Mine Life Cycle – How Accurate are the Resources Reported in Each Project Phase

A typical mining project goes through various phases of mine development, collectively known as the mine life cycle. as shown in the table below.

Mine Phase Objectives and Activities

Mine Life Cycle - How Accurate are the Resources Reported in Each Project Phase

Source: http://www.gardguide.com/index.php?title=File:MinePhaseObjectivesandActivities.gif

Initially, an exploration program is conducted to gather information about the potential presence of a mineable orebody. Exploration information, as defined by the CIM standards, includes geological, geophysical, geochemical, sampling, drilling, trenching, analytical testing, assaying, mineralogical, metallurgical, and other related information concerning a particular property derived from activities aimed at locating, investigating, defining, or delineating a mineral prospect or deposit.

During the exploration phase, the results of a drill program are reported under the supervision of a qualified person who will publish the first (and subsequent) mineral resource estimate(s).

If the preliminary economic assessment suggests that the project could be economically viable, management will hire a consulting firm to conduct the preliminary feasibility study. Notable consulting firms include SRK Consulting, Tetra Tech, and Behre Dolbear.

Based on the outcome of the preliminary feasibility study, if management concludes that the resource can be extracted profitably, a consulting firm will be hired to complete the (bankable) feasibility study, which includes engineering design.

After receiving the bankable feasibility study, management must arrange the best possible project financing, which is often challenging. Having a financial specialist in the management team with a track record of raising significant funds is preferred, although it doesn’t guarantee problem-free financing.

Once the project financing is secured, the company can begin the construction phase. This phase comes with considerable uncertainty, which can negatively impact share prices. Declining share prices during construction are often due to cost overruns from the original estimates in the bankable feasibility study. Keep the accuracy levels from the table below in mind when estimating. When you suspect that additional financing might be necessary, exercise caution when holding these stocks, as their share prices can often decline rapidly. However, these situations may also present ideal buying opportunities.

Upon completion of the construction phase, the mine will enter the production phase, aiming to generate profit from operations. Brownfield exploration can lead to an extended mine life.

At the end of the mine’s life, it will be closed, and the land must be returned to its pre-disturbance condition.

Accuracy Levels of Reported Resources in Each Project Phase of the Mine Life Cycle

Project Phase Accuracy of Reported Resources
Preliminary Economic Assessment (PEA)
(also referred to as Economic Analysis)
Preliminary Feasibility Study (PFS)
(also referred to as Pre-Feasibility Study)
Bankable Feasibility Study (BFS)
(also referred to as Final Feasibility Study or Feasibility Study)
Construction Phase


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