Mine Builders vs Mine Vendors

Normally when Major or Intermediate miners advance their projects through the study stages, they usually have the intent to build the mine at some time.  Sometimes they may decide to sell the project if it no longer fits in their corporate vision or if they desperately need some cash.   However, selling the project was likely not their initial intent.
On the other hand, Junior miners tend to follow one of two paths.  They are either on (a) the Mine Builder path, or (b) the Mine Vendor path (i.e. sell the project).  In this article, I will present some examples of companies on each path.   There will also be some discussion on whether the engineers undertaking the early stage studies (e.g., PEA’s) should be considering the path being followed.

The Mine Builder Path

The Mine Builder generally follows a systematic approach, as sketched out in the image below.  The project advances from drilling to Mineral Resource Estimate (MRE), scoping study (PEA), then through the Pre-Feasibility Study (PFS) and/or Feasibility Study (FS) stages.  Environmental permitting is normally proceeding in conjunction with the engineering. Once the FS is complete, the next hurdles for the Mine Builder are financing and construction.   The path is fairly orderly.
Mining Project Builder Path
The amount of the exploration drilling is only needed to define an economic resource to the Measured and Indicated classifications.   There is no requirement to delineate the mineral resource on the entire property since there will be time to do that during production.   Demonstrating an economic resource, with some upside potential, is often sufficient for the Mine Builder.
Three examples of companies on the Builder path are shown below; Orla Camino Rojo gold project (in operation), SilverCrest Las Chispas gold project (in operation), and Nexgen Rook uranium project (financing stage).   Although the duration of each timeline is different due to different project complexities, the development paths are consistent.  Most junior miners would not consider themselves on the Builder path.

The Mine Vendor Path

Mine Vendor type organizations have the primary goal of selling their project.  These companies may consist of management teams that don’t have the desire, comfort, or capability to put a mine into production. For example, this is often the case with companies founded by exploration geologists, whereby their plan is to explore, grow, and sell all (or part) of the project.   In other cases the Junior miner realizes their project is large with a high capital cost.  That capital cost is beyond the financial capability of the company.  Hence a deep-pocket partner is required or an outright sale is preferred.
Mining Project Vendor Path
The Mine Vendors tend to follow a different development path than the Mine Builders. They don’t have the same long term objectives.  Vendors want out at some point.
The Vendor path can be more irregular, with multiple studies undertaken at different levels of detail, sometimes stepping back to lower level of studies as more information is acquired.  Their object is to make the project look good to potential buyers, and look better than their junior miner competitors also for sale.  Often this ongoing project improvement process is termed “de-risking”.
Not only must the Vendors demonstrate an economic resource, they must demonstrate a highly valuable resource to maximize the acquisition price for the shareholders.  They will try to do this through multiple drill campaigns followed by multiple studies, each one looking better than the prior one.
Sometimes you will see a management team indicate that, if the project isn’t sold, they are going to put it into production themselves.  This may be true in some cases, or simply part of the negotiating game to try to maximize the acquisition price.
Two quick examples of companies on the Vendor path are shown below: Western Copper Casino project and Seabridge KSM project.  The durations of these development timelines are extensive and expensive, while waiting for an interested buyer.   During these periods, the companies may continue to spend money de-risk the project further.  The hope is that the company can eventually make the project attractive or that changing market conditions will make it attractive for them.   Unfortunately, there is always the possibility that no buyer will ever come along.

Engineer’s Perspective

One question is whether the independent geologists and engineers working on the advanced studies should be aware of the path the company is following. Is the company a Builder or a Vendor?
Some may feel that the technical work should be independent of the path being followed.  Based on my experience as both an owner’s representative and independent study QP, I have a somewhat different opinion.  The technical work should be tailored to the intended path.

The Engineer on the Mine Builder Path: 

If an engineer understands that a Mine Builder’s project will move from PEA to PFS to FS in rapid succession, then there is more incentive to ensure each study is somewhat integrated.
For example, a PEA will use Inferred resources in the economics.  However, if the project will advance to the PFS stage, where Inferred cannot be used, then it is important for the PEA to understand the role that Inferred plays in the economics.    How much drilling will be needed to upgrade Inferred resource to Indicated for the PFS, if needed at all?
Typically, capital costs tend to increase as advancing studies get more accurate due to greater levels of engineering.   A Builder wants to avoid large cost increases when moving from PEA to PFS to FS.  Therefore, when costing at the PEA stage, one may wish to increase contingency or use conservative design assumptions.  After all, one is not trying to sell or promote the project internally, but rather move it towards production.
There is no value to the Mine Builder by fooling themselves with low-balled cost estimates.  (Although some may argue there is still a desire to low ball costs to get management to approve the project).    Conversely Mine Vendors do have some incentive to low ball the costs.
Perhaps some of the recent project capital cost over-runs we have seen is that the Vendor mentality was used at the PEA stage to optimistically set the capital cost baseline.  Subsequent studies were then forced to conform to that initial baseline. Ultimately construction will be the arbiter on the true project cost.  Hence there is no real value in underestimating costs, ultimately making management appear incompetent if costs do over-run.
The Mine Builder will also be advancing environmental permitting simultaneously with their advanced studies.  Hence at the early stage (PEA) it is important to properly define the site layout, processing method, production rate, facility locations, etc. since they all feed into the permitting documents.
Changing significant design details in the future will set back the permitting and construction timelines.  Hence, for the Mine Builder, the engineers should focus on getting the design criteria mostly correct at the PEA stage.  For the Mine Vendor, this is not as important since multiple studies are being planned for in the future anyway.

The Engineer on the Mine Vendor Path: 

The objective of the Mine Vendor is to make the project attractive to potential buyers.  There is less urgency in fast tracking detailed engineering and permitting.
It is not uncommon to see multiple drilling programs, followed my multiple studies of scenarios with different size, production rate, and layout.   The degree of engineering conservativeness in design and costing is less critical since future studies may be on substantially different sized projects.
The role that the Inferred resource plays in the economics is also less important at this time, since a lot more drilling may be coming. The Vendor’s objective tends to be on maximizing resource size not necessarily optimizing resource classification.
While the Mine Vendor may also be advancing environmental permitting as another way to de-risk the project, the project design may still be in flux as the resource size changes.  Major modifications to the plan may cause permitting to stop and re-start, leading to an extended project timeline and wasted money.
There is also risk in starting the permitting with a project definition that isn’t of economic interest to future buyers.  Sometimes the Vendor may be making regulatory commitments that constrain the operating flexibility of future mine operators. Its easy to commit to things when you aren’t the one having to live up to them.
The Mine Vendor will also de-risk the project by moving from PEA to PFS and even to FS.   The caution with completing a FS is that it is a costly study and essentially brings one to the end of the study line.  What does the company do next if there is still no buyer?
Feasibility studies also have a shelf life, with the cost estimates and economics becoming inaccurate after a few years.  Some companies may re-examine the project, re-frame it, and jump back to the PEA or PFS stages.  There can be an on-going study loop, requiring continued funding with no guarantee of a sale in sight.  Often feasibility studies have the dual role of trying to boost the share price and market cap, as well as frame the project for potential buyers.

