Articles tagged with: PEA

Heap Leach or CIL or Maybe Both

Typically gold mines consist of either a heap leach (HL) operation or a CIL type plant. There are a few projects that operate (or are considering) concurrent heap leach and CIL operations. Ultimately the mineral resource distribution determines if it makes economic sense to have both.  This blog discusses this concept based on past experience.
A CIL operation has higher capital and operating costs than a heap leach. However that higher cost is offset by achieving improved gold recovery, perhaps 20-30% higher. At higher gold prices or head grades, the economic benefit from improved CIL recovery can exceed the additional cost incurred to achieve that recovery.

Some background

Several years ago I was VP Engineering for a Vancouver based junior miner (Oromin Expl) who had a gold project in Senegal. We were in the doldrums of Stage 3 of the Lassonde Curve (read this blog to learn what I mean) having completed our advanced studies. Our timeline was as follows.
Initially in August 2009 we completed a Pre-Feasibility Study for a standalone CIL operation. Subsequently in June 2010 we completed a Feasibility Study. The technical aspects of Stage 2 were done and we were entering Stage 3. Now what do we do? Build or wait for a sale?
The property’s next door neighbor was the Teranga Sabodala operation. It made sense for Teranga to acquire our project to increase their long term reserves. It also made sense for a third party to acquire both of us. The Feasibility Study also made the economic case to go it alone and build a mine.
While waiting for various third-party due diligences to be completed, the company continue to do exploration drilling. There were still a lot of untested showings on the property and geologists need to stay busy.
Two years later in 2013 we completed an update to the CIL Feasibility Study based on an updated resource model. Concurrently our geologists had identified seven lower grade deposits that were not considered in the Feasibility Study.
These deposits had gold grades in the range of 0.5 to 0.7 g/t compared to 2.0 g/t for the deposits in the CIL Feasibility Study. We therefore decided to also complete a Heap Leach PEA in 2013, looking solely on the lower grade deposits.
These HL deposits were 2-8 km from the proposed CIL plant so their ore could be shipped to the CIL plant if it made economic sense. Test work had indicated that heap leach recoveries could be in the range of 70% versus >90% with a CIL circuit. The gold price at that time was about $ 1,100/oz.
Ultimately our project was acquired by Teranga in the middle of 2013.

Where should the ore go?

With regards to the Heap Leach PEA, we did not wish to complicate the Feasibility Study by adding a new feed supply to that plant from mixed CIL/HL pits. The heap leach project was therefore considered as a separate satellite operation.
The assumption was that all of the low grade pit ore would go only to the heap leach facility. However, in the back of our minds we knew that perhaps higher grade portions of those deposits might warrant trucking to the CIL plant.
For internal purposes, we started to look at some destination trade-off analyses. We considered both hard (fresh rock) and soft ore (saprolite) separately. CIL operating costs associated with soft ore would be lower than for hard ore. Blasting wasn’t required and less grinding energy is needed. The CIL plant throughput rate could be 30-50% higher with soft ore than with hard ore, depending on the blend.
I have updated and simplified the trade-off analysis for this blog. Table 1 provides the costs and recoveries used herein, including increasing the gold price to $1500/oz.
The graph shows the profit per tonne for CIL versus HL processing methods for different head grades.
The cross-over point is the head grade where profit is better for CIL than Heap Leach. For soft ore, this cross-over point is 0.53 g/t. For hard ore, this cross over point is at 0.74 g/t.
The cross-over point will be contingent on the gold price used, so a series of sensitivity analyses were run.
The typical result, for hard ore, is shown in Table 2. As the gold price increases, the HL to CIL cross-over grade decreases.
These cross-over points described in Table 2 are relevant only for the costs shown in Table 1 and will be different for each project.

