Mine Reconciliation – Standardization Please

Date: May 7, 2025 Author: Ken Kuchling Comments: Leave a reply
Mine through mill reconciliation, in my view, is an under appreciated topic that could benefit from more conversation amongst industry members. Unfortunately, reconciliation is sometimes viewed as a time consuming frustrating activity, with what some consider less than verifiable results.  However given the ongoing innovation that we are seeing in mining, reconciliation may need to play a bigger role than ever.
The mining industry is implementing more and more technology in the mining cycle.
For example, this can range from AI assisted resource modelling, down hole logging, blast movement tracking, GPS controlled dig limits, MineSense bucket grade tracking, load scanning, truck dispatch control, smart mining and edge computing, online grade analyzers, belt weightometers, drone surveying of stockpiles, and real time process controls.
Lots of different innovations are continually being adopted by the mining industry, contrary to what some may say.
The question is does all this innovation improve the overall performance of a mining operation, and if so, by how much? It can cost a lot of money to implement the new technology, is there a payoff?
One cannot answer those questions if one doesn’t undertake proper mine reconciliation. A concern might be that mining is innovating faster than the ability to assess the results of that innovation.  To monitor it, you need to measure it.

What is Mine Reconciliation

Mine reconciliation is the process of comparing and aligning the estimated production with the actual production from mining and processing. It requires assessing the accuracy of pre-mining predictions against actual results to identify inconsistencies in the system and hopefully improve it, be it resource estimation, mine planning, or process efficiency. Comparisons can be made between multiple stages in the mining system, as shown in the image below.
  • Mine reconciliation requires information such as initial predictions from exploration data and geological models, actual measurement: data from mining sources, such as blast holes, stockpile samples, or mill feed. As well it will need data on the final product being shipped off site. Do the metal quantities balance out throughout the mining operation?
  • Mine reconciliation tends to aggregate over longer time periods (monthly, quarterly or annually) due to short term impacts of material handling in stockpiles and plant circuits and the labour time needed to collect the input data.
  • Mine reconciliation ultimately attempts to assess how well the delivery of the final metal product relates to the initial resource model (i.e. what the project decision was originally based on)? It is also tool to evaluate the impact of any innovation implementation on the operation.
  • Reconciliation will help mine operators highlight issues and optimize extraction, manage costs, and ensure compliance with regulatory or investor expectations. Factors such as poor resource estimation, excessive dilution and ore loss, inaccurate sampling, etc. can cause discrepancies, making reconciliation an important part of any operation.
  • The reconciliation process is also used to derive Mine Call Factors. These factors are used to modify the forecasts from long range models, short range models, and grade control models to better represent the actual performance the operation will likely see. Large call factors suggest something is amiss in the “forecast to actual” progression. The first problem is to identify the causes. The list of the common sources of error can be lengthy. Then, once identified, the second problem is how to fix them.
Harry Parker initially suggested various reconciliation parametrics and labelled them F1, F2, F3. In a 2009 paper by Fouet titled “Standardising the Reconciliation Factors Required in Governance Reporting”, indicates that Rio Tinto had decided upon fifteen  (15) different possible reconciliation correlations (see image below). Each one provides an insight on the efficiency of the operation in one way or another. I have seen modified versions of the reconciliation relationships, so it appears there may be no industry standard at this time. Fouet was asking about industry standardization in 2009 (an excellent paper to read by the way).

Mining Codes Getting Involved

It appears that the JORC Code may be recognizing the importance of reconciliation. In an August 2024 Exposure Draft JORC is suggesting the following text: “Where an Ore Reserve has been publicly reported for an operating mine, the results of both production reconciliation and any prior estimate comparison must also be included in the annual Mineral Resources and Ore Reserves statement. Refer to Clause 2.36. The relationships and variables being reconciled must be described in plain language or depicted graphically and must include reconciliations of both the Mineral Resources and Ore Reserves.”
Interestingly, it appears that NI43-101 has not yet jumped on the bandwagon about the importance of disclosing reconciliation results. However, it may just be a matter of time before it becomes one of their disclosure requirements.
If more regulatory focus will be put on mine reconciliation disclosure, then perhaps more industry standardization is warranted. This would help better define some of the terminology and “F factors” shown in the diagrams above to ensure consistency and help avoid each mine doing reconciliation in their own way.

