Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

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Technical Reports Technical Reports Who needs them? FINEX ‘10 Exploration meets the City

Transcript of Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Page 1: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Technical ReportsTechnical ReportsWho needs them?

FINEX ‘10 Exploration meets the City

Page 2: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

An early minerAn early minerFinex '10 October 2010 2

Page 3: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

The first technical report?The first technical report?Finex '10 October 2010

UGH !

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Page 4: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Roman gold mineRoman gold mine

Las Medullas, Leon, Spain

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Page 5: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Hydraulic miningHydraulic miningFinex '10 October 2010 5

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Roman gold mineRoman gold mine

Las Medullas, Leon, Spain

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•Major alluvial gold mine

•Over 1km across

•500 million m3 extracted

•Grade 3 g/t

•60,000 workers (slaves)

•200,000 oz p.a.

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Mediaeval mining-Agricola 1555Mediaeval mining-Agricola 1555Finex '10 October 2010 7

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The Industrial RevolutionThe Industrial RevolutionFinex '10 October 2010 8

Page 9: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Britain 17Britain 17thth and 18 and 18thth century centuryFinex '10 October 2010

•Britain leads the world in mineral production

•Iron ore•Coal•Copper•Tin

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Page 10: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

The Stock Exchange, LondonThe Stock Exchange, London

Started in a coffee house in 1698

South Sea Bubble had grown and burst within 25 years

Adopted formal name in 1773

Formal membership introduced in 1801

First Rule Book introduced in 1812

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Page 11: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London-global mining financeLondon-global mining financeFinex '10 October 2010 11

Page 12: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London-global mining financeLondon-global mining finance

London capital backed:◦Californian gold rush 1849

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Page 13: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London-global mining financeLondon-global mining finance

London capital backed:◦Klondike gold rush 1897

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Page 14: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London-global mining financeLondon-global mining finance

London capital backed:

◦Californian gold rush 1849◦Klondike gold rush 1897◦Australian gold rushes

◦Victoria 1850’s◦Kalgoorlie 1890’s

◦Kolar Gold Fields, India 1870’s◦Witwatersrand, S.Africa gold 1880’s

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Page 15: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Gold Fields of South Africa LtdGold Fields of South Africa Ltd

Prospectus issued 1887

£250,000 raised for 230,000 shares

Promotors took only 200 founder shares

But retained 3/15 (20%) of any profits

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Page 16: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Where was the CPR?Where was the CPR?

The Company is formed for the purpose of acquiring and dealing with certain auriferous and other mineral properties, interests and rights in South Africa, and also for carrying on general exploration with a view to making further investments of a similar nature

£25,000 spent on purchases and options but “opportunities exceed capacity of private capital”

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Page 17: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London-global mining financeLondon-global mining finance

London capital backed:

◦Californian gold rush 1849◦Klondike gold rush 1897◦Australian gold rushes

◦Victoria 1850’s◦Kalgoorlie 1890’s

◦Kolar Gold Fields, India 1870’s◦Witwatersrand, S.Africa gold 1880’s◦Malaysian tin from 1870’s◦Nigerian tin mines from 1900’s◦Zambian Copper Belt discovered 1928

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Page 18: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Chapter 19Chapter 19

Special LSE Rules for mining companiesExempt from 3 year trading recordListing particulars must contain a

Competent Person’s ReportRequired to demonstrate proven reserves

for at least 2 years operationAggregate value of proven and probable

reserves must exceed 50% of the expected market capitalisation

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Page 19: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Reign of the Mining Finance Reign of the Mining Finance HouseHouse

Consolidated Gold FieldsAnglo AmericanUnion CorporationGeneral Mining Selection Trust

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Page 20: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Canada and AustraliaCanada and Australia

Local mining industriesNeed for local capitalListing of exploration companies allowedBoom and bust in various commoditiesAttracted unwary international investorsLittle regulation of trading or reportingPoseidon nickel boomLed to tighter regulation in Australia

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Page 21: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

