51. Pre-Concentration – Savior or Not?

pre-concentration
Can pre-concentration become a savior for the mining industry by lowering metal production costs?
Pre-concentration is a way of reducing the quantity of ore requiring higher cost downstream processing, i.e. grinding in particular.  One can attain significant cost savings in energy consumption and operating expenses by using a low cost method to pre-concentrate minerals into a smaller volume. A previous blog “Remote Sensing of Ore Grades” discussed one new pre-concentration method currently under development.

Pre-concentration isn’t new

Pre-concentration has been around for many years.  However the techniques available are generally limited.  Hence many ore types are not amenable to it..unfortunately.
The main methods available are:
Ore sorting, which can be done using automated optical, electrical, or magnetic susceptibility sensors to separate ore particles from waste. The different sensors can rely on colour recognition, near infrared radiation, x-ray fluorescence, x-ray transmission, radiometric, or electromagnetic properties. The sensors can determine if a particle contains valuable mineral or waste, thereby sending a signal to activate air jets to deflect material into ore and waste bins.
Density separation, or specific gravity differences are another property that some pre-concentration methods can use. Gravity based systems such as dense media separation (DMS), jigs, or centrifugal concentrators are currently in commercial production.
Scrubbing, another very simple pre-concentration method is scrubbing, whereby simply separating fines or coatings may remove deleterious materials prior to final processing.

 BenefitsJig Plant 1

Pre-concentration provides several benefits:
  • If done underground or at satellite mine site, the ore hoisting or ore transport costs can be reduced.
  • If the pre-concentration rejects can be used as mine backfill, this can reduce backfilling costs.
  • Processing of higher grade pre-concentrated mill feed can reduce energy costs and ultimately reduce the cash cost of metal produced.
  • Grinding costs can be reduced if waste particles are harder than the ore particles and they can be scalped.
  • Minimizing waste through the process plant will reduce the quantity of fine tailings that must be disposed of.
  • Lowering operating costs may potentially allow lowering of the cutoff grade and increasing mineral reserves.
  • Higher head grades would increase metal production without needing an increase in plant throughput.

Limited ore types are suited for pre-concentration

Not all ore types are amenable to pre-concentration and therefore a rigorous testing program is required. In most cases a pre-con method is relatively obvious to metallurgical engineers but testing is still required to measure performance.
Testing is required to determine the waste rejection achieved without incurring significant ore loss. Generally one can produce a higher quality product if one is willing to reject more ore with the waste.  It becomes a trade-off of metal recovery versus processing cost savings.
Fine particles generated in the crushing stage might need to bypass the pre-con circuit. If this bypassed material is sent to downstream processing circuits, one may need to examine crushers that minimize fines to avoid excessive material bypassing the pre-con circuit.

Reject waste or reject ore?

One must decide if the pre-con system should reject waste particles from the material stream or reject ore particles from the stream.  The overall metal recovery and product quality may be impacted depending on which approach is used.

Conclusion

The bottom line is that the mining industry is continually looking for ways to improve costs and pre-concentration may be a great way to do this.   Every process plant design should take a look at it to see if is feasible for their ore type.
While the existing pre-concentration methods have their limitations, future technologies may bring in more ways to pre-concentrate.  This is probably an area where research dollars would be well spent.

50. Landslide Blog – If You Like Failures

slope failure blog
For those of you with a geotechnical background or have a general interest in learning more about rock slides and slope failures, there is an interesting website and blog for you to follow.
The website is hosted by the American Geophysical Union the world’s largest organization of Earth and space scientists. The blogs on their site are written by AGU staff along with contributions from collaborators and guest bloggers.

Landslide Blog screenshot

The independent bloggers have editorial freedom in the topics they choose to cover and their opinions are those of their authors and do not necessarily represent the views of the American Geophysical Union. This provides for some leeway on the discussions and the perspectives the writers wish to take.

