117-18 May 2016 |
PERSPECTIVES ON DIAMOND
RESOURCE DEVELOPMENT AND
REGULATORY COMPLIANCE
JAMES AH CAMPBELL
CEO, ROCKWELL DIAMONDS INC“uncover ing the face ts o f our po tent ia l ”
SAMREC/SAMVAL COMPANION VOLUME CONFERENCE
17-18 MAY 2016
217-18 May 2016 |
OUTLINE
• PUBLIC REPORTING
• MINERAL REPORTING STANDARDS AND CODES
• REGULATORY REQUIREMENTS
• DIAMOND MINING
• ASSESSING DIAMOND POTENTIAL
• JUNIOR MINERS
• CASE STUDIES
• KIMBERLITE MINING
• ALLUVIAL MINING
• IMPLICATIONS FOR INVESTORS
• IMPLICATIONS FOR PUBLIC REPORTING
• CONCLUDING REMARKS
James Campbell is President and CEO of
Rockwell Diamonds Inc. Previous roles
include Non Executive Director of Stellar
Diamonds plc, Vice President - New Business
for Lucara Diamond Corp, Managing Director
of African Diamonds plc, Executive Deputy
Chairman of West African Diamonds plc.
James worked at De Beers for over twenty
years; his roles included General Manager for
Advanced Exploration & Resource Delivery
and Nicky Oppenheimer's Personal Assistant.
James holds a degree in Mining & Exploration
Geology from the Royal School of Mines
(Imperial College, London University) and an
MBA with distinction from Durham University.
He is a Fellow of the Institute of Mining,
Metallurgy & Materials, South African Institute
of Mining & Metallurgy and Institute of
Directors of South Africa. He is also a
Chartered Engineer (UK), Chartered Scientist
(UK) and a Professional Natural Scientist
(RSA).
James also chairs two NPO’s and is
deeply committed to South Africa.
317-18 May 2016 |
REGULATORY & REPORTING REQUIREMENTS
417-18 May 2016 |
PUBLIC REPORTING
Public reporting refers to all disclosure, such as press
releases, website postings, presentations, technical reports
and technical disclosure accompanying financial reports
(statements of Mineral Resources and Reserves)
Public reporting must be
♦ Material. i.e. present all reasonably expected information
♦ Transparent, i.e. presented in a clear and unambiguous
manner
♦ Prepared by Competent Persons (CP)
Competent Persons must
♦ Be a Member or Fellow of a Recognised Professional
Organisation (RPO).
♦ Have a minimum of five years’ relevant experience in the
style of mineralisation or type of deposit under consideration
and in the activity which that person is undertaking.
♦ Be satisfied that they could face their peers and
demonstrate competence in the commodity, type of deposit
and situation under consideration.
Professional codes of practice
set minimum standards for public
reporting.
Public reports must be prepared
by a Competent Person (CP)
Codes differ slightly on the
requirements for CP’s relevant
experience
Membership in the RPO should
be primarily on the basis of
academic qualifications and
experience
RPOs should have enforceable
disciplinary processes including
the powers to suspend or expel
a member
Source: CRIRSCO
517-18 May 2016 |
MINERAL REPORTING STANDARDS & CODES
National reporting standards for selected countries
International initiative launched
in South Africa in 1994
Working group established to
develop a set of standard
definitions for reporting of
mineral resources and mineral
reserves
Today most national reporting
standards share a common set
of codes and guidelines
The Canadian mining sector’s
credibility improved greatly
after the NI 43-101 was
introduced in 2001
19971994 1999 2000
International
initiative to
standardise
definitions for
market-related
reporting
(CRIRSCO)
Agreement on
definitions for
Mineral
Resources and
Mineral
Reserves
(Denver Accord)
Alignment with
United Nations
Framework
Classification
Updated JORC
Code published
(first release 1989)
Other national
reporting
standards/codes
published, e.g.