Conclusion

It may make sense for some deposits to have both CIL and heap leach facilities. However one should first examine the trade-off for the CIL versus HL to determine the cross-over points.
Then confirm the size of the heap leach tonnage below that cross-over point. Don’t automatically assume that all lower grade ore is optimal for the heap leach.
If some of the lower grade deposits are further away from the CIL plant, the extra haul distance costs will tend to raise their cross-over point. Hence each satellite pit would have its own unique cross-over criteria and should be examined individually.
Since Teranga complete the takeover in mid 2013, we were never able to pursue these trade-offs any further.
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Connecting With Investors – Any New Ideas?

I recently read some LinkedIn posts from junior mining executives and IR staff asking for ideas about new ways to engage with investors.  The commonly used ways rely on PowerPoints, webinars, and trade show booths.   However during this Covid-19 crisis, trade shows are no longer an option.  Therefore these face to face discussions with investors will now be missing.  This will impact on the ability of a company to connect with and establish trust with those people.

What else can be done?

Perhaps with technology, like Zoom, one can replicate the personal feel of a trade show booth. One can still have back and forth conversations with investors rather than just doing lecture style webinars.
Free discussion is good in most cases. Letting investors feel they are sitting around a table will give them a better understanding of how management thinks and how decisions are being made.  It will also help them get to know the personality of the management team.
I’m not an IR person but I admire the job they have to do, especially in today’s business environment.  I have recently sat in on several junior mining online webinars.  When listening to the Q&A’s afterwards, it is apparent that many attendees enjoyed understanding the technical aspects of a project.  However they will only get that understanding by asking questions.  Trade show booths gave them that opportunity.

Technology gives some options.  Like what?

Set up regularly scheduled Zoom meetings, enabling investors to have interactive back and forth conversations with management.  Try to avoid long presentations with questions only at the end. Have a moderator review and ask questions as they come in.
Management teams should introduce more than just the CEO or COO.  Include VP’s of geology, engineering, corporate development, from time to time.    Don’t hesitate to let the public meet more of your team.  Trade show booths are often manned by different team members.
Pick different topics for discussion on each conference call to avoid repeating the same PowerPoint over and over again.
Avoid being too scripted.
For example one call could be a fly-around of the property using Google Earth.  Another call could focus on the ore body and resource model.  Another call might discuss metallurgy and the thought process behind the flow sheet. Perhaps discuss the development options you have considered.
None of this information is likely confidential if it has been presented in your 43-101 report.
Companies file highly technical 43-101 reports on SEDAR, but then let the investors fend for themselves.   One could take some online time for high level walk through of the report.  Clearly explain technical issues and how they have been addressed or will be addressed in the future.  This is an opportunity to explain things in plain English, and field questions.
One downside to such calls is if there are significant flaws with a project.  Open discussions may help expose them.   One needs to know your own project well, be aware of all the issues, and have them under control in one way or another.

Conclusion

Better communication with investors can increase confidence in a management team.   Although some investors may not enjoy technical discussions, I think there is a subset that will find them very helpful and interesting.  There will likely be an audience out there.
Mining projects are complex with many moving parts and many uncertainties. Trust and confidence will come if a company is transparent in what they are doing and explain why they are doing it.
The mining industry is looking for new ways to reach out, so it shouldn’t be afraid to try new things. Some management teams will be great at it, others not so much.  Figure out where you fit in.
Unfortunately one of the aspects of trade shows that cannot be replicated is the ability for investors to wander around aimlessly, take a quick glance at a lot of companies, and then decide which ones they want to learn more about.

Warning: zoom bombing

As an aside, if you are using Zoom make sure the host has configured the right settings.  There are instances where anonymous participants can suddenly share their own computer screen, i.e. with questionable videos, to the group.  It’s been referred to as “zoom bombing”.
Read more about how to prevent zoom bombing at the following two links.
https://www.forbes.com/sites/leemathews/2020/03/21/troll-terrifies-zoom-meeting-zoombombing/#2765abfc3e70
https://www.businessinsider.com/zoom-settings-change-avoids-trolls-porn-2020-3
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Online Collaboration and Management Tools (Part 2)

networking
This blog is the Part 2 continuation of a prior post regarding collaboration software tools that mining teams should consider.   Here are a few more ideas I’d like to share, having found that these are great to have in your toolbox.