Excel versus Cloud Based Reconciliation

Each mine site may be unique with respect to; ore sources; terminology; ore types; mining methods; stockpiling philosophy; processing methods; technology availability; and personnel capability. So often the easiest approach for mine reconciliation is based on the Excel spreadsheet. (Reconciliation is generally not an easy undertaking).
Spreadsheets can be built site specific, based on an operation’s unique characteristics.
Spreadsheets are often built by a user for that user. They are tailored for the tailor. In my experience, typically the modeler is the only one comfortable with an Excel model’s logic, since all of us may think differently. Unfortunately, with the spreadsheet approach, it becomes more difficult to standardize an industry wide reconciliation process.
An alternate solution to spreadsheets is to use a cloud based standardized software package. Toronto based Minebright has one option, called Pit Info (see link for more info). There are a few other reconciliation software applications available. They tend to be cloud based, hence multiple people can have access to the input modules or output modules.  (I would like to thank the Minebright people for steering me towards some of the technical papers on this subject).

The cloud based approach may help make reconciliation a group effort instead of a tightly controlled internal function. It may also help standardize reporting from a company’s multiple operations, reporting from the mining industry globally, or simply for consistent JORC reporting.
The downside to the cloud approach is the mine site teams must learn the software and tailor it to their operation. However, once that hurdle is passed, personnel changes become less onerous due to the model consistency. I have seen cases where a person doing the Excel reconciliation task has left their job, and hence forward the reconciliation effort came to a halt. The people remaining may be too busy or simply don’t want to have to figure out the Excel logic of someone else.
The other nice thing about a cloud software approach is that when improvements are rolled out, every user gets the same update. The “wisdom of crowds” will result in learnings and suggestions that will tend to improve the application functionality over time. There are a lot of smart people out there, and it would be nice to see them working together rather than individually, as the open source software community has demonstrated.
With AI, we also may get to the point where cloud based mine reconciliation platforms can use learnings from other projects, and help identify where the likely technical shortfalls are at a mine site and why production is not reconciling. Let’s ask AI do some of the thinking for us to get to the bottom of a problem.

Conclusion

Mine reconciliation is becoming more and more important, but it can be a forgotten aspect. Sometimes this is because it is difficult to do properly. However, that doesn’t mean it shouldn’t be attempted. The more one can learn about one’s operation, the more likely it can stay efficient, relevant, and in business. The more one knows whether technology improvements are making a difference, the more one may be willing to take on even more new technology.
Shifting some people (like me) away from Excel based solutions can be a challenge, but this is an area where it makes sense. Years ago, many engineers did mine production scheduling using Excel, but we have gradually moved away from that, thankfully.   Reconciliation should maybe follow that path.
Disclaimer: Mining is a global business, and perhaps more progress is being made on reconciliation standardization than I am aware of sitting here in my Toronto office. Mine operations around the world are at the forefront of developing new systems. Perhaps we are seeing great things being done in the area of mine reconciliation, or maybe we are not. Please share your experiences if you’re comfortable doing that.
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Spying on Tailings Using Satellites

Date: June 28, 2024 Author: Ken Kuchling Comments: Leave a reply
There have been recent heap leach pad failures in the Yukon and Turkey and tailings dam failures in Chile and the Philippines.  As a result I have been seeing more posts on LinkedIn about the application of satellite based InSAR deformation monitoring.  Prior to that I had never heard of InSAR, so thought a little bit of background study might be worthwhile.
The following are my observations on what InSAR is and where it may be going.  I am by no means an expert in this technology.  I am merely viewing it from the perspective of a mine design engineer.

What is InSAR

InSAR is satellite-based “Interferometric Synthetic Aperture Radar”.    It can measure the distance from a satellite to a ground feature.  With repeated imaging it is used to detect changes in distance and measure displacements to within 5-10 millimetre accuracy.  Hence it can be used as a potentially cost-effective slope monitoring tool, albeit it cannot be the only tool, as discussed later.
The relevant satellite images have been available for years.  Currently the availability of analytical software to interpret the satellite data is improving.   It can detect millimeter-scale displacements, however only in the line-of-sight (LOS) direction of the satellite.   Using two or more satellites in different orbits, displacements in horizontal and vertical directions can be defined.
An example of a satellite being used is the Sentinel-1, launched in mid-2015 by the European Space Agency. This satellite information is open-source data.  It will have a 6 to 12 day revisit cycle in many locations.
The results of an InSAR displacement survey are typically shown as a series of colored data points, typically coloured green for the stable points, trending to yellow and red for points that are moving.
This blog has some example images.