Conclusion

As an engineer, it is helpful to understand the objectives of the project owner and then tailor the technical studies to meet those objectives.  This does not mean low balling costs to make the study a promotional tool.  It means focusing on what is important.  It means recognizing the path, and what doesn’t need to be engineered in detail at this time.  This may save the client time, money, and improve credibility in the long run.
In many cases, the precise size of the deposit is less important than understanding the site, access, water supply, local community issues, the environmentally acceptable location for dumps and tailings, etc..   It can be more important to focus on these issues rather than having a detailed mine plan with multiple pit phases that immediately becomes obsolete in a few months after the next drilling campaign.
Potential buyers will have their own technical team that will develop their own opinions on what the project should be and what it should cost.   Just because a Mine Vendor has a feasibility study in hand, doesn’t mean a potential buyer will believe it.
This post is just a brief discussion of mining project timelines.   For those interested, there a few additional project timelines for curiosity purposes.   Each path is unique because no two mining projects are the same.  You can find these examples at this link “Mining Project Timelines”.
Let me know about other interesting projects that have interesting paths to learn from.  I can add them to the list.
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Grade-Tonnage Curves – Worthy of a Good Look

Most of us have seen the typical “grade-tonnage” table or graph, showing ore tonnes and grade at varying cutoff grades. It is usually part of every 43-101 technical report in Section 14.  We may glance at it quickly and then move on to more exciting chapters. Section 14 (Mineral Resources) can be a very complex chapter to read with statistics, geostatistics, and mathematical formulae.  However the grade-tonnage curve aspect isn’t complicated at all.
The next time you see the grade-tonnage relationship, I suggest taking a few seconds to study it a bit further.   There might be some interesting things in there.

Typical Grade-Tonnage Information

Typically, one will see grade-tonnage data in 43-101 Technical Reports towards the back of Section 14 "Mineral Resources".  The information is normally presented in either of two ways; (i) a grade-tonnage table or (ii) a grade tonnage graph.  Examples of each are shown below.  The grade tonnage graph typically has the cutoff grade along the bottom x-axis and the two separate y-axes  representing the ore tonnes above cutoff and the average ore grade above cutoff.
typical grade tonnage table
typical grade tonnage curve
Rarely do you see both the table and curve in the report, although ideally one would want to see both.  Given the option, I would prefer to see the graph more than the table of numbers.  The trend of the grade-tonnage information is just as important as the values, maybe even a bit more important.  Unfortunately, a data table by itself doesn’t illustrate trends very well.

Useful Grade-Tonnage Curve Information

mining grade tonnage curveWhen I am undertaking a due diligence review or working on a study, very early on I like to have a look at the grade-tonnage information.  This could be for the entire deposit resource, within a resource constraining shell, or in the pit design.
The grade-tonnage information gives an understanding of how future economics or technical issues may impact on the mineable tonnage.
An example of a typical grade-tonnage curve is shown here.
The cutoff grade along the x-axis will be impacted by changes in metal price or operating cost. The cutoff grade will increase if metal prices decrease or if operating costs increase.
The question is how sensitive is the mineable tonnage to these economic factors. The slope of the tonnage and grade curves will help answer this question.
In the example shown, the tonnage curve (blue dots) is fairly linear, meaning the ore tonnage steadily decreases with increasing cut-off grade.  That is expected and is reasonable.
mining grade-tonnage curveHowever, if the tonnage curve profile resembled the light blue line in this image, with a concave shape, the ore tonnage is decreasing rapidly with increasing cutoff grade.   This is generally not a favorable situation.
It indicates that a significant portion of the tonnage has a grade close to the cutoff grade.  If that’s the situation, the calculation of the cutoff and the inputs used to generate it are important and worthy of scrutiny.  Are they reasonable?  Over the long term, is the cutoff grade more likely to increase or decrease?
The same logic can be used with the ore grade curve in the graph.  As  shown in this example, the ore grade increases steadily as the cutoff is raised.  This is because lower grade ore is being shifted from ore to waste, and hence the remaining ore has better quality.  If the cutoff is raised from 0.4 g/t to 0.5 g/t, then some material with a grade of about 0.45 g/t is moved from ore to waste.
I also like to compare the ratio of the average grade to the cutoff grade.  Its nice to see a ratio of 4:1 to 5:1 to ensure the overall average grade isn’t close to the cutoff.  In this example, the cutoff grade is 0.5 g/t and the average grade is 4.5 g/t, a ratio of 9:1.
The tonnage curve and grade curve provide information on the nature of the mineral resource. Study them both.

Reporting Waste Within a Shell

One complaint I have about reporting mineral resources inside a resource constraining shell is the lack of strip ratio information. This applies whether disclosing a single mineral resource estimate or variable grade-tonnage data.
In my view, the strip ratio is even more important to be aware of when looking at grade tonnage data.
The strip ratio within a shell will climb as an increasing cutoff grade results in a decreasing ore tonnage.  Sometimes the strip ratio will increase exponentially. The corresponding amount of waste remaining in that pit shell increases, hence the ratio of the two (i.e. strip ratio) can escalate rapidly.
mining strip ratio curveRegarding mineral resources, one should be required to disclose the waste tonnage and strip ratio when reporting resources inside a constraining shell. The constraining shell and cutoff grade are both based on defined economic factors such as unit mining costs, processing cost, process recoveries, and metal prices.  With respect to the mining cost component, the strip ratio is a key aspect of the total mining cost, yet it normally isn’t disclosed.
Its common to see mention that the mining cost is (say) $2.50/t, but if the strip ratio is 10:1, that equates to an effective mining cost of $27.50 per tonne of ore.   That’s an important cost to know, especially if one is pushing a pit shell deep to maximum the mineral resource tonnage.
Each mineral deposit resource model can behave differently.  Hence, in my view, the waste tonnage should be included when reporting mineral resource tonnages (or presenting grade-tonnage data) within a constraining shell.  This waste tonnage or strip ratio can be in the footnotes to the mineral resource summary table.

Spider Diagram Downsides

In 43-101 technical reports, the financial Chapter 22 normally presents the project sensitivities expressed in a spider diagram or a table format.
In a previous blog post I had discussed the flaws in the spider diagram approach.  That article link is at “Cashflow Sensitivity Analyses – Be Careful”.  The grade-tonnage curve helps explain why that is.
In the spider diagrams, we typically see sensitivities related to +/- 20% on metal prices and operating costs.    If either of these factors change, then in reality the cutoff grade would change.
If the metal price decreases by -20%, or the operating cost climbs by +20%, the cutoff grade must increase.  This adjustment is normally not made in the sensitivity analysis because it requires a lot of re-work.
Elevating the cutoff grade would shift the pit ore tonnage towards the right on the grade-tonnage curve, showing a decrease in mineable tonnes.   However, in the spider diagram logic, the assumption is that production schedule in the cashflow model is unchanged and simply the metal prices or operating costs are adjusted.  Therefore, the spider diagram can be a misleading representation of the downside risk, showing a more positive situation than in reality.

Conclusion

The grade-tonnage information is always presented in technical reports. It examines the sensitivity of the orebody size to changes in cutoff grade. The next time you see grade-tonnage data, don’t skip over it.  Take a minute to study it further to see what can be learned.
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Polymetallic Drill Results – Interesting or Not?

A while ago I posted an article about how one can evaluate the economic potential of a gold deposit using early-stage exploration intercepts.  That article can be found at this link.   Doing the same evaluation for a polymetallic deposit is a bit more challenging.  There will be different metals of interest, with variable grades, prices, and process recoveries.
When disclosing polymetallic drill results, many companies will convert the multiple metal grades into a single equivalent grade.  I am not a big proponent of that approach.
I prefer using the rock value, whether calculated as a recoverable “NSR dollar value per tonne” or as an “insitu value per tonne”.  Either rock value is fine for my purposes.
Interestingly NI 43-101 prohibits the disclosure of insitu rock value but allows the use of metal-equivalents.  In my view this is a bit counter-intuitive since the equivalent grade  can be more misleading than rock value.