Zoom (for conferencing)

A great tool for video conferencing is zoom (https://support.zoom.us/hc/en-us).  Its similar to Skype but has added features.
It allows video conferencing, screen sharing, screen swapping.
There is a free version that provides some great functionality.

 

 

 

G-suite and miningG-Suite

Is the family of Google Drive, Docs, Sheets, and Slides online services.
Group collaboration can be frustrating using spreadsheets or text documents.  We typically end up with different versions of the same document floating around.  No one is sure whether they are editing the most recent version or which version they should be editing.
With G-Suite (Google Sheets and Google Docs) you can create online spreadsheets and documents and allow multiple team members to review and edit them in real-time online at the same time.
Writing reports gets simpler since there is only one working version of the document. A “track changes” option is there (called “Suggesting”) and everyone can see the edits as they are being made. No more asking “who has the most current version?”  This type of collaborative editing is also great for Design Criteria Documents that are regularly being updated by different team members.
I have used both DropBox and Google Drive, but my preference is using Google Drive since it integrates well with G-Suite.

Foxit Reader:  

This is an alternative to Adobe Reader and can be used for reviewing PDF documents, whether text documents or drawings.
Foxit provides great editing and commenting tools like highlighting text, adding comments, drawing lines and boxes, adding comment balloons, cut & pasting images into the PDF file, and then saving the commented version.
For the most part I have stopped using Adobe Reader and have now switched over to Foxit due to commenting capability that it provides.

Google Hangouts:  

This is an online and mobile application for team conference calling.  It allows screen sharing, online group video conversations, sends out meeting reminders, and it will call participants at the require time.
While Hangouts has many of the same features as Skype, it integrates with Google Calendar and Gmail.   Most of the tech world uses Hangouts instead of Skype, but I’m not sure if the mining industry is ready to move away from Skype.
An honorable mention for video-conferencing goes to Zoom. Some tech developers have been switching to Zoom, they feel it has more capabilities than Hangouts and better video resolution. I have never used it however.

Other Software

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

Geology & Mining Software

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

Conclusion

The bottom line is that there is a lot of interesting collaboration software out there.  Its readily available, much of it is free, and can make managing your remote project teams easier. Just because the software is used by the tech industry and millennials, don’t assume it won’t have a benefit to the mining industry.
The downside is the need to train and learn the new software, and the mining industry may not be so receptive to that.
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Online Collaboration and Management Tools (Part 1)

networking
Update:  This blog was originally published March 2016.   However like all things, the online world keeps evolving. So I have updated Part 1 and Part 2 of the blog (July 2020).  I added new software suggestions and removed some.
As part of a side business, I have been working alongside a team of software developers. It has been a good learning experience for me to see how the tech world does things compared to how the mining industry likes to work. We see a lot of private equity flowing into tech and less into mining, so they must be doing something right.
The tech start-up industry has developed its own set of jargon.  Common terms are agile management, lean start-ups, disruption, minimum viable products, pings, fail fast, and sprints.
Some of their work approaches do not make sense for the mining industry where one doesn’t have the luxury of using trial-and-error and customer feedback to help complete a project.
For software, the attitude is get it out the door fast and your customers will then tell you what fixes are needed. In mining you want to get it right the first time.  Having said that, some mining people will say they have seen 43-101 technical reports that follow the “wait for customer feedback” model.
Now where the tech industry can provide us with some guidance is in the implementation of collaboration tools. It is becoming more common for software developers to work remotely.  To collaborate they use the technology available or they develop new technology to meet their needs.  Mining teams are also working more and more from remote offices these days.