SAMREC, CIM
Country Reporting Standard/Code
Australia JORC Code (2012)
Canada CIM Definition Standards for Mineral Resources and
Reserves – NI 43-101 (2014)
Europe/UK PERC Reporting Standard (2013)
Russia NAEN Code (2011)
South Africa SAMREC Code (2007)
SAMVAL Code (2008)
USA SME Guide (2014)
Source: CRIRSCO, PWC
617-18 May 2016 |
REGULATORY REQUIREMENTS
Mining reporting requirements applicable in selected jurisdictions
Stock
Exchange
Mining-specific Reporting
Requirements (post-listing)
Mineral Reporting
Standard
ASX Annual and half-year financial report
Quarterly report by CP on production
and development activities (incl.
expenditure); exploration activities;
mineral results & ore results
JORC
JSE Annual and quarterly financial report
Description of exploration and mining
activities by CP; mineral resource and
reserve statement
SAMREC
TSX/TSXV Annual and quarterly financial report CIM (NI 43-101)
LSE/AIM Annual and half-year financial report
Interim management statement
Resource updates by CP (AIM)
JORC, SAMREC, CIM,
other selected codes
HKEx/GEM Annual and quarterly financial report
Half-yearly updates on mining
JORC, SAMREC, CIM
The world’s largest diversified
mining groups are listed on LSE
In 2013, TSX and TSX-V
combined were home to 57% of
the world’s publicly listed mining
companies
Cross border international
listings and dual/triple listings of
miners on AIM, TSX and ASX
continue to increase
HKEx is becoming a destination
of choice for mining companies.
However, companies with only
inferred resources are not
eligible for listing
Source: PWC, Mining Association of Canada
717-18 May 2016 |
DIAMOND MINING
817-18 May 2016 |
DIAMOND MINING – TWO SCENARIOS
KIMBERLITES
• High establishment costs
• Open pit and underground
operations (with progression
in some cases)
• Grade, diamond distribution
can be constrained with
sampling and modelling
• Higher resource confidence
can mitigate uncertainty
ALLUVIALS
• Lower start-up costs
• Low grade, high variability
• High uncertainty
• High volume, low cost approach
• Scarcity of larger (high-value)
diamonds
• Volumes are key to repeatability
Alluvial operations perceived
as being better suited to
smaller operators (juniors)
than kimberlites
Most juniors and mid-tiers own
kimberlite projects
Majors such as De Beers have
been running large-scale
alluvial operations
Diamonds from alluvial
operations are on average
larger (cts/stone) and more
valuable ($/ct)
Attracting equity and debt
funding is challenging in
current markets
917-18 May 2016 |
LISTED DIAMOND MINING IN SOUTH AFRICA
Company Size Listing SA operations
(K = kimberlite;
A = alluvial)
Annual
Production
(cts)
Annual
Revenue
(US$)
Blue Rock
Diamonds
Junior AIM Kareevlei (K) Ramp-up N/A
De Beers Major N/A Venetia,
Voorspoed (K)
4.5M No SA
reports
Diamcor
Mining
Junior TSX-V,
OTC
Krone-Endora (A) +/- 20,000
(incidental)
+/- 3M
DiamondCorp Junior AIM Lace (K) +/- 7,000
(ramp-up)
N/A
Petra
Diamonds
Mid-
tier
LSE Cullinan, Finsch,
Kimberley,
Koffiefontein (K)
3M 360M
Rockwell
Diamonds
Junior TSX,
JSE
Middle Orange
River (A)
36,000 51M
Trans Hex Junior JSE Lower Orange
River,
Namaqualand (A)
62,000 83M
South Africa currently produces
8% of world diamonds by
volume
In 2014 SA produced 8.1 million
carats of diamonds (nearly half
as pre-GFC levels)
The bulk of SA diamond
production is from primary
sources (kimberlites)
Operators are chiefly junior /
mid-tier companies
No new discoveries, nor
significant projects in the
pipelineSource: company websites, SA Chamber of Mines
Many private diamond mining companies too
1017-18 May 2016 |
A PERSPECTIVE ON JUNIOR MINERS
Source: Investopedia; mineralsnorth.ca; undervaluedequity
Some common traits of juniors Some common traits of majors
• Discoverers and developers of
new economic deposits
• Typically small-cap companies
• Exploration spend is their
lifeblood
• No/little production cashflow to
fund exploration activities
• Funding derived from share
issues & management
• No dividends paid - shareholders
rewarded by share price increase
• Results attract high degree of
public scrutiny and assurance
• Subject to full extent of regulatory
and reporting obligations
• Technical management teams
with deep practical experience
• Innovative, agile and fast
• Owners of mining operations
• Typically more than one mine
• Publicly traded, well capitalised
companies
• Exploration activities internally
funded by production cashflow
• Exploration spend viewed as
discretionary
• Steady, predictable cashflow
• Large corporate structures
• Complex decision processes
• Internal assurance processes
• Able to adjust production to
changing market conditions
• Large technical and non-
technical management
departments.