Landslide Blog

One specific area they cover well in their Landslide Blog are the various occurrences of rock falls and landslides from any location around the globe. They will present commentary, images, and even videos of slope movements as they happen.
Often they will provide some technical opinion on what possibly caused the failure event to occur. The Landslide Blog has a semi-regular email newsletter that will keep you updated on new stories as they happen.
The following links are a few examples of the type of discussions they have on their website.
Here is a description of a small water dam failure in Greece.
Here is some video of the Samarco tailings runout in Brazil.
From time to time the Landslide Blog will examine mine slopes, tailings dams, and waste dump failures, however much of their information relates to natural earth or rock slopes along roads or in towns.
Some of their videos are quite fascinating, illustrating the forces behind some of earth’s natural erosion processes. Check it out for yourself.
The bottom line on all of this is that the less the mining industry is mentioned in the Landslide Blog, the better it is.

49. Remote Sensing of Ore Grades

mining automation
Update:  This blog was originally written in March 2016 and has been updated Jan 2019. 
The mining industry must continually find ways to improve and modernize. The most likely avenue for improvement will be using new technologies as they become available.
One of the players on the scene is a start-up company called “MineSense Technologies Ltd.”  They are a British Columbia company looking to improve ore extraction and recovery processes based on the sensing and sorting of low-grade ore. They hope their technology will improve mine economics by reducing the consumption of energy, water, and reagents.

Minesense

Having first written about this in 2016, its still not entirely clear to me how developed their technology is in 2019. Thus far they appear to be secretive with respect to their testing and performance results.  Certainly they are able to raise financing to keep them going.

Sensors are the answer

It appears MineSense is relying on a combination of ground-penetrating sensors with other technology in order to measure and report the grade of ore in real time.
Existing ore sorting technologies seem to focus on distinguishing mineralized material from gangue, but MineSense seems to be targeting using actual ore grades as the defining factor.
They hope to be able to eventually integrate their technology into equipment such as shovels, scooptrams, conveyors, feeders, and transfer chutes.
Their proprietary technology is based on High Frequency Electromagnetic Spectrometry and High Speed X-Ray Fluorescence sensors. Reportedly these can deliver better sensitivity and operate at high speeds. They plan to develop two distinct product lines; shovel-based systems; and conveyor belt-based systems.

ShovelSense

Their ShovelSense system would be a real-time mineral telemetry and decision system and used for measurement of ore quality while material is being scooped into the dipper, then reporting the ore quality and type to the grade control/ore routing system, and then enabling real-time online ore/waste dispatch decisions. Additional features may include tramp metal and missing tooth detection.  Sounds like a good idea, albeit some practical operating issues will need to be overcome.

BeltSense

Their belt conveyor systems (BeltSense) will use high-speed multi-channel sensing to characterize conveyed ore and waste in real time, allowing grades and tonnages to be reported and allowing ore to be diverted to correct destinations based on the sensor responses.
MineSense say that pilot units are operating at 20 tph and systems of up to 2000 tph are in the development stages.
Ore sorting has been around for a long time, with companies like Tomra, but possibly the MineSense technical approach will be different.

Conclusion

The bottom line is that we should all keep an eye on the continued development of this technology, especially as MineSense completes larger field trials.  Hopefully they will soon share results with industry since it will be critical for operators to see more actual case study data on their website.
I recognize that developing new technology will have its successes and failures. Setbacks should not be viewed as failure since innovation takes time. Hopefully after fine tuning their technology they can advance to the commercialization stage.

48. Online Collaboration and Management Tools (Part 2)

networking
This blog is the Part 2 continuation of a prior post regarding collaboration software tools that mining teams should consider.   Here are a few more ideas I’d like to share, having found that these are great to have in your toolbox.
G-suite and miningG-Suite: is the family of Google Drive, Docs, Sheets, and Slides online services.
Group collaboration can be frustrating using spreadsheets or text documents.  We typically end up with different versions of the same document floating around.  No one is sure whether they are editing the most recent version or which version they should be editing.
With G-Suite (Google Sheets and Google Docs) you can create online spreadsheets and documents and allow multiple team members to review and edit them in real-time online at the same time.
Writing reports gets simpler since there is only one working version of the document. A “track changes” option is there (called “Suggesting”) and everyone can see the edits as they are being made. No more asking “who has the most current version?”  This type of collaborative editing is also great for Design Criteria Documents that are regularly being updated by different team members.
I have used both DropBox and Google Drive, but my preference is using Google Drive since it integrates well with G-Suite.