Some Limitations With InSAR

There are some limitations with InSAR, so it can only be part of a monitoring program.  These limitations are:
  • The displacement direction is only measured in the direction of the satellite.  Hence one may not know in which direction the movement is occurring.  The magnitude of displacement could be underestimated depending on the apparent angle of measurement.
  • The movement being measured could consist of vertical settlement due to material consolidation and may not be horizontal and related to impending failure.
  • The displacement magnitude measured on opposite sides of a facility may have different accuracy, depending on the slope orientation versus the line-of-sight.
  • Areas with heavy vegetation may be difficult to monitor
  • Areas with heavy or persistent cloud cover can be difficult to monitor.
  • Areas with snow cover will be difficult to monitor.
  • The satellite return period may be weekly or every two weeks, so one is not able to analyze daily movements if a situation is critical.  If the return visit day has cloud cover, there will be no new satellite data collected.
  • Areas with on-going construction or tailings deposition will lead to erroneous results.
  • Due to the line of sight, not all slope failure modes may be detectible (for example piping failure).
Regardless of these limitations, InSAR can still play a role in any monitoring program since it is able to monitor large areas quickly.   Consider it as a pre-screening tool, being aware that not all failure modes may be detectible with it.

Discussion

On LinkedIn, one can see numerous posts where independent experts are examining historical InSAR data for recent failures to see whether early movement should have been detected.  The results seem to be quite positive in that areas that have failed might have been red-flagged prior to failure.
There are also zones that showed critical displacements but have not failed.
Typically, there are four ways to monitor displacement in pit slopes, tailings dams, heap leach pads, and waste dumps.   They are:
  1. Insitu monitoring using embedded instruments, for example slope indicators, extensometers, and settlement gauges.  These instruments provide information on what is happening internally within a slope, where actual movement is occurring, and they can be used in warning alert systems.
  2. Surface monitoring using radar (ground based InSAR) systems and survey prisms.  These tools measure only surface movements in selected areas, can be monitored as frequently as needed on an automated basis, and integrated into warning alert systems.
  3. Drone or aerial surveys can be used to measure topography and monitor movements over large areas.   This method requires a data processing delay (not real time) to derive the movement information, but such surveys can be done as frequently as needed.
  4. InSAR from satellite can be used over very large regions to highlight areas with movement.  That should trigger the implementation of one or more of the other monitoring approaches (if not already in place).

Conclusion

A mining site consists of numerous constructed embankments and slopes of all types and heights.  Many of these slopes may be creeping and moving all the time – it’s a living beast.
The operator’s awareness about their site will be better the more monitoring tools they use.  This awareness is important given the critical role that slope stability plays.  We will see if InSAR technology achieves much wider adoption in the mining industry as a first phase of a stability monitoring programs.
Since InSAR monitoring is done from space, it does not require access to a property.  Hence it can be used by third parties or NGO’s to “spy” on facilities of concern anywhere.
Possibly over the next few years we will see independent donor-funded organizations monitoring tailings facilities around the globe.  They will be able to notify the public and mine operators “Hey, there is some movement on this mine site that needs to be addressed”.    An organization called World Mine Tailings Failures has started some discussions on this concept.   Check it out.
Finally, it is great for a mine site to collect a lot of displacement data, hopefully to forewarn of movement, displacement acceleration, and imminent failure.  However, this assumes that someone experienced is interpreting the data and its not just generating graphs for the file cabinet.   Perhaps AI can play a role here in the future, if the technical personnel to do this are lacking.
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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.

