Articles tagged with: Mine Engineering

Open Pit Optimization – How I View It

Mining feasibility study
One of the first steps in an open pit design is the pit optimization analysis.  Pit optimization is used to define the most profitable pit shell for a given set of economic parameters.  The economic parameters include the metal prices, processing recoveries, and site operating costs. Normally when optimization is done, a range of metal prices or Revenue Factors (“RF”) is used to develop a series of nested shells to understand how the pit will expand or contract with increasing or decreasing metal prices.
Once the optimization step is complete, mining engineers will then design the pit inside that shell, introducing benches and ramps.  The pit design should mimic the selected optimized shell as closely as possible.
The pit design may (or may not) closely replicate the optimization shell depending on the slope angles used in the optimization and where the haul ramps are located in the design.
Hence the actual ore and waste tonnages mined may be different that the tonnages defined by the optimizer.
Various experts in pit optimization will use approaches of differing complexity.  Some may apply variable mining costs with pit depth; apply variable process recoveries linked to head grade; apply variable pit slopes by sector or depth, apply dilution and ore losses; etc.   One can make the pit optimization step as simple or detailed as one wants it.
The question is whether detailed pit optimization is warranted.  My view is that overly detailed pit optimization is  not required, other than if one wants to test parameter sensitivity on the resulting pit size and shape.  There are just too many uncertainties in the parameters being used in optimization.

Open Pit Optimization Uncertainties

Some of the uncertainties involved in the optimization approach are listed below:
  • Pit optimization can generate large pits that would have a long mine life.  However one doesn’t really know the metal prices far into the future.   So will that final pit ever get mined, or might it even be larger than shown.
  • Pit optimization is typically done at the start of a study, so one doesn’t have the detailed operating costs yet. The size of the project may be unknown and one has to use rough estimates for future costs and possibly even assume preliminary process recoveries.
  • Operating costs will also change in the future, and the optimization step is just a snapshot using current information.
  • Sometimes the optimization includes the use of Inferred resources, which are uncertainty.   Sometimes optimization is done only using Measured and Indicated resource, yet there may be areas if Inferred resource that ultimately convert to M &I and these will have been ignored.  So, either way you do it, you are not sure what ore the pit can captured and will  to shape the pit.
  • The smaller pits, if developed, would consist of smaller operations and may have different operating costs than assumed in the optimization.   Similarly larger pits may have different throughput rates and  operating costs than assumed in the optimization.
  • The ore and waste split reported within the pit will be based on a specific life-of-mine cutoff grade.  This is based on the fixed metal price and operating cost assumptions applied.
  • Overall pit wall slopes may differ for shallow pits versus deep pits.  Slopes may vary above the groundwater table and below it.  In many instances during pit optimization the wall angles are maintained at the same angle irrespective of the pit depths.   Sometimes geotechnical programs have not yet been completed, so optimization slope angles are simply educated guesses.
  • Dilution may be applied globally during pit optimization (unless one is working with a diluted block model).  In reality, dilution may differ in different parts of the ore body, and that may not be considered in the optimization stage. For more discussion on dilution in general, read the blog “Ore Dilution Prediction – Its Always an Issue“.

Conclusion

The bottom line is that pit optimization should be viewed as a guide to the pit design, but not as a highly precise calculation.  There are too many uncertainties in the parameters used.
There is always opportunity for future miner operators to examine pushback to grow the pit larger than initially envisioned.  Having said all that, one should still understand how future changes in metal prices can impact on the pit size, and then assess whether practical pushbacks are possible.   Thin sliver pushbacks are operationally difficult so this should be understood at the start.
While open pit optimization is not a precise science, there is still merit in examining how the pit size and shape reacts to changes in different parameters.  There are many ways to examine this and help select which shell should be advanced into the design stage. It can be more than just looking at the NPV versus Revenue Factor chart.   You can read this post at this link “Pit Optimization – More Than Just a “NPV vs RF” .
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Mining Project Economics – Simple 1D Model

mining desktop study
In a previous article I outlined my thoughts on the usefulness of early stage financial modelling (“Early Stage “What-if” Mine Economic Analysis – Its Valuable”).     My observation was that it is useful to take a few days to build a simple cashflow model to help your team better understand your project.