Foxit Reader:  This is an alternative to Adobe Reader and can be used for reviewing PDF documents, whether text documents or drawings.
Foxit provides great editing and commenting tools like highlighting text, adding comments, drawing lines and boxes, adding comment balloons, cut & pasting images into the PDF file, and then saving the commented version.
For the most part I have stopped using Adobe Reader and have now switched over to Foxit due to commenting capability that it provides.
Google Hangouts:  This is an online and mobile application for team conference calling.  It allows screen sharing, online group video conversations, sends out meeting reminders, and it will call participants at the require time.
While Hangouts has many of the same features as Skype, it integrates with Google Calendar and Gmail.   Most of the tech world uses Hangouts instead of Skype, but I’m not sure if the mining industry is ready to move away from Skype.
An honorable mention for video-conferencing goes to Zoom. Some tech developers have been switching to Zoom, they feel it has more capabilities than Hangouts and better video resolution. I have never used it however.

Other Software

Those are a few of the software tools that I have found useful and so now you’re probably wondering “what else is out there for me?” The website The Freelance Stack lists many of different tools that exist. Check them out and some of the others may be of value to you. :

Geology & Mining Software

One of the standard marketing approaches used by tech software is to provide a fully functional product for free and then charge money to access the enhanced features. The goal is to get future users familiarized and trained on the product.  They hope that they will get hooked on the product and decide to upgrade their plan for the full product suite.
I’m not sure whether any geology or mining software  is available for free in a fully functional format with optional upgrading. By functional, I don’t mean simply providing a “viewer” to view the work of others or a 30-day free trial period.  I mean actual software that provides some useful capability for free in order to get you hooked. Please let us know if this software marketing approach exists in the mining industry.

Conclusion

The bottom line is that there is a lot of interesting collaboration software out there.  Its readily available, much of it is free, and can make managing your remote project teams easier. Just because the software is used by the tech industry and millennials, don’t assume it won’t have a benefit to the mining industry.
The downside is the need to train and learn the new software, and the mining industry may not be so receptive to that.

47. Online Collaboration and Management Tools (Part 1)

networking
Update:  This blog was originally published March 2016.   However like all things, the online world keeps evolving. So I have updated Part 1 and Part 2 of the blog (Dec 2018).  I added new software suggestions and removed some.
As part of a side business, I have been working alongside a team of software developers. It has been a good learning experience for me to see how the tech world does things compared to how the mining industry likes to work. We see a lot of private equity flowing into tech and less into mining, so they must be doing something right.
The tech start-up industry has developed its own set of jargon.  Common terms are agile management, lean start-ups, disruption, minimum viable products, pings, fail fast, and sprints.
Some of their work approaches do not make sense for the mining industry where one doesn’t have the luxury of using trial-and-error and customer feedback to help complete a project.
For software, the attitude is get it out the door fast and your customers will then tell you what fixes are needed. In mining you want to get it right the first time.  Having said that, some mining people will say they have seen 43-101 technical reports that follow the “wait for customer feedback” model.
Now where the tech industry can provide us with some guidance is in the implementation of collaboration tools. It is becoming more common for software developers to work remotely.  To collaborate they use the technology available or they develop new technology to meet their needs.  Mining teams are also working more and more from remote offices these days.

What are the collaboration software available

The following is a partial list (Part 1) of free software tools that I have used, mainly because I was forced to. With some hesitation at first, I have subsequently found the tools easy to use.  Many of them can definitely be applied in the mining industry with remote and diverse study teams.
There are a lot more tech tools out there but my list includes some that I have personally used. Most of these are free to begin with, and enhanced features are available at a minimal cost. However even the free versions are functional and can be used to build a comfort level in the team. Most of them provide both web based access and mobile access so even when you’re on the road you can still use them and contribute.

Trello

Trello: If you want to create a “to-do list” or task list for your team, this is the software to use. Imagine a bunch of  post-it notes that you can place under different categories, assign persons to each note, attached a file to the note if you wish, and then have back and forth discussions within each note.   Once a task is done, just drag the note to another category (e.g. “In Progress”, “Completed”). Anyone on the team can be invited to the Trello Board and can collaborate. See the image below for an example Trello screenshot.   This is a great tool for helping to manage tasks in a mining study.