What defines a junior miner?
♦ No single definition
♦ Prospectors and developers
♦ “The exploration division of
the mining industry”
♦ No marked separation
between junior and mid-tier
1117-18 May 2016 |
ASSESSING DIAMOND POTENTIAL FOR MINING (GENERALISED PROCESS)
Confidence in the
deposit/resource improves as
new information is analysed and
assumptions are re-visited
As confidence increases, so do
costs and timeframes
Technology plays a critical role in
resource assessment process,
as do risk modelling simulations
Accurate and reliable resource
models are essential inputs to a
sound economic assessment
Expert operators are able to
shorten timeframes, without
compromising on quality of
resource assessment
Deep knowledge, expertise are
key differentiators
Mapping,
sampling,
geophysics
Core drilling or
trenching
(100’s kg)
Initial bulk
sampling
(10-100’s t)
Infill drilling,
bulk sampling
(1000’s t)
Inferred
Resource
Indicated
Resource
Diamond potential,
surface size
estimate
Preliminary grade
estimate, prelim.
geological model
Global grade,
preliminary value
estimate
Geological,
density, volume,
grade, value
models
Preliminary
Economic
Assessment
Pre-Feasibility
Study
Bankable
Feasibility Study
DepositTarget /
Anomaly
Activity
Ou
tco
me
sM
inera
l
Re
sou
rce
Eco
no
mic
Stu
die
s
INCREASING COSTS & TIMEFRAMES
DECREASING UNCERTAINTY & RISK
Duration: months
Cost: R millions
Duration: years
Cost: R tens of millions
1217-18 May 2016 |
ASSESSING DIAMOND VALUE
Unlike other mineral commodities, diamonds don’t have set prices
Equity funders require that a rough diamond pricing model be decided upfront in a deal
Two models in diamond valuation: fixed price book or open tender
Open tenders have the following advantages:
♦ Market related price
♦ Competitive bidding
♦ Pricing transparency
♦ Clients get the goods they want
♦ Premium paid for valued goods
Disadvantages of open tenders include:
♦ Less predictable cash flows
♦ Higher risk of price volatility
♦ Speculative buying
Open tenders are on the increase
♦ Initiated by juniors seeking transparent pricing models
♦ Majors have been integrating tenders into their sales
Five Models underpin a diamond
resource: Geological, Density,
Volume, Grade, Value
Modelling of value is unique to
diamond resource estimation
Value estimates require a
substantial investment in order
for a representative sample to be
obtained
Understanding the size
distribution of diamonds in a
deposit is critical in designing an
effective treatment plant
The value of diamonds
recovered can be optimised
through the selection of a
suitable bottom cut-off size
(BCOS)
Source: GIA, Rockwell
1317-18 May 2016 |
DIAMOND MINING CASE STUDIES
1417-18 May 2016 |
A KIMBERLITE CASE STUDY: AK6 (KAROWE MINE)
AK6 is a diamondiferous
kimberlite pipe located in the
Orapa kimberlite field in north-
eastern Botswana
Discovered by De Beers in 1969,
but deemed low priority
Evaluated in 2003-2007 by
De Beers – African Diamonds JV
Now called Karowe Mine and is
owned and mined by Lucara
Diamond Corp
Mining began in 2012
Anticipated LoM is 15 years
Source: Lucara, JAH Campbell
1517-18 May 2016 |
AK6 - THE JOURNEY
Initial
evaluation by
De Beers
Preliminary
size, grade,
value
encouraging
Boteti JV:
African
Diamonds, De
Beers (49/51)
Evaluation
Phase 1
Inferred
Mineral
Resource
Positive
sampling
results
released
Decision to
fast-track
evaluation
Evaluation
Phase 2
Indicated
Mineral
Resource
Conceptual
