Articles for January 2016

40. Integra Gold Rush Challenge – Watch for it at PDAC

Has everyone heard about the Gold Rush Challenge contest being held by Integra Gold Corp?  If not, I’d like to provide some information on it.  It’s another innovative event happening in the mining industry, following along on the footsteps of the Goldcorp Challenge held in 2001.

Gold Rush Challenge

The Integra Gold Rush Challenge is a contest whereby entrants are given access to a geological database and they are asked to prepare submissions presenting the best prospects for the next gold discovery on the Sigma/Lamaque properties.  Winners can get a share of the C$1 million prize.   Entrants will be given access to a database built from six terabytes of historical information that has been consolidated down to roughly 25 GB.
Integra Gold hopes that the contest will expand their access to quality people outside their company enabling their own in-house geological team to focus on other exploration projects.  Integra hope that they can get cutting-edge, innovative ideas not just from people in the mining industry but also from anyone proficient at analyzing big data.
From a recent press release update (Jan 6, 2016) here is what is currently happening.  It’s turning into quite the corporate event at PDAC.
In total 1,342 entrants from over 83 countries registered to compete in the challenge, resulting in 95 teams and over 100 proposals. Integra Gold is currently in the process of selecting the top 20 submissions which will be given to the Challenge’s technical judging panel.  The Challenge’s technical judging panel is made up of Neil Adshead, Andrew Brown, Benoît Dubé, James Franklin, David Rhys, and Brian Skanderberg.
By February 15th the judging panel will narrow the field down to the top five finalists.  These five teams will present to panel of industry leaders in a “shark-tank” style live finale at PDAC 2016.  Proceeds from the evening will go to a variety of Val-d’Or based charities.  The PDAC panel has been nominated and consists of Brent Cook, Chantal Gosselin, Rob McEwen, Sean Roosen, and Randy Smallwood.   It’s good to see the interest and participation from so many industry experts.
At PDAC there are always a lot of things to do, from visiting corporate booths, the tradeshow, gala award events, and hospitality suites.  Now the Integra Gold Rush Challenge brings another function to add to your PDAC agenda.
By the way, regarding the 2001 Goldcorp Challenge, it has been reported that it resulted in $CAD 575,000 being split amongst several teams and it having identified deposits were worth more than $6 billion and saved two to three years off the company’s exploration time.
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39. Measured vs. Indicated Resources – Do We Treat Them the Same?

One of the first things we look at when examining a resource estimate is how much of the resource is classified as Measured / Indicated (“M&I”) versus the tonnage classified as Inferred.  It’s important to understand the uncertainty in the estimate and to a large degree the Inferred proportion gives us that.   At the same time I think we tend to focus less on the split between the Measured and Indicated tonnages.
We are all aware of the study limitations imposed by Inferred resources.  They are speculative in nature and hence cannot be used in the economic models for feasibility and pre-feasibility studies. However Inferred resource can be used for production planing in Preliminary Economic Assessments (“PEA”).
Inferred resources are also so speculative that one cannot add them to the Measure and Indicated tonnages in a resource statement, although that is what just about everyone does when looking at a project.   I don’t think I fully understand the concerns with a resource statement if it included a row that adds M&I tonnage with Inferred tonnes as long as everything is open and transparent.   When a PEA production schedule is presented, the three resource classifications are combined into a single tonnage number but in the resource statement itself the M&I&I cannot be totaled.  A bit contradictory I feel.
With regards to the M&I tonnage, it appears to me that companies are most interested in what part of their  resource meets the M&I threshold but are not as interested in how the tonnage is split between Measured and Indicated.   It seems that M&I are largely being treated the same.  Since both Measured and Indicated resources can be used in the feasibility economic analysis, does it matter if the split is 100% Measured (Proven) or 100% Indicated (Probable)?   The NI 43-101 and CIM guidelines provide definitions for Measured and Indicated resource but do not specify any different treatment like they do for the Inferred resources.

 

CIM Resources to Mineral Reserves

Relationship between Mineral Reserves and Mineral Resources (CIM Definition Standards).

 

In my past experience with feasibility studies, some people used the rule-of-thumb that the tonnage mined during the payback period must largely consist of Measure resource (i.e. Proven reserve) and then the rest of the production schedule could rely on Indicated tonnage (Probable reserve).  The idea was that a way to reduce project risk was to ensure that the production tonnage providing the capital recovery should be based on the resource with the highest certainty.   Nowadays I generally do not see this same requirement for Measured resources, although I am not aware of what everyone is doing in every study.   I realize there is a cost, and possibly a significant cost, to shift Indicated resource to Measured so there may be some hesitation. Hence it may be simpler for everyone to simply regard the Measured and Indicated tonnages in roughly the same way.
NI 43-101 specifies how the Inferred resource can and cannot be utilized.  Is it a matter of time before the regulators start specifying how Measured and Indicated resources can be used?  I see some potential merit to this idea but adding more regulation and cost to an already burdened industry is not helpful.
Perhaps in the interest of increased transparency, feasibility studies just need to add two rows to the bottom of the production schedule showing how the annual processing tonnages are split between Proven and Probable reserves.  One can get a better sense of the resource risk in the early years of the project.  Given the mining software available today, it likely isn’t difficult to provide such additional detail.
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38. Claim Fees Paid for a Royalty Interest – Good Deal or Not?

