investing in canada’s mineral industry – factors to...

www.rpacan.com Rock Solid Resources. Proven Advice.

INVESTING IN CANADA’S MINERAL INDUSTRY – FACTORS TO CONSIDER

Canada-China Mining Investment Forum PDAC

Deborah McCombe, President and CEO

Roscoe Postle Associates Inc March 7, 2017

Toronto Denver London Vancouver Quebec City


2

Agenda

• Canadian Mining Industry • Assessing Risks in Projects in Mining Industry • Stages of a Mineral Project • Economic Studies • National Instrument 43-101 – Canadian Disclosure Rules • Mineral Resources and Mineral Reserves • Environment or Socioeconomic Considerations


3

Canadian Mining Industry (from Mining Association of Canada and NRCan)

• Canada is one of the largest mining nations in the world producing more than 60 minerals and metals.

• Canada ranks in the top five countries in the global production of 13 major minerals and metals: • First in potash • Second in uranium, nickel and niobium • Third in cobalt, aluminum and platinum group metals • Fourth in salt, sulphur and tungsten • Fifth in diamonds, graphite and gold

• 57% of the world’s public mining companies are listed on the TSX and TSX-Venture Exchanges. Together, the two exchanges accounted for 53% of the equity capital raised globally for mining in 2015, totalling $6.8 billion.

• Canada is recognized for its leadership in safety and sustainability. Mining companies in Canada were the first in the world to develop an externally-verified performance system for sustainable mining practices with the creation of MAC’s Towards Sustainable Mining initiative in 2004.


4

Assessing Risks in Projects in the Canadian Mining Industry

• What stage is the project?

• What is the location and regulatory environment?

• What types of studies are available?

• Who has carried out the studies?

• Are there any environmental or social issues?


5

Types of Mineral Properties

• Producing mineral properties can be:

• Producing mines

• Development planned or under construction

• They contain mineral reserves ± mineral resources

• Non-producing mineral properties can be:

• Early stage exploration properties

• Drilling stage exploration properties

• Properties with identified mineral resources

• Prefeasibility or feasibility stage projects

• Marginal development properties

• Past producing mines


6

Stages of A Mining Project

• Exploration

• Advanced Exploration

• Scoping/Preliminary Assessment

• Pre-feasibility

• Feasibility

• Project Financing

• Construction

• Startup

• Operation

• Closure/Reclamation


7

Scoping Study/Preliminary Economic Assessment

FIRST LEVEL ECONOMIC STUDY +/- 30% Objective • Determine project development plan, identify areas for detailed study and trade-offs

FULL STUDY BY INDEPENDENT ENGINEERING GROUP Physicals • Resource estimate, mine design, metallurgy, capex/opex, environmental costs, project schedule, cash

flow

SIX MONTHS TO ONE YEAR Timeline

$200K TO SEVERAL MILLION Cost

FIRST LIFE OF MINE COST ESTIMATE Environment

• Tailings and water management plan • Permitting schedule, ESIA • Closure issues and costs


8

• Objective of a Scoping Study / PEA. • Identify potential of new or expanded business opportunity.

• The study team assesses: • General features of the opportunity. • Selecting the best options to be studied during Prefeasibility Study (PFS). • Key business drivers for opportunity and any potential fatal flaws. • Order of magnitude costs of opportunity (capex and opex). • Technical issues needing further investigation. • Costs and time to undertake a PFS. • Expertise, personnel and services required to undertake planned work on

opportunity.

• On completion of Scoping Study, the study team must present: • Study report, with their recommendation for further investigations. • A work plan for the Prefeasibility Study (if recommended).

Scoping Study/PEA


9

Prefeasibility Study

SECOND LEVEL ECONOMIC STUDY +/- 20% TO 25% Objective • Better definition

FULL STUDY BY INDEPENDENT ENGINEERING GROUP Physicals • Reserve estimate, mine design, metallurgy, capex/opex, environmental costs, project schedule, cash

flow • Conclusion of trade-off studies

ONE TO THREE YEARS Timeline

0.2% to 1.5% of Capex; $1MILLION TO $5 MILLION Cost

BETTER DEFINTION LIFE OF MINE COST ESTIMATE Environment

• Tailings and water management plan • Permitting schedule, ESIA • Closure issues and costs


10

• Objective of a Prefeasibility Study (PFS). • Select the best option taking into account risk and cost. • Review ore or feedstock sources, process, location and project configuration

cases to recommend preferred optimum for a FS.

• The study team assess options of the opportunity, particularly focusing on: • Technical and economic viability. • Risks and potential fatal flaws. • Risk profile.

• Once selected, identify optimal alternative and determine if it should progress to a FS.

• At the end of the PFS Study, the study team must present: • Study report, recommending the preferred option outlining features. • A work plan for the FS, identifying cost, schedule, expertise, personnel and

services required.

Prefeasibility Study


11

Feasibility Study

DETAILED ECONOMIC STUDY +12% / -10% Objective • Production Decision • Can be called “Definitive” or “Bankable”

FULL STUDY BY INDEPENDENT ENGINEERING GROUP Physicals • Reserve estimate, mine design, metallurgy, capex/opex, environmental costs, project schedule, cash

flow • All aspects of the development, operation, and closure of the mine

TWO TO FIVE YEARS Timeline

1.0% TO 3.5% of CAPEX; $3 MILLION to +$100 MILLION Cost

MITIGATION PLANS AND COSTS Environment • IBAs with local people • Permitting, ESIA • Closure issues and costs • Equator Principles and IFC


12

• Objective of the Feasibility Study (FS). • To fully define and optimize the selected project configuration.

