exploration amongst other things. There is a brief biography included below. Enjoy the video and the weekend!
‘Rick Menell “trained as an exploration geologist and worked as an investment banker with JP Morgan in New York and Melbourne. He also worked as an executive director of Delta Gold in Australia. He worked with Anglovaal Mining from 1992 – 2006, becoming CEO in 1999 and executive chairman in 2002 before his current position at Teal Exploration & Mining, Inc. He is also deputy chairman of Harmony Gold Mining Company Limited, Chairman of the South African Tourism Board, a director of the Standard Bank Group and Mutual & Federal, and chairman of Village Main Reef Gold Mining Company (1934) Limited. He is a director of the Chamber of Mines where he was president from 1999 to 2001. Richard Menell was appointed a Weir Group “non-executive director in April 2009. Richard was previously an investment banker with JP Morgan in New York and Australia and an executive director of gold producer Delta Gold in Australia. He returned to South Africa in 1992 to join the Anglovaal Group and was appointed chief executive of Anglovaal Mining in 1996 and executive chairman in 2002. He was president and chief executive of TEAL Exploration & Mining Inc from 2005 until 2008. He was also formerly chairman of Avgold Ltd (1996-2004) and Bateman Engineering BV (2005-2009) and director of Mutual & Federal Insurance Company Ltd (1996 -2010) and Standard Bank Group Ltd (1997-2011). Richard is currently a director of Gold Fields Ltd in South Africa and a senior advisor to Credit Suisse. He is a fellow of the Geological Society (London), and both the Australasian and South African Institute of Mining and Metallurgy.’
When talking about feasibility studies and more particularly their failures, it is important to define what exactly a failure is. It is important for a number of reason but a particular one that comes to mind is that not knowing about, or not admitting, a problem or failure almost certainly leads to cost escalation later down the road. So how do you know when your feasibility study has failed? I am aware of the fact that in some circumstances it might be difficult to distinguish between feasibility study failure and project implementation failure but often the implementation and execution has its roots in feasibility problems.
The massive landslide at Kennecott Utah Copper’s Bingham Canyon Mine occurred on April 11, 2013. Image courtesy of KSL