What are the collaboration software available

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

Trello

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

 

Trello screenshot

Slack

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

Slack Screenshot

Milanote

Who hasn’t done whiteboard brainstorming while sitting in a conference room? Although I have not used this application, Milanote appears to be an interesting tool to organize your team’s ideas and projects into visual boards. This is a way to do it online with your remote team. It also allows mood boarding, storyboarding, and design collaboration. While the application is intended for creative professionals, perhaps the mining industry is going to have to become more creative. Check out their website at https://milanote.com. They have a free plan that allows 100 notes, images or links with no time limit and unlimited boards.

Conclusion

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

mining economics
Update: This blog was originally written in Feb 2016, but has been updated in Aug 2019.
As a reminder for all QP’s doing economic analysis for PEA’s, don’t forget that one needs to present the economic results on an after-tax basis.
Every once in a while I still see PEA technical reports issued with only pre-tax financials.  That report is likely to get red- flagged by the securities regulators.  The company will need to amend their press release and technical report  to provide the after tax results.    No harm done other than some red faces.

Taxes can be complicated

When doing a tax calculation in your model, where can you find international tax information?  PWC has a very useful tax-related website.  The weblink below was sent to me by one of my industry colleagues and I thought it would be good to share it.
The PWC micro-site provides a host of tax and royalty information for selected countries.  The page is located at https://www.ey.com/gl/en/services/tax/global-tax-guide-archive
On the site they have a searchable database for tax information for specific countries.
The PWC tax and financial information includes topics such as:
  • Corporate tax rates
  • Excess profits taxes
  • Mineral taxes for different commodities
  • Mineral royalties
  • Rates of permissible amortization
  • VAT and other regulated payments
  • Export taxes
  • Withholding taxes
  • Fiscal stability agreements
  • Social contribution requirements
PWC has a great web site and hopefully they will keep the information up to date since tax changes happen constantly.  The website also has a guide related to the rules for the treatment of capital expenditures.   Check it out.  https://www.ey.com/gl/en/services/tax/global-tax-guide-archive
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Measured vs. Indicated Resources – Do We Treat Them the Same?

measured and indicated
One of the first things we normally look at when examining a resource estimate is how much of the resource is classified as Measured or Indicated (“M+I”) compared to the Inferred tonnage.  It is important to understand the uncertainty in the estimate and how much the Inferred proportion contributes.   Having said that, I think we tend to focus less on the split between the Measured and Indicated tonnages.

Inferred resources have a role

We are all aware of the regulatory limitations imposed by Inferred resources in mining studies.  They are speculative in nature and hence cannot be used in the economic models for pre-feasibility and feasibility studies. However Inferred resource can be used for production planing in a Preliminary Economic Assessment (“PEA”).
Inferred resources are so speculative that one cannot legally add them to the Measure and Indicated tonnages in a resource statement (although that is what everyone does).   I don’t really understand the concern with a mineral resource statement if it includes a row that adds M+I tonnage with Inferred tonnes, as long as everything is transparent.
When a PEA mining schedule is developed, the three resource classifications can be combined into a single tonnage value.  However in the resource statement the M+I+I cannot be totaled.  A bit contradictory.

Are Measured resources important?

It appears to me that companies are more interested in what resource tonnage meets the M+I threshold but are not as concerned about the tonnage split between Measured and Indicated.  It seems that M+I are largely being viewed the same.  Since both Measured and Indicated resources can be used in a feasibility economic analysis, does it matter if the tonnage is 100% Measured (Proven) or 100% Indicated (Probable)?
The NI 43-101 and CIM guidelines provide definitions for Measured and Indicated resources but do not specify any different treatment like they do for the Inferred resources.
CIM Resources to Mineral Reserves

Relationship between Mineral Reserves and Mineral Resources (CIM Definition Standards).