 

Trello screenshot

Slack

Slack: If you want to maintain a running dialogue of group discussions that invited team members can follow and join in on, then Slack (a Canadian company) is for you. It can replace the long confusing back-and-forth emails that we commonly see.  If someone forgets to “reply all” the rest of the team is out of the loop. See the image below for an example Slack screenshot. It’s great for discussions among the team.  You can also have private one-on-one discussions or wide open team discussions.  You can attach files too and you can get pinged when something new is added. It provides permanent record of conversations and decisions.

Slack Screenshot

Mural

Mural:  Mural is a recent innovation to solve the issue that remote teams have of not sitting in the same room and writing ideas down on a whiteboard.   For that last while, there was no good white boarding software out there but I understand that Mural fills the gap.  i have not used it so cannot vouch for its simplicity, however it seems to be catching with the tech developers.  The screenshot below shows the type of inter-actions possble.  Each person has access to write on the whiteboard.
Basecamp: is similar program to Slack that incorporates features from both the above and some people swear by this tool. I have not personally used it so cannot vouch for it, but some say it is very good.

Conclusion

The bottom line is that there is a lot of good stuff out there, readily available, much of it free, and can facilitate collaboration among your teams. Just because its tech industry related, don’t assume it wouldn’t have an application in the mining world.  As millennials enter the mining workforce, these tools may gain a foothold.
To read about even more collaborative tools, take a look at Part 2 of this blog.  Comments on any of the discussions or software are appreciated.

46. Tailings Disposal Method Risk

mine tailings
After the Mt Polley and Samarco tailings failures, there have been ongoing discussions about the benefits of filtered (dry stack) tailings as the only way to eliminate the risk of catastrophic failure. Mining companies would all like to see risk reductions at their projects.

Filtered tailings stack

However what mining companies don’t like to see are the capital and operating costs associated with dry stacking. The filtering cost and tailings transport cost are both higher than for conventional tailings disposal. Obviously this cost increase gets offset against improved environmental risk and simpler closure.

So what is a company to do?

In my experience when designing a new mining project, all companies at some point complete a trade-off study for different tailings disposal methods and disposal sites. Contrary to some environmental narratives, mining companies really do want to know about their different tailings options.  They would all adopt the dry stack approach if it was the most advantageous method.
The mining companies are fully aware of the benefits but the dilemma is the cost and being able to somehow justify the technology. Complicating their decision, companies also have other options for reducing their tailings risk.

The  final decision can get complex.

In a tailings risk analysis, people will use a risk-weighting approach to assign an expected economic impact to their tailings plans. For example, if the cost of a failure is $200 million and the risk is 0.1%, then the Expected Cost is $200,000. The problem with this is its based on a theoretical calculation on an assumed likelihood of failure.   In reality either the dam will fail or it won’t.  So failure remediation money will be spent ($200M) or it won’t be spent ($zero), it won’t be partially spent ($200k).
The accepted tailings risk therefore becomes a subjective factor.
While implementing a dry stack may reduce the risk of catastrophic failure to near zero, implementing a $100,000 per year monitoring program on a conventional tailings pond will reduce its risk.
Implementing a $500,000 per year monitoring program would reduce that risk even further.
Installing in a water treatment plant to enable periodic water releases may further lower the tailings risk.
The company can look at various mitigation options to keep lowering their risk, although none of the options would necessarily bring the risk down to zero. Ultimately the company could compare the various risk mitigation options against the dry stack costs in order to arrive at an optimal path forward.

What level of risk is acceptable?

So the question ultimately becomes how low does one need to reduce the tailings risk before it is acceptable to shareholders, regulators, and the public. I don’t think the answer is that one must lower the risk down to zero. There are not many things in today’s world that have zero risk. Driving a car, air travel, shipping oil by ocean tanker, having a gas furnace in your house..none of these have zero risk yet we accept them as part of living.
Environmental groups continually discuss ways of forcing regulators and mining companies to take action against the risk of tailings failure. This is commendable.
However they generally fail to provide any guidance on what level of risk would be acceptable to them or to the public. It seems to be difficult for these groups to define what an acceptable risk is. They offer no solutions, other than either zero risk or shut down all mining.