I have read several articles about how the junior mining industry must innovate to stay relevant.    Innovation and changing with the times may be what is needed in this economic climate.
One company that is trying something new is Abitibi Royalties.  They are promoting a new way for them to acquire royalty interests in early stage properties by offering to fund the claim fees on behalf of the property owner in return for a royalty.
Their corporate website states that they will pay, for a specified period of time, the claim fees/taxes related to existing mineral properties or related to the staking of new mineral properties.   In return, Abitibi Royalties would be granted a net smelter royalty (“NSR”) on the property.  It may be a gamble for them but it’s not really that risky given that the low investment needed to pay claim fees, even if one considers having to make these payments over multiple years.
Abitibi are specifically targeting properties located near an operating mine located in the Americas. They are keeping jurisdiction risk to a minimum.   Abitibi state that their due diligence and decision-making process is fast, generally within 48 hours.  No waiting around here but likely this is possible due to the low investment required and often the lack of geological information to do actually do a due diligence on.
To give some recent examples, in a December 14, 2015 press release, Abitibi state that the intend to acquire a 2% NSR on two claims in Quebec and will pay approximately $11,700 and reimburse the claim owner approximately $13,750 in future exploration expenses. This cash will be used by the owner towards paying claim renewal fees and exploration work commitments due in 2016.   Upon completion of the transaction, these will be the ninth and tenth royalties acquired through the Abitibi Royalty Search.  For comparison, some of their other royalty acquisitions cost were in the range of $5,000 to $10,000 each (per year I assume).   I think that those NSR interests are being acquired quite cheaply.
The benefit to the property owner may be twofold; they may have no other funding options available and they are building a relationship with a group that will have an interest in helping the project move forward.  The downside is that they have now encumbered that property with a NSR royalty going forward.
The benefit to Abitibi Royalties is that they have acquired an early stage NSR royalty quite cheaply although there will be significant uncertainty about ever seeing any royalty payments from the project.   Abitibi may also have to continue to make ongoing payments to ensure the claims remain in good standing with the owner.
It’s good to see some degree of innovation at work here, although the method of promotion for the concept may be more innovative than the concept itself. Unfortunately these Abitibi cash injections investments are not enough to pay for much actual exploration on the property and this is where the further innovation is required, whether through crowd funding, private equity, or some other means.   I’m curious to see if other companies will follow the Abitibi royalty model but extend it to foreign and more risky properties.
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37. 3D Model Printing – Who To Contact?

One of the technologies that’s still getting a lot of press lately is 3D printing; it seems new articles appear daily describing some fresh and novel use. Everything from home construction, food preparation and industrial applications, 3D printing continues to find new applications in a wide range of disciplines. Mining engineering is no exception.
In a previous blog “3D Printing – A Simple Idea”, I discussed the helpfulness of printing 3D topographic models for the team members of a mining study. I was recently contacted by a consulting firm from Texas that, amongst other things, specializes in the 3D printing of mining models. Here is their story and a few model images as provided to me by Matt Blattman of Blattman Brothers Consulting. (www.blattbros.com/3dprinting)
Their 3D printed models are used in the same way geologists and mining engineers have employed models for decades. We’ve all seen the physical models made of stacked mylar or plexi-glass maps, wood or foam core. We all recognized that there is value in taking two dimensional sections or plan maps and making a 3D representation which provides more that those viewed on a computer screen. Physical models convey scale, interactions and scope in ways that no other method can. 3D printing improves the model-making process by allowing for the addition of high definition orthophotos, reducing the model building cost, increasing its precision, and its delivery time.
The current 3D models can be made in a variety of materials but the primary three are extruded plastic, gypsum powder, or acrylics.
  • Plastic models (ABS or PLA) are cheap, fast and can created on relatively inexpensive, hobbyist printers. The downside to these models is that the number of colors available in a single model are limited, typically a single color.
  • Powder-based printers can typically print in 6.5M colors, allowing for vibrant, photo-realistic colors and infinite choices for title blocks, logos and artistic techniques. However, gypsum models can be as fragile as porcelain and require some care in handling.
  • Acrylic models allow for translucent printing (“looking into the ground to see the geological structure”) and are more durable than the gypsum. Nevertheless, acrylic models are significantly more expensive than the other two types and the color palettes are limited.
Here are some example models.
Leapfrog 3D Geological Model
Acrylic Based Geological Model
3D Mine Model - Powder based
3D Mine Site Model
Besides having another toy on your desk next to the stress ball, why print your mine plan, the geology shapes or the topographic surface? It’s all about “communicating highly technical data to a non-technical audience”, whether that audience is a permitting authority, the general public, or company management.
The ability to understand a map or technical drawing is a learned skill and not everyone has it. If you’ve just spent $20M on a feasibility study, why trust in the assumption that the attendees in a public consultation meeting will fully appreciate the scale and overall impact of your proposed project? That message can be better conveyed with a model that is easily understood. One of Blattman’s clients, Luck Stone, recently described how they use their 3D printed models in this video.
Blattman’s models are created from the same 3D digital data already in use by most companies involved in geological modeling and mine designs. Other than the units (meters versus millimeters), the triangulated surfaces created by mining software are theoretically no different than those created by mechanical or artistic 3D modeling programs.
While many 3D printing services are available on the market, not all of them are able to speak “mining”. They may not be able to walk the skilled geologist or mining engineer through the process of creating the necessary digital formats and that’s where Blattman comes in. With more than 20 years of mining experience and having already gone through the 3D printing learning curve, they can assist any natural resource company through the process, either as a full-service/turn-key project or just to advise the client on how to prepare their own files.
Recently, Blattman announced a contest to give away a custom model of the winner’s own data, a $5000 value. Not every data set is ideal for printing, so each entry must be accompanied by a screenshot of the model (no need to upload the actual data). Anyone is eligible to enter; the entry form can be found here: www.blattbros.com/contest/. They will announce the winner just after PDAC, in mid-March 2016.
My bottom line is that 3D printing is here to stay, so go ahead and check out the technology. Maybe enter the Blattman 3D model contest if you have something worth modelling.
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