The Double Life of Inferred Resources: Now You See It – Now You Don’t

Date: April 18, 2026 Author: Ken Kuchling Comments: Leave a reply

There is a unique paradox sitting at the heart of how the mining industry evaluates its projects. It’s called the Inferred Resource—now you see it, now you don’t.

A company can publish a Preliminary Economic Assessment (PEA) showing a mine life, a robust internal rate of return, and a strong net present value. That study can be based on mineral resources that regulators consider too geologically uncertain to support a production decision. These are the infamous Inferred resources: tonnes, grades, and dollars in the economic model, yet with a classification that effectively flags them as educated guesses. The PEA rules permit their inclusion because early-stage projects need a way to test whether chasing more resource certainty is worth the additional cost.

The paradox occurs when that same project advances to the pre-feasibility (PFS) or feasibility (FS) stage. Suddenly the Inferred ore tonnes are gone; they are now waste rock. The mine plan must be based on more certain Measured and Indicated resources. Theoretically, the life-of-mine production profile that looked compelling in the PEA may now shrink—so the NPV and IRR might shrink too. Nothing has gone wrong in any technical sense. The project simply requires a higher standard of certainty now.

Potentially, some investors who focused on the PEA economics may feel the subsequent feasibility study is a disappointment (especially if costs have also escalated). They’ll say the PEA is garbage. In reality, the project has moved from an aspirational study (i.e., the PEA) toward a bank-financeable study. To compensate for the loss of Inferred material, companies will rely of step out drilling to grow the resource to maintain size.

What Are Inferred Resources?

Inferred resources represent the lowest confidence category of mineral resources; typically estimated in zones with limited sampling and unconfirmed geological continuity. They carry the highest geological uncertainty of the three resource categories.

In Preliminary Economic Assessments (PEAs), Inferred resources are allowed—but only under certain conditions:

They can be included in mine plans and economic models, which is the reason PEAs exist: to allow early-stage projects to test economic viability using all available resource data.
However, any PEA that includes Inferred resources cannot be used to support a production decision and must carry prominent cautionary language. Under NI 43-101, the technical report must explicitly state that the PEA is preliminary in nature, that Inferred resources are too speculative geologically to have economic considerations applied, and that there is no certainty the PEA will be realized. (It seems a PEA without Inferred resources can be used to support a production decision.)
Inferred tonnes are routinely used to extend mine life or improve project economics in PEA studies. Investors must understand this risk and should examine the proportion of mined tonnage that is classified as Inferred. This breakdown is normally presented in the Technical Report.

Conversely, in Pre-Feasibility Studies (PFS) and Feasibility Studies (FS), the rules for Inferred material are different:

Inferred resources cannot be included in mineral reserve estimates or in the economic analysis underpinning a PFS or FS. Inferred “ore” is treated as waste rock.
Only Indicated and Measured resources can be converted to Probable and Proven mineral reserves.
Including Inferred material in a PFS mine plan would typically disqualify the study from being used for project financing or a production decision.
Some companies might include Inferred material in a PFS as “upside” or as a sensitivity case, but that analysis must be clearly distinguished from the base case.

The resource upgrade requirement (from Inferred to Indicated) creates some interesting dynamics:

Companies may need additional funds to drill sufficiently to upgrade the resource before advancing to the PFS/FS stage. The cost and time for this infill drilling can be a major driver of exploration spending and can delay project timelines. Mining projects can take a long time to develop, and this is one reason why.
Companies will look at ways to compensate for the Inferred material deduction. Cutoff grade changes and step out drilling are ways to mitigate this impact.
A large Inferred resource that cannot be upgraded without great cost (due to depth, remoteness, or lack of ore-zone continuity) can permanently stall a project at the PEA stage. Hence, one may see multiple PEAs completed on the same project (i.e., the PEA loop).
In closing, the peculiarity of the Inferred resource is that it is essentially a tiered permission structure. Inferred resources are useful for early economic screening, but they must be converted to higher-confidence categories before they can support a bankable study or project debt financing.

Permitting via a PEA

Companies sometimes will commence the permitting process based on their PEA study. There are some risks to doing this, and the Inferred resource creates one of these risks.

With limited capital, a junior miner may not be able to afford the $5–20 million cost of a full feasibility study before determining whether a project is even permittable. A PEA, costing a fraction of a FS, can provide enough technical substance to engage regulators and begin the environmental baseline work that must precede any formal permit application.

Baseline studies for hydrology, ecology, and air quality typically require two to three years of data collection. So starting early makes sense, even with only a PEA-level project layout in hand.

Permitting and ongoing technical study work will run in parallel on most projects. Waiting for a completed FS before starting permitting would add years to the project timeline. Companies routinely will concurrently advance environmental impact assessments, indigenous consultation, and baseline data collection with subsequent PFS and FS work.

Jurisdiction may play a role too. Some areas are more receptive to early-stage permitting engagement. Other permitting processes may be more rigorous such that operators want at least a PFS in hand before committing to a full EIA process.

Now, with respect to the Inferred resource, the risk is that a project permitted around a PEA-scale footprint may shrink in size at the feasibility stage. Some reasons for this size reduction will be discussed in a future blog post, as well as the ways companies avoid this with ever increasing ore tonnage. Project shrinkage can result in a company acquiring permits and bonding for a proposed mine plan that no longer exists.

How Can Inferred Resources Affect Permitting

Let us examine some specific aspects of permitting that can be influenced by Inferred resources.

1. Project Footprint and Disturbance Area: Permits are issued for a defined physical footprint, consisting of pit limits, waste dumps, tailings facilities, and infrastructure corridors. If a PEA mine plan is inflated by Inferred tonnes and defines a large footprint versus the feasibility study, the company faces a choice:

(a) Permit the smaller FS footprint and risk under-permitting if Inferred is later upgraded. Requesting future permit modification for a suddenly larger project is sometimes viewed by regulators as “permitting by stealth”.

(b) Permit the larger PEA footprint to provide flexibility, which may trigger more extensive environmental review and higher bonding requirements.

2. Environmental Impact Assessment (EIA) Scope & Cost: A mine plan that includes Inferred material:

– May define a larger disturbance envelope, larger waste dumps, larger tailings facility, all of which require assessment of broader habitat, hydrology, and community impacts. Perhaps the project must advance into a new watershed. This can add permitting cost and time. If the Inferred material is later excluded, the assessment work may have been unnecessarily extensive.

3. Tailings and Waste Facility Sizing: Tailings storage facilities (TSFs) and waste rock dumps are sized to the life-of-mine tonnage. Inferred tonnes included in a PEA can drive facility sizing significantly. Permitting a TSF for a larger tonnage is:

– More difficult and time-consuming to obtain if the height and footprint increase

– Will be subject to more rigorous dam safety and closure review- However this could be potentially beneficial if the Inferred resource is later confirmed during mining

Conversely, I have seen situations where permitting was done on the pre-feasibility level design, thereby excluding Inferred ore from the plan. The operability of a planned co-disposal waste facility relied on relative ratios of clean waste rock, acid generating rock, and tailings. During production, the conversion of Inferred material from “waste” to “ore” would mean more tailings, less waste rock, and could shift the required material balance for co-disposal in a negative way. Permitting based on a PEA might make more sense here.

4. Financial Assurance and Reclamation Bonding: Regulators require bonds or financial assurances sized to the cost of full site reclamation. A larger mine footprint driven by Inferred tonnes means:

– Higher bonding requirements

– Larger financial burden on the company during the project development phase

– Potential difficulty for junior companies in securing bonds for Inferred-inflated footprints that have not been proven out yet.

5. Water Licences and Discharge Permits: Water use and discharge volumes scale with throughput and mine life. A longer mine life driven by Inferred tonnes may require expanded water licences. If those tonnes are later excluded, the licence may be oversized. Keep in mind that obtaining an amendment to increase a water licence later can be harder than acquiring a larger one initially, so there is a trade-off here.

6. Indigenous and Community Consultation: In jurisdictions with consultation requirements (Canada’s duty to consult, FPIC principles, etc.), the scope of consultation is tied to the project’s impact footprint and duration. A mine life extended by Inferred tonnes:

– Triggers consultation over a longer operational period

– May affect benefit agreement negotiations (royalties, employment commitments) tied to mine life or total tonnage

– If mine life subsequently shrinks at FS stage, it can create credibility and trust issues with communities who were counting on a longer mine life.

In closing, personally I feel that project proponents should try to permit to a footprint somewhat larger than the Pre-Feasibility base case to preserve operation flexibility. For more on the benefits of flexibility, see the blog post “Mining’s Obsession with Optimization – Good or Bad”.

Conclusion

Inferred resources present a unique paradox; they can and can’t be used in mining economic analysis. They can be used to examine project viability but can’t be used to make a production decision.

The manner in which Inferred resources are viewed can also affect permitting. Although they don’t directly enter the regulatory process, they can shape the physical parameters of the mine plan that regulators will evaluate.

Even if a company grows the resource size between the PEA and PFS, there will still be a component of Inferred material within the PFS mine design that might be considered real tonnage or not.

Getting the permitted footprint right relative to the eventual resource confidence level is an underappreciated skill in project development. Each mining project is unique, and there is no easy one-size fits all solution when considering the impact of Inferred resources on project development.

In case you missed it, the last blog post was ” Mining’s Obsession with Optimization – Good or Bad“. https://kuchling.com/minings-obsession-with-optimization/ The entire blog post library can be found at https://kuchling.com/library/

You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on LinkedIn or Twitter (@KJKLtd) for updates and other mining commentary.

Mining’s Obsession with Optimization – Good or Bad?

Date: March 31, 2026 Author: Ken Kuchling Comments: Leave a reply

You read a lot these days about the push for more optimization in mining. Ore grades are declining and high-grade, easy-to-process deposits are becoming scarcer, forcing new projects to face greater risk. To compensate for this, miners are told to optimize and innovate more. They are doing both; including making technological gains.