Payback Period and Measured Resource

In my past experience with feasibility studies, some people applied a  rule-of-thumb that the majority of the tonnage mined during the payback period must consist of Measure resource (i.e. Proven reserve).
The goal was to reduce project risk by ensuring the production tonnage providing the capital recovery is based on the resource with the highest certainty.
Generally I do not see this requirement used often, although I am not aware of what everyone is doing in every study.   I realize there is a cost, and possibly a significant cost, to convert Indicated resource to Measured so there may be some hesitation in this approach. Hence it seems to be simpler for everyone to view the Measured and Indicated tonnages the same way.

Conclusion

NI 43-101 specifies how the Inferred resource can and cannot be utilized.  Is it a matter of time before the regulators start specifying how Measured and Indicated resources must be used?  There is some potential merit to this idea, however adding more regulation (and cost) to an already burdened industry would not be helpful.
Perhaps in the interest of transparency, feasibility studies should add two new rows to the bottom of the production schedule. These rows would show how the annual processing tonnages are split between Proven and Probable reserves. This enables one to can get a sense of the resource risk in the early years of the project.  Given the mining software available today, it isn’t hard to provide this additional detail.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  Otherwise I post notices on LinkedIn, so follow me at: https://www.linkedin.com/in/kenkuchling/.
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On-Line Technical Report Library

mining studies
Update: This blog was originally written in August 2015, but has been updated in June 2019.
A while ago (in 2015) on LinkedIn I noticed a discussion from a member of an Australian/New Zealand consulting group about developing an on-line community for undertaking free peer reviews of new resource estimates and technical reports.   The objective was to help the mining industry improve on their standards, consistency, and quality of resource estimates and the supporting technical reports.

Original RSC website

OPAXE (then called RSC) created a library of technical reports that can be accessed via a searchable map on their web site at this link.  The map functionality is quite unique and interesting.  Check it out – there are many global projects already listed on the map.
Originally they also proposed a peer review concept. The goal was to develop a team of pre-approved volunteer mineral consultants that would review the various technical reports for accuracy and compliance. The hope is that such on-going peer reviews would help improve the quality of technical work.
It appears that the peer review aspect has been discontinued.  However currently, when viewing an individual project there is an input box that asks “I would like to anonymously report a compliance or data error issue with this report.
The website also allows you to search for reports based on date, commodity, stock exchange, type of study, as well as other criteria.

Conclusion

If you are interested in the technical aspects of different mining projects in different jurisdictions, check out the OPAXE website.  You can also still retrieve documents from the SEDAR site if you know the company you are looking for.  Alternatively the company website itself usually includes links to all their technical reports.

Update

Digbee website screenshot

In June 2019, a new website has come to my attention.  It is called Digbee, at thedigbee.com.   Its a new data and research platform where they match experts with mining feasibility studies to create objective reviews.  The site is very similar to the OPAXE one.
In May 2019 Digbee launched with a free database of over 3,000 economic studies, displayed on an interactive map.  In addition, they intend to offer a paid on-demand and independent analysis of published feasibility studies.  Mining companies can contact Digbee to get their project added.
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Cashflow Sensitivity Analyses – Be Careful