 

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Junior Mining Shams and Scams – Part 2

Date: June 3, 2024 Author: Ken Kuchling Comments: Leave a reply
This is Part 2 of the blog post discussing junior mining scams and the sanctioning of those responsible.  Part 1 can be found at this link “Junior Mining Shams and Scams – Part 1” and can be read first to get some background.
Part 2 provides examples involving professional Qualified Persons (QPs).  We may have the feeling that QP’s are never held accountable for their work, but that is not always the case.  There are numerous instances of QP’s being hauled off in front of their professional organizations for unprofessionalism.   This blog will highlight some of those cases.
The lesson is that QP’s signing off on technical information for clients should be proficient in the nature of their work and need to know the reporting rules very well.  Some of these incidents involve error and poor judgment, not outright fraud.
These examples involve in-house QP’s that work for a company while others involve independent QP’s that have been contracted by the company.
In most of these cases, any sanctions, if applied, were mainly doled out by the professional engineering or geological associations.  The legal courts are often not involved.

Examples (Part 2)

Inaccurate QP Resource Estimate:  This example relates to the Barkerville Gold Mines resource estimate complete in 2012.  The mineral resource estimate had numerous errors and issues related to assays, capping, cutoff grades, etc.   The allegation was the QP had demonstrated incompetence, unprofessional conduct, and negligence.   The sanctions on the QP included a $15,000 fine, $20,000 legal costs, re-training, and license suspension.
Link 1:   
Link 2:
False QP Statements:  Here is an example from 2011.  The QP / company Director was charged with multiple allegations, including stating the mine was in commercial production (when it wasn’t), leaving the impression there were mineral resource (which there weren’t any), and generally approving information that was not accurate.  Ultimately the allegation was demonstrating incompetence, unprofessional conduct, and negligence.   The resulting sanctions included 2 year license suspension, re-training, payment of $80,000 to the professional association.
Link 1: 
False QP Statements: This is case were a resource QP failed to comply with the NI43-101, Form 43-101F1, CIM Standards, and CIM Guidelines. The Panel concluded that the Member was guilty of non-compliance with the standards and hence guilty of professional misconduct. Its not clear what specifically was not complied with, but this illustrates that QP’s will be held accountable for their work.  The two reports in question were either amended or withdrawn to address the concerns of the regulator in British Columbia, although there had been no intentional non-compliance and no economic impact.   The penalty was 2 months suspension (deferred), and the QP had to work under a mentor for 9 months and pay a maximum $10,000 for the mentor’s fees.
Link 1: 
False QP Statements:  Here is another example of sanctioning a QP in 2018.  The person was charged with unprofessional conduct and incompetence.  He stated that he was responsible for the preparation of the technical report, had no prior involvement in the project, and was independent of the issuer.  This was false.   Sanctions included three month license suspension, taking some re-training, require peer review of the report.   In 2022, further sanctions consisted of a $75,000 penalty, further sanctioned along with an executive in the company for insider trading issues (see Link 3 below).
Link 1:
Link 2: 
Link 3:
False QP Statements:  This is an example for 2017 when an independent QP took responsibility for the resource estimation work in section 14 of the report, yet they did not have the experience to take responsibility.   They also misrepresented that the Report complied with 2014 CIM standards, yet it didn’t, resulting in an overestimation of the mineral resource in both confidence and magnitude.    Other claims include relying on non-QP experts but not stating that, failing to adequately discuss the nature of sample quality control procedures as required.    The sanctions included license suspension of 3 months, must work with a technical supervisor, re-training, and $7,500 in legal fees.
Link 1:
False QP Statements:  This is another example from 2019, when the QP / Director permitted the disclosure of information to the public in multiple news releases where they should have known that that information was misleading.  An example is the disclosure of inferred reserves when there were no reserves and “inferred” is not even a classification of reserves.   The sanctions were a license suspension of 4 months, $5,000 legal costs, re-training, and requirement not to act as a QP again.
Link 1: 
QP Resource Estimate Error:  This occurred in 2012 when a QP and consulting firm delivered a incorrect resource estimate and reportedly withheld negative opinions on the project from the client.  The company spent $3 million on a feasibility study during which the resource estimate error was discovered.  The “corrected” resource made the project uneconomic, meaning the feasibility study should not have been done.  The mining company sought compensation from the consulting firm, ultimately receiving $1.25 million.  The Link 3 references is interesting in that it states “As this case demonstrates, it is critically important for professional service firms to be forthcoming about any reservations they may have regarding the work they are being employed to undertake.”     Whatever  that really means?
Link 1: 
Link 2:
Link 3: 