What can drill intercepts show

The three aspects that interest me the most when looking at early-stage drill results are:
  1. The economic value of the rock (in $/t tonne). This can either be “insitu value” (assuming 100% recovery, 100% payable) or the “NSR value” incorporating recovery and payable factors (if available).   Personally, the 100% insitu value is simpler to calculate and assess.
  2. The depth to the top of the economic zone, which indicates if this deposit would be a lower cost open pit mine or must be a higher cost underground mine.
  3. The length of the economic intervals, which indicates whether bulk mining approaches are viable versus the need to selectively mine narrow ore zones. The economic interval lengths also give a sense for the potential tonnage size (i.e. is it a big deposit or a small one).
There are two types of early-stage exploration data that can be examined with respect to the three items of interest described above.  They are (i) the drill hole assay data and (ii) the drill hole "intercepts of interest".  I will show an example of each in this post using sample data from an actual exploration program.
One can examine individual drill hole assays to calculate the rock value profile along each drill hole.  One can also examine the rock values for the major and minor intervals of interest reported in company news releases.
I normally like to examine both, but the intervals of interest data is publicly disclosed and more readily available.  Drill hole assays are often a bit harder, if not impossible, to track down.

Economic Parameters

In a polymetallic deposit, the insitu rock value is simply the summation of value of the individual metal, based on their respective assay grades.   An NSR rock value would apply an adjustment for metal recoveries and smelter payables, thereby lowering the insitu rock value somewhat.  However the insitu value is fine if there is no metallurgical or process data to rely upon.
Next one must determine what insitu rock value is deemed potentially economic, i.e. the breakeven cutoff.
One can estimate a processing cost and G&A cost.  In an open pit scenario, one doesn’t include the mining cost since the goal is to decide whether to send a truck to the waste dump or to the crusher. Only the processing and G&A cost musts be recovered by the ore value.   In an underground mining scenario, one would include the mining cost in the cutoff calculation.
In our example, lets assume a unit processing cost of $12/t and a G&A cost of $$2/t, for a combined cost of $14/t.    If we envision a metal recovery range of 75%-95%, we can assume 85% for now.
If we envision a smelter payable range of 75% to 95%, we will assume 85% for that also.
The “NSR factor” would now be 85% x 85% or 75%. Therefore, if the breakeven cost is $14/t, then one should target to mine rock with an insitu value greater than $20/tonne  (i.e. $14 / 0.75). This would be the approximate ore vs waste cutoff.  It is still only ballpark estimate at this  early stage, but good enough for this type of review.
Normally it would be nice to see the average head grade (or rock value) at 3 to 4 times greater than the cutoff grade.  This is not a necessity but it is a positive factor.
For example, in a gold deposit with a 0.3 g/t cutoff, one would like to see average head grades at least 0.9 to 1.2 g/t or more.  If the average head grade is close to the cutoff grade, then possibly the orebody tonnage may be very sensitive to changes in cutoff.  This may not be a good thing.
In our example, with a breakeven cutoff rock value of $20/t, one would like to see some ore zones with insitu values 3-4x higher, or above $60 - $80/t.   We can target >$70/t rock as a "nice to have" with $20/t as the cutoff.
So far, its all pretty simple. Let’s look at some actual exploration data to see how to apply this approach.
Our example will be a polymetallic deposit containing four metals of interest; copper, gold, cobalt, and iron.  One can examine  a few drill holes as well as the intervals of interest.
Metal prices used in this example are Cu = $4/lb, Au = $1980/oz, Co = $15.50/lb, Fe concentrate = $100/tonne, assuming 100% recovery and 100% payable for everything.

Drill Hole Assays Examples

The following three graphs show down hole profiles for Drill Holes A, B, C.  For each hole there are two plots. One plot shows the insitu rock values down the hole.  The second plot is the same, except the x-axis minimum has been set to the breakeven cutoff value of $20/t. This is done simply to highlight the potentially economic zones.
Hole A:
Shows positive economic results with ore quality rock starting near surface and extending down to 120 metres.
While many of the assay values are between $20-$70/t there are a significant number exceeding $70/t.
This hole has good economic potential for production.
Polymetallic drill hole evaluation
Hole B:
Shows positive economic results with economic rock starting near surface.  There are multiple economic zones extending all the way down to 370 metres.
The upper part of the hole, from 40m to 100m, shows multiple assay values exceeding the $70 target.
A second potentially economic zone is seen at a depth of 130m to 190m, which is still within the open pit mining range.
This hole also has good economic potential.
Polymetallic drill hole evaluation
Hole C:
For comparison purposes, Hole C is neutral in that while there are multiple potentially economic zones, they have lower insitu value.
This hole doesn't have the economic consistency that was seen in Holes A and B.
Possibly this hole may be near the edge of the ore body, in which case such a profile is not unexpected.
Polymetallic drill hole evaluation
Normally I would not spend a lot of time examining holes with little to no grade.  Some may consider this as a biased view.   However, every orebody has its limits, and what is occurring along the edges isn’t that critical in my view.
My objective is to understand what is happening in the core of the orebody, since that is what will dictate the overall economics.  Is the core of the orebody marginal value, or does it consist of high value rock?   Ultimately it will be the exploration company's task to keep drilling to define if there is sufficient tonnage of this higher value rock to justify a mine.  However this shows that at least the grades are there.

Intervals of Interest Example

The next series of plots examines the insitu rock values over drill intervals typically published in a company news releases. The intervals of interest will composite the individual assays over larger widths based on the company’s technical judgement.
It is interesting to see whether the larger intervals have good economic potential.   The following charts combine both major intervals with minor zones, often referred to as “including” in news releases. Both major and minor intervals can provide useful information.
Insitu Rock Value vs Depth:
This chart shows the rock values for multiple report intervals versus their depth (top) along the hole.
One can see multiple intervals at open pit depths (<250 m) with insitu values above the $20/t cutoff and above the $70/t threshold.
Within the upper 250 metres, we are seeing multiple intervals with good value.  That is a positive sign.
Note that these depths are not depths from surface, but distance along the drill hole.  In reality the intervals may be slightly closer to surface, depending on the hole inclination.
Polymetallic assay interval evaluation
Insitu Rock Value vs Interval Length:
The next question to ask is whether the higher value zones are narrow or wide?
In the example here one can see some wide zones (70 to 90m) with rock values in the range of $40-70/t.   These are good open pit mining widths.
There are numerous higher grade zones ($70-$200/t) in the 5m to 20m width range.   These widths are still fine for open pit mining.
Some intervals are quite narrow (<5m), being a bit more difficult to mine.  Since many of these are higher grade, they will tolerate some mining dilution.
Polymetallic assay interval evaluation

Conclusion

Although publishing insitu rock values is prohibited by NI-43-101, I find them important in my understanding the economic potential of a deposit. Reviewing the insitu rock values spatially is not difficult and can shed light on what is there. Even at a very early stage, one can get a sense of economic character of the orebody.   This is a great approach to use when doing an acquisition due diligence on an exploration stage project consisting mainly of drill hole data.
In my view, it would be beneficial if all polymetallic drill results were reported with the individual grades and using a standardized industry wide insitu rock value formula. Then one could compare projects (or even different zones on the same project) on an equal basis.   The cutoff to be applied to different projects would vary but the insitu value is what it is.
This might be better than each company applying their own unique equivalent grade calculation to their exploration results.
The equivalent grade calculation still requires assumptions on the metal prices and recoveries.  The result is, unfortunately, presented as a grade value rather than a dollar value.
The intervals of interest published in news releases are usually not available for download.   Great Bear is (was) one example where the data was available.  It would be nice if more companies followed suit by releasing their interval data in CSV or Excel format.  It worked out well for Great Bear!
Perhaps the detailed hole assay data may be too complex or voluminous to release.  Maybe this level of information is not useful except to the more technically driven investors. Nevertheless it would still be nice to have access to this drill data in electronic form, at least in the core of the orebody.
For further light reading, the two previous articles referenced above are “Gold Exploration Intercepts – Interesting or Not?" and "Metal Equivalent Grade versus NSR for multi-metals – Preference?"
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Mining Under Lakes – Part 2: Design Issues

