Question: how important is the integrity of a tailings dam to the successful operation of a mine? Very important; so much so that in some jurisdictions regulators may soon be stipulating that mining companies must have third party independent review boards or third party audits done on their tailings dams. The feeling is that although a team of capable engineers may be doing the dam design, there is still a need for some outside oversight to get another perspective. Differences in interpretation, experience, and errors of omission are always a possibility regardless of who does the work. Hence a second set of eyes can be beneficial.
Next question is how important is the integrity of the resource and reserve estimate to the successful operation of a mine? Very important; the mine life, project economics, and shareholder value all depend on it. So why aren’t a second set of eyes or third party resource audits commonly done?
In the years prior to 43-101, junior mining companies could produce their own resource estimates and disclose the results. With the advent of NI 43-101, a second set of eyes was introduced whereby an independent QP could review the company’s internal resource estimate and/or prepare their own estimate and ultimately take legal responsible for the estimate.
Nowadays most small companies do not produce their own in-house resource estimates and the task is generally awarded directly to an independent QP. Maybe companies don’t prepare their own in-house resource estimates due to the specialization needed in modelling and geostatistics, and the knowledge needed to use today’s block modeling software. Maybe they feel doing their own internal resource estimate is a waste of time since an independent QP will be preparing an estimate for them anyway.
Given that, in many cases the project resource estimate is prepared solely by the QP or a team of QP’s. In many cases this resource gets published without any other oversight, in other words without a second set of eyes taking a look at it. The assumption is that QP doing the work is a qualified expert, their judgement is without question, and their work is error free.
As we have seen recently, some resources estimates have been mishandled and disciplinary actions have been taken against some QP’s. I guess one can conclude that maybe not all QP’s are perfect. Just because someone meets the requirements to be a Competent Person or a Qualified Person does not automatically mean that they are competent or qualified. Geological modeling is not an exact science and will be partly based on the person’s experience and what they have seen in the past.
My question is whether it wouldn’t be good practice for companies to have a second set of eyes take a look at their maiden resource estimates produced by independent QP’s? For example, where I have been involved in mining mergers or takeovers, often one side will tend to rebuild the resource model using their own team. They don’t put 100% confidence in the original resource model handed over to them. “Just give me the database” they ask.
One downside to a third party review is the additional cost. Another downside is that when one consultant reviews another consultant’s work there is a tendency to list numerous concerns that are not really that material, which then can muddle the conclusion of the review. On the other hand, a third party review may identify serious interpretation or judgement issues that could be fatal if they impact on the viability of the resource.
If tailings dams are so important to require a second set of eyes, why not the resource estimate that is the foundation of the project?
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.
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.
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.
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.
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.