Disclaimers

Many QP’s realize the legal responsibility and liability they have.  Hence in 43-101 reports QP’s sometimes attempt to mitigate this by putting in broad disclaimers to limited that liability.  If the securities commission notices such disclaimers, they will require that they be removed.
For example, sometimes the QP of a chapter may have other geologists or engineers (i.e. experts) assisting them.  They may then put in disclaimers saying “They disclaim responsibility for such expert content” for the work done by the others.   A QP essentially has to sign off on the work of others in the sections they are responsible for.   A recent example is a Generation Mining technical report prepared by G-Mining, that had to be amended from (March 31_2023 to May 31_2024) removing several QP liability limiting disclaimers.
43-101 regulations state that “An issuer must not file a technical report that contains a disclaimer by any qualified person responsible for preparing or supervising the preparation of all or part of the report that
(a) disclaims responsibility for, or limits reliance by another party on, any information in the part of the report the qualified person prepared or supervised the preparation of;
or (b) limits the use or publication of the report in a manner that interferes with the issuer’s obligation to reproduce the report by filing it on SEDAR.“
” These disclaimers are also potentially misleading disclosure because, in certain circumstances, securities legislation provides investors with a statutory right of action against a qualified person for a misrepresentation in disclosure that is based upon the qualified person’s technical report.
That right of action exists despite any disclaimer to the contrary that appears in the technical report. The securities regulatory authorities will generally require the issuer to have its qualified person remove any blanket disclaimers in a technical report that the issuer uses to support its public offering document.“

Conclusion

This ends Part 2 of this blog post. It hopefully highlights the importance of QP’s being knowledgably on the disclosure rules and the technical aspects of what they are hired to do.
Companies should always ensure that only qualified QP’s are used for their project work, even if some of the others might be less expensive.   The potential headaches and costs afterwards may override the higher upfront cost.
It should be noted that this Sham and Scam blog does not discuss the other less than desirable junior mining traits seen from time to time.  These relate to; insider trading; abuse of micro-penny founder shares; and the ever present “pump & dump” schemes.
In closing, if anyone is aware of other good examples of QP issues, please provide any links to any publicly disclosed information. I can add them to the blog post.
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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.
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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.
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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.
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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.
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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.
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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.

 

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NPV a Disappointment? A Few Ways to Fix It

Date: April 5, 2024 Author: Ken Kuchling Comments: Leave a reply
So, you just completed your initial PEA cashflow model and the resulting NPV and IRR are a little disappointing. They are not what everyone was expecting. They don’t meet the ideal targets of an IRR greater than 30% and an NPV that is more than 2x the initial capital cost. The project could now be on life support in the eyes of some.
Now what to do? Its time to jump into NPV repair mode.
Hopefully this blog post isn’t too controversial but will lead to some discussion about how studies are done.  Its based on observations I have made over the years as to what different studies will do to try to improve their economics.
The first thought typically is to lower (i.e. low ball) the capital and operating costs. We know that will certainly improve the economics. A risk with that is it might discredit the entire study if the costs are not in line with similar projects. Perhaps someone does a deep dive into the costing details or does some benchmarking against other projects. Also, advanced studies will develop more accurate costs, ultimately highlighting that the initial study was inaccurate and misleading. So overly optimistic, under-estimated costing is not a good approach.
What other things can help bump up the NPV? Let’s look at some of the ones I have seen, some of which I have applied in my work. I would expect (and hope) that some of these ideas will already have been adopted in the initial engineering and cashflow model.

