Page 279 - Introduction to Mineral Exploration

262 B. SCOTT & M.K.G. WHATELEY

cash flows arising from mine production. How stage, pause while more data are collected or
these values are determined is discussed in sec- perhaps be discarded in favor of a more attrac-
tion 11.5. tive investment opportunity. Naturally, the
The basic data for the financial model, or detail of the content of the program will vary
cash flow, is collected in a series of studies, according to the mineral type, geological and
which are considered next. Some geologists metallurgical complexity, location, environ-
may reject this involvement with finance. mental considerations, etc., so that there is no
However, it has to be remembered that while ready-made recipe that applies in all situations.
all acknowledge the expertise of mine making Reports at the end of each stage describe
(i.e. transposing mineralized rock into ore) technical issues such as geological, mining
which lies with geologists and other engineers, engineering, mineral processing and extractive
the ultimate success or failure of a project is metallurgy, infrastructure, environmental,
measured in financial terms. Decisions are social, financial, commercial and legal aspects
made with whatever geological information is of the project (Goode et al. 1991, Smith 1991,
available and it is the geologist’s responsibility Barnes 1997, Northcote 1998, White 2001).
to see that as much critical information as Similarly there is a range of business issues to
possible is taken into account. Many geological be addressed, such as the project’s ownership
assumptions are included in financial decisions structure, permitting, marketing and govern-
regarding the development of a mineral pro- ment relations. Business and technical issues
perty and geologists should participate fully in also interact, e.g. when a particular product
these financial deliberations. specification has to be achieved to enable mar-
ket penetration.
From these inputs capital and operating costs
11.4 STUDY DEFINITIONS are derived to prepare estimated cash flows
from which the value of the mineralisation in
A mining company may be exploring for new question is determined. The value provides a
deposits (“greenfields”) or evaluating a mine base on which decisions can be made, including
extension (“brownfields”) possibly as a result strategic or political, technical, financial, and
of the discovery of additional ore, an increase social aspects. The project moves progressively
in commodity price, a change in the mining from an exploration target, where “back of the
method, or the introduction of different tech- envelope” estimates are made, to a feasibility
nology. For each project technical and eco- study from which there is sufficient confidence
nomic studies are required to determine if the in the information for a financial institute to
project is valuable to the company concerned. lend the capital that will be required to bring
Initially, especially during exploration, the the mine on stream.
amount of information available is limited and Estimates may be ranked according to the
this constrains the range and detail possible in information available and the extent and depth
studies. As more data are collected across a of study completed. A ranking proposed here
range of disciplines, including geology, mining, (N. Weatherstone, personal communication)
mineral processing, marketing, etc., the studies ranges from conceptual through order-of-
become more extensive and eventually “home magnitude and pre-feasibility to feasibility
in” on the single project with the most value. studies. An example for geological studies is
The end result is a series of study stages that in shown in Fig. 11.7. A conceptual study report
most cases involve increasing levels of detail may only comprise a single sheet compiled in
and expenditure. a few hours or days, whilst a feasibility study
The definition of each study stage is import- may involve a team of geologists, engineers,
ant and this is part of the job of the competent and other specialists for several months or
person (see section 10.4.1). In most cases study years. A decision point is reached after each
stages are defined by a set of objectives at the stage, which marks a significant point in the
start, a series of work programs designed to project development. The project only con-
achieve these objectives, and a decision point tinues if there are sufficient indications of
at which the project may progress to the next significant tonnage and grade, mining and