Study (DB):
marginal
economics;
capital
USD380M
Pre-Feasibility
Study (AFD):
robust
economics
Feasibility
Study (DB):
marginal
economics
Mining
Licence (2008)
Value
Engineering
Study (AFD):
robust
economics;
capital
USD88M
Lucara
acquires DB’s
share in Boteti
Feasibility
Study (Lucara):
robust
economics;
capital
USD156M
Lucara
acquires AFD’s
share in Boteti
Construction &
Commissioning
Cost:
USD110M
Mining begins
in Q2 2012
2003-5 2010-122005-6 2006-7 AK6 initially downgraded due
to small size (3.3ha), low
grade (3cpht) and poor mineral
chemistry
Re-assessed by De Beers
(Debot) in 2003
Boteti JV (AFD-DB) formed in
2004, prior to initial evaluation
results being released
Facilitated by AFD, Debot sold
its share to Lucara in 2009, in
the wake of the GFC and due
to apparent marginal
economics
AFD exited in 2010 following
significant share premium
buyout from Lucara
2008-9
1617-18 May 2016 |
AK6 EVALUATION PROGRAMME (2003-2007)
Extensive evaluation:
♦ +/-23,000m core drilling
♦ +/- 12,500m LDD
♦ +25,000t samples collected
(not all processed)
Total cost of evaluation
programme USD26.8M
High levels of diamond
damage observed
High abundance of high value
Type II diamonds
Phase Technique Objective Results
Initia
l
eva
lua
tio
n LDD
5x12¼”
Macro potential, preliminary
grade
97t (in situ)
25cpht (+1mm)
138USD/ct
High-resolution
geophysics
Surface area, geological
model9.5ha
Eva
lua
tio
n P
ha
se
1 Percussion drilling
44x6.5”
Delineation, geological model,
mineral chemistry, macro
4,575m
28t (in situ)
29.6cpht (+1mm)
Core drilling
17xinclined
12xvertical
Internal geology, LDD pilots,
micro
9,883m
South Lobe
increased
LDD
13x23” @70m
Grade and revenue – inferred
resource 500ct for valuation
2,747t (in situ)
689cts
25.1cpht (+1mm)
Eva
lua
tio
n P
ha
se
2
Core drilling
11xvertical
29xinclined
Delineation, internal geology,
LDD pilots
12,860m
Kimberlite at
884m
LDD
12x23” @50m
Grade and revenue –
indicated resource 3000ct for
valuation
3,298t (in situ)
483cts
17.8 cpht (+1mm)
Trenching (S Lobe)Grade and revenue 7.393t (in situ)
Trenching (C Lobe)Grade and revenue 12,074t (in situ)
Source: Lucara, JAH Campbell
1717-18 May 2016 |
AK6 / KAROWE RESOURCE STATEMENTS
Karowe Mineral
Resource / Reserve
(2013)
Tonnes
(000,000’s)
Grade
(cpht)
M Carats
(+1.25mm)
Value
(USD/ct)
Probable Reserve
(to 324m)33.1 15.5 5.1 394
Indicated Resource
(to 400m)48.07 16 7.61 393
Inferred Resource
(400-750m)21 14 3.04 412
Source: JAH Campbell, Lucara
2003-7 evaluation programme led to first mineral resource estimate for AK6 (2009)
Grades regarded as conservative; improvement anticipated with further work
Considerable upside expected in diamond values (revised upwards by +25% in 2010)
Latest Karowe resource statement (2013) reflects a drop in grades and increase in values
Higher BCOS (1.25mm) accounts for grade decrease
Value increase chiefly due to incorporation of production and sales data into estimates
2013 value estimation qualified as conservative
AK6 Mineral
Resource (2009)
Tonnes
(000,000’s)
Grade
(cpht)
M Carats
(+1 mm)
Value
(USD/ct)
Indicated Resource
(to 372m)40 22 8.9 153
Inferred Resource
(372-758m)31 19 6 139
1817-18 May 2016 |
KAROWE PRODUCTION PERFORMANCE
A proven large stone producer
2015 large stone recoveries:
20 greater than 200cts
7 greater than 300cts
Three exceptional stones
recovered from South Lobe in
November 2015, including
world’s second largest
diamond: 1,111cts Type IIa
Lesedi La Rona