Mining has gotten better at squeezing more value from each tonne of ore. So why do see mining projects still stumbling and everyone being pushed to do even more optimization?

The answer may be that the industry is confusing optimization with resilience. A mine tuned to perform perfectly under one set of conditions may become fragile when those conditions shift. And in mining, things are always shifting. Maybe the head grades don’t meet expectations or metal prices collapse. Maybe there is a shift in community sentiment or a geotechnical surprise in the mine.

The pursuit of a single “optimal” outcome might leave projects well engineered, yet poorly equipped for reality. Flexibility (or resiliency) aren’t the enemy of efficiency; they may be the only way to make efficiency sustainable.

Which Aspects Should Be Optimized

Is the concept of optimization the most important factor in a project’s design? If so, which aspect is the most important to optimize? A danger is optimizing for a single criteria, for example NPV, at the expense of everything else. Selecting the optimal design for one aspect will likely result in being sub-optimal in some of the others.

Once one has selected the aspect to optimize, the next issue becomes what to base the optimization on. Optimization typically is founded on a specific set of inputs. When these change, the optimized design will likely require revision. This then forces a new optimization, which can create a never-ending optimization loop because things are always changing in mining.

The design aspects that I have seen recommended for optimization range from:

optimize your drill hole locations
optimize your pit size
optimize your production schedule
optimize your throughput and/or recovery
optimize your water consumption
optimize your carbon footprint
optimize your project design
optimize your labour productivity
optimize either NPV, IRR, or payback
optimize your metal production cash cost

There are a lot of suggestions and recommendations and people will have differing opinion on which are the most important optimizations. This opinion is typically driven by their own expertise or field of work, not necessarily by what is best for the project.

Optimal vs Resilient Design

Optimization of a mining project can yield meaningful cost and efficiency gains. However mines face inherent constraints, such as ore grade variability, geological surprises, equipment life cycles, and regulatory issues.

Company success is typically driven by a broader set of variables: commodity price cycles, capital availability, asset portfolio quality, ESG and social license, M&A timing, and balance sheet strength. A perfectly optimized mine in a declining commodity or in a politically unstable jurisdiction may underperform a less-optimized mine in the right location at the right time.

Chasing optimization can sometimes lead to over-investment in a single asset, reduced flexibility, or operational fragility. The system performs well only under the ideal conditions.

Hence flexibility is important. If the mine plan is so rigid that it cannot pivot when a new high-grade zone is discovered or a pit wall becomes unstable, then one has optimized for a single scenario rather than for long-term resilience. Rather than designing for the “best case,” design for resilience.

Flexibility builds in the ability to scale production up or down, switch mining sequences, or pivot processing approaches as conditions change. Resilience has real value in mining, where geology, markets, and costs are unpredictable.

Flexibility identifies and can mitigate technical, geopolitical, regulatory, environmental, and market risks. The mines that do run into trouble rarely do so because they weren’t optimized; they fail because key risks weren’t anticipated or managed.

Workforce capability, safety culture, and leadership quality are key predictors of operational success. Optimization alone may not be able to address high turnover, poor safety records, and weak supervisory capacity. These can erode profitability far more than sub-optimal scheduling.

In my experience, the best operations have systems for ongoing learning and improvement rather than seeking a one-time optimal design. However, there is still a place for full optimization in some situations.

When does a flexible project design win?

Commodity prices are volatile up and down
Geological uncertainty is high (low proportion of Measured Resource)
Mining uncertainty (limited geotechnical investigations)
Long mine life (10–30+ years), where conditions will certainly change
Regulatory or social environments are unpredictable
Capital markets may require staged investment rather than full financing

When does an optimal project design win?

Shorter mine life where conditions are unlikely to change materially
Commodity is stable, well-hedged, or under long term offtake contract pricing
Geology and processability is well-understood (mature, well drilled-out deposit)
Capital is constrained and upfront efficiency is critical (you need to get it right)

Unfortunately some might view flexibility as a weakness. If a company has to change a plan or pivot, some will view that as a sign that the company is poor at planning and they don’t know what they are doing. In some cases, this might be true. Conversely the company may simply be reacting to unforeseeable outside influences.

The Path to Resiliency

If one decides to pursue the path of operational flexibility, what are the things that help make it happen?

Design for flexibility at the start: Build project components that can scale up or down as needed. This might include wider pit ramps, larger infrastructure, some modularization in the processing system and the mine. Building a single rigid optimal design can be a trap. Open pit mines may be inherently more flexible than underground mines.
Maintain multiple ore sources: Maintain flexibility across different mining areas and ore zones with different metallurgy or head grades means one can blend ore as needed. Multiple mining areas provide flexibility in the case of geotechnical or weather events. Multiple stockpiling is also part of flexibility in design and operation.
Be careful consuming all high grade ore: In order to boost NPV, often most of the high grade ore is consumed early in the schedule, meaning the back part of the schedule relies on low grade material. This reduces economic flexibility if prices decrease in the future and may also miss out on the benefits if prices rise.
Real-time data collection and adaptive planning: Real time control systems let operations respond to actual conditions rather than following a fixed weekly plan. The idea is to shorten the time between observation and reaction, not to automate rigidly but enable the system to adapt rapidly.
Keep a cross-trained workforce: Operational flexibility may be enhanced if people can fill multiple roles. Cross-training operators means one can redeploy people as needed when conditions change.
Maintain financial health: A company with low debt, high cash assets, and easy credit access can keep a mine on basic functionality (or care-and-maintenance) rather than being forced to sell assets or close the doors during a downturn. Financial health will help ensure operational flexibility. The major miners already know this. The junior miners learn it the hard way.
Build supplier and contractor relationships before needed: Much like access to credit, long-term supplier arrangements might mean one can find labor and materials faster than competitors scrambling during downturns or upturns.
Scenario-plan continuously: Run multiple what-if commodity price, head grade, geotechnical & water management scenarios regularly during operations, not just at the feasibility or permitting stage. Operations change over time, and teams that have already pre-planned “what if this happens” respond better when it really happens.

Flexible mining operations may sacrifice a little efficiency at peak conditions and not meet the fully optimized vision. However this flexibility is a trade-off for the ability to stay profitable over a range of scenarios.

Conclusion

Rather than focus on constant optimization in design, it may be wiser to focus on a flexible design. Adaptability, flexibility, and resilience may be more important than being fully optimized.

Modern mine planning is starting to consider Real Options Analysis and stochastic optimization (Monte Carlo simulation) to help quantify the value of flexibility. They may find that a slightly suboptimal design is actually worth more than a rigid optimized one when uncertainty is priced in.

Probabilistic analysis can provide some assistance by highlighting the impact of unforeseen events. However the key is not just to know the event’s impact, but also how will one respond even if there is only a 10% probability of it occurring.

Optimization may be great, but it isn’t everlasting. Squeezing the last dollar out of a plan may be less important than keeping a mine in business. A flexible plan may actually be the optimal plan.

end

In case you missed it, the last blog post was “The Surprising Parallels Between Junior Miners and Tech Startups“. The entire blog post library can be found at https://kuchling.com/library/

You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts.

What Does Ai Think of Toll Milling

Date: February 24, 2026 Author: Ken Kuchling Comments: Leave a reply

I recently noticed a few new mining studies that relied on toll milling as their base case operation. This made me wonder if this is a trend and if there are more examples of where this is happening.

If only there was a way to find out.

I have been tinkering with Ai (mainly ChatGPT and Gemini) to see what it can do, but I never really had a “project” for it to work on.

So I thought, lets see what Ai can tell us about toll milling. This would be an opportunity to test out Claude (AI assistant built by Anthropic) to see what it will deliver. I could ask it a few questions about the concept of toll milling to find out what it would say.

The following blog is the unedited responses that were given to my user prompts. The results, albeit lengthy, are interesting and informative. Let’s dive in.

By the way, this is the first blog post ever where I have applied Ai.

CLAUDE Ai CONVERSATION

USER PROMPT: Can you prepare a list of recent mining studies that used toll milling as the base case.

RESPONSE: Here is a summary of recent mining studies (primarily PEAs and PFS-level studies) that used toll milling as the base case or a key component, based on publicly available information from 2024-2026:

1. RPX GOLD – WAWA GOLD PROJECT (ONTARIO, CANADA) PEA – February 2026
The base case is built entirely around toll milling, with crushed ROM ore trucked to an off-site facility within 150 km for processing into gold dore. No on-site mill or tailings facility is planned, significantly reducing capital requirements. The project sits in the Michipicoten Greenstone Belt near Wesdome, Alamos, and Hemlo operations, all of which offer potential excess capacity.

2. AMEX EXPLORATION – PERRON GOLD PROJECT (QUEBEC, CANADA) Updated PEA – September 2025
Features a two-stage development strategy: a 4-year, 1,000 tpd contract mining and toll-milling operation in Phase 1, followed by construction of an on-site processing plant in Phase 2. The Abitibi region’s numerous operating mills make this approach practical. Initial capex is C$146M, partially offset by C$68.6M in pre-production revenues during the toll-milling phase.

3. CHALLENGER GOLD – HUALILAN PROJECT (ARGENTINA) PFS – 2024/2025
The PFS is structured around toll milling as the path to near-term production, with the study outlining forecast EBITDA of approximately A$221M over a 3-year tolling period at current metal prices. Challenger also executed a binding term sheet with Dolphin Real Assets/Elsztain Group to facilitate processing through a tolling agreement, with the arrangement expected to fund mining, transportation, and processing costs until initial gold revenue is received.

4. SCOTTIE RESOURCES – SCOTTIE GOLD MINE PROJECT (BRITISH COLUMBIA, CANADA) PEA – October 2025
The primary base case is a Direct-Ship Ore (DSO) scenario, but the study prominently presents toll milling at the nearby Premier mill as a significant upside scenario. Under the toll-milling arrangement, the after-tax NPV(5%) rises from C$215.8M to C$380.1M at US$2,600/oz gold – a meaningful enhancement. No formal toll-milling agreement was in place at the time of the study.