Using the Time Value of Money

The discounting of cashflows in a cashflow model means that up-front revenues and costs have a bigger impact on the final economics than those far off in the future. This effect is amplified at higher discount rates.
Hence looking at ways to bring revenue forward or push costs backwards  are typically the first options considered. Here are a few of the ways this will be done.
High Grading and Stockpiling: One can bring revenue forward by using a Low Grade Ore stockpiling strategy. Select an elevated cutoff grade to define High Grade Ore and send only that ore to the plant. The Low Grade Ore can be placed into a stockpile and processed gradually or all at once at the end of the mine life. One must mine more tonnes to undertake stockpiling and will eventually incur an ore rehandling cost. However, in my experience, the early revenue benefit from high grade normally outweighs the associated cost impacts.
Stockpiling Tramming: If using the stockpiling approach described above, many assume that all stockpile rehandling to the crusher will simply be done by tramming with a wheel loader. Having to re-load the ore into trucks will cost more than double the cost of tramming. So place the ore stockpiles close to the crusher to lower rehandling costs.
Milling Soft Ore: If the deposit has both an upper soft ore (oxide, saprolite) and a deeper hard ore, one can take advantage of the soft material and push more ore tonnage through the plant at start-up. This will increase the up-front revenue. It may also allow the cost deferral of some plant components that are only needed for processing the harder ore.
Defer Stripping Tonnages: Delaying some waste stripping costs from pre-production (Y-1) to Year 1 or Year 2 will help improve the NPV. However, care must be taken that increasing mining tonnages in Year 1 or 2 doesn’t trigger the purchase of additional loaders and trucks. The deferred tonnes need to be small enough not to trigger a fleet size increase or could negate the impact of the cost deferral.
Capitalize Waste Stripping: It may be possible to capitalize waste stripping for satellite pits and pit wall pushbacks to better align stripping costs with the timing of ore mining. Capitalizing waste stripping may result in lower short term taxable income since the entire expense is not immediately deducted. This can reduce tax liabilities and improve cash flow. Each situation may be unique.
Accelerate Depreciation: In some jurisdictions, tax laws permit accelerated depreciation rates. This will help to lower or eliminate taxable income in the early years. This boosts the after-tax cashflow in those years, bumping up the NPV. If accelerated depreciation is the case, enhancing revenue (by high grading) at the same time, gives an even bigger nudge to the NPV. Maximize the revenue during tax free periods.
Apply Tax Losses: On some projects there are historical corporate tax loss carry-overs. These losses allow one to offset future taxes payable in the early years. This help bump up the initial after-tax cashflows.
Leasing of Equipment: One can look at equipment leasing to defer some of the initial capital costs. Leasing will distribute the purchase cost over several years (typically 60 months). Although the lease interest will increase the total cost of the machine, the capital cost deferral likely results in an NPV benefit.
Use Contract Mining: To avoid the entire cost of purchasing major mining equipment, many will look to contract mining. In studies, sometimes contract mining costs are estimated or they can be derived from budgetary contractor quotes. At an early stage these contractor quotes might be quite “favorable” as the contractor tries to stay in the good books of the mining company. Contract mining will greatly reduce the mining equipment capital cost and can help the NPV, even if the unit mining costs may be slightly higher with a contractor.

Using Other Cashflow Tweaks

There are other tweaks that one can make to the cashflow model. Sometimes several of the small ones, when compounded together, will result in a significant impact. Here are some of the other cashflow model adjustments that I have seen.
Increase Metal Prices: Normally when selecting metal prices for the cashflow model one looks at; trailing averages; analyst consensus forecasts; marketing study forecasts; and prices being used in other current studies. It is usually simple to defend whatever price you wish to use. In a rising price environment, one can see what other recent studies have used and escalate those prices by 5%-10%. That likely won’t be viewed as unreasonable. After all, someone has to be the trailblazer in raising modelling metal prices.
Improve metal recoveries: At an early study stage, one may have limited number of metallurgical tests upon which to base the process recoveries. I have seen some bump up the recoveries slightly and add the statement “Further metallurgical testing, grind size optimization, and reagent optimization should improve the recovery above those shown by the current test work”. This can gain a bit of revenue at no extra cost.
Optimistic Dilution: It can be very difficult to predict ore mining dilution at an early stage. Two different engineers looking at he same mining method, may come up with different dilution assumptions. Hence one may have the opportunity to select an optimistic dilution. Lower dilution will increase the head grade to the mill and hence increase the revenue at no extra cost. Even a modest reduction in dilution will play its role in nudging up the NPV.
Reduction in Working Capital: Some cashflow models do not include the cost for working capital, while others will include it. Working capital is the money needed on hand to pay the monthly operating cost in Year 1 before payable revenue is generated. If difficulties arise in achieving commercial production, one wishes to have more working capital on hand. Working capital typical is 2-4 months of operating cost. To bump up NPV, some will use the lower range of 2 months working capital. Some will just omit working capital entirely. Take a look at the working capital needs and decide what is reasonable.
Buy the Royalty: Some projects may have the option for a company to buy out the royalty from the royalty holder. Although doing this may result in an upfront cost, the payable royalty saving may offset that up-front buy-out cost. At high metal prices, the royalty saving could be significant.
Reclamation Cost Equals Salvage Value: At the end of the mine life, the final closure and reclamation cost will be in the tens of millions of dollars. Although this cost is heavily discounted back to the start of the cashflow model, I have seen cases where it is assumed that salvage value of the mine and plant equipment is sufficient to pay the entire closure cost. I don’t know how realistic this is, but I have seen that assumption used.
Lower The Discount Rate:  A few years ago, it seems the benchmark discount rate was 5% used in most studies.   In 2024, the cost of capital has gone up.  Hence many studies seem to be using 8%-10% as their base case.   A project at the PEA stage today isn’t going to be built for a few years.  Some can argue that interest rates will likely be lower in a few years, and so using 5% discount rate today is still reasonable.  Conversely some will maintain that is is best to use what others are using so that current projects are all comparable.

Conclusion

Don’t let a disappointing NPV get you down. There may be a few ways to boost the NPV by applying some common practices. However, if after applying all of these adjustments, the NPV still isn’t great, something bigger may be required. That could be an entire project scope re-think.
Or go drill for more ore higher grade ore.
Or low-ball the cost estimates (just kidding).
I have heard that if the project requires fancy tax manipulation to make it work, then it isn’t a good project to begin with. If taxes are critical, the economics may be too marginal.
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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.
ore stockpileSometimes 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

Diavik mines

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).

Open Pit Slope

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.
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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.
Geological pit sectionThere 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

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/

Top Ten Mining Podcasts

Date: March 12, 2024 Author: Ken Kuchling Comments: 1 Reply
Podcasts. There are thousands of them out there, free for anyone to access. I regularly listen to them on all sorts of topics ranging from sports, politics, and even mining. This blog post is about my top mining podcasts that I find entertaining and/or educational. There are likely others missing from this playlist, but one only has so much time in a day.
On YouTube, there are also a lot of educational videos related to mining. Some of the same audio podcast episodes are also available on the YouTube platform. Given an option, I prefer the audio-only podcast format over YouTube.
One doesn’t need to sit there focusing on a video screen. With podcasts, you can do other things at the same time, like exercise, walk the dog, drive a car, etc. One has freedom to multi-task, something that the video format doesn’t allow.
When listening to podcasts, I used the Android phone app called Podcast Addict. However, most likely there are plenty of other smartphone apps to use.

Mining Podcast Categories

In my experience, mining podcasts typically fall into one of two categories; Mining Investment; and Technical Discussions.
Mining Investment: These are the investor targeted interviews, chatting with corporate executives or newsletter writers. They discuss what is new with their companies or what is happening in the industry. From an engineer’s perspective (not as an investor), I listen to a few of these to catch up on projects that I worked on in the past, or to learn how different executives strategize. These interviews are often paid for promotions by the company, so sometimes the interview questions can be the softball type. I’m not sure how often the interview questions are actually provided in advance.
Technical Discussions: There are also a few podcasts related to technical discussions on geology, exploration methods, resource modelling, mining software, and mining services. I have not found any podcasts specifically related to mine engineering or mineral processing. Most are geared towards the geological and exploration aspects of the industry.
Pick and choose. One can’t listen to all the podcast episodes available or else you wouldn’t have time to do anything else in life. You would also become bored since much of it can be repetitive.
Therefore, I follow multiple podcasters, get updates on their new episodes, and then pick and choose from there. I probably only listen to 10%-20% of the episodes, i.e. only those that are of real interest to me.
Sometimes, especially with investor presentations, the same executives will appear on multiple podcasts. You only need to hear the story once. As well, some executives will be returning frequently to the same podcast with not a lot new to say from their last interview. They need to catch the eyes of investors.
The podcast host will have a lot to do with the style of discussion. Some are better than others. Sometimes the interviewing style is dull and unexciting, even through the topic itself may be great. The following are some of the mining podcasters that I follow.