Year
Tonnes
mined
(000,000’s)
Tonnes
treated
(000,000’s)
Carats
recovered
Grade
(cpht)
Ave
$/ct
sold
Stones
>10.8ct
s
2015 3.18 2.24 365,690 16.3 593 727
2014 3.32 2.42 430,292 17.7 644 815
2013 3.94 2.35 440,751 18.8 411 732
Source: Lucara
Operating costs are USD33-35 per tonne treated
Lobes
1917-18 May 2016 |
REFLECTIONS ON AK6
Quality and abundance of large
diamonds initially
underestimated
Type IIa diamonds typically
colourless and extremely
transparent (notable examples
are the Cullinan and Koh-i-Noor)
Valuation models: market tender
vs. price book
Joint Venture dynamics: different
perspectives; funding structure
Fit-for-purpose approach to plant
design
Risk modelling / simulations
Impact of global events:
timing is crucial
Diamond value
♦ Type IIa diamonds recovered during bulk sampling
♦ Abundance of Type II and larger diamonds inadequately
considered in initial valuations
♦ Diamond value underestimated in financial modelling
♦ Karowe consistently delivering large and exceptional stones
Joint Venture
♦ Agreement signed ahead of first bulk sampling results
♦ JV operated by a major
♦ Substantial variance in
› Risk appetite
› Plant design philosophy
› Capital estimates
› Project economics
Economic context
♦ Global Financial Crisis
♦ Change in De Beers’ strategy
♦ Investors’ reluctance to fund a project deemed marginal
2017-18 May 2016 |
AN ALLUVIAL CASE STUDY: SAXENDRIFT MINE
Alluvial diamond operation on
the south bank of the Orange
River, 160 km from Kimberley
Mined by TransHex in 2000-6
Purchased by Rockwell
Diamonds (RDI) in 2008
LoM extended by acquisition of
Saxendrift Extension in 2012
First full SA implementation of
Bourevestnik bulk X-Ray
technology in operational
environment
Saxendrift Mine has produced
numerous +100ct stones,
including the Alana (169cts)
and the Rockwell (287cts)
2117-18 May 2016 |
SAXENDRIFT MINE
Three terrace complexes with
associated palaeochannel
depositional packages identified
on Saxendrift Mine:
Brakfontein Hill (“BHC”)
Saxendrift Hill (“SHC”)
Saxendrift River (“SRC”)
Saxendrift project properties
extend over 5,120.55ha,
comprising both Mining Rights
and Prospecting Rights
Saxendrift Mine also includes
Kwartelspan Complex (KPC),
contiguous to the east
Saxendrift River
Complex (SRC)
Saxendrift Hill Complex
(SHC)
Brakfontein Hill Complex
(BHC)
2217-18 May 2016 |
SAXENDRIFT HISTORY
Early
artisanal
diggings in
mid 1920’s
98,000cts
recovered
Hard
calcrete
cover, poor
returns
Diggings end
by 1950
Mapping and
bulk
sampling by
Broadacres,
Moonstone
NCDM&E
operating
Saxendrift,
Brakfontein
Gem buys
NCDM&E
(1998)
TransHex,
Gem merge
(1999)
TransHex
acquires
permit (2000)
Saxendrift
Mine
commissioned
MOR
exploration
2001: 216ct
stone found
2003:
45,000$/ct for
blue diamond
Saxendrift
put on C&M
76,803cts
produced
RDI buys
Saxendrift
(2008)
New plant
installed
BHC bulk
sampling
(2008-9) and
trial mining
(2009-10)
BHC mining
(2011-2015)
SRC bulk
sampling
(2012-14)
SHC bulk
sampling
(2013-14)
KPC bulk
sampling
(2014)
RC drilling
for volume
estimations
(2015)
1920-50’s 2006-101980-90’sEarly digging activities dating
back to 1920’s-1950’s
Bulk sampling in 1980’s-90’s
Formal mining in late 1990’s
Blasting and earthmoving
equipment used to rip and
remove hard calcrete
Mined by TransHex since
2000, Rockwell since 2008
Concurrent bulk-sampling and
mining since late-2000’s
Drillhole material from volume
estimation not sampled for
diamonds (low grade)
