When looking at a resource company investors should take note of what stage of development their projects are at. Each stage suggests a different level of risk, required funding and future action. There are 4 key stages of a mining project - exploration, development, production, and care and maintenance.

Exploration

Exploration is the first stage of the project lifecycle and is commonly referred to as a ‘greenfield’ project. This means that the project has has little previous work done and does not yet have an independently recognised resource (i.e. JORC).

On the ASX, over 25% of all listed entities are currently focused on resources with a majority operating in the exploration stage.

The exploration stage is often considered the riskiest point of the project lifecycle as the presence of minerals is not yet known or poorly defined. With this risk does come (potential) reward. There is a large potential for investment upside if a commercial discovery is made and announced at this stage.

During this stage, the exploring company may choose to apply a range of exploration techniques to better understand their project including but not limited to:

• Geological Surveys;

• Sampling; and

• Drilling.

Development

Once a company has conducted sufficient exploration and geological work, the company may choose to release a maiden resource. In Australia, the resource must be declared under the JORC code which sets minimum standards for Public Reporting of minerals Exploration Results, Mineral Resources and Ore Reserves.

Once this maiden resource is declared, the project is considered to have entered the development phase.

The key catalysts for development projects are externally commissioned studies into the project including:

• Scoping Study: an initial study used to define the potential metallurgical process of a project and the overview of unit operations required. Data used is preliminary in nature. Capital and operating expenditures are typically bound to a +/- 40% accuracy range.

• Pre Feasibility Study: A more detailed and informative study that contains information such as ore composition, detailed testwork and advanced process designs. Capital and operating expenditures are bound to +/- 30% accuracy range.

• Feasibility Study: Definitive or Bankable Feasibility Studies are advanced stage works and based on finalised process designs for the project. Most input elements are defined with up to 30% of the engineering definition completed. Capital and operating expenditures are bound to +/- 15% accuracy range.

Feasibility studies are typically a precursor for external funding, partnering and binding off-take agreements as it provides parties with a detailed report of the project, development strategy, flowsheet, chemistries and the risk involved. This is a key milestone in the project development lifecycle.

Alongside these studies, companies may also choose to advance regulatory approvals (permitting, licensing etc), FEED work, acquisition of long-lead time items, and other pre-FID items.

Once all works and pre-requisites are in place, the company will then make a Final Investment Decision (FID). The final investment decision is the point where a company approves the project’s future development. If approved, the company will commence engineering, procurement and construction works, which may be followed by installation or commissioning depending on the execution strategy. 

Production

Production is when a mine has completed all construction and has commenced commercial production.

Care and Maintenance

Care and Maintenance is when a mine ceases production but is managed to ensure safe and stable condition to enable restart at a future date. A C&M plan is required before a company can place a mine into C&M.

Company’s often place mines on care and maintenance due to unfavourable economic conditions, resource pricing or operational challenges. During this period, the owner must continue to meet ongoing environmental obligations.