This is Part 2 of a blog post related to open pit mining within bodies of water. Part 1 can be found at this link “Mining Under Lakes – Part 1“, which provides a few examples where this has been done successfully. Part 2  focuses on some of the social and technical issues the need to be considered when faced with the challenge of open pit mining within a water body.
dike construction in waterThe primary question to be answered is whether one can mine safely and economically without creating significant impacts on the environment.
The answer to this question will depend on the project location and the design of the water retaining structure.
I have worked on several projects where dike structures were built. I have also undertaken due diligence reviews of projects where dikes would be required. Most recently I have participated in some scoping level studies where mining within a lake or very close to a river were part of the plan.
In some instances, the entire orebody is located in the lakebed. In others, the orebody is mainly on land but extends out into the water. Each situation will be unique. In northern Canada, given the number of lakes present, it would be surprising if a new mining project isn’t close to a river or lake somewhere.

Dike concepts consider many factors

Different mining projects may use different styles of dikes, depending on their site conditions. Some dikes may incorporate sheet piling walls, slurry cutoff walls, low permeability fill cores, or soil grouting. There are multiple options available, and one must choose the one best suited for the site.
The following is list of some of the key factors and issues that should be examined.

ESG Issues

One’s primary focus should be on whether building a dike would be socially and environmentally acceptable. If it is not, then there is no point in undertaking detailed geotechnical site investigations and engineering design. One must have the “social license” to proceed down this path.
Water Body Importance: Is there a public use of the water body? It could be a fresh water source for consumption, used for agricultural or fishery purposes, or used as a navigable waterway, etc. Would the presence of the dike impact on any of these uses? Does the water body have any historical or traditional significance that would prevent mining within it?
Lake Turbidity: Dike construction will need to be done through the water column. Works such as dredging or dumping rock fill will create sediment plumes that can extend far beyond the dike. Is the area particularly sensitive to such turbidity disturbances, is there water current flow to carry away sediments?
At Diavik, a floating sediment curtain surrounding the dike construction area was largely able to contain the sediment plume in the lake.
Regional Flow Regime: Will the dike be affecting the regional surface water flow patterns? If the dike is blocking a lake outflow point, can the natural flow regime be maintained during both wet and dry periods?

Location Issues

If there are no ESG issues preventing the use of a dike, the next item to address is the ideal location for it.
Water depth: normally as the dike moves further away from land, both the water depth and dike length will increase. The water depth at the deepest points along the dike are a concern due to the hydraulic head differential created once the interior water pool is pumped out. The seepage barrier must be able to withstand that pressure differential, without leaking or eroding. A low height dike in shallow water may be able to use a simpler seepage cutoff system than a dike in deep water.
Islands: Are there any islands located along the dike path that can be used to shorten the construction length and reduce the fill volumes? Is there a dike alignment path that can follow shallower water zones?
Diavik open pit dikesPit wall setback: Given the size and depth of the open pit, how far must the dike be from the pit crest? Its nice to have 200 metre setback distance, but that may push the dike out into deeper water.
If the dike is too close to the pit, then pit slope failures or stress relaxation may result in fracture opening and increase the risk of seepage flows or catastrophic flooding. The pit wall rock mass quality will be the key determining factor in the setback distance.
Maximizing ore recovery: If the ore zone extends further out into the lake, maximizing ore recovery may require using a steep pit wall along the outer sections of the pit. This may require positioning haulroads with switchbacks along other sides of the pit rather than using a conventional spiral ramp layout.
At Diavik (see image), the A154 north open pit wall was pushed to about 60 metres of the dike to access as much of the A154N kimberlite ore as possible. Haulroads were kept to the south side of the pit.
It may be possible to recover even more ore by pushing out the dike even further. However, this may result in a larger and costlier dike or even require a different style of dike. There will be a tradeoff between how much additional ore is recovered versus the additional cost to achieve that. There will be a happy medium between what makes both technical sense and economic sense.

Design Issues

Once the approximate location of the dike has been identified, the next step is to examine the design of the dike itself. Most of the issues to be considered relate to the geotechnical site conditions.
Lakebed foundation sediments: What does the lakebed consist of with respect to soft sediments? Soft sediments can cause dike settlement and cracking, or mud-waving of fill material.
Will the soft sediments need to be dredged prior to construction, and if so, where do you dispose of this dredge slurry, and what impact will dredging have on the lake turbidity?
Lakebed foundation gravels: Are there any foundation gravel layers that can act as seepage conduits beneath the dike? If so, will these need to be sub-excavated, or grouted, or cut off with some type of barrier wall?  Sonic drilling, rather than core drilling, is a better way to identify the presence of open gravel beds.
Upper bedrock fracturing: Is the upper bedrock highly fractured, thereby creating leakage paths? If so, then rock grouting may be required all along the dike path to seal off these fractures.
Major faults: Are there any major faults or regional structures that could connect the open pit with the lake, acting as a source of large water inflow?. At Diavik, we attempted to characterize such structures with geotechnical drilling before construction. Upon review, I understand there was one such structure not identified, which did result in higher pit inflows until it was eventually grouted off.
Water level fluctuations: In a lake or river one may see seasonal water level fluctuations as well as storm event fluctuations. The height of the dike above the maximum water level (i.e. freeboard) must be considered when sizing the dike.
Ice scouring: In a lake or river that freezes over, ice loads can be an important consideration. During spring breakup as the ice melts, large sheets of ice can be pushed around and may scour or damage the crest of the dike. The dike must be robust enough to withstand these forces.
Construction materials available on site: Is there an abundance of competent rock for dike fill? Is there any low permeability glacial till or clay that can be used in dike construction? If these materials are available on site, the dike design may be able to incorporate them. If such materials are not available, then a alternate dike design may be more appropriate, albeit at a cost.

Conclusion

Each mine site is different, and that is what makes mining into water bodies a unique challenge. However many mine operators have done this successfully using various approaches to tackle the challenge.
Even at the exploration stage, while you are still core drilling the orebody through the ice, you can start to collect some of this information to help figure it all out.
The bottom line is that while mining into a water body is not a preferred situation, it doesn’t mean the project is dead in the water. It will add capital cost and environmental permitting complexity, but there are proven ways to address it.
On the opposite side, I have also seen situations where a dike solution was not feasible, so ultimately there are no guarantees that engineers can successfully address every situation. Lets hope your project isn’t one of them.
There could be a 3rd part to this post that discusses issues associated with underground mining beneath bodies of water; however that is not my area of expertise.  I would be more than happy to collaborate on a article with someone willing to share their knowledge and experience on that subject.
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NPV One – Cashflow Modelling Without Excel

NPV One mining software
From time to time, I encounter interesting software applications related to the mining industry.  I recently became aware of NPV One, an Australian based, cloud hosted application used to calculate mineral project economics. Their website is https://npvone.com/npvone/
NPV One is targeting to replace the typical Excel based cashflow model with an online cloud model. It reminds me of personal income tax software, where one simply inputs the income and expense information, and then the software takes over doing all the calculations and outputting the result.
NPV One may be well suited for those not comfortable with Excel modelling, or not comfortable building Excel logic for depreciation, income tax, or financing calculations. These calculations are already built in the NPV One application.
I had a quick review of NPV One, being given free access to test it out. I spent a bit of time looking at the input menus and outputs, but by no means am I proficient in the software after this short review.
Like everything, I saw some very good aspects and some possible limitations. However, my observations may be a bit skewed since I do a lot of Excel modelling and have a strong comfort level with it. Nevertheless, Excel cashflow modelling has its own pro’s and con’s, some of which have been irritants for years.