5. MAGNA MINING – CREAN HILL PROJECT (ONTARIO, CANADA) PEA – 2024
The PEA incorporates a definitive off-take agreement with Vale Base Metals to process Contact mineralization through Vale’s Clarabelle Mill in Sudbury. This is a firm, contracted toll-milling arrangement rather than a conceptual one, giving the study’s economics a higher degree of confidence in processing costs.

6. AURIC MINING – JEFFREYS FIND GOLD MINE (WESTERN AUSTRALIA) Operational toll-milling program – 2024
While not a formal feasibility study, Auric and joint venture partner BML Ventures executed a contract to toll mill a minimum of 300,000 tonnes of ore through the Greenfields Mill in Coolgardie during 2024. The first stage produced ~9,741 oz of gold at 1.86 g/t, demonstrating the model’s viability for small, high-grade open pit operations lacking on-site processing infrastructure.

GENERAL OBSERVATIONS:

Toll milling as a base case is most common in:

– Early-stage PEAs for junior developers in established mining districts (Abitibi, Michipicoten, Sudbury) where nearby mill capacity exists.
– High-grade, lower-tonnage projects where the capital cost of a dedicated mill is hard to justify at the outset.
– Projects pursuing a phased development path to generate near-term cash flow before committing to full plant construction.

USER PROMPT: What are the risks of toll milling plan.

RESPONSE: Toll milling carries several meaningful risks that study authors and investors should consider carefully.

OPERATIONAL & LOGISTICS RISKS

The most fundamental risk is mill availability. A toll miller may prioritize its own ore or other clients during peak periods, leaving your project without processing capacity exactly when you need it. Scheduling conflicts can delay production and erode project economics significantly. Transportation of ore or concentrate over long distances also introduces costs that are sensitive to fuel prices, road conditions, and seasonal access – particularly in remote northern jurisdictions.

COMMERCIAL & CONTRACTUAL RISKS

Toll milling agreements are typically not long-term ironclad contracts, and terms can be renegotiated or terminated. The toll miller holds significant leverage, especially if there are few alternative processors nearby. Processing rates, payable metal terms, and penalty clauses for deleterious elements can all shift unfavorably over time. If no binding agreement exists at the study stage – as was the case with Scottie Resources – the entire economic base case rests on an assumption rather than a firm commitment.

METALLURGICAL RISKS

The toll miller’s circuit is optimized for their own ore, not yours. Differences in mineralogy, grind size requirements, or the presence of penalty elements like arsenic, bismuth, or mercury can result in lower recoveries than modeled, higher processing charges, or outright refusal to accept the ore. Blending your material with the host mill’s feed can also complicate settlement and metal accounting.

FINANCIAL & ROYALTY RISKS

Without ownership of the processing facility, you have limited control over costs. Any increase in the toll miller’s operating costs – energy, reagents, labor – can be passed through to you. Additionally, some royalty structures are calculated on net smelter returns, meaning toll milling charges directly reduce the royalty base and affect third-party obligations.

REGULATORY & PERMITTING RISKS

Transportation of ore across jurisdictions may require additional permits, environmental assessments, or spill containment plans. If the toll mill’s own permits are challenged or its tailings facility reaches capacity, your project could be indirectly affected by regulatory actions aimed at a third party.

STRATEGIC RISKS

Relying on toll milling can delay the development of on-site infrastructure and institutional processing knowledge, which matters if the long-term plan is to build a dedicated mill. It can also make the project harder to finance or sell, since acquirers typically prefer integrated operations with controlled processing costs. Finally, if the toll miller is acquired, restructured, or shuts down, continuity of the arrangement is immediately in question.

In short, toll milling is an elegant solution for reducing upfront capital, but it trades capex risk for a different set of operational, commercial, and strategic risks that need to be carefully managed and clearly disclosed in any technical study.

USER PROMPT: What responsibility does the Qualified Person have in signing off on a study with toll milling.

RESPONSE: The Qualified Person (QP) signing off on a technical study that uses toll milling as the base case carries significant professional and regulatory responsibility, particularly under NI 43-101 in Canada or JORC in Australia.

CORE RESPONSIBILITY UNDER REGULATION

Under NI 43-101, the QP must take responsibility for the technical report in its entirety, or for clearly delineated sections where multiple QPs are involved. The QP must have sufficient relevant experience not just in geology or engineering broadly, but specifically in the type of deposit and the technical aspects being certified – which in a toll milling scenario includes process engineering, metallurgy, and mine economics. A geologist signing off on processing assumptions they are not qualified to assess would be in breach of their obligations.

REASONABLENESS OF ASSUMPTIONS

The QP is required to certify that the study’s assumptions are reasonable and reflect industry best practice. For toll milling specifically, this means the QP must be satisfied that the processing costs used in the economic model are realistic and supportable. If the toll milling rate is based on a verbal understanding or a letter of intent rather than a binding agreement, the QP must disclose this clearly and assess whether the assumed rate is achievable in the current market. Using a stale or unsupported toll rate without disclosure would represent a failure of duty.

DISCLOSURE OF RISKS

The QP has an affirmative obligation to disclose material risks that could affect the project’s viability. A rigorous technical report should explicitly identify the risks associated with toll milling – mill availability, contract uncertainty, metallurgical compatibility, transportation costs – rather than burying them in boilerplate language. Superficial or generic risk disclosure that does not reflect the specific circumstances of the toll milling arrangement would fall short of professional standards.

METALLURGICAL COMPETENCE

If the study relies on recoveries and processing costs derived from testwork conducted on the toll miller’s circuit, the QP must evaluate whether that testwork is adequate, recent, and representative of the ore to be processed. If no testwork has been done on the specific mill to be used, the QP must justify why analogous data is sufficient, and must disclose the uncertainty this introduces. Blindly accepting a recovery assumption without interrogating its basis is a serious professional risk.

INDEPENDENCE AND CONFLICTS OF INTEREST

NI 43-101 requires the QP to be independent in certain circumstances, and to disclose any relationships with the issuer. If the toll miller is a related party or has a financial interest in the project, the QP must consider whether this creates a conflict that needs to be disclosed or whether it affects the reliability of commercial terms assumed in the study.

SITE VISIT REQUIREMENTS

The QP is generally required to have conducted a site visit. In a toll milling scenario, a thorough QP would arguably need to be familiar not just with the mine site but with the processing facility to be used – its condition, spare capacity, metallurgical compatibility, and operational track record. Signing off on processing assumptions for a facility that has never been visited or independently assessed is a professional vulnerability.

PRACTICAL AND PROFESSIONAL CONSEQUENCES

If a study proves materially misleading due to unsupported toll milling assumptions, the QP faces regulatory action from securities regulators, professional discipline from their engineering or geoscience association, civil liability to investors, and reputational damage. Canadian securities regulators have historically taken a dim view of QPs who rubber-stamp economic assumptions without genuine independent verification.

In summary, the QP’s responsibility in a toll milling study is not merely to sign a form – it is to genuinely interrogate the commercial, metallurgical, and logistical assumptions underpinning the arrangement, ensure they are adequately disclosed, and take personal professional accountability for their reasonableness. A QP who treats toll milling as a convenient shortcut to a positive economic outcome without doing this work is exposing themselves to considerable risk.

I asked Claude to create a QP checklist for factors that should be reviewed for a toll milling study. You can download that file at this link DOWNLOAD FILE.

CONCLUSION

The results given by Claude are quite thorough and insightful. It’s hard to argue with its observations and conclusions. This research took all of 30 seconds, so I can see it is no longer difficult to become a blog writer. Writing isn’t the challenge; finding interesting topics is.

One toll milling project that Claude did not list was the Galway Metals Estrades Project PEA published February 18, 2026. Perhaps that study was too recent to be familiar with it.

While Claude is not a mining specific Ai platform, there are some that are under development with a mining research focus. Some of these include MineGPT , SureOre.ai, ProspectorAi , and there are probably even more out there.

This area will continue to evolve, and may help mitigate the technical personnel shortage being experienced.

END

In case you missed it, the last blog post was “Mine Waste Risk Management – A Step Towards Consistency“.

You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

A Rookie in the Oilsands – Part 2

Date: June 2, 2025 Author: Ken Kuchling Comments: Leave a reply

The article is Part 2 of discussion on my experiences working in the oilsands at the Syncrude Mine in northern Alberta. Part 1 can be read at this link https://kuchling.com/a-rookie-in-the-oilsands-part-1/

In Part 1, I described the great Engineer-in-Training rotational program that Syncrude had in place for new engineering graduates. Initially I had rotated through the Overburden Geotechnical and Industrial Engineering departments. I was then fortunate enough to go though the Mine Geotechnical department and Short Range Planning. Here are some experiences from those assignments.

Will the Draglines Be Safe

Syncrude had four large walking draglines, each with a 80 cubic metre bucket and 110 metre operating radius. These were very big machines; you could sit one in the end zone of a football field and the bucket would be digging (or dumping) in the other end zone. Two draglines were on the East side of the mine and two were on the West, mining the oilsand in 25 m wide strips.

Mining oilsand while from the top of a 50 metre high and 45 degree highwall had never been done before. The geotechnical conditions were new. They were also dramatically different on the East and West sides of the mine, even though mining in the same orebody.

The East side was far more a greater geotechnical concern than the West side. I happened to be the West side mine geotechnical engineer (lucky for me I guess).

The oil sands are sedimentary deposits, and consist of inter-layered sands, silts and clays. At the Syncrude mine, the clay layers were regionally dipping towards the west at 5 to 10 degrees (as shown in the sketch below). Hence they were dipping into the wall on the West side and dipping out of the wall on the East side. The orebody also contained ancient creek scour channels, now infilled with clays and sands.