By “simple” I mean really simple.

This blog describes one of the techniques that I use to take a super-quick look at any project; whether it is for a client wishing to understand his project at a high level; or whether it is a project that I have read about.  There isn’t any actual study or production schedule available yet.  Maybe there is only a mineral resource estimate available.
It takes about 10 minutes to plug the numbers into my template to get fast results.  The image below is an example of the simple model that I use, but anyone can build one for themselves.

Screenshot of Simple Economic Model

I use the term one dimensional (“1D”) model since it doesn’t use the typical X-Y matrix with years across the top and production data down the page.
The 1D model simply relies simple on life of mine (“LOM”) totals to estimate the total revenue, total operating cost, and total profit.  This determines how much capital expenditure the project can tolerate.
The only caveat is that you need to have some sense for operating and capital costs for similar projects. This analysis can be on both a pre-tax and simple after-tax basis.
Using estimated metal prices and recoveries, the first step is to calculate the incremental revenue generated by each tonne of ore (see a previous article “Ore Value Calculator – What’s My Ore Worth?”).
Next that revenue per tonne is multiplied by the total ore tonnage to arrive at the total revenue over the life of mine.
The second step is to determine the life of mine operating cost, and again this simple calculation is based on estimated unit operating costs multiplied by the total tonnages being handled.
The third step is to calculate the life of mine profit based on total revenue minus total operating cost.
The potential net cashflow would be calculated by deducting an assumed capital cost from the life-of-mine profit.  The average annual cashflow is estimated based on the net cashflow divided by the mine life.  An approximate NPV can be calculated by determining the Present Value of a series of annual payments at a certain discount rate.
The reasonableness of the 1D model will be examined via benchmarking and this will be summarized once completed.  I will include a link to that future blog here.

You need to understand your project

One can easily evaluate the potential impact of changing metal prices, changing recoveries, ore tonnages, operating costs, etc. to see what the economic or operational drivers are for this project.  This can help you understand what you might need in order to make the project viable.

Conclusion

The bottom line is that a 1D economic calculation is very simplistic but still provides a vision for the project.  The next step in the economic modelling process would be a 2D model based on an annual production schedule.  The 1D approach is just a quick first step in looking at the potential.  You can do it even when you only know the head grades and some generalized orebody information.
The two ways you can apply the simple 1-D model are:
  1. evaluate the potential of early stage projects using cost inputs from other studies,
  2. examine a project’s sensitives (units costs, recoveries, prices) by calibrating your simple model to the published study (i.e. use the same parameters and make changes as needed.
The entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

 

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Oil Sands vs Tar Sands – Something I’ve Been Wondering About

tar sand mining
Watching the television news in Canada these days, one sees the environmental opponents of the oil sands parading around with signs that say “Stop the Tar Sands”.  One way to distinguish whether someone is for or against the oil sands is to see what terminology they use.  Do they call them “oil sands” (i.e. pro groups) or “tar sands” (i.e.anti groups)?   Personally raw bitumen seems more tar-like than oil-like so the enviro’s seem to have it right.