NPV One – Pros and Cons

NPV One mining softwarePros

  1. NPV One develops financial models that are in a standardized format. Models will be very similar to one another regardless of who creates it. We are familiar with Excel “artists” that have their own modelling style that can make sharing working models difficult. NPV One might be a good standard solution for large collaborative teams looking at multiple projects while working in multiple offices.
  2. NPV One, I have been assured, is error free. A drawback with Excel modelling is the possibility of formula errors in a model, either during the initial model build or by a collaborator overwriting a cell on purpose (or inadvertently).
  3. With NPV One, a user doesn’t need to be an Excel or tax modelling expert to run an economic analysis since it handles all the calculations internally.
  4. NPV One allows the uploading of large input data sets; for example life-of-mine production schedules with multiple ore grades per year. This means technical teams can still generate their output (production schedules, annual cost summaries, etc.) in Excel. They can then simply import the relevant rows of data into NPV One using user-created templates in CSV format.
  5. As NPV One evolves over time with more client input, functionality and usability may improve as new features are added or modified.

Cons

Like anything, nothing is perfect and NPV may have a few issues for me.
  1. Since I live and breathe with Excel, working with an input-based model can be uncomfortable and take time to get accustomed to. Unlike Excel, in NPV One, one cannot see the entire model at once and scroll down a specific year to see production, processing, revenue, costs, and cashflow. With NPV jump to. If you’re not an avid Excel user, this issue may not be a big deal.
  2. In Excel one can see the individual formulas as to how a value is being calculated.  Excel allows one to follow a mathematical trail if one is uncertain which parameters are being used. With NPV One the calculations are built in. I have been assured there are no errors in NPV One, so accuracy is not the issue for me. It’s more the lack of ability to dissect a calculation to learn how it is done.
  3. With NPV One, a team of people may be involved in using it. That’s the benefit of collaborative cloud software. However that means there will be a learning curve or training sessions that would be required before giving anyone access to the NPV One model.  Although much of NPV One is intuitive, one still needs to be shown how to input and adjust certain parameters.
  4. Currently NPV One does not have the functionality to run Monte Carlo simulations, like Excel does with @Risk. I understand NPV One can introduce this functionality if there is user demand for it. There will likely be ongoing conflict to try to keep the software simple to use versus accommodating the requests of customers to tailor the software to their specific needs.

Conclusion

The NPV One software is an option for those wishing to standardize or simplify their financial modelling.
Whether using Excel or NPV One, I would recommend that a single person is still responsible for the initial development and maintenance of a financial model. The evaluation of alternate scenarios must be managed to avoid it becoming a modelling team free for all.
Regarding the cost for NPV One, I understand they are moving away from a fixed purchase price arrangement to a subscription based model. I don’t have the details for their new pricing strategy as of May 2023. Contact Christian Kunze (ck@npvone.com) who can explain more, give you a demo, and maybe even provide a trial access period to test drive the software.
To clarify I received no compensation for writing this blog post, it is solely my personal opinion.
Regarding Excel model complexity mentioned earlier, I have written a previous blog about the desire to keep cashflow models simple and not works of art. You can read that blog at Mine Financial Modelling – Please Think of Others”.
As with any new mining software, I had also posted some concerns with QP responsibilities as pertaining to new software and 43-101. You can read that post at the appropriately titled “New Mining Software and 43-101 Legal Issues”.

 

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Life as an Engineer – Read All About It

One of the interesting aspects of being an engineer in the mining industry is travelling around the globe (or even) around your own country. I have been to over a dozen countries as part of my career and this only makes me a small-time traveller compared to other engineers I know. Travelling and experiencing the world is often part of the job, whether working for a junior miner, a major, a financial house, a consulting firm, or an equipment vendor. It is actually quite difficult to avoid travel if you work in mining.

Diavik Project

Recently a former colleague of mine on the Diavik Diamond Diavik project has published book that describes his life as an engineer. The book is titled Roseway: a Life of Adventure and is available on Amazon.
Its the story of John Wonnacott, a Canadian professional engineer who was involved in the construction of several projects, including the Diavik Diamond mine in Canada, a nickel smelter in China, a gold mine in Brazil, and a titanium mine in Madagascar to list a few.
John has a broad background, having conducted engineering studies in the jungles of Indonesia, the cold of Greenland, the sands of the desert, the heat of Australia, the altitude of the Andes. He has documented his engineering career in his new book.
Disclaimer: I have not yet read the book since it has only recently been published. However John has kindly sent me some excerpts that I have reprinted below to provide everyone with a sense for the content and style.

Some Excerpts

Introduction

At one time or another, I have been a professional paper-boy, forest worker, tree planter, market gardener, food processing equipment operator, lobster fisherman’s helper, commercial dragger deckhand, short-order cook, military engineering officer, computer system installer, greenhouse worker, permafrost researcher, marine oil spill cleanup specialist, pyrometallurgy researcher, garbage landfill operator, project manager, construction company general manager, regional director, open pit diamond miner, underground gold miner, corporate vice-president, design consultant, company owner, private corporation president and for 50 years, a damn good engineer. I have also been happily married to my wonderful wife Carole Anne for more than 52 years and we have 2 outstanding children. So I can add “husband”, “father” and “grandfather” to the list – but making lists like this is boring. Let me tell you my story.

Newfoundland

I remember in the late fall of that year, the company had a chance to bid on a larger project in Gros Morne National Park, Newfoundland. So our President, Frank Nolan (he was a brother to Fred Nolan, the infamous land-owner at Oak Island, by the way), decided he wanted to see the site and he chartered a Bell 106 helicopter to fly us there from Deer Lake. It was December (they say “December month” in that province) and when we got close to the Park, we ran into a sudden snow squall.
From bright sunny weather we were suddenly flying in heavy wet snow. I was sitting in the back of the chopper, with Frank sitting in the left front passenger seat. We were chatting with the pilot, via the radio headsets, when suddenly there was a loud “BEEP BEEP BEEP” sound coming from the front of the aircraft, and a number of the instrument lights started flashing. The engine had cut out – we learned later that wet snow had blocked the air intake and the engine had stalled – and we started descending pretty fast. Most people don’t realize that a helicopter will glide (quite steeply, at a glide angle of about 10 to 1) provided the pilot gets the torque off the rotor and he makes the correct feathering adjustments.
Our pilot did that instinctively and when we passed through the squall he calmly explained to us what was happening as he looked around for an open, flat spot to land. We didn’t have many options as we were flying over a densely wooded forest, with the mountains of Gros Morne and a deep fiord up ahead. But the pilot spotted a snow-covered frozen bog that was not a lot bigger than the helicopter and he put us down there as smoothly as if the engine hadn’t stopped. Maybe the deep snow cushioned our impact, because I felt nothing. But the instant we landed, Frank Nolan wrenched his door open, and he bolted out of the machine, straight ahead, in front of us.
The rotor was still spinning rapidly, and just as Frank ran ahead, the chopper settled further into the snow, tilting the machine forward in the process. With the chopper blades almost skimming the top of the snow, both the pilot and I expected Frank to be cut into pieces by the rotor, but he was just past their reach and he ran on, unaware of his narrow escape. When the spinning parts stopped, the pilot and I climbed out of the chopper to catch up with Frank. Examination of the machine showed us how the snow had plugged the air intake. The pilot cleared away the snow, and walked around the chopper once and then we took off again. We continued our aerial inspection of the National Park project and later that afternoon we flew back to Deer Lake.