2000-5 2011-16
Source: Rockwell, Explorations Unlimited
2317-18 May 2016 |
SAXENDRIFT BULK SAMPLING / TRIAL MINING (2008-2014)
Due to the low grades and large
stone sizes in alluvial diamond
deposits, bulk samples are
collected and processed to
determine in-situ grades
Recovered diamonds are sold
on the open market to determine
realisable value
Mining in one area of an alluvial
diamond mine can occur
concurrently with trial-mining
and/or bulk-sampling operations
in other areas
The transition to trial mining and
onto production mining can be
seamless
Area Volume (m3) CaratsGrade
(ct/100m3)Stones
Size
(ct/st)
Average
value
(USD/ct)
BH
C 194,287
2,398,009
2,436.73
14,073.49
1.25
0.62
1,414 (2009)
1,956 (2010)
SR
C
2,218,210 13,523.10 0.61 3,089 4.38 1,726 (2014)
SH
C
1,007,781 4,209.27 0.42 761 5.53 1,904 (2014)
KP
C
80,590 450.62 0.57 187 2.41 1,072 (2014)
Source: Rockwell, Explorations Unlimited
2417-18 May 2016 |
SAXENDRIFT MINERAL RESOURCE
0
500
1000
1500
2000
2500
3000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
2007 2009 2010 2012 2014 2015U
SD
/ct
Vo
lum
e (
m3)
MINERAL RESOURCE ESTIMATES
Inferred Indicated Value
2007 third party Mineral
Resource estimate re-modelled
in 2009 to Rockwell’s group
standards: drop in volumes,
increase in grades
Change in mining method in
2010 (entire sequence mined)
explains increase in volumes
and drop in grade
Bottom cut-off size increased
from 2mm to 5mm in 2011
(fewer carats recovered)
Upgrade of Inferred to Indicated
Resource in 2012 due to
proximity to mining face
Two-year moving average
of value from 2013
GFC
BCOS 5mm
Inf Res upgrade
0.68
0.41 1.01
0.72
0.66
0.56
0.47
0.47
0.45
0.53
0.42
0.5
RDI
model
Mining
method
Grade
2517-18 May 2016 |
SAXENDRIFT PRODUCTION PERFORMANCE
Recovered grades in line with
modelled grades
Rigour applied to resource
modelling (and NI 43-101
reporting) leads to consistent
production performance
Mining feedback validates
resource assessment
Optimised EMV fleet is
paramount to operational
performance
Notable recoveries in 2014-15
included 6 stones over 100cts
YearVolume treated
(m3)
Carats
recovered
Grade
(cts/100m3)
Ave $/ct
sold
2015 2,559,000 10,442 0.41 2,363
2014 2,296,000 12,701 0.55 2,338
2013 1,775,130 8,373 0.47 1,918
2012 1,469,215 6,944 0.47 2,444
2011 1,449,875 6,705 0.46 2,003
2010 1,216,503 8834 0.73 1968
2009 194,287 2,437 1.18 1,767
0
500
1000
1500
2000
2500
3000
3500
0
100000
200000
300000
400000
500000
600000
700000
800000
Q1-F14 Q2-F14 Q3-F14 Q4-F14 Q1-F15 Q2-F15 Q3-F15 Q4-F15U
SD
/ct
Vo
lum
e (
m3)
Saxendrift production 2014-15
Volume processed ValueSource: Rockwelll AR’s
0.39
Grade
0.54 0.76 0.50 0.64 0.34 0.39 0.32
2617-18 May 2016 |
IMPLICATIONS FOR INVESTORS AND REPORTING
2717-18 May 2016 |
JUNIOR FUNDING
Equity financing is the juniors’
dominant source of funding,
while the majority of mining
debt financings are undertaken
by large market cap companies
In 2013, 62% of global mining
equity financing was raised on
TSX and TSX-V
ASX, TSX and AIM are funding
junior exploration and
development companies
Juniors are responsible for the
majority of further issues,
reflecting their need for cash to
fund exploration and feasibility
studies
Source: PDAC, PWC
2817-18 May 2016 |
IMPLICATIONS FOR INVESTORS
Mining investors view favourably:
♦ Companies with experienced management teams, exploring
in prospective areas and with reasonable project timelines
♦ The use of new technology, as it demonstrates an ability to