Conclusion

We know that mining is here to stay so we all should work together towards solutions.
The solutions need to be realistic in order to be taken seriously and to play a real role in redefining tailings disposal. Dry stack may not be the only solution and we should be looking for more ways to improve tailings disposal.
Since these other options don’t seem to be available yet, dry stack tends to offer the best solution in most circumstances.  I have written another blog on this topic “Fluid Tailings – Time to Kick The Habit?”

45. Do Any Junior Producers Model a Gold ETF?

junior mining company
I have often wondered if any of the smaller gold producers have ever considered modelling their business plan similar to a gold Exchange Traded Fund (“ETF”).
This hybrid business model may be a way for companies to provide shareholders a way to leverage themselves to physical gold rather than leveraging to the performance of a mine.

Let me explain further

Consider two identical small mining companies each starting up a new mine. Their projects are identical; 2 million gold ounces in reserves with annual production rate of 200,000 ounces with a 10 year mine life. On an annual basis, let’s assume their annual operating costs and debt repayments could be paid by the revenue from selling 180,000 ounces of gold. This would leave 20,000 gold ounces as “profit”. The question is what to do with those 20,000 ounces?

Gold Dore

Company A

Company A sells their entire gold production each year. At $1200/oz, the 20,000 oz gold “profit” would yield $24 million. Income taxes would be paid on this and the remaining cash can be spent or saved.
Company A may decide to spend more on head offices costs by adding more people, or they may spend money on exploration, or they could look at an acquisition to grow the company. There are plenty of ways to use this extra money, but returning it to shareholders as a dividend isn’t typically one of them.
Now let’s jump forward several years; 8 years for example. Company A may have been successful on grassroots exploration and added new reserves but historically exploration odds are working against them. If they actually saved a portion of the annual profit, say $10M of the $24M, after 8 years they may have $80M in cash reserves.

Company B

Company B only sells 180,000 ounces of gold each year to cover costs.  It puts the remaining 20,000 ounces into inventory. Their annual profit-loss statement shows breakeven status since their gold sales only cover their financial commitments. In this scenario, after 8 years Company B would have 160,000 gold ounces in inventory, valued at $192 million at a $1200 gold price.
If you’re an investor looking at both these companies in the latter stages of their mine life, which one would you rather invest in?
Company A has 400,000 ounces (2 years) remaining in mineral reserves and $80M cash in the bank. Company B also has 400,000 ounces of mineral reserves and $192 million worth of gold in the vault. If I’m a bullish gold investor and foresee a $1600/oz gold price, then to me Company B might theoretically have $256M in the vault (160k oz x $1600). If I’m a super bullish, their gold inventory could be worth a lot more..theoretically.

Which company is worth more?

I assume that the enterprise value (and stock price) of Company A would be based on its remaining reserves at some $/oz factor plus its cash in the bank. Company B could be valued the same way plus its gold inventory. So for me Company B may be a much better investment than Company A in the latter stages of its mine life. In fact Company B could still persist as an entity after the mine has shutdown simply as a “fund” that holds physical gold. If I am a gold investor, then Company B as an investment asset might be of more interest to me.
If Company A had good exploration results and spend money wisely, then it may have more value but not all companies are successful down this path.

Conclusion

It appears that most of the time companies sell their entire annual gold production to try to show profit on the annual income statement. This puts cash in the bank and shows “earning per share”.
My question is why not stockpile the extra gold and wait for gold prices to rise?  This might be an option if the company doesn’t really need the money now or doesn’t plan to gamble on exploration or acquisitions.
This concept wouldn’t be a model for all small miners but might be suitable for a select few companies to target certain types of gold investors.
They could provide an alternative mining investment that might be especially interesting in the last years of a mine life. Who really wants to buy shares in a company who’s mine is nearly depleted?  I might buy shares, if they still hold a lot of gold.

44. Higher Metal Prices – Should We Lower the Cut-Off Grade?

When metals prices are high, we are generally told that we should lower the cutoff grade. Our cutoff grade versus metal price formula tells us this is the correct thing do. Our grade-tonnage curve reaffirms this since we will now have more ounces of gold in the mineral reserve.

But is lowering the cutoff grade really the right thing to do?