Madagascar

The QMM field office In Port Dauphin, Madagascar was located near the edge of town, and I typically walked from my lodging to the office each morning when I was there, about the time when school started for the children. Typically I passed dozens and dozens of tiny bamboo huts with corrugated metal roofs, and dirt floors each about 2 meters square.
I was constantly amazed by the flocks of young boys and girls walking to school – each child aged from 6 to 15 years old, I suppose – dressed in immaculate white shirt or blouse and blue shorts or skirts. I never saw a dirty child, and how they could have kept clean clothes while living in those small crude huts was something I never could figure out. Even more amazing, were the genuine, wide smiles and frequent greeting as we passed the children: “bonjour monsieur, bonjour monsieur”.
It brings tears to my eyes even now, thinking about those children. If they were girls, they could look forward to a life expectancy of 48 years, according to the town officials we talked to. If they were boys, they could expect to live to an age of only 40 years. The perils of fishing in the ocean in dugout canoes made life even harder for the men.
The next morning, we arrived at the Astana international airport, to find that the check-in arrangements were quite different from what we were used to. Instead of checking our luggage at a desk and then walking through Security to get to our departure gate, everyone was expected to wheel their luggage and handbags through security, as the airline check-in desks were located inside.
The mechanics of rustling our luggage weren’t difficult, but as I passed through the check-point, suddenly a strange-sounding alarm went off. As the alarm rang and rang, my mind raced – what did I have in my bag that would trigger the alarm, I wondered? It didn’t help that the Security guards only spoke Russian, and they were dressed in military uniforms with ridiculously large military caps, which made them look imposing (and silly). But what began to worry me more, was that the look on the Security guards’ faces was not the usual one that happens when a piece of metal sets off an alarm. The guards looked frightened and angry, at the same time.
Fortunately for us, the commotion caught the attention of the clerks at the Turkish Airlines desk inside the terminal building, and one English-speaking fellow approached, speaking to the security guards in Russian first, then saying to us: “I speak English, may I help”? Well, he helped, but it took a while, because it turned out that a rarely used hidden nuclear radiation detector had been triggered when I came through the gate, and the guards were concerned that I had some kind of radioactive material in my suitcase.
For a moment my mind went blank, and then I remembered a card that I was carrying in my wallet. I had had a bout of prostate cancer the previous fall, and my brachytherapy treatment had involved inserting over a hundred tiny radioactive pellets in and around my prostate – designed to kill the cancer. The pellets decay naturally in a fairly short time, and by now, 9 or 10 months after my operation, I would have bet that the radioactive material had all decayed to an undetectable level. But my doctor had given me a card to carry, which explained the medical procedure, just for circumstances like this. When I pulled out the card, it was like a “Get out of Jail Free Card” from the Monopoly game. Instantly the guards’ attitudes changed from fear and suspicion, to sympathy and smiles. One of the big fellows wheeled my luggage over to the Turkish Airlines desk where the Good Samaritan clerk reverted back to his normal job of checking us in.

**** end of excerpt ****

Conclusion

It is one thing to briefly visit a remote project as part of a review team. It is another thing to be there as part of a design team trying to solve a problem and engineer a solution. I know of many engineers and geologists that would have similar work life experiences as part of their careers. However John has taken the initiative to write it all down.
The author is available to be contacted on LinkedIn if you have any questions or just want to say hello (at https://www.linkedin.com/in/john-wonnacott-84aa461a/).
The book can be found on Amazon at this link: Roseway: a Life of Adventure.
This is a story from the life of an experienced engineer working in the mining industry.  If you want to read the perspective from a new mining engineer graduate, check out this post “A Junior EIT Mining Story“.   There is no book deal yet here.
If you find stories about working as an engineer of interest, I have written a 2 part blog post on my adventures in the potash industry in Saskatchewan.  You can read that post at this link “Potash Stories from 3000 Feet Down – Part 1
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Games People Play

Are you a board game player?  Personally I am not.  However I understand there is a huge board game community out there. These game enthusiasts meet in small coffee shops and attend large gaming conventions. I read that 35% of Americans say they play board games several times a month. Think about how many board games you may have laying around in your own place, even if you’re not a hard core gamer.
Recently an avid board game player sent me an email asking if I was aware that there several mining related games. That was a surprise to me. Who would create a board game about mining and for what demographic market?
Curiosity took over and I had to check out the links sent to me on the Board Game Geek website. Here’s a few of the games and what they do.   Now that Germany may be moving back into coal, the first three games may come back into fashion.  The 4th game listed is a bit of a head scratcher.

A few of the mining board games

Game 1: Haspelknecht: The Story of Early Coal Mining (2015)
This game is part of a coal-mining game trilogy created by Thomas Spitzer in Germany. The players take the role of farmers with opportunities to exploit the presence of coal in the Ruhr region of Germany. During the game, players acquire knowledge about coal, extend their farms, and dig deeper in the ground to extract more coal.
Players must select the correct tasks while being mindful of quickly accumulating pit water, for it can stall efforts and prevent extraction of coal.  The game info link is here.
Game 2: The Ruhr: A Story of Coal Trade (2017)
In the second game of Spitzer’s trilogy, you are still in the Ruhr region in the 18th century, at the beginning of the industrial revolution. The Ruhr river presented a transportation route from the coal mines. However, the Ruhr was filled with obstacles and large dams, making it incredibly difficult to navigate.
The players transport and sell coal to cities and factories along the Ruhr river in the 18th and 19th centuries. In the beginning, players have access only to low value coal but can gain access to high value coal. The players also build warehouses, locks, and export coal to neighboring countries in the pursuit of the most points.
The info link is here.
Game 3: Schichtwechsel: Die Förderung liegt in deiner Hand (2021)
This game may still be in German text only. Players are the administrator of a coal mine, and experience competition while living through a piece of Ruhr Valley history.
They bring coal and overburden from underground to the surface, let the miner go through a “shift at the colliery”, produce coke, or build the typical colliery settlements.
The info link is  here.
Game 4: The Cost (2020)
This game takes on a more negative view of the mining industry. It is described as “A bold take on the economics in the brutal industry that is asbestos.” The game players assume the role of a global asbestos company.
Players make their fortune in mining, refining, and shipping. Whoever ends the game with the most money wins. The last part of the description is the gem “When players mine or refine asbestos, they must choose to either maximize profits for short-term gains or sacrifice their hard-won money to minimize deaths, thus sustaining the industry.” That’s every mining executive’s dilemma; profits or deaths.   The info link is here.
Some of these game boards look more complicated than the actual industry. To find other games you can go to the Board Game Geek website and search for different themes. Most mining games listed there are not realistic but are more about dwarves mining gems or they just have an activity called “mining”.   Here’s one called Copper Country.

