Mining is a technical field and requires a comprehension of many complex factors.
This includes everything from the characteristics of an orebody to the actual extraction method envisioned and used—and the devil is often found in these technical details.
Part 4: Evaluating Technical Risks and Project Quality
We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.
Here is a basic introduction to some technical and project quality characteristics to consider when looking at your next mining investment.
View the three other parts of this series so far:
- Mistakes made when choosing a team
- Mistakes made with the business plan
- Mistakes with project jurisdiction
Part 4: Technical Risks and Project Quality
So what must investors evaluate when it comes to technical risks and project quality?
Let’s take a look at four different factors.
1. Grade: Reliable Hen Vs. Golden Goose
Once mining starts, studies have to be adapted to reality. A mine needs to have the flexibility and robustness to adjust pre-mine plans to the reality of execution.
A “Golden Goose” will just blunder ahead and result in failure after failure due to lack of flexibility and hoping it will one day produce a golden egg.
Many mining projects can come into operation quickly based on complex and detailed studies of a mineral deposit. However, it requires actual mining to prove these studies.
Some mining projects fail to achieve nameplate tonnes and grade once production begins. However, a team response to varying grades and conditions can still make a mine into a profitable mine or a “Reliable Hen.”
2. Money: Piggy Bank vs. Money Pit
The degree of insight into a mineral deposit and the appropriate density of data to support the understanding is what leads to a piggy bank or money pit.
Making a project decision on poor understanding of the geology and limited information leads to the money pit of just making things work.
Just like compound interest, success across many technical aspects increases revenue exponentially, but it can easily go the other way if not enough data is used to make a decision to put a project into production.
3. Environment: Responsible vs. Reckless
Not all projects are situated in an ideal landscape for mining. There are environmental and social factors to consider. A mining company that takes into account these facts has a higher chance of going into production.
Mineral deposits do not occur in convenient locations and require the disruption of the natural environment. Understanding how a mining project will impact its surroundings goes a long way to see whether the project is viable.
4. Team: Orchestra vs. One-Man Band
Mining is a complex and technical industry that relies on many skilled professionals with clear leadership, not just one person doing all the work.
Geologists, accountants, laborers, engineers, and investor relations officers are just some of the roles that a CEO or management team needs to deliver a profitable mine. A good leader will be the conductor of the varying technical teams allowing each to play their best at the right time.
Mining 101: Mining Valuation and Methods
In order to further consider a mining project’s quality, it is important to understand how the company is valued and how it plans to mine a mineral resource.
There are two ways to look at the value of a mining project:
- The Discounted Cash Flow method estimates the present value of the cash that will come from a mining project over its life.
- In-situ Resource Value is a metric that values all the metal in the ground to give an estimate of the dollar value of those resources.
The location of the ore deposit and the quantity of its grade will determine what mining method a company will choose to extract the valuable ore.
- Open-pit mining removes valuable ore that is relatively near the surface of the Earth’s crust using power trucks and shovels to move large volumes of rock. Typically, it is a lower cost mining method, meaning lower grades of ore are economic to mine.
- Underground mining occurs when the ore body is too deep to mine profitably by open-pit. In other words, the quality of the orebody is high enough to cover the costs of complex engineering underneath the Earth’s crust.
When Technicals and Quality Align
This is a brief overview of where to begin a technical look at a mining project, but typically helps to form some questions for the average investor to consider.
Everything from the characteristics of an orebody to the actual extraction method will determine whether a project can deliver a healthy return to the investor.
An Investor’s Guide to Copper in 3 Charts
Explore three key insights into the future of the copper market, from soaring demand to potential supply constraints.
An Investor’s Guide to Copper
Copper is the world’s third-most utilized industrial metal and the linchpin of many clean energy technologies. It forms the vital connections in our electricity networks, grid storage systems, and electric vehicles.
In the above infographic, iShares digs into the forces that are set to shape the future of the copper landscape.
How Much Copper Do We Need?
Copper is poised to experience a remarkable 54% surge in demand from 2022 to 2050.
Here’s a breakdown of the expected demand for copper across clean energy technologies.
|Technology||2022 (kt)||2050P (kt)|
|Other low emissions power generation||93.7||142.2|
|Grid battery storage||24.6||665.2|
Copper is vital in renewable energy systems such as wind turbines, solar panels, and electric vehicle batteries because of its high electrical conductivity and durability.
It ensures the effective transmission of electricity and heat, enhancing the overall performance and sustainability of these technologies.
The rising demand for copper in the clean energy sector underscores its critical role in the transition to a greener and more sustainable future.
When Will Copper Demand Exceed Supply?
The burgeoning demand for copper has set the stage for looming supply challenges with a 22% gap predicted by 2031.
Given this metal’s pivotal role in clean energy and technological advancements, innovative mining and processing technologies could hold the key to boosting copper production and meeting the needs of a net-zero future.
Investing in Copper for a Prosperous Future
Investors looking for copper exposure may want to consider an ETF that tracks an index that offers access to companies focused on the exploration and mining of copper.
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