Print4.2.4: What's Next?
Let's imagine that we have completed our feasibility study, and the results indicate that this reserve could be made into a profitable mining operation. Given this, we’ll prepare the formal NI 43-101 report. The next step will be to seek financing for our project. If we are going to seek public investment, we’ll list the opportunity on one or more of the stock exchanges. Concurrently, we may be using the report to gain the interest of private equity groups. Regardless, the next step is to obtain financing.
Sometimes the entity that brought the project to this point has no interest in developing and operating a mine. The entity may be a few individuals backed by a venture capital group or may be a company. Regardless, they are interested in turning their hard work into a pile of cash! A large company may want to purchase their reserve to add it to their reserve base – something that they may not mine for several years. Or, a group that does want to work actively to open a new mine may purchase it. For the purposes of our educational journey, we’ll assume that a mining company conducted, or commissioned, the prospecting and exploration and put together the 43-101 report. As such, the company will want to develop and operate the mine.
The engineers on the team will be engaged in time-critical activities while the search for financing is underway. Time is of the essence! A significant amount of money will have been invested to bring the project to this point – perhaps a hundred thousand dollars for a very small project or millions of dollars for a larger one. What have they earned on this investment so far? Nothing, nada, zip! When will they begin to earn something on the investment? Not until they have a mined product to sell. When will that be? Well, for a stone quarry, it may be in as little as a couple of years. In larger projects, eight-to-ten years is not unusual, and in very large and complex projects, it may be closer to two decades! Think about this – sinking money into a project for years and not seeing a penny back!
I have a proposition for you: how about if each of you loans $1000 to me. In return, I will agree to pay you interest on your money, but I will not begin paying anything to you for 10 years. How many of you are going to jump into this investment opportunity that I am offering? How much interest would you need to be promised in order to seriously consider this investment? Oh, and by the way, if things don’t work out quite the way that I plan, I may not be able to pay you back in full, if at all! Welcome to the world of high risk project financing!
Ok, back to the team of engineers doing time-critical things. What are these things that will be happening while financing is being sought? Consider that the time required to bring the project online will include the time that it takes to:
- acquire access rights, as needed
- prepare permit applications
- wait for permit approval
- conduct the detailed engineering studies
- design and bid surface facilities
- construct surface facilities
- order equipment
- provide access to the orebody
- construct underground facilities (if an underground mine)
- hire the workforce
Permits are required by several state and federal agencies. Not only is it expensive and time-consuming to prepare the application packages, but also some of the permits may require the completion of work that may take a year or two. For example, it may be necessary to sample local streams for one year and include the results in the permit application. Once the permits have been submitted, the review and approval process can be tortuous, as the different agencies review and comment on a particular permit. If there is public resistance to the project, public hearings may be required as part of the permit review process. It is important to plan for and sequence the work that you have to do to achieve a timely filing. For example, you don’t want to add an unnecessary delay because you forgot to hire a consultant to conduct an archeological study that is required in support of one of your permit applications!
While the permitting process is underway, detailed engineering studies will be required to design the various systems, e.g., production, materials handling, power, mineral processing, and so on. These designs will then be used to develop specifications for major plant items, such as the mineral processing, equipment and so on. Bid packages will be prepared for surface facilities such as the mineral processing plant, loading facilities, water treatment, warehouses, shops, and so on. If it is an underground mine, the shaft or other access to the orebody will be bid as well. The construction of these facilities can take a few years. So, exactly when do you need each to be completed, and knowing that, when do you need to initiate the bidding for their construction? These are important questions. Given the cost of capital, you don’t want to make the expenditure prematurely; and at the same time, you are going to look rather foolish if mining is set to commence, but the load-out facilities, which are required to get your product off the property and on the way to your customers, have yet to be constructed!
Some equipment can be received within weeks of order, whereas others will be fabricated on-demand, and lead times of several months are common. Choosing the correct point in time to place orders is important.
Accessing the deposit for a surface mine takes less time than for an underground mine, although it can take several weeks to months and must be planned. Underground access can be far more complex. It may take a year to sink a shaft and to develop the spaces around the shaft bottom. And then, depending on the deposit and mining method, it can take weeks to a year or more to develop the workings necessary for mining.
I started this discussion with the question of what are the activities that will be undertaken concurrently with the effort to obtain financing. Clearly, many of the activities that I’ve just outlined will not be initiated until financing is in-hand. However, these activities will be in various stages of planning before financing is completed. Early on, it is crucial that an accurate and detailed project plan be prepared. All of the tasks that need to be performed will be represented on a network diagram known as a PERT diagram. Detailed timing charts, known as Gantt Charts, will be prepared to document the time relationships of the activities that must be completed when they need to be completed and started, and their duration. These diagrams will be used to determine the critical path and when mining can begin, to assess the effect of delays, and ultimately to monitor the progress of the project. Resource requirements will be documented and integrated into the project plan as well. The size and complexity of these projects necessitate the use of project management software, such as MS Project.
By the time financing has been secured, a good project plan will have been completed. Further, work will be well underway to prepare the permit applications; and it is likely that detailed engineering design and analysis will be underway.
The engineering design and analysis of the many systems will be the subject of courses such as MNG 404 Materials handling; MNG 411 Systems Analysis; MNG 422 Ventilation, MNG 431 Rock Mechanics; MNG 410 Underground Mining; and MNG 441 Surface Mining. You will learn more about project management techniques in the capstone design course, MNG 451, where you will conduct a 43-101 feasibility study.