We have a deposit that we believe is economically viable. Through the exploration program, we’ve defined the size and quality of the deposit. Are we ready to start excavating ore and collecting revenue for our hard work? Not quite! We still have a good amount of work in front of us before we buy our first shovel.
A significant amount of capital must be available to open a mine. In many cases, this money must be raised from investors; whereas, in other cases, the company will have its own capital to invest in the project. In either case, additional engineering studies will be conducted to establish the feasibility of opening a mine. A company with its own capital will have many competing projects for that money, and they will want to allocate it to the project that bests meets their criteria for a return on their capital. Investors, on the other hand, will also want to understand the income potential of their investment. And in either scenario, both will want to understand the risks associated with the project. Consequently, we will have to perform a prefeasibility study to satisfy either potential investors or the company’s board of directors, that we have a deposit with good potential to provide a return on the investment of their money.
In this module, we will focus on the decision criteria for determining whether or not we want to go forward and turn this deposit into a profitable mining operation.
I should mention for completeness, that the development stage also includes the work necessary to access the ore body and prepare for mining. Clearing the land for a surface mine, sinking a shaft for an underground mine, or building the mineral processing plant are examples of development activities. We will talk about all of those things, but we will do so in future modules.
At the successful completion of this module, you should be able to: