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
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 | |
| Exploration | ||
| 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 | ||
| Operations | ||
| Closure | ||
You may also want to read...
- Mining Companies Analysis - Learn How to Invest in Mining Stocks. To execute your own mining companies analysis, I have created a lot of (sub)pages about the relevant terminology and working methods from the mining sector.
- Oil and Gas Companies Analysis - How to Invest in Energy Stocks. I created different pages about the relevant terminology and working methods from the energy sector to conduct your own analysis for oil and gas companies.
- Understanding the Stock Market - How Do Stocks Work. To help you with understanding the stock market, I have created some articles to explain how stocks work and I also reveal my own stock market analysis in this chapter.
- How to Invest in Shares - Learn How to Start Investing in Stocks. In this chapter I inform you how to invest in shares - the UndervaluedEquity.com way. I also reveal which (free) resources I use to execute my due diligence.
- How I Invest in Stocks - My Preconditions for Selecting Undervalued Stocks. In this chapter I answer the question: how do I invest in stocks? Thus, I explain which investment rules I follow whilst selecting companies for my stock portfolio.
- Stock Investment Analysis - A More Detailed Elaboration on How to Buy Stocks. When a company complies with my preconditions for selecting undervalued stocks, I will elaborate my stock investment analysis to assess the quality of it's assets, management, etc.
If my articles are helpful to you, please consider supporting my work by making a small donation...