On the flanks of these scour zones, the thin clay layers could dip up to 25 degrees out of the wall. This was a problem. In university we learned rock slope failures generally require 30-35 deg dipping joint structures for sliding to occur; but here in the clays, sliding (block slides) could occur along 15 to 25 deg dips.

There were numerous instances of East mine block slides, where large portions of the upper slope would fail as large blocks, 50 metres long and up to 30 metres back from the crest. The fear was that if a dragline happened to be sitting on one of these failing blocks, the entire machine would slide along into the pit. Many block slides did occur over the years, but only a few came close to jeopardizing a machine. The geotechnical monitoring programs in place were successful (described later).

The insitu clay structures were identified using oil and gas borehole logging technology, with tadpole dipmeter plots (see image) used to analyse the bedding (the tail on the tadpole shows the dip direction). The vertical axis is depth from surface or elevation. The geotech engineers would use this information, combined with structural mapping of previously mined faces, to forecast potentially unstable areas.

In these problem areas, the geotech teams would install slope indicators that were monitored while the dragline was mining through the area. Dedicated 24 hour field engineers were assigned to each of the East side draglines and mining operations were closely monitored at all times.

It was not uncommon for the Syncrude geotechnical engineer to get a 2 am phone call at home saying movement has been detected and they walked the dragline back from the face and then get asked “What should we do now?”.

In the places that the engineers knew were going to be very risk, they could implement mitigation measures. How would you deal with the steeper scour zones? They had three main options.

mine through the area with intense geotechnical monitoring in place, using slope indicators, survey prisms, and visual ground inspections.
sub-excavate the zone; using the dragline to dig out the area and then backfill with the same material to destroy the clay bedding. Then they could safely mine through the area, although the days used to sub-excavate would remove the dragline from oilsand production.
another option was to blast the area ahead of time, to destroy the clay bedding and allow pore pressure dissipation.

All three options were available at the discretion of the geotechnical engineering team. However they all cost money and/or loss in mining production, but safety was always the priority.

The four draglines are now mothballed and thankfully none were ever harmed. All oilsand mining operations are now based on truck-shovel systems.

Basal Slope Failures

On the West side of the mine, the bedding was mainly into the highwall, so block slides were not a major concern. In my brief time there, we never had a block slide on the West side although we did continually review dipmeter plots and face mapping results. One still couldn’t be too careful or get lazy.

The main geotechnical issue on the West side were basal slope failures, termed this due to sliding along weak clays and muds at the base of the highwall. This photo shows a typical basal failure. Basal failures also occured on the East side.

Generally, these slope failures did not jeopardize the dragline since they occurred on freshly cut highwalls away from the machine. Eventually the dragline would be required to operate next to existing basal failures when mining the next panel (as shown in the photo).

The dragline would sit 15-25 metres from the wall, the closer is better to maximize reach into the pit.

The main concern with basal failures was that the toe of the failed slope would move beyond the reach of the dragline and could not be mined. As well, sometimes the dragline would need to cast waste layers back into the mined out pit while avoiding the burial of the oilsand toe. If the waste couldn’t be cast back inpit due to toe failure, it would be placed on the operating bench and trucked away later (at a cost).

The Alberta government focused on maximizing oilsand resource recovery. If the dragline could not reach the ore due to a failure, we would need to send mobile equipment down to get it. If we couldn’t do this due to access issues, we needed to prepare an Ore Loss Report that was tracked and submitted to the government agency (ERCB). We hated to submit those reports, taking it as a personal disappointment that we couldn’t get to that ore.

In the basal failure photo, one can see a vertical scarp next to the dragline. The oilsands were a “locked sand” in that the sand grains were tightly compacted or interlocked from the compressive weight of over a kilometre of glacial ice thickness in the past. The vertical scarps would stand indefinitely, sometime spalling off in slabs. The oilsand itself was a very strong geotechnical unit (friction angles in excess of 50 degrees).

Conclusion

Hopefully the above narrative is informative about on mining in the oilsands in the 1980’s. There are plenty more examples of technical issues that our engineering teams had to deal with, whether in the mining operation or tailings disposal area. As a new graduate engineer, it was a great learning experience.

Once our engineer-in-training rotation program was complete, we were to be assigned to a more permanent position. For me, that was going to be as an East side geotechnical engineer – ugh!. It’s at that time I decided to look for greener pastures. Three years was long enough from 1980 to 1983; given the amount of learning and responsibility I had undertaken. Other colleagues left the same time, while many other friends stayed in Ft McMurray for their entire careers.

I enjoyed the mine planning and scheduling work more than geotechnical engineering. The stress of the East side geotechnical role was not really for me. These days, I commend the tailings engineers that willingly accept the Engineer of Record role for tailings dams, knowing the risk, consequences, and potential legal ramifications of their work.

My next career move (after getting an M.Eng from UBC) was going to the Saskatchewan potash industry. One thing common between open pit oil sand mining and the underground potash mining was the heavy reliance on conveyor usage at both. I was getting very comfortable around conveyors. If you found this oilsand narrative mildly interesting, you can read about potash experiences at the blog post “Potash Stories from 3000 Feet Down – Part 1”. .

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

Here is short cheesey video of what the oilsands were about in the 1980’s and 1990’s.

Filtered Tailings Testing Checklist

Date: June 12, 2024 Author: Ken Kuchling Comments: 1 Reply

I have always been a big proponent of filtered (or dry stack) tailings over conventional tailings disposal. Several years ago I had written a blog (Fluid Tailings – Time to Kick The Habit?) that this is the tailings disposal approach the mining industry should be moving toward.

Recently I have been seeing more mining studies proposing to use the dry stack approach. In some cases, they no longer even do the typical tailings trade-off study that look at different options. The decision is made upfront that dry stack is the preferred route due to its environmental acceptability and positive perceptions.

Recently I came across a nice document prepared by BHP and Rio Tinto titled “Filtered Stacked Tailings – A Guide for Study Managers (March 2024)”. I will refer to this document as “The Guide”. You should definitely get a copy of this Guide if your project is considering a dry stack operation. An information link is included at the end of this post.

A Guide for Study Managers

The Guide covers several topics, including tailings characterization; site closure concepts; filtered tailings stack design; material transport, stacking systems; and tailings dewatering methods. The Guide covers all the basics very well. The one area that jumped out at me is the tailings characterization and testing aspect.

Many assume that dry stack is simply filter, haul, dump, then walkaway. Its all very easy! However, in reality, the entire dry stack approach is complex.

One needs to be able to consistently dewater tailings from different ore types, then transport it under different climatic conditions, and then place and compact the tailings efficiently.

One also needs to be able to deal with plant upsets, when the filtered tailings don’t meet the optimal product specifications. So its not really that simple.

One of the chapters in the Guide details the different test work that should be done to understand the dry stack approach. The list of tests is a lot longer than I had envisioned. I previously knew some of the types of lab testing required, however the Guide outlines a very comprehensive list.

The Guide also categorizes the tests according to study stage, be it concept study, order of magnitude study, or Pre-Feasibility level. Interestingly, the concept study can rely mainly on published information. However, the more advanced mining studies require the lab testing of actual tailings material.

Testing Checklist

To help organize the complexity of testing, I have listed their suggested tests as to whether the test is related to material characterization, process characterization, or filtered product characterization. Each aspect serves a different purpose in understanding the workings of the filtered tailings approach. The engineer will decide at which study stage they wish to do each of the tests, or which of the them they actually need to do.

To keep the blog post brief, I am not describing the details for each test. Most geotechnical or process engineers will already be familiar with them, or anyone can search the web to learn more.

MATERIAL CHARACTERIZATION TESTS

Chemical composition Testing: using atomic absorption or spectroscopy, identify the elements within the tailings stream to highlight contaminants and potential flocculation issues.
Conductivity Test: increase knowledge of the tailings stream.
Mineralogy Testing: identify mineral types and clay minerals (if any) that could impact on performance.
Particle Shape Analysis: are there fibrous minerals present, as well as settling and rheology effects.
Particle Size Distribution: are the tailings coarse, or mainly fine silt and clay sized particles that can impact on filtering and product performance.
pH Test: determine the acidity of the tailings steam, can relate to flocculant selection.
Tailings Slurry Density Test: assess the pumpability and amount of thickening and filtering that will be required.
Tailings Solid Mass Concentration and Moisture content: required for process mass balances.
Specific Gravity Testing: assess the SG of the tailing particles, i.e. light or heavy minerals.
Total Dissolved Solids Test: assess the fluid composition, are minerals dissolvable.
Zero Free Water Test: relates to the solids concentration at which the sample is fully saturated and may relate to transportability.

PROCESS CHARACTERIZATION TESTS

Total Suspended Solids: assess the quality of the return water from thickening or filtration.
Drained and Undrained Settling Test: to assess the thickening aspects and stack performance.
Setting Cylinder Tests: used to assess thickener settling performance.
Raked Setting Cylinder Tests: used to assess thickener settling performance.

Dynamic Continuous Settling Tests: used to assess thickening under continuous feed situation.
Minimum Moisture Content: assess the minimum moisture content achievable in filtration.
Vacuum/Pressure Filtration Test: often done by vendors, assess the filtering performance.
Compression Rheology: design consolidation / permeability data for filtering and disposal design.
Shear Rheology: provide information for pump and pipeline design.
Shear Yield Stress: provide processing insights for slurry dispersion and flocculation.

FILTERED PRODUCT CHARACTERIZATION TESTS

Leaching Tests (long term): assess whether the tailings stack will continue to leach metals and contaminants over the long term.
Leaching Tests (short term): assess whether the tailings stack will rapidly leach metals and contaminants.
Acid Base Accounting Tests: will the stack be an ARD concern.
Net Acid Generation: relates to ARD and neutralizing potential.
Air Drying Tests: determine the rate of natural air drying and dry density.
Atterberg Limits Testing: determine the plastic limit, liquid limit with respect to moisture content and stackability.
Consolidation Tests (one-dimensional): to assess the consolidation and settlement of the stack over time.
Proctor Density Tests: assess the optimal compacted density and moisture content vs the moisture content delivered by filtration.
Critical Void Ratio Tests: assess compaction, consolidation, and liquefaction potential.
Shear Testing: determine the geotechnical strength of the filtered product for stack height design.
Permeability Testing: assess the internal drainage characteristics of the filtered product.
Soil-water characteristics Tests: assess the unsaturated behavior of the filtered product.
Flow Moisture Point Tests: assess how well the material can be transported and placed.
Conveyance Testing: assess how well the material can be conveyed (troughing, steepness).
Minimum Angle for Discharge: used in the design of hoppers and chutes.
Angle of Repose Tests: used in hopper design and dry stack design. Ground Bearing Pressure: used to assess the trafficability of the deposit.

Conclusion

A dry stack operation might be just as complex as conventional tailings disposal, although that might not be the perception. Certainly, the processing side of filtered tailings is more complex than conventional tailings. The transportation design may also be more complex, as is the tailings placement methodology. The main complexity missing from the dry stack is the need for a large sludge retaining dam, albeit that is a huge and important difference.

Some might view the suggested testing checklist as overkill and decide that not all test work is necessary. That is most likely true for some situations, especially for small mines not dealing with large quantities of tailings. However for a project with a high capital investment, one doesn’t want to see the entire mill off-line because the tailings disposal system isn’t functioning.

Major miners, such as BHP and Rio Tinto, typically spare no expense on material testing for metallurgical or geotechnical purposes. They have the funds available to test and engineer to a high level to adequately de-risk the project to meet their investment thresholds.

Junior miners often don’t have the time or funds to spend on such comprehensive testing programs. “Good enough” is often good enough.

One reason why junior miners sign 5-year JV deals with the Major is the amount of technical work required to properly evaluate a project.

The Major understands the amount of time needed for sample collection, testing, analysis of results, and follow up with more testing. It takes a fair bit of time to reach a comfort level for moving forward. Even then, there are no guarantees of success.

Each tailings disposal project is unique in size, location, type of mineralization, site layout, and throughput rate, so each company must decide what level of testing is “good enough” to address their risk tolerance.

For those that would like to get a copy of the the Guide, you can find more information at this LinkedIn link. I thank BHP and Rio Tinto for putting their heads (and wallets) together to prepare (and share) this document.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

Junior Mining Shams and Scams – Part 1

Date: May 30, 2024 Author: Ken Kuchling Comments: Leave a reply

Recently (in April 2024) Red Pine Exploration issued several press releases highlighting that some assays in their geological database were found to have been manipulated. Numerous assays input into their database did not match the original lab certificates. Is this another mining scam?

The Red Pine event led me to ask some colleagues about similar situations that have occurred and whether the personnel responsible were ever sanctioned. Their feedback provided me with several past examples of such incidents, which I have attempted to summarize in this two-part blog post. Big thanks to my colleagues that took the time to provide these examples.

Raise the Red Flag

The focus of this blog is on the types of activities that raised the red flags in the past. I am less interested in naming the people responsible, although the associated web links do provide more detail on the events.

Not all of the examples listed in these two blogs are scams or deliberate falsification of results. Some may be incompetence, faulty reporting, or lack of diligence and care. Some of these involve company executives, in-house Qualified Persons (QPs), and independent QP’s working for the companies.

Part 1 has examples mainly involving company management or in-house QPs. Part 2 will provide other examples where QP’s have been held to account for their poor quality of their work.

Examples (Part 1)

The following are presented in no particular order. Some of these may still be at the allegation or investigation stage. This blog post can be updated when the issue is eventually resolved.

Tampering with Samples: Bre-X salting of samples is the number one example of a well orchestrated scam. I’m not sure if anyone was ever officially convicted of anything at Bre-X, but it warranted several books, recent podcasts, and even a loosely-based Hollywood movie (Gold). As an aside, I had spoken with the Bre-X team in 1995 about consulting work while I was living in Calgary. However, they were still far from needing mine engineering services at that time. That would have been a wild ride, although with my luck, I would have ended up being the only one in jail. For further information here is an interesting story from Warren Irwin on the Bre-x story. https://redcloudfs.com/25-years-after-bre-x-by-the-man-who-made-a-fortune-going-long-short-of-the-biggest-ever-mining-fraud/

Falsifying QP Signature: The B.C. Securities Commission (BCSC) is alleging that a B.C.-based mining company and its CEO made false or misleading statements about an Idaho mineral deposit in a report that it filed. In 2019, Multi-Metal filed a technical report which contained an electronic signature of a qualified person – a professional engineer – and listed him as an author. The BCSC alleges the qualified person did not review, sign, or consent to filing Multi-Metal’s report. At this time, the BCSC’s allegations have not yet been proven.
Link 1

Falsifying Assay Data: The Ontario Securities Commission approved a settlement agreement between a geologist with 30 years of experience and the Qualified Person for Bear Lake Gold Ltd. Between 2007 and 2009 the QP altered certain assay results and transferred these results into the company’s assay database; prepared draft press releases that contained incorrect and inflated data, then provided Independent QP’s with the altered data, and also replaced core and modified a drill core log. In the settlement, the QP agreed to a permanent ban from acting as a Director and Officer of any issuer, an administrative penalty of $750,000, $50,000 in costs, and a prohibition from trading.
Link 1
Link 2
Link 3

Falsifying Assay Data: In 2024 Red Pine Exploration Inc. reported that there were 382 assay inconsistencies out of a total of 60,000 assay results for the 2019-2024 Period, representing 95 intersections contained within 69 drill holes as follows. An independent investigation is underway, however at the time of this blog, the investigation is still on-going. A link will be provided here once their final report is disclosed publicly.
Link 1

Tampering with Samples: This example goes back to 1981, involving New Cinch Uranium. They published test results that showed significant gold and silver at their New Mexico property. After the stock jumped, third party tests showed that samples did not contain any significant amount of precious metals. The New Cinch samples were “salted”. The Vancouver Stock Exchange was sued for not verifying the company’s test results. In response, the VSE made it compulsory for companies to issue a disclaimer on each press release stating that the VSE “neither approves nor disapproves of their contents”. This case goes back 40 years, so limited information is available on it. A bit more discussion on this case and discussing the VSE is found at the link below. While the VSE no longer exists, the TSX has taken over.
Link 1

Falsifying Assay Data: This example involves Southwestern Resources, a company with the Boka Project in China. The former CEO and President, John Paterson, was the company’s QP. In 2007, a month after Paterson’s resignation, Southwestern announced there were errors in previously reported assay results. As a result, Southwestern withdrew all of its previously disclosed results for that project. Sounds familiar? An independent investigation by Snowden led to a revised resource estimate that was substantially less than previously reported and identified 433 discrepancies in gold grades reported in dozens of 2003 and 2007. The original assay certificates were sent to Paterson and he was the sole recipient. Instead of transferring the true assay certificate data, Paterson transferred data containing discrepancies into the database. There was 6 years of jail time involved with this case.
Link 1
Link 2
Link 3
Link 4

Falsified Resource Estimate: This one goes back to 1997, although sanctioning of parties was only done in 2007. The company geologist was accused of several things, including not having adequate data to support the findings in his 1997 resource report; the methods used to calculate resources were not appropriate; the report portrayed the project as more advanced than it was; the $129 projected share value was based on “unsubstantiated tonnage and grade information and data.”. Exotic assaying methods and duping accredited investors was also part of this operation.
Link 1

Using Exploration Targets in Economic Analysis: This event goes back to 2012 and involves a company breaking the rules by disclosing the results of an economic analysis that included a target for further exploration (pie-in-the-sky) of the company’s gold mining operation. The economic analysis was not based on a current resource estimate. The punishment was the proponents had to pay to the commission $20,000 and complete a course of study on the requirements of Canadian mining rules.
Link 1

Conclusion

This ends Part 1 of this blog post. Part 2 will continue with a few more examples, specifically involving Qualified Persons, and can be found at this link Junior Mining Shams and Scams – Part 2

Discipline is typically rendered in two ways; the Security Commission may prosecute; or the professional associations will provide sanctions. Typically, the professional association penalties are more lenient, consisting of a temporary license suspension and the payment of legal fees.

If readers have any other examples of such junior mining stories, email them to me at kjkltd@rogers.com and I can add them to this blog.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

The Anatomy of 43-101 Chapter 16 – Mining (Part 2)

Date: March 22, 2024 Author: Ken Kuchling Comments: Leave a reply

Part 2 of this blog post will focus on the remaining engineering work to finish Chapter 16 of the Technical Report. We only wrote about half of it in Part 1. The mining engineer can generally handle the rest of these tasks without requiring a lot of external input. You can read Part 1 at this link “The Anatomy of 43-101 Chapter 16 – Mining (Part 1)”.

The pit design and phases were completed at the end of Part 1, and we can move on to scheduling.

4. Production Scheduling

Once the pit design is complete, everyone will be calling for the production schedule as soon as possible. Others on the team are waiting for it. The tailings engineers need the production schedule for the tailings stage design. The process engineers need the scheduled head grades to finalize sizing the plant components. The client wants the schedule to plug into their internal cashflow model for a quick peek at the economics.

However, before the mine engineer can start scheduling, the dilution approach needs to be selected. Dilution is waste that is mixed in with ore during mining. A high amount of dilution can dramatically lower the processed head grades. There may be a desire to “low ball” the dilution to make the grades look better, but the engineer should base the dilution on what they would expect to see.

Two dilution approaches are common. One can either construct a diluted block model; or one can apply dilution afterwards in the production schedule. I have used both approaches at different times.

The production schedule must be on a diluted basis, since that represents what the processing plant will actually see.