cashflow sensitivity
One of the requirements of NI 43-101 for Item 22 Economic Analysis is “sensitivity or other analysis using variants in commodity price, grade, capital and operating costs, or other significant parameters, as appropriate, and discuss the impact of the results.”
The result of this 43-101 requirement is typically the graph seen below, which is easily generated from a cashflow model.  Simply change a few numbers and then you get the new economics.  The standard conclusions derived from this chart are that metal price has the greatest impact on project economics followed by the operating cost.   Those are probably accurate conclusions, but is the chart itself telling the true story?
 DCF Sensitivity GraphI have created the same chart in several economic studies so I understand the limitations with it.   The main assumption is that sensitivity economics are based on the exact same mineral reserve and production schedule.
That assumption may be applicable when applying a variable capital cost but is not applicable when applying varying metal prices and operating costs.   Does anyone really think that in the example show, the NPV is $120M with a 20% decrease in metal price or 20% increase in operating cost?
Potentially a project could be uneconomic with such a significant decrease in metal price but that is not shown by the sensitivity analysis.  Reducing the metal price would result in a change to the cutoff grade.  This changes the waste-to-ore ratio within the same pit.  So assuming the same the  mineral reserve is not correct in this scenario.
These changes in economic parameters would impact the original pit optimization used to define the pit upon which everything is based.  A smaller pit size results in a smaller ore tonnage, which may justify a smaller fleet and smaller processing plant, which would have higher operating costs and lower capital costs.
A smaller mineral reserve would produce a different production schedule and shorter mine life.  It can  get quite complex to do it properly.
Hence the shortcut is to simply change inputs to the cashflow model and generate outputs that are questionable but meet the 43-101 requirements.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  Otherwise I post notices on LinkedIn, so follow me at: https://www.linkedin.com/in/kenkuchling/.
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Request For Proposal (“RFP”) – Always Prepare One

Mining request for proposal
When it comes to time to gather costs for any type of engineering 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.
An RFP is better than a verbal phone call to a consultant describing what you want.  Its 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.

The RFP doesn’t need to be complicated

executive meetingFrom an owner’s perspective, preparing an RFP gives the opportunity to collect the 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 study and specifically what they want to see in the proposal.
From a consultant’s perspective, receiving an RFP is preferred 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” and if ultimately extra services are required then “out-of-scope” work can be defended.   An RFP also gives the consultant some reassurance that the owner has put consideration into exactly what they want them to do.

What to include in the RFP

The RFP that is sent to bidding consultants should contain (at a minimum) the items listed below. A sole sourced study can have a scaled back RFP but some 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 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 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.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  Otherwise I post notices on LinkedIn, so follow me at: https://www.linkedin.com/in/kenkuchling/.
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Google Earth – Keep it On Hand

Mining studies
In a previous article (3. Site Visit – What Is the Purpose?) I briefly discussed the requirements for a site visit to be completed by one or more Qualified Persons (“QP”) in a 43-101 compliant study.    Unfortunately the entire study team cannot participate in a site visit; however the next best thing may be Google Earth.

Lets fly around with Google Earth

Gather your team around their computers and fire up screen sharing software like Glance, GoToMeeting, Skype, or Cisco Webex.   Here are some of the things your group can do with Google Earth:
  • It can be used to fly-around the project site examining the topography.
  • It can be used to view regional features, regional facilities, land access routes, and existing infrastructure.
  • It  has the capability to measure distances, either in a straight line or along a zigzag path.
  • It provides the capability to view historical aerial photos (if they exist) to show how the project area might have changed over time.
  • It can import GPS tracks and survey waypoints.  If a member of the study team has visited the site with a GPS, they can illustrate their route and their observations.
My recommendation is to always have a Google Earth session with your engineering team to examine the project site and the regional infrastructure.
A group session like this ensures that everyone sees and hears the same thing. It’s like taking a helicopter tour of the site with your entire study team at once!   A “helicopter tour” would be a good agenda item at the very first kickoff meeting.
Another option is to check the aerial photos and Bird’s Eye views on the Bing Maps website (www.bing.com/maps).  Sometimes those images will be different than what you will find in Google Maps or Google Earth.
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Large Consulting Firms or Small Firms – Any Difference?

Mining feasibility pre-feasibility
Some junior mining companies have selected their engineering consultant on the assumption that they need a “big name” firm to give credibility to their feasibility study.   This creates an interesting dilemma for many smaller mining companies.  Its also a dilemma for smaller engineering firms trying to win jobs.  While large consultants may be higher cost due to their overheads; their name on a study may bring some intangible value.
In my personal experience I find that larger consultants are best suited for managing the large scale feasibility studies.  This isn’t because they necessarily provide better technical expertise.  Its because they generally have the project management and costing systems to manage the inherent complexities of such larger studies.
The larger firms are normally able to draw in more management resources; for example, project schedulers, cost estimators, and document control personnel.
Ultimately one does pay for all of these people, albeit they may be a critical part in successfully completing a study.  However there is a cost to this.

