Technical Due Diligence Investigation

Anyone who has been involved with a mining business acquisition as a potential buyer are familiar with the need to review and understand a huge amount of information and data in short period of time. It takes weeks or months to read all these documentations before any observations can be made, not to mention reaching any conclusions. Hiring a due diligence team of technical professionals is an effective way to deal with the evaluation of mining properties; the team has the appropriate technical expertise and will provide an unbiased assessment of the property.

Having a professional team can help a lot in terms of their strong background in the technical and financial areas, but the investor or potential owner still need to be prepared to do his/her own home work to get the best from the professional team.

Some basic questions, for a mine project, whether green field or brown field, which the investor should ask his/her team include the following:

- What are the economic products of the project? What is the quality of the product, are there any deleterious elements? Are there any testwork reports and assay certificates to support this?

- What is the predicted project economic performance, is there a financial model based on critical data and providing an analysis on an after-tax basis?

- What is the latest resource estimate and resource classification? How were these estimates prepared? Are input data coming from an exploration program or from a historical database? Has any verification work be done?

- For advanced properties, what is the current project status? is there a project development schedule and budget program;

- Are there any amenability metallurgy tests? What samples were used in the tests?

- Are there any desk-top studies providing preliminary design including mining, processing, infrastructure and tailings management? What is the estimated capital cost and operating cost?

- Are there risks or bottlenecks associated with the project?

Always communicate with the due diligence team and ask them about any abnormal data and or fatal flaws identified in their review. This can be anything such as design assumptions, data quality and operational projections. Interim conferences can help to bridge the communication between seller and buyer by providing supplementary information or clarifications. If there are any previous production data, always collect these and analyze them to get a picture of the historical operation.

A site visit is always suggested to at least confirm desk top review observations and to take samples for either geological or metallurgical purposes. This can take from a couple of days to a couple of weeks depending on the site accessibility and complexity of existing facilities. After the review and site visit, verification test work is sometimes recommended; and an in-depth review of the previous designs is sometimes required to confirm capital cost and operating cost data proposed by the seller. In any case, an independent financial analysis is always recommended for the buyer to maintain and update.


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