Mining Investment Podcasts

  • This list are my favorites, in order of preference. They are the only ones I follow
  • Mining Stock Education (680 episodes) https://www.miningstockeducation.com/ This podcast can have some lively discussion that focus on both the positives and negatives of mining investment. Some guests definitely provide great learnings on the inner workings of the industry.
  • Crux Investor (2500 episodes) https://www.cruxinvestor.com/ Matthew and Merlin have an engaging interview style, and sometimes will have a hard edge, putting interviewees on the spot. They say they “…exist to cut through the jargon, bias and bluster.”
  • Mining Stock Daily (2800 episodes) Mining Stock Daily, hosted by Trevor Hall, provides a daily 8 minute overview of overnight mining news and will also have long form discussions on finance, macro economics, and corporate exploration news.
  • Global Lithium Podcast (130 episodes) is hosted by Joe Lowry, known as “Mr Lithium” who is a 30 plus year industry veteran. For me, this podcast is the “go to” on everything lithium, whether brines or hard rock production.
  • Money of Mine (170 episodes) This Aussie mining podcast focusses mainly on Aussie companies, but the three hosts have an interesting style and not afraid to say what they think. Listening to their Aussie accents always makes me think of the Crocodile Dundee movies.

Technical / Informational Mining Podcasts

These are podcasts on the informational and technical side of mining. Unfortunately for we engineers, they mainly focus on geology.
  • Fresh Thinking by Optiro-Snowden (53 episodes) This podcast is hosted by Snowdon – Optiro consultants. They typically focus on resource modelling and grade reconciliation aspects. The episodes are fairly short (15 mins), which is nice. Although I am not a resource modeller, I can always learn more about the black art of resource modelling.
  • The Northern Mining Podcast (400 episodes) This podcast provides general industry news, as the Northern Miner newspaper does. It also has interviews with key industry players, but generally avoids the company investor relation interviews.
  • Discovery to Recovery (50 episodes) This is a podcast produced by the Society of Economic Geologists (SEG), brings geoscience and technology stories from the world of ore deposits. This podcast can be harder to listen to, getting heavy into geology discussions beyond my expertise.
  • Exploration Radio (73 episodes) This is a podcast focusing on the past, present and future of exploration. They don’t seem to post very often, but can have interesting topics, even for an engineer.
That is the end of my list.
To the best of my knowledge, there are a lack of podcasts related to mine engineering, for topics such as pit optimization, mine design, scheduling, equipment selection, and costing.
There is one podcast on mine scheduling by Mark Bowater, author of “Crimes Against Mine Planning”, but I cannot find it on any podcast platform.
Another honorable mention is Antonio at https://www.youtube.com/@ResourceTalks/ who does a great job at interviewing executives. The downside is that I don’t think he is on audio-podcast format and his episodes are over 1 hour, or 3600 seconds as he likes to present it. That’s beyond my normal attention span.
Update:  A follower of my blog posts has suggested a mining investing site on YouTube called “Junior Resource Investing“.    The host is Matthew Mick, seems to have a preference for Ni and base metal projects,  interviews are up to 50 minutes each with well prepared questions.  Check it out.  I can’t find it on a podcast platform as of yet.

Conclusion

There is no shortage of material in the podcast world about the mining industry. It all depends on what interests you the most. There is even more mining information available on YouTube, if you have the time to sit and watch videos. Nevertheless the audio-only platform is great, although you don’t get to see the charts being discussed. That’s fine with me, particularly if they take a few seconds to describe the chart.
Let us know what mining podcasts you enjoy and would recommend. I have room to add one more to my list of 9 mining podcasts. I don’t actually have 10 favorites yet.

 

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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.
Mining Project Builder Path
The amount of the exploration drilling is only needed to define an economic resource to the Measured and Indicated classifications.   There is no requirement to delineate the mineral resource on the entire property since there will be time to do that during production.   Demonstrating an economic resource, with some upside potential, is often sufficient for the Mine Builder.
Three examples of companies on the Builder path are shown below; Orla Camino Rojo gold project (in operation), SilverCrest Las Chispas gold project (in operation), and Nexgen Rook uranium project (financing stage).   Although the duration of each timeline is different due to different project complexities, the development paths are consistent.  Most junior miners would not consider themselves on the Builder path.

The Mine Vendor Path

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

Engineer’s Perspective

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

The Engineer on the Mine Builder Path: 

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

The Engineer on the Mine Vendor Path: 

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

Conclusion

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