Is it Oil Sands or Tar Sands

Going back many decades the oil sands were originally called the tar sands.  I’m not sure when the terminology shifted, but in the mid-1960’s the first large scale mining operation was called Great Canadian Oil Sands (GCOS).  I’m not sure why the terminology shift from tar to oil, but maybe it was related to the fact that “tar” was considered something of low perceived value while “oil” was considered something of high economic value.
Jed Clampett and familyLook at what oil did for the economic situation of Jed Clampett on the Beverly Hillbillies.  How about the show “Dallas”? There was also a lot of money and scotch drinking.
Back then we all wanted to discover an oil well in our backyard so perhaps the term “oil” implied some level of elegance and prosperity.
These days when one sees the term “oil” in the news, it tends to be associated with negatives.  We see oil references to rail explosions, pipeline ruptures, tanker spills, job layoffs, fracing, carbon emissions, Middle East wars, and protests.
These days I don’t know if there is any intangible benefit in using the term “oil” to describe your product anymore.  Maybe there is actually some intrinsic harm in doing so.
Tar sand bitumenTar (or bitumen) on the other hand, is a molasses-like substance generally viewed by the public as a material used to repair our streets and patch our roofs. A tar spill is not going to flow anywhere; it will barely flow out of the tank it is held in.  What is there not to like about tar?
So next time there is a protest with signs being held up to “Stop the Tar Sands”, the oil companies should shrug their shoulders, jump on the band wagon, and say “Yeah, tar, that’s us. So what are you worried about?”.
They should try to commandeer the word “tar” back from the protest groups since there really is nothing wrong with tar.  There seems to be a lot wrong with oil.

 

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3D Printing – A Simple Idea

3D models
We hear more and more about 3D printing and what it is able to do. 3D printers have come down in price and can be bought for under $500.   Here is an example of using a 3D printer from a recent project that I consulted on.
The open pit was going to be located in hilly terrain, and issues related to haul road access, waste dump sites, and leach pad location were all important.   The client used a 3D printer to create a small desktop model of the terrain, which was given to each of the consulting firms.
The photo below shows the scale of the model.
3D printed topographyMembers of the engineering team were each given their own 3D model to take back to their offices.  Putting one of these on your desk helps with familiarity of the overall site and allows you to better understand the siting and drainage issues.
Topographic maps may give data on actual elevations and distances, but even a small 3D model gives you a feel for the site.    The model shown above was for undisturbed topography but one could easily print off a similar model once the final pit and dump design is done.
With the current three-dimensional printing capabilities, creating simple 3D topographic models for the engineering team is feasible and I recommend doing so.
At the same time provide the Owner’s team with their own models, helping them understand the site issues that must be dealt with.
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Work Breakdown Structures – Don’t Forget About The WBS

mining project WBS
Normally at the start of a mining study, the team members receive a matrix of responsibilities.  This table shows which people (or groups) are responsible for different aspects of the study, i.e. who is responsible for geology, for mine design, for process design, infrastructure, etc.  This is great tool and a necessity in making sure that everyone knows what they are supposed to do.
Next we generate a project schedule based on some work plan.  In realty this isn’t the correct sequence.

Sometimes the WBS is forgotten

What often gets forgotten in early stage studies is providing the team members a Work Breakdown Structure (“WBS”).   I consider the WBS an equally important component as the responsibility matrix and both should always be provided.
The WBS is a hierarchical breakdown of the project into phases, deliverables, and work packages usually associated with cost estimation. It is a tree based structure, developed by starting with the final objective and then dividing that into manageable components based on size, duration, and responsibility.  Typically this is done for the capital cost estimate, breaking it down into individual cost areas and cost components.  A WBS can also be used for the operating cost estimate.
request for propoalsThe WBS can provide the following information to the team:
  • It assigns the costing responsibility to specific people or group so each know what must be delivered.
  • It provides a consistent format for developing and reporting the capital costs (and operating costs).
  • It helps ensure that no cost components get omitted and no costs get double counted.
  • It provides the cashflow modeler with a clean format to import the capital cost into the cashflow model.
  • The WBS should be developed before the project schedule, not after it.

Any study will benefit from a WBS

Typically a WBS is developed for pre-feasibility and feasibility mining studies but is often ignored at the PEA stage.  Some feel it is too detailed for that level of study.  I don’t feel this is the case.
The WBS is a communication tool to confirm responsibilities.  Thus even a simplified WBS is still useful at the PEA stage.
I have seen some instances where a WBS has been created but does not get wide distribution to the entire team.  The WBS should be provided to everyone and ideally a team session be held to walk through the WBS structure.
The idea is not make everyone a costing expert, but rather to ensure all understand how the project cost estimate will be structured.