Free Excel Mining Game

In 1983 my brother, at the age of 10, got his Commodore 64 computer and was eagerly learning to program in BASIC. He was always looking for ideas on what he could write programs about. I had graduated from McGill in Mining Engineering a few years earlier, so I suggested he write a simple computer game about mining as his project.
I provided him with the logic and in no time he had it written and functioning. That game is long gone, likely at the bottom of a landfill stored inside the chips of his Commodore 64. Some 40 years later, my brother is still coding as a software development manager. I guess I managed to convince him the mining industry wasn’t a career path.
Over the last few months I decided to learn VBA (Visual Basic for Applications). VBA is a programming language the works with Microsoft Office products, mainly Excel.
I always enjoyed programming. In university we wrote FORTRAN programs using stacks of punch cards to feed the machine the code. I had also learned the BASIC language, from my brother’s VIC 20 and Commodore computers.
A good way to learn something is to watch a few pf the many tutorial videos on YouTube. An even better way to learn VBA is by taking on an actual coding project from scratch. So, what worked 40 years ago, would work again. Rather than write something useful, I decided to re-write the mining game from 1983, albeit enhanced with the Excel application capability and more years of personal mining experience.
This coding process would force me to learn how to write code, figure out logic, create loops, if-then statements, and handle debugging. Already knowing Excel makes the entire process easier.  Combining Excel functionality with VBA delivers capabilities that would have been difficult to do in BASIC alone.  Note: It appears that BASIC is no longer in use, having been replaced by Python as the preferred programming language.

Download it.. if curious

If you are curious about the capability of VBA, the Excel mining game can be downloaded. A descriptive overview of the game is included in the PDF file at this link.

Junior Mining CEO game screenshot

The very simple game is called Junior Mining CEO. The object is to find gold, raise the share price, and not go bankrupt given the pitfalls that often befall the mining industry. The input parameters have a lot of optionality, although I have protected the macro code itself for this edition. You can borrow money and issue equity to fund your mining activity.
The Excel file can be downloaded at this link. The was written using Excel 365 but it may also work on older versions of Excel.
You will first need to save the game to your computer to run the macros. Since there are macros, many computers will disable such Excel files because they can contain viruses. You may need to toggle the file Properties in File Explorer to unblock the file to allow the macros to run.
Is there a junior mining corporate sponsorship opportunity here? Sure. For a small fee, I will add your company logo to the game and pre-set all the input parameters so that everyone is a big winner all the time.

Conclusion

As mentioned in a blog from a few months ago, “ A Junior EIT Mining Story” some gamification of mining may help introduce and educated people on the industry. Augmented reality (AR) and Virtual reality (VR) are both technologies that can be used to help reach out to the younger generations (I’m not talking about investor outreach).
How about a new board game that does to mining what Monopoly did to real estate investing? Look at real estate prices today, no doubt being influenced by everything we learnt playing Monopoly as kids.
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Resources, Resources, and Mineral Reserves

Every so often I like to comment on issues related to the way the mining industry does things. This is one of those posts.
Currently the mining industry reports their exploration results as either Mineral Resources or Mineral Reserves. In my opinion, these two categories do not adequately reflect the reality of the current mining environment. I would suggest using a three category approach, as will be described below.
The implementation of this approach would not result in any more technical effort. However, it would provide clarity for stakeholders and investors and compare companies on a more equitable basis.

The issue

In today’s world, it is an onerous task to permit, finance, build, and operate a new mine. This is a significant achievement.
An operating company will be generating revenue and should be recognized for that big step. Hence does it make sense for an operating company to report Mineral Reserves while a junior company that has simply completed a pre-feasibility study to also report Mineral Reserves?
Both companies could report identical Reserves, but those reserves would not be the same thing. One company has built a mine while the other may have spent a few months doing a paper study. One company’s reserves will actually be mined in the foreseeable future while the other company’s project may never see the light of day. Yet both companies are allowed to present the same Mineral Reserves.
As a mine operates, the remaining ore reserves will deplete over time. However, a company can add to their reserves by finding satellite ore bodies or converting inferred material into a higher classification. The net of these adjustments will be reflected in the corporate Mineral Reserve Statement for all their operations.
A company can also increase the corporate Mineral Reserves simply by completing a pre-feasibility or feasibility study on a new project. However, is this a true reflection of the Reserves upon which the company should be evaluated?

Suggestion

I would suggest that the three reporting categories be used instead of two, described as follows:
1 – Mineral Resources (insitu): This category is the same as the current Mineral Resources being reported according to NI43-101. It is based on reasonable prospects for economic extraction. Hence open pit resources would be reported within an optimized shell and underground reserves within approximate stope shapes. No external dilution or mining criteria would be applied, as is the current approach.
2 – Economic Resources: This would be a new category that would simply be the outcome from a pre-feasibility or feasibility study, which is currently being labelled a “Mineral Reserve”. This Economic Resource would incorporate mining criteria, Measured & Indicated classes only, a mine plan, and an economic analysis. The differentiation from Reserves is because the mine is not built yet.
3 – Mineral Reserves: This highest-level category could be reported only once a mine has reached commercial production. The Economic Resources would automatically convert to Mineral Reserves once production is achieved. As the mine continues to operate, and as new ore sources are identified, the Mineral Reserves would increase / decrease. The Mineral Reserves would represent the remaining ore tonnage at operating mines and only that.
This three-category approach would help separate mine operators from junior development companies. The industry should recognize the difference between companies and projects at different life-cycle stages and that they are not all directly comparable. A junior explorer could be reporting huge reserves, but without a mine being there, should that company be compared to a mine operator that has similar reserves?
This approach would identify situations whereby a company suddenly reports a sizeable increase in Reserves. Is it because they found more ore at an existing operation (a great event) or because they did a paper study on a new project?
As a clarification, if a mine gets placed onto care & maintenance, likely due to poor economics, then the remaining tonnes at the mine would no longer be considered Mineral Reserves and may have to revert to Economic Resources, although even that would be questionable.

Examples

Out of curiosity I randomly selected three companies (Yamana Gold, Eldorado Gold, Alamos Gold) to compare their total Mineral Reserve tonnages based on their operations versus study stage development projects. The results are show in the images below. The percentage of Reserves provided by their producing (P) mines varied and ranged from 14% to 51%. A significant proportion of their Reserves (49% to 86%) are still at the development (D) stage. One or two large study-stage projects can boost the corporate reserves significantly. This is not immediately evident when looking at the total Mineral Reserves being reported.
For most junior miners 100% of their Reserves are still at the study-stage. They should not be able to declare Mineral Reserves and appear on an equal footing with mine operators. Their company should only be comparable to other companies with advanced study-stage projects.

Conclusion

The foregoing discussion is a suggestion as to how the mining industry can recognize the achievement and economic reality of building a mine, i.e. by being allowed to report Mineral Reserves. All others only get to report Resources. This would help clarify what long term tonnages are actually being mined versus simply being studied on paper.
The suggested approach does not create additional work for the mining companies. However, it provides a much fairer and transparent comparison between companies.
Interestingly, NI43-101 specifies that one cannot mathematically add together Indicated and Inferred resources because they are view as materially different. However, in a corporate Mineral Reserve Statement one is allowed to combine Reserves at an operating mine with Reserves from a study.  These two reserves, in my view, are even more materially different than Indicated and Inferred resources are.
Its great for a company to report Mineral Reserves from a pre-feasibility study.  However if for some reason that mine never gets built, then those Reserves are valueless. Maybe years ago it was foregone conclusion that a positive feasibility study would result in the construction of a mine, so the risk was less. That is no longer the case and this fact should be recognized when defining and reporting Mineral Reserves.
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Let A.I. Help Target Your Infill Drilling

From time to time I come across interesting new tech that I like to share with colleagues.  The topic of this blog relates to solving the problem of defining an optimal infill drill program.
In the past I have worked on some PEA’s whose economics were largely based on Inferred ore.  The company wanted to advance to the Pre-Feasibility (PFS) stage. However, before the PFS could start they would need additional drilling to convert much of the Inferred resource into Measured and Indicated resources.
I’ve seen similar experience with projects that are advance from PFS to FS where management has a requirement that the ore mined during the payback period consist of Measured classification.