Books have been written on the subject of cutoff grades where readers can get all kinds of detailed logic and calculations using Greek symbols (F = δV* − dV*/dT). Here is one well known book by Ken Lane, available on Amazon HERE.
Recently we have seen a trend of higher cash costs at operating mines when commodity prices are high. Why is this?
It may be due to higher cost operating inputs due to increasing labour rates or supplies. It may also be partly due to the lowering of cutoff grades.  This lowers the head grade, which then requires more tonnes to be milled to produce the same quantity of metal.
A mining construction manager once said to me that he never understood us mining guys who lower the cutoff grade when gold prices increase. His concern was that since the plant throughput rate is fixed, when gold prices are high we suddenly decide to lower the head grade and produce fewer and higher cost ounces of gold.

Do the opposite

His point was that we should do the opposite.  When prices are high, we should produce more ounces of gold, not fewer. In essence, periods when supply is low (or demand is high) may not be the right time to further cut  supply by lowering head grades.
Now this is the point where the grade-tonnage curve comes into play.
Certainly one can lower the cutoff grade, lower the head grade and produce fewer ounces of gold.  The upside being an extension in the mine life.  A company can report more ounces in reserves and perhaps the overall image of the company looks better (if it is being valued on reserves).

What if metal prices drop back?

The problem is that there is no guarantee that metal prices will remain where they are and the new lower cutoff grade will remain where it is. If the metal prices drop back down, the cutoff grade will be increased and the mineral reserve will revert back to where it was. All that was really done was accept a year of lower metal production for no real long term benefit.
This trade-off  contrasts a short term vision (i.e. maximizing annual production) against a long term vision (i.e. extending mineral reserves).

Conclusion

The bottom line is that there is no simple answer on what to do with the cutoff grades.  Hence there is a need to write books about it.
Different companies have different corporate objectives and each mining project will be unique with regards to the impacts of cutoff grade changes on the orebody.
I would like to caution that one should be mindful when plugging in new metal prices, and then running off to the mine operations department with the new cutoff grade. One should fully understand both the long term and short term impacts of that decision.

43. Mining Fads and the Herd Mentality

minerals
Have worked in the mining industry for over the last 35 years it is always interesting to watch the herd mentality that exists.  Its obvious how easily we all get caught chasing the latest fads.
All it takes is a short term spike in a commodity price or a big discovery somewhere and then off everyone goes running in that direction.  It doesn’t matter the rationale driving the event, all we know is that we need to be in there and our investors want to be in there too.

Just don’t be the last on the bandwagon

Based on my experience, the fads that grab us can include commodities, locations, or technologies. The mining industry is very flexible in that regard. I’ll give a few examples that I have seen.  You probably have even more from your own experience.

Commodity Fads

It seems that as soon as there is a price spike or positive market narrative, a commodity can take on a life of its own.  The following list gives a few examples and when you think about them ask how many actually came into successful production.
  • Potash: a few years ago potash prices spiked and potash properties were all the fad no matter where they were located around the globe, be it Canada, Russia, Ethiopia, Thailand, Brazil, etc.  That has largely fizzled out as prices returned to normal.
  • Lithium / Graphite:  as soon as green battery technology started to be promoted in the news, miners couldn’t run fast enough to pick up the lithium properties.  The same idea hold for the graphite, vanadium, cobalt, and rare earth categories.  Parts of the sector are still hot in 2018 although lithium stories seem to have run their course.
  • Uranium: years ago uranium prices spiked and Ur properties were hot everywhere.  Prices have dropped but seem to be ramping up in late 2018.
  • Nickel: years ago a spike in nickel prices caused a surge in nickel properties, whether it was sulphide nickel, laterite nickel, or other forms.
  • Iron Ore: in conjunction with the Chinese construction boom, iron ore properties were hot around the globe, in high cost or low cost jurisdictions, it didn’t matter where the property was.  Iron is still being pursued but mega scale projects always overhang the market.
  • Diamonds: in conjunction with the first diamond discoveries in Canada in the 1990’s, diamond properties became hot, whether in the Canada or around the globe.  If you couldn’t get a property in Canada’s NWT boom area, anywhere else was fine.
  • China in general: a few years ago every base metal project was thought of as either a potential supplier to China or a potential acquisition for Chinese companies.  As long as it could meet Chinese investor interest it was good.