• During the FS, the option selected in the PFS Study is investigated to identify: • Demonstrable technical and economic viability of the proposed project as

presented in the PFS. • Only one configuration and investment case for the Project Execution Phase (PEP). • The scope, quality, cost and time of the proposed project. • The reward for risk profile of the proposed project based on a quantitative

assessment. • That no residual or future issues could significantly impact assessments.

• The FS plans the Project Execution Plan (PEP) of the proposed project, setting the project plan for the Execution Phase. This includes setting baselines for management, control, monitoring and reporting.

• At the end of the FS Study, the study team must present: • Their study report, together with their recommendation for the project and a Project

Execution Plan.

Feasibility Study


13

What are the core principles of NI 43-101?

Standards &

Best Practices

Qualified Person

Technical Report

NI 43-101 Technical

Report

Objective of NI 43-101:

Ensure that disclosure is based on reliable information, reflecting professional opinions, based on industry best practices and using standardized terms.


14

Standards of Disclosure for Projects and Studies in the Canadian Mining Industry – NI 43-101

Desired Outcome of NI 43-101 • Investors have sufficient information to make an informed investment decision • Provides information that is not misleading • Promotes balanced disclosure with context • Understand the significance of the results • Able to compare similar projects • Understand risks and limitations of data • Confidence in those that prepared the technical information for disclosure • www.sedar.com


15

Typical Disclosure for Mining Properties in Canada

• Early Stage Exploration (no resources)

• Disclosure of Mineral Resources

• Preliminary Assessment

• Preliminary Assessment Update

• Pre-feasibility

• Pre-feasibility Update

• Feasibility

• Feasibility Update

• Operational Update


16

• “Disclosure” means any oral statement or written disclosure made by or on behalf of an issuer and intended to be, or reasonably likely to be, made available to the public in a jurisdiction of Canada, whether or not filed under securities legislation.

• Oral statement or written disclosure • Conference calls, speeches, company websites.

• Not limited to material mineral properties or material information • Not just what gets filed with securities commissions or stock exchanges • Includes OTC-BB, Pink Sheets, Private companies

Broad application of NI 43-101


17

CIM Definition – Mineral Resource

A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.


18

Mineral Resources

Components of a Mineral Resource • Reliable database – survey for sample locations, geology, assays,

density • Realistic interpretation of mineral deposit • Appropriate resource estimation method • Quantity and quality of the resource expressed, typically as

tonnes and grade at different confidence levels. • Mining and economic parameters


19

CIM Definition – Mineral Reserves

Mineral Reserves are defined by a Preliminary Feasibility Study or Prefeasibility Study

• Comprehensive study of viability of a mineral project • Mining method and costs established • Processing and metallurgy and costs established • Measured and indicated resource estimated • Reasonable assumptions for engineering, legal, social and

environmental factors • Includes financial analysis – need to demonstrate profitability

(mining and processing, G&A, commodity price forecasts, foreign exchange forecasts, inflation, taxes, royalties)


20

Legal Right to Mine

• Leases, Patented and Unpatented claims • What is property ownership? • China and Russia have leases. How do you handle mine plans that extend

beyond lease term? • Environmental and Permitting

• Are required permits in place? • A property doesn’t need to have final approvals of all permits if the permits are

likely. • Some permits are unlikely:

• a new gold property in Montana that requires a process design based on use of cyanide where cyanide use is restricted.

• an open-pit gold mine in California that hasn’t included costs to backfill post-closure where backfill of mine pits is required under new law.


21

Classification of Mineral Resources and Reserves

Modifying factors are used to convert mineral resources to mineral reserves

Source: CIM Definition Standards for Mineral Resources and Mineral Reserves (2014)


22

Members of CRIRSCO


23

Environment and Socio-Economic Issues

• Permitting and approval of mining projects at all stages is by province and may include federal approvals depending on the size and complexity of the project

• Environmental assessment and analysis will cover the normal technical requirements covering air, water, land, flora, and fauna.

• Equally important to the technical requirements is consideration for the involvement of local residents and stakeholders.

• In particular, First Nations engagement and involvement in a meaningful material manner is absolutely critical to successful advancement of a project. Regulators will normally require this prior to formal approval of a project.


24

About RPA

• Advice to the mining industry for over 25 years

• The specialty firm of choice for resource and reserve work

• All stages: • exploration and resource evaluation • scoping, prefeasibility and feasibility studies • financing, permitting, construction, operation, closure and rehabilitation.

• Clients are financial institutions, governments, major mining companies, exploration and development firms, law firms, individual investors, and private equity ventures

• Offices in Canada, United States and United Kingdom

• Head office in Toronto

• 100% employee owned


25

RPA Capabilities

• Mineral resource/reserve estimates and audits, compliant with worldwide reporting codes

• Mine design and optimization • Metallurgical assessment and

process review • Estimation of project capital and

operating costs, financial modeling and analysis

• Preliminary economic assessments, scoping, prefeasibility, and feasibility studies

• Valuation of mineral properties • M&A due diligence reviews of

mining and exploration projects

• Lender advisory services • Expert witness services • Design and management of

exploration programs • Reporting for public disclosure,

including NI43-101 Technical Reports, Competent Persons Reports, and Mineral Expert Reports

• QA/QC audits and reporting • Operations benchmarking,

optimization programs and troubleshooting

• Strategic planning and advice for boards and senior management


26

PRESENTER

Toronto Denver London Vancouver Quebec City

Deborah A. McCombe, P. Geo. Tel: +1 (416) 947-0907 Email: [email protected]

mailto:[email protected]

mailto:[email protected]

investing in canada’s mineral industry – factors to...

Documents