Generally, two different production schedules must be created: (i) a Mining schedule, and (ii) a Processing schedule. In some instances, they may be one and the same schedule. However, if any ore stockpiling is done, then the Mining schedule will be separate from the Processing schedule.

The Mining schedule shows ore going directly to the plant and ore going into the stockpiles. The Processing schedule will show ore delivered directly from the mine and ore reclaimed from stockpiles. Building stockpiles and pulling ore from stockpiles are two independent activities.

Sometimes lower grade stockpiles are built up by the mine each year but only processed at the end of the mine life. Periodically the ore mining rate may exceed the processing rate and other times it may be less. This is where the stockpile provides its service, smoothing the ore delivery to the plant.

Scheduling can be done with variable time periods. Perhaps the schedule is generated using monthly time periods, or quarters, or years.

The 43-101 report will normally show the annual production schedule, but that does not mean it was generated that way. I prefer to use short time periods (monthly or quarterly) for the entire mine life, to ensure ore is always available to feed the plant. A 10 year mine life would result in 120 monthly time periods, so output spreadsheets can get large.

Scheduling can be done manually (in Excel) or by using commercial software, like Datamine’s NPVS. The commercial software is better in that it allows one to run different scenarios more quickly, and it does a lot of the thinking for the engineer. It also does a good job of stockpile tracking. It also decides when it is necessary to transition to mining in satellite pits.

Once the schedules are finalized, they are normally reviewed by the client for approval. The strip ratio and ore grade profile by date are of interest. One may then be asked to look to at different stockpiling approaches to see if an NPV (i.e. head grade) improvement is possible.

One can stockpile lower grade ore and feed the plant with better grade by mining at a higher rate with more equipment. One might need to examine iterative schedules of that type.

Sometimes one must take two steps backwards and re-design some of the initial pit phases to reduce waste stripping or improve grades. Then one would run the schedules again until getting one that satisfies everyone.

Now that the schedule is complete, we can write up the Chapter 16 text up to page 15. We’re getting closer to the end.

5. Site Layout Design

With the pit tonnages and mining sequence from the schedule, the mine engineers can start to look at the site layout (waste dumps and haul roads). Normally the tailings engineers will be responsible for the tailings layout. However, if there is no tailings engineer on the PEA team, the mining engineer may look after this too.

First there is a need for a waste balance. This defines how much mined overburden or waste rock will be needed to build haulroads, laydown pads, and tailings dams. Then the remaining waste volume must be placed into waste dumps.

Hopefully the tailings engineers have finished their tailings dam construction sequence by this time to provide their rockfill needs (although unlikely if you only gave them the production schedule two days ago).

The geotechnical engineers will provide the waste dump design criteria; for example, 3:1 overall side slope using 15m high dump lifts. Ideally it is nice to have soil and foundation information beneath the waste dump sites, but at PEA stage most often this isn’t available. The dump locations are only being defined now.

The mining engineers will size the various waste dumps to their required capacity. Then they can lay out the mine haulroads from the pit ramps exits to the ore crusher, the ore stockpiles, and to each waste dump.

That’s it for the site layout input. Add another 2 pages to Chapter 16. Now the mining engineers can look at the mining equipment fleet.

6. Fleet Sizing and Mining Manpower

The last task for the mine engineer in Chapter 16 is estimating the open pit equipment fleet and manpower needs. The capital and operating costs for the mining operation will also be calculated as part of this work, but the costs are only presented in Chapter 21.

The primary pieces of equipment are the haul trucks. They can range in size from 30 tonnes to 350 tonnes and anywhere in between.

Typically, the larger the equipment is, the lower the unit cost ($/t), especially in jurisdictions where labor costs are high. One doesn’t want a mine fleet with only 5 trucks nor one with 50 trucks. So where is the happy medium?

Once the schedule and site layout are complete, the mine engineers can run the truck haul cycles, in minutes. They need to estimate the time to drive from the pit face, up the ramp, to the waste dump, to the ore crusher, and return back into the mine. Cycle times determine the truck productivity, in tonnes per hour per truck and include the time to load the truck. Some destinations may have long cycle times (to a far off crusher) while others may be quick (to an adjacent waste dump).

The cycle time must be calculated for each material type going to each destination. As the pit deepens, the cycle times increase.

Very simplistically, if a 100 tonne truck has a 20 minute cycle time, it can do three cycles in an hour (300 tph). If one has to mine 10 million tonnes of ore per year, then that would require 33,300 truck hours. If a single truck provides 6500 operating hours per year, that activity would require a fleet of 5 trucks. The same calculation goes for waste.

The total trucking hours will vary year to year as waste stripping tonnages change or haul cycle times increase in deeper pits. The required truck fleet may vary year to year. Keeping haul distance short and haul cycles quick is the key to a lower cost mine.

The mine engineers undertake the productivity calculations for loading equipment to estimate annual operating hours, and the required shovel / loader fleet size.

The support equipment needs (dozers, graders, pickups, mechanics trucks, etc.) are typically fixed. For example, 2 graders per year regardless if the annual tonnages mined fluctuate.

The support equipment needs are normally based on the mining engineer’s experience. Hence the benefit of actually working at a mine at some point in your career.

Blasting includes both the blasthole drilling activity and hole charging. The mining engineer estimates drill productivity and specifications based on the bench height, the expected rock mass quality, and the power factor (kg/t) need to properly demolish the rock.

Finally, the mine operation manpower is estimated based on all the equipment operating hours as well as the fixed number of personnel to support and supervise the mine.

This essentially concludes the mining information presented in Chapter 16 of a typical 43-101 open pit report.

Conclusion

These two blog posts hopefully give an overview of some of the things that mining engineers do as part of their jobs. Hopefully the posts also shed light on the amount of work that goes into Chapter 16 of a 43-101 report. While that chapter may not seem that long compared to some of the others, a lot of the effort is behind the scenes.

Some will say PEA’s are not very accurate documents that should be taken with a grain of salt. One should understand that engineers are working with a limited amount of information at this early stage while forming the concept for the proposed operation.

The subsequent study stages are where more accurate costs are expected and can be demanded.

I don’t know if this overview makes one want to sign up to be a mining engineer or learn to code instead. None of this is rocket science; it just requires practical thinking.

If young people want to get into mining, but not sure into which aspect, I suggest go read through a 43-101 report. There are sections describing exploration, resource modelling, mine engineering, metallurgy, geotechnical engineering, environmental, and financial modelling. Its all in one document. See if any of these areas are of interest to you. Universities should use 43-101 reports as part of their mining engineering curriculum.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

The Anatomy of 43-101 Chapter 16 – Mining (Part 1)

Date: March 20, 2024 Author: Ken Kuchling Comments: 4 Replies

When people learn that I’m a mining engineer, I’ll normally get perplexed looks and asked what that job is about. Most never even knew the job existed.

So I thought what better way to explain the mining engineer role than by describing the anatomy of a typical Chapter 16 (MINING) in a 43-101 Technical Report. That chapter is a good example of the range of tasks typically undertaken by mining engineers.

Secondarily it also provides an opportunity to describe in detail all the steps that go into writing a Chapter 16, focusing on the PEA.

PEA’s tend to have a poor reputation for lack of accuracy, and this blog post may shed some light on why that is. To avoid running on too long, I have subdivided this into Part 1 and Part 2.

Generally, one will see a single QP sign off on Chapter 16. However, the chapter requires input from several people. Section 16 is generally prepared in the same way for a PEA or a feasibility study (FS). The main difference is related to the amount of hard supporting data in a FS versus a PEA.

The PEA will rely on many “reasonable assumptions” and it can be done in at least half the time of a FS. A FS will also build on previous study decisions, something a PEA doesn’t have access to since it is a first time snapshot of a project.

Normally preparing Chapter 16 is done under time pressure to deliver results as quickly as possible. Other study team members are waiting for its output to finalize their own engineering work.

1. Define the Mine

In a PEA, the first thing that must be conceptualized is whether this will be an open pit (OP) mine, underground (UG), or a combination of both.

There is always a mineral resource estimate available before doing a PEA. The way the resource is reported will indicate what type of mine this likely is. The geologists have already done some of the mining engineer’s work.

The mineral resource will suggest if this will be an OP or UG, a large or small operation, a long life or short life, and the likely processing method. The framework for the project is already set at the mineral resource estimate stage.

We can now write page 1 of Chapter 16.

2. Optimize the Pit Size and Shape

The first step for the mining engineer is a pit optimization analysis to define the approximate size and shape of the pit. The pit optimization step creates a series of nested economic pit shells for different metal prices. For example, the base case gold price may be $1800/oz, but we still want to see what size of pit would be economic at $1000/oz, $1200, $1300, etc. Normally one may run 50 different price scenario increments. The smaller shells may eventually be good starter pits to help improve NPV and payback time.

Before starting pit optimization, we require economic inputs from several people. The base case metal prices must be selected (normally with input from the client). The mining operating cost per tonne must be estimated (by the mining engineer). The processing engineers will provide the processing cost and recovery for each ore type.

The geotechnical engineers will provide approximate pit wall angles. All of these inputs have to be forecasted at a very early stage. We don’t yet know the size of the pit, the ore tonnage available, nor the actual plant throughput rate but one must still predict some costs. Hence these initial inputs might just be ballpark data.

In the final cashflow model you may eventually see slightly different metal prices, costs, or recoveries than used in pit optimization. That’s because that cashflow model inputs are generated by the study, while the optimization inputs are pre-study estimates.

The pit optimization step may also need to apply constraint boundaries. For example, if there is a nearby property limit or river, one may want to constrain the pit optimization to get no closer than 50 metres to the river or boundary. The pit shell optimizer may be free to expand the pit outwards in multiple directions, except that one direction.

Once the optimization is run, a series of nested pit shells are created, each with its own tonnes and grade. These shells are compared for incremental strip ratio, incremental head grade, total tonnes, and contained metal.