Location Fads

Mineral claim map exampleWe have all seen the staking rushes that occur when a world class prospect is discovered.  I’m sure we can all recall getting the large claim maps (as shown) with their multicolored graphics showing the patchwork of acquisitions around a discovery. PDAC was great for distributing these.  They were well done and interesting to study.
Picking up properties in hot areas became the fad and share prices would move upwards regardless of whether there was any favorable geology on the property.  Who recalls the following?
  • Voisey Bay: with a mad staking rush around there, with nothing else really paying off in the long run.
  • Saskatchewan:  the potash staking rush where almost every inch of the potash zone was staked with only a couple of companies eventually moving forward and only one going into production.
  • Indonesia: during Bre-X people could not acquire properties in Indonesia fast enough.
  • NWT:  where the diamond property staking rush was crazy in the mid 1990’s.

Technology Fads

Even mining or processing technologies could get caught up in somewhat of a wave and become a fad for further study.  Sometimes this is driven by suppliers or consultants.  Who can recall…
  • Paste Tailings: with numerous conferences and consultants promoting thickened or paste tailings technology as the panacea.  This lead to numerous studies related to thickening, pumping, and disposal at each mine.
  • Block Caving: whereby in order to deliver high tonnages at low cost, bulk underground mining was being promoted.  Everyone wanted their underground project to be a low cost caving style operation.
  • High Pressure Grinding Rolls (HPGR): where process consultants would highlight HPGR as the new replacement for conventional grinding mills.  I’m not sure this technology has taken the industry by storm as they were hoping in the 1990’s.
  • IPCC: whereby inpit crushing and conveying systems were being promoted in many articles and global conferences as the solution to operating cost issues.  I think implementation of IPCC technology isn’t as simple as envisioned and I’m not aware of many cases of its successful implementation.
  • Dot.com: in the early 2000’s many junior miners left exploration behind and transitioned to the dot.com boom, a fad that essentially went nowhere for most.
  • Medical marijuana: it seemed to be the hopeful future for some junior miners in 2000 and still today. The new marijuana entrepreneurs are building on the junior mining model of heavy promotion with skyrocketing valuations and questionable economics.
  • Pre-concentration: this seems to be a growing technology that may be gaining momentum.  It isn’t new technology and it will definitely have its benefits.  However a big stumbling block is how many deposits are actually suitable for its application.  I have written more about this technology “Pre-Concentration – Savior or Not?

Conclusion

Have I missed anything?
The bottom line is that over the years it has been interesting to watch the mining industry react to events.  Sometimes it seems like we’re passengers on a boat, running from one side to other side and then back again.  Unfortunately that doesn’t necessarily make for smooth sailing and can result in upset stomachs.
What’s the next fad? I don’t know but if you can predict it you can probably make a lot of money.

 

42. Global Tax Regimes – How Do They Compare?

mining economics
Update: This blog was originally written in Feb 2016, but has been updated in Dec 2018.
As a reminder for all QP’s doing economic analysis for PEA’s, don’t forget that one needs to present the economic results on an after-tax basis.
Every once in a while I still see PEA technical reports issued with only pre-tax financials.  That report is likely to get red- flagged by the securities regulators.  The company will need to amend their press release and technical report  to provide the after tax results.    No harm done other than some red faces.

Taxes can be complicated

When doing a tax calculation in your model, where can you find international tax information?  PWC has a very useful tax-related website.  The weblink below was sent to me by one of my industry colleagues and I thought it would be good to share it.
The PWC micro-site provides a host of tax and royalty information for selected countries.  The page is located at http://www.pwc.com/gx/en/industries/energy-utilities-mining/mining/tax.html
On the site they have a searchable database for tax information for specific countries.
The PWC tax and financial information includes topics such as:
  • Corporate tax rates
  • Excess profits taxes
  • Mineral taxes for different commodities
  • Mineral royalties
  • Rates of permissible amortization
  • VAT and other regulated payments
  • Export taxes
  • Withholding taxes
  • Fiscal stability agreements
  • Social contribution requirements
PWC has a great web site and hopefully they will keep the information up to date since tax changes happen constantly.   It would be nice to see them add more countries to their 23 country database but it’s already good.  Check it out.