London’s responseLondon’s response

Still unable to list exploration companiesMajor changes in 1995OFEX market set upLSE established AIM European market of choice for resourcesUnique regulatory modelRelatively light & flexibleRegulated by Nominated Advisers

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Requirements for mining listing Requirements for mining listing on AIMon AIM

Suitability for listing No minimum free floatWorking capitalIndependent Competent Persons ReportOngoing reporting obligations

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Technical reports vitalTechnical reports vital

Competent Persons ReportExploration updatesResource estimates

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Standards varyStandards vary

Convergence in Australia, Canada, South Africa

US regulators much more restrictive

Russia-an acquired taste

China-not yet

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Page 25: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

The Russian systemThe Russian systemFinex '10 October 2010 25

Page 26: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Russian reservesRussian reserves

VMS depositC1 +C2 “reserves”24.0Mt5.87% Zn (1.41Mt Zn)0.67% Pb (161,000t Pb)106 g/t Au (81.8M oz Ag)0.3 g/t Au (232,000 oz Au)

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Page 27: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Western reservesWestern reserves

9.7Mt8.94% Zn (865,000t Zn)3.58% Pb (346,000t Pb)161 g/t Ag (50.5M oz Ag)0.37 g/t Au (115,000 oz Au)

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Page 28: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Chinese systemChinese systemFinex '10 October 2010 28

Page 29: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Australian resourcesAustralian resources

Volcanic hosted sulphide depositMeasured, indicated and inferred resource

(90% inferred)Total resources 6.897Mt 4.4% Zn (303,000t Zn)3.5% Pb (241,000t Pb)34g/t Ag (7.5M oz)

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Page 30: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Recalculation to Chinese standardRecalculation to Chinese standard

Total mineral resources 25.253Mt3.08% Zn (778,000t)3.02% Pb (763,000t)51g/t Ag (41.4M oz)4.6% S (1.16Mt)

Of which the “controlled intrinsic resource” is 4.5Mt (2.41% Zn, 3.57% Pb, 64g/t Ag) and the “inferred intrinsic resource is 20.7Mt (3.23% Zn, 3.57% Pb, 48g/t Ag)

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Page 31: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

An Australian lessonAn Australian lesson

An alluvial tin projectPeriods of historic productionMassive historic database of drillingCPR by reputable consultantMeasured and indicated resourcesUpgrade to reserve statusPlant constructionOutcome?

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Page 32: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Impact of Bre-XImpact of Bre-XFinex '10 October 2010 32

Page 33: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

What to look out forWhat to look out for

Management experience

◦Is the in house “qualified person” qualified?

Track record

◦Do the directors know what they are doing?◦Have they done it before

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Page 34: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

What to look out forWhat to look out for

Beware of silence after a run of news

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Page 35: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

What to look out forWhat to look out for

Independent oversight

◦Ensure the consultant really is competent

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Page 36: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

What to look out forWhat to look out for

Are the samples selective?

Is the cut off grade stated?

Are they true widths?

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Page 37: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

What to look out forWhat to look out for

Beware of gross, in the ground values

Metal equivalent◦Base metal equivalent better than precious◦In Australia includes an adjustment for recovery◦In Canada it does not

Is reserve/resource terminology sloppy

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Page 38: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

ConclusionsConclusionsFinex '10 October 2010 38

Page 39: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

ConclusionsConclusions

Investors today are given more information than ever before

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Page 40: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

ConclusionsConclusions

Investors today are given more information than ever before

It takes knowledge, experience and effort to make the most of it

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Page 41: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

ConclusionsConclusions

Agricola put his finger on it-

“Those who take an interest in … mining … should read studiously and consult expert mining people”

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Page 42: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

LastlyLastlyFinex '10 October 2010 42

Ask yourself-does it look too good to be true?

Page 43: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

Always bear in mindAlways bear in mind

Mark Twain’s immortal words

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Page 44: Technical Reports Who needs them? FINEX ‘10 Exploration meets the City.

The definition of a mine is a hole in the ground that belongs to a liar!

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