The Life and Times of a Gold Explorer, Developer, Miner
The life of a gold company through all stages of the gold exploration, development and mining process is simplified below.
This is an idealised progression through the stages from discovery through mining. More commonly though, is that a gold deposit will change ownership many times before it becomes a mine, if it becomes one at all. The skills and expertise to carry out each stage of a gold project are very different. Exploration companies can evolve into mining companies, but they need to employ entire new workforces in order to do so. Mining companies are not necessarily skilled at evaluating new projects, and are even less likely to make good explorers. Explorers Exploration companies search for new gold deposits. Statistically they have less than 1% chance of finding an economic deposit after spending US$500,000 (Bartrop and Guj, 2009). This figure is now likely to be much higher due to cost inflation. Explorers fail most of the time. They acquire funding only because the potential gains if they make a discovery are large enough for investors to take on the huge risk. It is the classic risk-reward relationship at play. Even after a discovery is made, much work needs to be done to properly define the gold deposit so that there is a certain amount of confidence about what lies beneath the ground. This may or may not progress as hoped, so the risk is still high of initial positive discoveries not leading to an economically viable project. It is important then to understand exploration results in context in order to gauge their significance. This site aims to put exploration results in context. Evaluation and Developers The stage after a gold deposit has been defined with some confidence is the evaluation and development stage. Here a company determines if the gold deposit can be turned into a profitable gold mine or not based on the cost to extract and sell the gold from that particular deposit. As each deposit is different, the evaluation stage takes years and can cost many tens to hundred's of milliond of dollars - all before any gold is poured. Evaluation starts with very crude estimations in a Scoping Study. If the Scoping Study indicates there is a reasonable chance a profitable mine could be built, a Preliminary(Pre)-Feasibility Study will be completed. A Pre-Feas will include new information gathered on the deposit to make a better estimate of the most apprpriate mining and processing methods and at what cost. Assuming results of the Pre-Feas are positive a full Feasibility Study will be done, based on yet more information and going into more detail. The Feasibility study will then be used to solicit financing by being repackaged as Bankable Feasibility Study (BFS) or Definitive Feasibility Study (DFS). The expense and effort of taking a gold deposit through Scoping to Feasibility stage is great. In 2007 McKenzie and Cusworthy estimated the cost for one project was between 2.2 and 2.5% of the total final cost of bringing the project into production. Cost inflation has been rampant in recent years and in 2013 this would have to be 5% at least (anecdotal). The time between discovery and production of a gold mine is now estimated at on average 10 years (Schodde, 2011) and growing due to increasing compliance demands and skills shortages. Miners Miners dig up the rock of the deposit and extract and concentrate the gold from it. By the time a company is mining at full production most of the risk, and conversely upside, have been removed. Attraction to investors will remain through either leveraged exposure to the gold price or the potential for growth through discovery or acquisition. |
References
Bartrop and Guj, 2009. CET Quarterly News. Issue 8, June 2009. Centre For Exploration Targeting. (note that this study was across a range of commodities, not specifically gold).
McKenzie and Cusworth, 2007. The Use and Abuse of Feasibility Studies. Project Evaluation Conference, AusIMM, Melbourne.
Schodde, 2011. Recent Trends in Gold Discovery - Are We Finding Enough? NewGenGold Conference presentation, Perth, November 2011.
Bartrop and Guj, 2009. CET Quarterly News. Issue 8, June 2009. Centre For Exploration Targeting. (note that this study was across a range of commodities, not specifically gold).
McKenzie and Cusworth, 2007. The Use and Abuse of Feasibility Studies. Project Evaluation Conference, AusIMM, Melbourne.
Schodde, 2011. Recent Trends in Gold Discovery - Are We Finding Enough? NewGenGold Conference presentation, Perth, November 2011.