Conclusion

The bottom line is that regardless of the level of study, a WBS should always be created.
Some will say the WBS is not required for early stage studies but I have found benefits in having one, at least for the capital cost estimate.   Obviously the level of detail in the WBS should be appropriate to the level of the study.
Once the WBS is in place, then go ahead and build your project schedule.
A competent Study Manager can easily create an initial WBS, thereby mitigating some headaches when the final study is being assembled.   You may even want a basis WBs at the proposal stage.
By the way, before awarding a study to anyone, try to have a prepared Request for Proposal beforehand.   I have written about the benefit of this document in a blog post titled “Request For Proposal (“RFP”) – Always Prepare One
My entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

 

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  
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Potash Ore Grades – Check the Units

KCl vs K2O
Having worked with the potash industry for many years, I have reviewed numerous geological reports for projects in Canada, Asia, Russia, and Africa.  One of the curious things that I have seen is the reporting of resource  grades in two different units; either as potassium oxide (K2O) or potassium chloride (KCl).

Is it K2O or KCl ?

Standard practice in the Saskatchewan industry is reporting ore grades using K2O units, with typical head grades in the range of 25% K2O.  Many of the international projects, but not all, have decided to use the KCl units. Therefore when comparing potash resource grades between deposits, one must be vigilant for the units used since there is a significant difference.
The conversion from K2O to KCl is based on the formula K2O = 0.6317 x KCl.   So a grade of 25% K20 is equal to 25/0.6317 = 39.6% KCl.  The KCl grade value is significantly higher.  The unit issue is relevant with low grade deposits, were an actual grade of 15% K2O may be reported as 23.7% KCl.  One might see the ore grade in KCl and assume it is comparable to Saskatchewan potash grades, when in reality they are quite different.

Concentration Ratio is the Key

When looking at different potash projects, particularly those involving underground mining, a key economic factor is the concentration ratio.  This ratio represents the tonnes of potash ore needed to produce a tonne of final saleable product.
Typically the final potash product has a grade of 60% K2O.  Therefore a potash ore with a grade of 25% K2O would have a concentration ratio of about 2.4:1 (60%/25%).  This means that 2.4 tonnes of potash must be processed to produce 1 tonne of product (ignoring the process recovery factor).   For a lower grade ore with a head grade of say 15% K2O, the concentration ratio is 4:1 (60%/15%).

potash mining

This gives a rough sense for the comparable operation size required to meet the same final product production levels.  This also gives a indication for the relative amounts of salt tailings requiring disposal.  Low grade ore can generate significant quantities of tailings, the disposal of which is becoming a larger permitting issue.
In the past gold grades have been reported as “oz/ton” or currently as “g/t”, but most geological reports today are consistent with “g/t”.  Sometimes US based gold projects may use “oz/ton” however the magnitude in reported grades are fairly obvious between grams and ounces.  That isn’t the case with potash grades.
The bottom line is that potash is one commodity that will use different units when reporting ore grades.  Investors and reviewers must be aware of which units are being used.
If you are into potash mining, I have written a couple of blog posts about my brief, but interesting, time working at a potash mine in Saskatchewan.   This was early in my career and I had roles that included mine engineer, chief mine engineer and production foreman.  Each of these roles gave me a different perspective about a mining operation. In this two part blog, I share some stories relating to the uniqueness of potash mining.   If interested, here is the link “Stories from 3000 Feet Down – Part 1“.

 

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Importance of a Study Manager – That’s the Key

project manager
Over my career I have worked as an engineering team member on numerous projects and mining studies.  Some studies went better than others.  Unfortunately some dragged on, ran over budget, and ended up delivering a less than optimal product once all was said and done.
There are numerous factors that will influence the successful completion of a study.   They can be related to the quality of the technical team, the budget, the time window, and direction from the Owner.  However the key factor that I observed is the competency of the Study Manager (or Project Manager).