The Problem

In both cases described above, it is necessary for someone to outline an infill drill program to upgrade the resource classification while also meeting other project priorities.  The goal is to design an infill drill program with minimal time and cost yet maximize resource conversion.  Possibly some resource expansion drilling, metallurgical sampling, and geotechnical investigations may be required at the same time.
I’m not certain how various resource geologists go about designing an infill drill plan.  However, I have seen instances where dummy holes were inserted into the block model and then the classification algorithm was re-run to determine the new block model tonnage classification.   If it didn’t meet the corporate objectives, then the dummy holes may be moved or new ones added, and the process repeated.
One would not consider such a trial & error solution as optimal. It may not necessarily meet the cost and time objectives although it may meet the resource conversion goals.

The Solution

The DRX Drill Hole and Reporting algorithm developed by Objectivity.ca uses artificial intelligence to optimize the infill drilling layout.  It intends to match the QP/CP constraints with corporate/project objectives.
For example, does company management require 70% of the resource in M&I classifications or do they require 90% in M&I?  Each goal can be achieved with a different drill plan.
The following description of DRX is based on discussions with the Objectivity staff as well as a review of some case studies.  The company is willing to share these studies if you contact them.
The DRX algorithm relies on the resource classification criteria specified by the company QP.  For example, the criteria could be something like “For a block to qualify as Measured, the average distance to the nearest three drill holes must be 30 m or less of the block centroid. For a block to qualify as Indicated, the average distance from the block centroid to the nearest three holes must be 50 m or less. For a block to qualify as Inferred it will generally be within 100 m laterally and 50 m vertically of a single drill hole.
The DRX algorithm will use these criteria to optimize drill hole placement three dimensionally to deliver the biggest bang for the buck.   Whatever the corporate objective, DRX will attempt to find an optimal layout to achieve it.  The idea being that fewer well targeted holes may deliver a better value than a large manually developed drill program.
The DRX outcome will prioritize the hole drilling sequence in case the drill program gets cut short due to poor weather, lack of funding, or the arrival of the PDAC news cycle.
The DRX approach can also be used to optimally site metallurgical holes and/or geotechnical holes in combination with resource drilling if there are defined criteria that must be met (by location, ore type, rock type, etc.).   The algorithm will rely on rules and search criteria developed by experts in those disciplines.  It does not develop the rules, it only applies them.
DRX can also help optimize step-out drilling, such that the step-out distance will not be beyond the range that negates the use of the hole in a resource estimate.  It can also consider geological structure in defining drill targets.

By optimizing the number of drill holes and their orientation, the company may see savings in drill pad prep, drilling costs, field support costs, and sample assaying.
One can even request drilling multiple holes from the same drill pad to minimize drill relocation costs and safety issues in difficult terrain.
A large benefit of DRX is to be able to examine what-ifs.  For example, one may desire 85% of the resource to be M&I.   However, if one is willing to accept 80%, then one may be able to save multiple holes and associated costs.   Perhaps with the addition of just a few extra holes one could get to 90% M&I.   These are optimizations that can be evaluated with DRX.

An Example

In the one case study provided to me, a $758,000 manually developed drill program would convert 96.6% of the Inferred resource to Indicated.  DMX suggested that they could achieve 96.7% for $465,000. Alternatively they could achieve 94% conversion for $210,000.  These are large reductions in drilling cost for small reductions in conversion rate.  This may allow the drill-metres saved to be used for other purposes.
For that same project, a subsequent study was done to convert Indicated to Measured in a starter pit area. DRX concluded that a 5000-metre program could convert 62% of Indicated into Measured.  A 12,000-metre program would convert 86%,  A 16,000-metre program would achieve 92%.
So now company management can make an informed decision on either how much money they wish to spend or how much Measure Resource they want to have.

Conclusion

Although I have not yet worked with DRX, I can see the value in it.   I look forward to one day applying it on a project I’m involved with to develop a better understanding of what goes in and what comes out.   DRX hopes to become to resource drilling what Whittle has become to pit design – an industry standard.
The use of the DRX algorithm may help mitigate situations where, moving from a PEA to PFS, one finds that the infill program did not deliver as hoped on the resource conversion.  Unfortunately, this leaves the PFS with less mineable ore than anticipated and sub-optimal economics.
New tech is continually being developed in the mining industry.  Hopefully this is one we continue to see forward advancement. It makes sense to me and DRX could be another tool in the geologist toolbox.  Check out their website at objectivity.ca
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Pit Optimization – More Than Just a “NPV vs RF” Graph

In this blog I wish to discuss some personal approaches used for interpreting pit optimization data. I’m not going to detail the basics of pit optimization, assuming the reader is already familiar with it .
Often in 43-101 technical reports, when it comes to pit optimization, one is presented with the basic “NPV vs Revenue Factor (RF)” curve.  That’s it.
Revenue Factor represents the percent of the base case metal price(s) used to optimize for the pit. For example, if the base case gold price is $1600/oz (100% RF), then the 80% RF is $1280/oz.
The pit shell used for pit design is often selected based on the NPV vs RF curve, with a brief explanation of why the specific shell was selected. Typically it’s the 100% RF shell or something near the top of the NPV curve.
However the pit optimization algorithm generates more data than just shown in the NPV graph.  An example of that data is shown in the table below. For each Revenue Factor increment, the data for ore and waste tonnes is typically provided, along with strip ratio, NPV, Profit, Mining cost, Processing, and Total Cost at a minimum.
Luckily it is quick and easy to examine more of the data than just the NPV curve.

In many 43-101 reports, limited optimization analysis is presented.  Perhaps the engineers did drill down deeper into the data and only included the NPV graph in the report for simplicity purposes. I have sometimes done this to avoid creating five pages of text on pit optimization alone, which few may have interest in. However, in due diligence data rooms I have also seen many optimization summary files with very limited interpretation of the optimization data.
Pit optimization is a approximation process, as I outlined in a prior post titled “Pit Optimization–How I View It”. It is just a guide for pit design. One must not view it as a final and definitive answer to what is the best pit over the life of mine since optimization looks far into the future based on current information, .
The pit optimization analysis does yield a fair bit of information about the ore body configuration, the vertical grade distribution, and addresses how all of that impacts on the pit size. Therefore I normally examine a few other plots that help shed light on the economics of the orebody. Each orebody is different and can behave differently in optimization. While pit averages are useful, it is crucial to examine the incremental economic impacts between the Revenue Factor shells.

What Else Can We Look At?

The following charts illustrate the types of information that can be examined with the optimization data. Some of these relate to ore and waste tonnage. Some relate to mining costs. Incremental strip ratios, especially in high grade deposits, can be such that open pit mining costs (per tonne of ore) approach or exceed the costs of underground mining. Other charts relate to incremental NPV or Profit per tonne per Revenue Factor.  (Apologies if the chart layout below appears odd…responsive web pages can behave oddly on different devices).

Conclusion

It’s always a good idea to drill down deeper into the optimization output data, even if you don’t intend to present that analysis in a final report. It will help develop an understanding of the nature of the orebody.
It shows how changes in certain parameters can impact on a pit size and whether those impacts are significant or insignificant. It shows if economics are becoming very marginal at depth. You have the data, so use it.
This discussion presents my views about optimization and what things I tend to look at.   I’m always learning so feel free to share ways that you use your optimization analysis to help in your pit design decision making process.
As referred to earlier, there is a lot of uncertainty in the input parameters used in open pit optimization.  These might include costs, recoveries, slope angles and other factors.  If you would like to read more, the link to that post is here.  “Pit Optimization–How I View It”.
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