A decision must now be made on which shell to use for the mine design. Larger economic shells may have more tonnes, lower grade, and higher strip ratio. Smaller shells may have lower strip ratio and better grade.

For example, a smaller shell may have 10 year life containing 800,000 oz at a strip ratio of 2:1 while a larger shell may have 14 years, 1 million oz at a strip ratio of 3:1. Both are roughly the same economically. However, developing the larger shell may require more mining equipment capital yet have a lower average cost per tonne. Which shell do you choose?

There can be dozens of such shell to shell trade-offs and typically one doesn’t run schedules and cost models on all of them. The client will have input on whether they wish to move forward with 10 years 800,000 oz or the 14 years with 1 million oz. Sometimes selection is driven by investors having size expectations that need to be met.

Some people may say ‘Well… just run cashflow models for each case to see which is best”. The problem with doing too much analysis at this stage is that if you re-do the pit optimization with different recovery, operating costs, pit wall angles, you will get a different optimization result. It becomes a question of how much detail work to do on something that is based on very preliminary input parameters.

Assuming the mining engineers have now selected the preferred shell for mine design, they can move on to mine design. We can now write more of Chapter 16 to page 5.

3. Open Pit Design.

The mining engineer is now ready to undertake the pit design. The pit design step introduces a benched slope profile, smooths out the pit shape, and adds haulroads. Hence a couple of key input parameters are required at this time. The mining engineer will need to know the geotechnical pit slope criteria and the truck size & haul road widths. Let’s look at both of these.

Pit Slopes: Geotechnical engineers are responsible for providing the slope angle criteria to the mining engineers. The geotech engineers may have a lot or little information to work with. Perhaps they have geotechnical oriented core holes and they have undertaken some rock strength testing.

Perhaps the only information for the geotechnical engineers is rock quality data from exploration drilling. I have seen both situations at the PEA stage; the latter is more typical. In the feasibility study they would have geotechnical core hole data available. At the PEA stage, that is less likely, since no one yet knows the size and depth of the pit. We are only getting to that now.

Pit wall schematic

The geotechnical engineers will provide the inter-ramp slope angles, specified by catch bench widths and bench face angles. The engineers may subdivide slopes by rock type.

For example: the overburden wall is to be at 30 degrees, the underlying oxide rock at 40 degrees and the deeper fresh rock wall at 55 degrees. Additionally, the pit may be subdivided into pie shaped sectors, with differing slope criteria.

For example, the fresh rock on the west wall might have a 55 degree angle, but the east wall fresh rock may only allow 50 degrees and the south wall is 45 deg.

The more sectors and differing slope criteria, the more complex it is to do the pit design. Normally you don’t see geotechnical engineers signing off as QP’s for Chapter 16, although they had key input into the pit design.

Ramps: Next the mining engineer needs to select the truck size, even though the production schedule has not yet been created.

Trucks sizes can vary between 30t up to 350t. A double lane ramp width is approximately 4.5 times the truck width, including space for a ditch and an outer safety berm. A 90 tonne truck is 6.7 metres wide (haulroad of 30m) while a 350 tonne truck is 9.8 m wide (haulroad of 44 m wide). That’s a 14m width difference.

The haul road gradient is normally 10%, which means a 200 metre deep pit requires a ramp length of 2000 metres to get to the bottom. It can be difficult to fit a 2 kilometre ramp in a small pit without pushing the walls out to provide enough circumference to get to depth.

Ramps can spiral around the pit, or they can zigzag back and forth on one side of the pit (switchbacks). The mine engineer will decide this once they see the topography, pit size, and ore body orientation. Adding ramps in a pit design pushes the crest outwards and adds waste to be stripped.

Pit Phases: After the pit design is complete, the mine engineer will design multiple interior phases to distribute the waste and ore tonnages in the mining schedule. These phases are sometimes referred to as pushbacks, laybacks, or stages. At mine start-up, one doesn’t want to strip the entire top off of a large pit. A smaller pit within the large pit will allow faster access to ore.

This completes the open pit design and now allows one to write to page 10 of Chapter 16. However, the mining engineer is not done yet.

Conclusion

This ends Part 1. In Part 2 we will discuss the mining engineer’s next tasks; production scheduling; waste dump design; and equipment selection. The mining engineer QP will sign off and take responsibility for all the mine design work done so far. You can read Part 2 at this link “The Anatomy of 43-101 Chapter 16 – Mining (Part 2)“.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

Mine Builders vs Mine Vendors

Date: October 15, 2023 Author: Ken Kuchling Comments: Leave a reply

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.

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.

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.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

Don’t Cut Corners, Cut Cross-Sections Instead

Date: October 4, 2023 Author: Ken Kuchling Comments: Leave a reply

This article is about the benefit of preparing (cutting) more geological cross-sections and the value they bring.

Geological sections are one of the easiest ways to explain the character of an orebody. They have an inherent simplicity yet provide more information than any other mining related graphic.

Some sections can be simple cartoon-like images while others can be technically complicated, presenting detailed geological data.

Cartoon-stylized sections are typically used to describe the general nature of the orebody. The detailed sections can present technical data such as drill hole traces, color coded assays intervals, ore block grades, ore zone interpretations, mineral classifications, etc.

Sections provide a level of clarity to everyone, including to those new to the mining industry as well as those with decades of experience.

This article briefly describes what story I (as an engineer) am looking for in sections. Geologists may have a different view on what they conclude when reviewing geological sections.

I will describe the three types of geological sections that one can cut and what each may be describing. The three types are: (1) longitudinal (long) sections; (2) cross-sections; (3) bench (level) plans. Each plays a different role in helping to understand the orebody and mining environment.

There is also another way to share simple geological images via3D PDF files. I will provide an example later.

Longitudinal (Long) Sections

Long sections are aligned along the long axis of the deposit. They can be vertically oriented, although sometimes they may be tilted to follow the dip angle of an ore zone.

Long sections are typically shown for narrow structure style deposits (e.g. gold veins) and are typically less relevant for bulk deposits (e.g. porphyry).

The information garnered from long sections includes:

The lateral extent of the mineralized structure, which can be in hundred of metres or even kilometers. This provides a sense for how large the entire system is. Sometimes these sections may show geophysics, drilling to defend the basis for the regional interpretation.
Long sections will often highlight the drill hole pierce points to illustrate how well the mineralized zone is drilled off. Is the ore zone defined with a good drill density or are there only widely spaced holes? As well, long sections can show how deep ore zone has been defined by drilling. On some projects, a few widely spaced deep holes, although insufficient for resource estimation purposes, may confirm that the ore zone extends to great depth. This bodes well for potential development in that a long life deposit may exist.
Sometimes the long section drill intercept pierce points can be contoured on grade, thickness, or grade-thickness. This information provides a sense for the uniformity (or variability) of the ore zone. It also shows the elevations of the higher grade zones, if the deposit is more likely an open pit mine, an underground mine, or a combination of both.

Cross-Sections

Cross-sections are generally the most popular geological sections seen in presentations. These are vertical slices aligned perpendicular to the strike of the orebody. They can show the ore zone interpretation, drill holes traces, assays, rock types, and/or color-coded resource block grades.

As an engineer, my greatest interest is in seeing the resource blocks, color coded by grade. Sometimes open pit shells may be included on the section to define the potential mining volume. The engineering information garnered from block model cross-sections includes:

Where are the higher-grade areas located; at depth or near surface?
If a pit shell profile is included, what will the relative strip ratio look like? Are the ore zones relatively narrow compared to the size of the pit?
How will the topography impact on the pit shape? In mountainous terrain, will a push-back on pit wall result in the need to climb up a hillside and create a very high pit slope? This can result in high stripping ratios or difficult mining conditions.
Does the ore zone extend deeper and if one wants to push the pit a bit deeper, is there a high incremental strip ratio to do this? Does one need to strip a lot of waste to gain a bit more ore?
Are the widths of the mineable ore zones narrow or wide, or are there multiple ore zones separated by internal waste zones? This may indicate if lower-cost bulk mining is possible, or if higher cost selective mining is required to minimize waste dilution.
How difficult will it be to maintain grade control? For example, narrow veins being mined using a 10 metre bench height and 7 metre blast pattern will have difficulty in defining the ore /waste contacts.
Cross-sections that show the ore blocks color coded by classification (Measured, Indicated, Inferred), illustrate where the less reliable (Inferred) resources are located and how much relative tonnage may be in the more certain Measured and Indicated categories.

When looking at cross-sections, it is always important to look at multiple cross-sections across the orebody. Too often in reports one may be presented with the widest and juiciest ore zone, as if that was typical for the entire orebody. It likely is not typical.

Stepping away from that one section to look at others is important. Possibly the character of the ore zones changes and hence its important to cut multiple sections along the orebody.

Bench (Level) Plans

Bench plans (or level plans) are horizontal slices across the ore body at various elevations. In these sections one is looking down on the orebody from above.

Level plans are typically less common to see in presentations, although they are very useful. The level plans may show geological detail, rock types, ore zone interpretations, ore block grades, and underground workings.

The bench plan represents what the open pit mining crews would see as they are working along a bench in the pit. The information garnered from bench plans that include the block model grades includes:

Where are the higher-grade areas found on a level? Are these higher grade areas continuous or do they consist of higher grade pockets scattered amongst lower grade blocks?
Do the ore zones swell or pinch out on a bench? A vertical cross-section may give a false sense the ore zones are uniform. The bench plan gives an indication on how complicated mining, grade control, and dilution control might be for operators.
Do the ore zones on a bench level extend out beyond the pit walls and is there potential to expand the pit to capture that ore?
On a given bench what will the strip ratio be? Are the ore zones small compared to the total area of the bench?

As recommended with cross-sections, when looking at bench plans, one should try to look at multiple elevations. The mineability of the ore zones may change as one moves vertically upwards or downwards through a deposit.