Study Managers must wear many hats

Study managers are responsible for being the main liaison with the Owner. They must herd a team of geologists and engineers in the same direction. They must ensure that technical quality and consistency is maintained by the entire group.  They are responsible for ensuring that budgets and timelines are being met.  The combination of all of these responsibilities can be an onerous mission, more so depending on the experience of the Owner’s team.
Every technical team has those members that will deliver quality within timelines consistently.  There are also team members that have difficulty meeting targets.  The Study Manager, early on, needs to figure out who fits into which category and then must be able to work with each.

Studies can quickly grind to a halt

An entire study can quickly grind to a halt simply because one key component becomes bogged down. A good Study Manager may occasionally ruffle some feathers but is always appreciated by the team knowing that everyone will be held to account.
The Study Manager also needs to understand the objectives of the Owner and ensure the team is working towards those objectives.
The Study Manager however must also be honest with the Owner, keeping him informed of the actual progress and warn if some target will not be met.
The Study Manager coordinates communication within the team and with the Owner.  Some managers are excellent at this while others fall into the trap of communicating on a “need-to-know” basis or “too late” basis.
Timely and thorough communication is important.  Don’t assume that one is hampering progress by involving the team in frequent communications. They serve a purpose.

Environmental Assessments need engineering input

Often the Environmental Impact Assessment is being conducted concurrently with an engineering study.  The level of internal and external communication now becomes even more critical due to the large number of new technical disciplines involved.
It is not uncommon for EIA’s to make regulatory commitments  that have not been signed off by the engineering side. The Study Manager should be aware when such commitments are being made because the engineering design needs to reflect them.

You should approve the Study Manager

When approving the consultant’s Study Manager, keep in mind that in some instances you may find that different managers within the same organization may have different internal authority.  For example, if technical people are needed on another project, some managers are able to keep their team together.  Other managers may lose team members to the other project if that manager has more internal authority.  Losing manpower doesn’t help a study progress,  so if possible try to get a sense for the authority that the Study Manager has within the organization.

Conclusion

The bottom line is that when a project Owner has received proposals for a study and is in the process of awarding that job, the most important consideration is who will be the Study Manager.  If possible meet or chat about how they will manage the study and what their experience is.  Check references if possible.
The voluminous proposals provided by consulting firms contain a lot of information like Gantt charts, organizational charts, cost estimates, team resumes, safety plan, and corporate project experience.  Focus on the Study Manager. Don’t assume they are simply an administrator scheduling meetings and issuing monthly reports. They are the key to success.
A good Study Manager can make a poor engineering team perform, while a poor Study Manager can bog down a great technical team.
One thing to be aware of is that with some firms, a Study Manager is not the same role as a Project Manager.  The SM may undertake more clerical duties, such as weekly or monthly reports, manhour tracking, distributing documents, and coordinating the logistics of the study rather than the technical aspects that a Project Manager may look after.
Another blog post discusses undertaking studies using multiple engineering teams and the pitfalls to watch out for.  That blog post is at “Multi-Company Mining Studies Can Work Well…or Not“.
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Directional Drilling Open Pit Dewatering Wells – Great Idea

open pit dewatering
I read an interesting article in the Mining Magazine May 2015 edition called “Top 10 Technologies”.  One of the new technologies that jumped out at me is the capability to directionally drill open pit dewatering wells.   This is an oil field technology from Schlumberger Water Services that was now going to be applied to mining.
One of my past roles was as a mine engineer on the Diavik diamond mine team. Pit geotechnical and hydrogeology were under my domain during project design and permitting from 1997 to 2000.
The granitic rock mass was geotechnically very competent with a limited amount of jointing and fracturing.  The pits were going to be located within a lake bed.
It was anticipated that groundwater seepage coming from a partly permafrost pit wall could create a host of operational problems in winter. Most of the groundwater flows were predicted to be along a few major structures or along single open joints.
Generally these major structures were near vertical, which created a problem when trying to intercept them with vertically drilled depressurization wells.  Either you hit one or you didn’t.