work faster and cost-effectively
♦ Clarity on a company’s position with respect to key drivers
of future value (the investors’ reward lies in the increase in
share price)
♦ Companies who “graduate” from the venture to the main
board of a stock exchange, as this implies additional
corporate governance and due diligence effort
Mining investors view less favourably:
♦ New discoveries without a demonstrable way to mine the
mineral resource economically
♦ Junior miners with little or no track record, especially so
during cyclical mining downturns
Typically, juniors have to raise
equity to fund their
exploration/evaluation
activities all the way to
feasibility stage (whereas
majors are able to self-fund
this process)
Attracting and retaining
investors’ interest requires an
ongoing effort
Information of relevance to
investors is disclosed through
public reporting
Caution must be exercised not
to overstate the potential of a
project in an effort to keep
investors’ interest alive
Source: Canadian Mining Journal. PWC, Pinnacle Digest
2917-18 May 2016 |
IMPLICATIONS FOR PUBLIC REPORTING
Public reporting is expected to:
♦ Provide high levels of assurance to accompany disclosure
of information of a financial or operational nature
♦ Provide clearly defined and highly reliable measures that
have the potential to influence markets
♦ Include non-GAAP performance measures - such as
production volumes, resources/reserves and cash costs –
which investors use in their analyses
♦ Report accurately on responsible operational activities in an
unambiguous, timely fashion
Accurate and transparent reports are critical in securing
subscriptions to further share issues, as IPOs generally raise
funds to cover only the first 2-3 years of exploration
Juniors are subject to a high
degree of public scrutiny and
assurance (majors tend to
conduct these internally)
Mineral resource estimates
and other non-GAAP
measures are increasingly
scrutinised by investors
Shortened project timeframes
are appealing, as long as
accuracy of information is not
compromised
Relevant and accurate
reporting helps to sustain
interest throughout the
lifecycle of a project
3017-18 May 2016 |
CONCLUDING REMARKS
Mineral resource development is a complex and costly process
with a high degree of risk
Technology has a key role to play in the risk reduction process
Plant design philosophy can make or break a project
Experienced technical management is probably the most
important critical success factor
In order to comply with regulatory requirements, project results
must be reported within accepted frameworks
Stringent reporting parameters don’t always allow for the full
characterisation of future potential of a mining project
(commentary is just as important)
Accepted reporting standards are primarily designed to protect
investors from misrepresentation of resource value
There is a fine line between compliance and excessive caution,
which may result in conservative understatements of future
potential
Reporting and regulatory
requirements place a
significant burden of
compliance on juniors
However, relevance and
transparency of reporting is
increasingly important in
attracting junior funding
Rigour and diligence applied to
resource development pays off
in resource performance and
repeatability of results
Accelerated project timeframes
are appealing, but there is no
room for compromise on
resource assessment