 

41. Resource Estimates – Are Independent Audits A Good Idea?

mining reserves
Question: How important is the integrity of a tailings dam to the successful operation of a mine?
Answer: Very important.
Tailings dam stability is so important that in some jurisdictions regulators may be requiring that mining companies have third party independent review boards or third party audits done on their tailings dams.  The feeling is that, although a reputable consultant may be doing the dam design, there is still a need for some outside oversight.
Differences in interpretation, experience, or errors of omission are a possibility regardless of who does the design.  Hence a second set of eyes can be beneficial.

Is the resource estimate important?

Next question is how important is the integrity of the resource and reserve estimate to the successful operation of a mine?
Answer: Very important.  The mine life, project economics, and shareholder value all rely on it.     So why aren’t a second set of eyes or third party audits very common?

NI 43-101 was the first step

In the years prior to 43-101, junior mining companies could produce their own resource estimates and disclose the results publicly.  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 and/or prepare their own estimate.  Now the QP ultimately takes legal responsible for the estimate.
Nowadays most small companies do not develop their own in-house resource estimates.  The task is generally awarded to an independent QP.

Resource estimation is a special skill

Possibly companies don’t prepare their own resource estimates due to the specialization needed in modelling and geostatistics. Maybe its due to the skills needed to operate block modeling software.   Maybe the companies feel that doing their own internal resource estimate is a waste of time since an independent QP will be doing the work anyway.

The QP is the final answer..or is it?

Currently it seems the project resource estimate is prepared solely by the QP or a team of QP’s.   In most cases this resource gets published without any other oversight. In other words no second set of eyes has taken a look at it.  We assume the QP is a qualified expert, their judgement is without question, and their work is error free.

Leapfrog Model

As we have seen, some resources estimates have been mishandled and disciplinary actions have been taken against QP’s.   The conclusion is that 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 they are competent or qualified. Geological modeling is not an exact science and will be based on their personal experience.

What is good practice?

The question being asked is whether it would be good practice for companies to have a second set of eyes take a look at their resource estimates developed by independent QP’s?
Where I have been involved in due diligence for acquisitions or mergers, it is not uncommon for one side to rebuild the resource model with their own technical team.  They don’t have 100% confidence in the original resource handed over to them.   The first thing asked is for the drill hole database.
One downside to a third party review is the added cost to the owner.
Another downside is that when one consultant reviews another consultant’s work there is a tendency to have a list of concerns. Some of these may not be material, which then muddles the conclusion of the review.
On the positive side, a third party review may identify serious interpretation issues or judgement decisions that could be fatal to the resource.
If tailings dams are so important that they require a second set of eyes, why not the resource estimate?  After all, it is the foundation of it all.

40. Disrupt Mining Challenge – Watch for it at PDAC

Update:  This blog was originally written in January 2016, and has been updated for Jan 2018.

Gold Rush Challenge

In 2016 at PDAC, Integra Gold held the first the Gold Rush Challenge.  It was an innovative event for the mining industry.  It was following along on the footsteps of the Goldcorp Challenge held way back in 2001.
The Integra Gold Rush Challenge was a contest whereby entrants were given access to a geological database and asked to prepare submissions presenting the best prospects for the next gold discovery on the Lamaque property.  Winners would get a share of the C$1 million prize.
Integra Gold hoped that the contest would expand their access to quality people outside their company enabling their own in-house geological team to focus on other exploration projects.   In total 1,342 entrants from over 83 countries registered to compete in the challenge.  A team from SGS Canada won the prize.

Then Disrupt Mining came along

In 2017, its seem the next step in the innovation process was the creation of Disrupt Mining sponsoerd by Goldcorp.  Companies and teams developing new technologies would compete to win a $1 million prize.
In 2017, the co-winning teams were from Cementation Canada (new hoisting technology) and Kore Geosystems (data analystics for decision making).
In 2018, the winning team was from Acoustic Zoom, an new way to undertake seismic surveys.

The 2019 winners will be announced at PDAC.  The entry deadline has passed so you’re out of luck for this year.

Conclusion

At PDAC there are always a lot of things to do, from networking, visiting booths, presentations, trade shows, gala dinners, and hospitality suites.
Now Disrupt Mining brings another event for your PDAC agenda.