The use of directional drilling of pumping wells is a great innovation

Directional drilling of dewatering wells gives the opportunity to angle a pumping well to an orientation that allows the well bore to cut across vertical structures rather than paralleling them.   In addition, one could drill pumping wells near the pit crest targeting towards the ultimate pit bottom.  This may help improve drainage near the operating benches as the pit deepens and could eliminate the need to install inpit pumping wells if water becomes a problem.
Some open pits have constructed underground drainage galleries around the pit circumference to help intercept deep groundwater seepage.  Possibly directionally drilling aligned parallel to the pit wall can replace such high cost drainage galleries.
The bottom line is that the directional drilling innovation makes a lot of sense and mine operators should take a look at it.  It might help improve their pit dewatering systems.
If anyone has experience with directionally drilled dewatering wells, please let us know.
The hydrogeology at Diavik was unique in that the ground consisted of both permafrost and unfrozen ground.  It was likely that unfrozen ground would eventually form permafrost over time once exposed to the cold winter climate.  To read more about the hydrogeology at Diavik, check out this link “Hydrogeology At Diavik – Its Complicated“.
The entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.   
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Request For Proposal (“RFP”) – Always Prepare One

Mining request for proposal
When it comes to time to undertake any type of mining study, whether small or large, whether sole sourced or competitively bid, it is always a good idea to prepare a Request For Proposal (“RFP”) document.
I know that it can be an annoyance, but an RFP document is a lot better than a simply phone calling a consultant describing what you want.  Its also better than a cursory email outlining what you want. In many cases the RFP doesn’t need to be a complex document; however RFP’s are appreciated by everyone involved.   It provides the documentation that can help make things go smoothly.

The RFP doesn’t need to be complicated

executive meetingOwner’s Perspective: preparing an RFP gives the opportunity to collect the Owner’s team thoughts on the scope of study needed, on the deliverables required, and on the timing.   The RFP will outline this for the consultants and simultaneously help the owner’s team to get on the same page themselves.
The RFP is the opportunity for the owner to tell the consultants exactly what they are looking for in the mining study.  It also specifies what they want to see in the proposal to help them compare multiple proposals if needed.
Consultant’s perspective: receiving an RFP is great to them since having a detailed scope of work laid out means they don’t need to guess the scope when preparing their cost estimate.  It will be clear to the consultant what work is “in scope”.  If extra services are required in the future, then “out-of-scope” work can be defended.
An RFP also gives the consultant some reassurance that the Owner has put thought into exactly what they want them to do.

What to include in the RFP

The RFP sent to bidding consultants should contain (at a minimum) the items listed below. A sole sourced study can have a scaled back RFP document, but many of these key items should be maintained.
Much of this RFP information can be a single template document that will be modified if different scopes of work will be sent to different consultants (e.g. tailings design, pit geotechnical, groundwater, feasibility study, etc.).
  • Project Introduction (a high level overview of the project and the Owner).
  • Table of Responsibilities for the Study (if other consultants are being involved in different areas).
  • Scope of Work (for this Proposal), and highlight any specific exclusions from the scope.
  • Additional Requirements (update meetings, monthly reports, timesheets, documentation, etc.)
  • Schedule (the timing for the proposal, job award date, study kickoff, and completion date).
  • Instructions to the Bidder (e.g. what information should be provided in each proposal and in what format).
  • Other (the legal rights of the Owner, confidentiality statement, how proposals will be evaluated, etc.).

Specifying format makes it easier to compare proposals

If a company is competitively bidding the study, it can be easier to compare multiple proposals if certain parts are presented in the exact same format.  Usually different consulting firms have their own proposal format, which is fine, however certain sections of the proposal should be made easily comparable.
The RFP can request that each proposal should contain (at a minimum):
  • Confirmation of the scope of work based on the RFP, which may be more detailed than the RFP itself.
  • List of exclusions.
  • List of final deliverables.
  • Proposed Study Manager, resume and relevant study management experience.
  • Proposed team members, organizational structure by areas of responsibility, and resumes.
  • Cost estimate on a not-to-exceed basis for each area, subdivided by team member, hours and unit rates ,and possibly in a specific table format.
  • A fee table for the various job classifications that would be applied to out-of-scope additional man hours.
  • All indirect costs, administrative costs, indicating mark-ups (if any).
  • Miscellaneous disbursements (i.e., airfares, hotel, vehicles) and indicate if there are mark-ups.
  • Detailed study schedule to completion.
  • Payment schedule.
  • Specify if there are any potential conflicts of interest with other projects.