Never mind cross-sections – give me 3D

While geological sections are great, another way to present the orebody is with 3D PDF files to allow users to view the deposit in three-dimensions. Web platforms like VRIFY are great, but I have been told they sometimes can be slow to use.

3D PDF files can be created by some of the geological software packages. They can export specific data of interest; for example topography, ore zone wireframes, underground workings, and block model information. These 3D files allows anyone to rotate an image, zoom in as needed and turn layers off and on.

You can also create your own simplistic cross-sections through the pdf menus (see image).

A simple example of such a 3D PDF file can be downloaded at this link (3D DPF File Example). It only includes two pit designs and some ore blocks to keep it simple.

The nice thing about these PDF files is that one doesn’t need a standalone viewer program (e.g. Leapfrog viewer) to view them. They are also not huge in size. As far as I know 3D PDF files only work with Adobe Reader, which most everyone already has. It would be good if companies made such 3D PDF files downloadable along with their corporate PowerPoint presentations.

Conclusion

The different types of geological sections all provide useful information. Don’t focus only on cross-sections, and don’t focus only on one typical section. Create more sections at different orientations to help everyone understand better.

In 2019 I wrote an article describing the lack of geological cross-sections in many 43-101 technical reports. The link to that article is her “43-101 Reports – What Sections Are Missing?”

Geological sections are some of the first items I look for in a report. Sometimes they can be hidden away in the appendices at the back of the report. If they are available, take the time to actually study them since they can explain more than you realize.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

There is a unique paradox sitting at the heart of how the mining industry evaluates its projects. It’s called the Inferred Resource—now you see it, now you don’t.

What Are Inferred Resources?

Inferred resources represent the lowest confidence category of mineral resources; typically estimated in zones with limited sampling and unconfirmed geological continuity. They carry the highest geological uncertainty of the three resource categories.

In Preliminary Economic Assessments (PEAs), Inferred resources are allowed—but only under certain conditions:

They can be included in mine plans and economic models, which is the reason PEAs exist: to allow early-stage projects to test economic viability using all available resource data.

Inferred tonnes are routinely used to extend mine life or improve project economics in PEA studies. Investors must understand this risk and should examine the proportion of mined tonnage that is classified as Inferred. This breakdown is normally presented in the Technical Report.

Conversely, in Pre-Feasibility Studies (PFS) and Feasibility Studies (FS), the rules for Inferred material are different:

Inferred resources cannot be included in mineral reserve estimates or in the economic analysis underpinning a PFS or FS. Inferred “ore” is treated as waste rock.

Only Indicated and Measured resources can be converted to Probable and Proven mineral reserves.

Including Inferred material in a PFS mine plan would typically disqualify the study from being used for project financing or a production decision.

Some companies might include Inferred material in a PFS as “upside” or as a sensitivity case, but that analysis must be clearly distinguished from the base case.

The resource upgrade requirement (from Inferred to Indicated) creates some interesting dynamics:

Companies will look at ways to compensate for the Inferred material deduction. Cutoff grade changes and step out drilling are ways to mitigate this impact.

A large Inferred resource that cannot be upgraded without great cost (due to depth, remoteness, or lack of ore-zone continuity) can permanently stall a project at the PEA stage. Hence, one may see multiple PEAs completed on the same project (i.e., the PEA loop).

In closing, the peculiarity of the Inferred resource is that it is essentially a tiered permission structure. Inferred resources are useful for early economic screening, but they must be converted to higher-confidence categories before they can support a bankable study or project debt financing.

Permitting via a PEA

Companies sometimes will commence the permitting process based on their PEA study. There are some risks to doing this, and the Inferred resource creates one of these risks.

Baseline studies for hydrology, ecology, and air quality typically require two to three years of data collection. So starting early makes sense, even with only a PEA-level project layout in hand.

Jurisdiction may play a role too. Some areas are more receptive to early-stage permitting engagement. Other permitting processes may be more rigorous such that operators want at least a PFS in hand before committing to a full EIA process.

How Can Inferred Resources Affect Permitting

Let us examine some specific aspects of permitting that can be influenced by Inferred resources.

(a) Permit the smaller FS footprint and risk under-permitting if Inferred is later upgraded. Requesting future permit modification for a suddenly larger project is sometimes viewed by regulators as “permitting by stealth”.

(b) Permit the larger PEA footprint to provide flexibility, which may trigger more extensive environmental review and higher bonding requirements.

2. Environmental Impact Assessment (EIA) Scope & Cost: A mine plan that includes Inferred material:

3. Tailings and Waste Facility Sizing: Tailings storage facilities (TSFs) and waste rock dumps are sized to the life-of-mine tonnage. Inferred tonnes included in a PEA can drive facility sizing significantly. Permitting a TSF for a larger tonnage is:

– More difficult and time-consuming to obtain if the height and footprint increase

– Will be subject to more rigorous dam safety and closure review- However this could be potentially beneficial if the Inferred resource is later confirmed during mining

4. Financial Assurance and Reclamation Bonding: Regulators require bonds or financial assurances sized to the cost of full site reclamation. A larger mine footprint driven by Inferred tonnes means:

– Higher bonding requirements

– Larger financial burden on the company during the project development phase

– Potential difficulty for junior companies in securing bonds for Inferred-inflated footprints that have not been proven out yet.

6. Indigenous and Community Consultation: In jurisdictions with consultation requirements (Canada’s duty to consult, FPIC principles, etc.), the scope of consultation is tied to the project’s impact footprint and duration. A mine life extended by Inferred tonnes:

– Triggers consultation over a longer operational period

– May affect benefit agreement negotiations (royalties, employment commitments) tied to mine life or total tonnage

– If mine life subsequently shrinks at FS stage, it can create credibility and trust issues with communities who were counting on a longer mine life.

In closing, personally I feel that project proponents should try to permit to a footprint somewhat larger than the Pre-Feasibility base case to preserve operation flexibility. For more on the benefits of flexibility, see the blog post “Mining’s Obsession with Optimization – Good or Bad”.

Conclusion

Inferred resources present a unique paradox; they can and can’t be used in mining economic analysis. They can be used to examine project viability but can’t be used to make a production decision.

The manner in which Inferred resources are viewed can also affect permitting. Although they don’t directly enter the regulatory process, they can shape the physical parameters of the mine plan that regulators will evaluate.

Even if a company grows the resource size between the PEA and PFS, there will still be a component of Inferred material within the PFS mine design that might be considered real tonnage or not.

Getting the permitted footprint right relative to the eventual resource confidence level is an underappreciated skill in project development. Each mining project is unique, and there is no easy one-size fits all solution when considering the impact of Inferred resources on project development.

In case you missed it, the last blog post was ” Mining’s Obsession with Optimization – Good or Bad“. https://kuchling.com/minings-obsession-with-optimization/ The entire blog post library can be found at https://kuchling.com/library/

You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on LinkedIn or Twitter (@KJKLtd) for updates and other mining commentary.

Mining has gotten better at squeezing more value from each tonne of ore. So why do see mining projects still stumbling and everyone being pushed to do even more optimization?

The pursuit of a single “optimal” outcome might leave projects well engineered, yet poorly equipped for reality. Flexibility (or resiliency) aren’t the enemy of efficiency; they may be the only way to make efficiency sustainable.

Which Aspects Should Be Optimized

The design aspects that I have seen recommended for optimization range from:

optimize your drill hole locations

optimize your pit size

optimize your production schedule

optimize your throughput and/or recovery

optimize your water consumption

optimize your carbon footprint

optimize your project design

optimize your labour productivity

optimize either NPV, IRR, or payback

There are a lot of suggestions and recommendations and people will have differing opinion on which are the most important optimizations. This opinion is typically driven by their own expertise or field of work, not necessarily by what is best for the project.

Optimal vs Resilient Design

Optimization of a mining project can yield meaningful cost and efficiency gains. However mines face inherent constraints, such as ore grade variability, geological surprises, equipment life cycles, and regulatory issues.

Chasing optimization can sometimes lead to over-investment in a single asset, reduced flexibility, or operational fragility. The system performs well only under the ideal conditions.

Flexibility builds in the ability to scale production up or down, switch mining sequences, or pivot processing approaches as conditions change. Resilience has real value in mining, where geology, markets, and costs are unpredictable.

Flexibility identifies and can mitigate technical, geopolitical, regulatory, environmental, and market risks. The mines that do run into trouble rarely do so because they weren’t optimized; they fail because key risks weren’t anticipated or managed.

Workforce capability, safety culture, and leadership quality are key predictors of operational success. Optimization alone may not be able to address high turnover, poor safety records, and weak supervisory capacity. These can erode profitability far more than sub-optimal scheduling.

In my experience, the best operations have systems for ongoing learning and improvement rather than seeking a one-time optimal design. However, there is still a place for full optimization in some situations.

When does a flexible project design win?

Commodity prices are volatile up and down

Geological uncertainty is high (low proportion of Measured Resource)

Mining uncertainty (limited geotechnical investigations)

Long mine life (10–30+ years), where conditions will certainly change

Regulatory or social environments are unpredictable

Capital markets may require staged investment rather than full financing

When does an optimal project design win?

Shorter mine life where conditions are unlikely to change materially

Commodity is stable, well-hedged, or under long term offtake contract pricing

Geology and processability is well-understood (mature, well drilled-out deposit)

Capital is constrained and upfront efficiency is critical (you need to get it right)

The Path to Resiliency

If one decides to pursue the path of operational flexibility, what are the things that help make it happen?

Real-time data collection and adaptive planning: Real time control systems let operations respond to actual conditions rather than following a fixed weekly plan. The idea is to shorten the time between observation and reaction, not to automate rigidly but enable the system to adapt rapidly.

Keep a cross-trained workforce: Operational flexibility may be enhanced if people can fill multiple roles. Cross-training operators means one can redeploy people as needed when conditions change.

end