Sub-contracting

For certain aspects of a feasibility study, one may get better technical expertise from smaller specialized engineering firms.  However the overall coordination of heavily sub-contracted studies can be an onerous task.  Often the larger firms may be better positioned to do this.
In my view, likely the best result will come from a combination of a large firm managing the feasibility study but undertaking only the technical aspects for which they are deemed to be experts.
The large lead firm would be supported by smaller firms for the specialized aspects, as per a previous article “Multi-Company Engineering Studies Can Work Well..Or Not”.

What about smaller studies?

For smaller studies, like scoping studies (i.e. PEA’s), which can be based on limited amounts of technical data, I  don’t see the need to award these studies to large engineering firms.  The credibility of such early studies will be linked to the amount of data used to support the study.  For example, there may be limited metallurgical testing, or limited geotechnical investigations; or the resource is largely inferred.  Not all PEA’s are equal (see “PEA’s – Not All PEA’s Are Created Equal”).  A large firm’s application of limited data may be no more accurate or defensible than a small firm’s use of the same data.
One of the purposes of an early stage study is to see if the project has economic merit and would therefore warrant further expenditures in the future.  An early stage study is (hopefully) not used to defend a production decision.  The objective of an early stage study is not necessarily to terminate a project (unless it is obviously uneconomic).
I have seen instances where larger firms protecting themselves from  limited data, were only willing to use very conservative design assumptions. This may not be helpful to a small mining company trying to decide how to advance an earlier stage project.

Conclusion

The bottom line is that for early stage studies like a PEA, smaller engineering firms can do as good a job as larger firms.  However one must select the right firm.  Review some of their more recent 43-101 reports to gauge their quality of work.  Don’t hesitate to check with previous client references.
For the more advanced feasibility level studies, be wary if a smaller firm indicates they can do the entire study. Perhaps they can be responsible for some parts of the feasibility study as a sub-contractor to a larger firm. Managing these large study may be beyond their experience and internal capabilities.
Whether you are considering a small or large engineering firm, know their strengths and weaknesses as they will relate to the specific’s of your study.

 

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PEA’s – Is it Worth Agonizing Over Details

Mining PEA
As stated in a previous article (“PEA’s – Not All PEA’s Are Created Equal“) different PEA’s will consist of different levels of detail.  This is driven by the amount of technical data available and used in the study.    The same issue applies to a single PEA whereby different chapters of the same study can be based on different degrees of data quality.
I have seen PEA’s where some of the chapters were fairly high level based on limited data, while other parts of the same study went into great depth and detail. This may not be necessary nor wise.

Think about the level of detail justifiable

If the resource is largely inferred ore, then the mine production plan will have an inherent degree of uncertainty in  it.  So there is not a lot of justification for other engineers (for example) to prepare detailed tailings designs  associated with that mine plan.
Similarly there is little value in developing a very detailed operating cost model or cashflow model for a study that has many underlying key uncertainties.  Such technical exercises may be a waste of time and money, adding to the study duration, increasing engineering costs, and giving the unintended impression that the study is more accurate than it really is.
Different levels of detail in the same study can crop up when diverse teams are each working independently on their own aspect of the study.   Some teams may feel they are working with highly accurate data (e.g. production tonnage) when in reality the data they were provided is somewhat speculative.
The bottom line is that it is important for the Study Manager and project Owner to ensure the entire technical team is on the same page and understands the type of information they are working with.   The technical detail in the final study should be consistent throughout.
Experienced reviewers will recognize the key data gaps in the study and hence view the entire study in that light regardless of how detailed the other sections of the report appear to be.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  Otherwise I post notices on LinkedIn, so follow me at: https://www.linkedin.com/in/kenkuchling/.
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