Conclusion

The bottom line is that an owner should always take the time to prepare some type of RFP for any mining study they want to undertake.  The owner should also request a consultant proposal based on that RFP, even if it is being sole sourced to just one consultant.
Depending on the size and nature of the study, one can use judgement on how detailed the RFP or consultant’s proposal must be, but one should always have the proper documentation in place beforehand.
A key part of any mining study is the project capital cost estimate.  In my view it is important that any RFP includes the requirement to develop a Work Breakdown Structure.  This has many uses, and is discussed further in the blog post “Work Breakdown Structures – Don’t Forget About The WBS
My entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

 

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  
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Mining Due Diligence Data Rooms – Help!

Mining reviews
Many of us have heard the statement “Have a look in the data room, it’s all in there”. This can bring a cold sweat to even the most experienced engineer who undertaking a due diligence review.  How many of you can recall being given FTP access to a data room that is full of highly disorganized folders and sub-folders, files with cryptic names, different updates of the same file in different folders?

It’s like looking for a needle in a haystack.

It can be difficult to impossible to determine which files are important and relevant and which files have been simply dumped into the data room. There is nothing worse than spending a day reviewing an Excel financial model only to find out that it wasn’t the latest version and a different un-related folder had the correct version.
Data rooms are typically created for due diligence exercises, or during advanced an engineering stage. Regardless of the purpose, it is helpful for all involved  to have a document control person who understands what is in the data room, what is important, and what is non-essential.
Large projects often have an dedicated document control person to manage the data room.  However smaller companies in a due diligence phase may tend to use a team approach.  Everyone dumps all their electronic files into the data room, including email transcripts, using some type of sensible folder structure (hopefully).
It’s then up to the user to dig through the files to locate what they need.  This can be an onerous task, costing everyone money in wasted time.

Organization of the mining data room is key

Comprehensive searchable document management systems such as Ansarada, Aconex, SharePoint, and others are available.  They can be pricey and will require a team mindset to function, organize, and catalog the information.  However a properly implemented system can make it easier to search for files, keywords, and the latest versions of files. “Properly implemented” means that the entire team takes time when putting information in to ensure it is properly tagged meta-data.  Its is not uncommon for such systems to become repositories for hundreds or thousands of different files.
When using a cloud-based data room or FTP site, try to select one that allows bulk downloading of documents rather than only allowing one file download at a time.
Some data rooms, for security and tracking purposes, require users to be online in order to open a document, even documents downloaded onto your computer.  This makes it difficult to work when one doesn’t have internet access (like on an airplane).
Some data rooms limit the cut & pasting ability from the documents.  This can make it difficult to prepare your own summary  report if you want to include pasted images from the documents.

Conclusion

The bottom line is that management of a mining data room is critically important, although I don’t know if there is any single magic solution.
Small mining companies may have tight budgets and a limited management team so organizing data properly isn’t high on the priority list.   I suggest to anyone organizing a data room, please take the time to properly set up the folder structure, develop a single bibliography of what files are in there, and assign a person to be familiar with the general contents of the data room.
Unless its a legal case involving lawyers, don’t just dump in everything. Avoid unnecessary data files or “work in progress” files that are not actually required by anyone.

Read More on the Subject

Another aspect of data rooms that can help make a due diligence taxing is the way the spreadsheet models are built.  Models can either be made simple and user friendly, or can be complex showing how clever the model creator is.   You can read some thoughts on this at the following link “Mine Financial Modelling – Please Think of Others“.
For more discussion on the topic of mining due diligence, another blog post discusses the help that a technical checklist can deliver.  There are many aspects of a mining project, from legal, social, to technical and a checklist helps to avoid missing things.  You can read more about the checklist on this at “Mining Due Diligence Checklist“. You can even request a free copy of my Excel checklist if interested.

 

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