The mining lifecycle: from exploration to production
Mining is not a short-term game.
From early high-risk exploration to community liaison and securing project financing, there are many steps involved in getting a mine into production. Companies expend a lot of time and money proving up a resource before moving into the development phase, and, even then, only a handful are successful in finding a commercially viable deposit to mine.
No matter the size of the company or the type of commodity, there are several fundamental steps that take place before mining begins. Small Caps breaks down the key stages involved in the lifecycle of a mine:
Exploration
Before mining of an orebody can take place, companies need to find lucrative resources to mine. This stage of the mine lifecycle is commonly referred to as exploration.
As a necessary precursor, it involves mining firms targeting prospective areas of ground for minerals, and this can take anywhere from a few years to decades.
During the often capital-intensive exploration phase, companies will undertake a range of activities aimed at finding a sizeable quantity of the desired mineral. The various stages of exploration help build and confirm predictions of where mineral deposits might be.
While brownfields exploration, otherwise known as near-mine exploration, is undertaken in proximity to a known mine with the goal of extending its operating life, greenfields exploration is considered higher-risk in nature because it commonly involves work in underexplored or completely frontier regions.
Greenfields exploration has the overarching purpose of establishing a new mine and can be broken down into the following two categories:
Prospecting
The first stage of greenfields exploration is prospecting and is the very beginning phase of the mineral search.
This phase brings with it many levels of uncertainty, as few prospects lead to profitable mines.
A variety of advanced techniques are used in prospecting to identify the location of mineral deposits.
These can include geological mapping and geophysical surveys, which help to measure the magnetic, gravitational, and electromagnetic fields.
Moreover, as mineral deposits can be situated at or below the earth’s surface, prospecting often involves both direct and indirect techniques.
The direct method is usually limited to surface deposit targets and involves physical geologic studies such as geologic maps, aerial photography, and structural assessment.
Mapping and microscopic studies are completed to locate pockets of surface mineralisation. During indirect prospecting, geophysics is undertaken.
The methods can encompass seismic, gravitational, magnetic, electrical, and electromagnetic work.
Additional ways to analyse the topography include geochemistry, which involves quantitative analysis of soil and rock samples.
Drilling
This next phase of exploration is aimed at evaluating the possible size and value of the deposit and will occur only if prospecting has been successful.
The drilling stage involves techniques such as aerial or seismic surveys, surface sampling, drilling core samples, trenching, and bulk sampling.
Drilling and test programs usually start with sample drilling, assaying, and testing. Developmental drilling will then take place and can encompass diamond, aircore, and auger drilling.
The highest outcome of drilling will see mining companies move towards defining a JORC-compliant resource and reserve for the mineral deposit. This phase is undertaken by geological modelling experts.
A resource can be proved up and defined to the highest level, known as the ‘indicated’ and ‘measured’ categories. If tonnage and grade of the mineral deposit are deemed satisfactory, mining companies will move to the next stage of the mine lifecycle to further assess the opportunity.
Mine-site planning and development
The next phase of the mine lifecycle is very multi-faceted.
Environmental and social impact studies are often undertaken in parallel with feasibility studies, which help a company make an informed decision on whether to proceed with development of the prospective mine.
This phase of project development can take up to a decade to complete and involves due diligence across a range of areas to ensure the mine stacks up economically and environmentally.
The items below, while not necessarily undertaken in a set order, encompass the various elements associated with mine planning and development:
Environmental and social assessments
This is an extremely vital component when it comes to assessing the viability of a mining operation.
Because a mine can be developed near landholders, communities, and businesses, companies take a holistic view during these assessments that go beyond the parameters of the potential mine site.
This phase is known as the social licence to operate and requires companies to undertake ongoing stakeholder engagement to build trust with the community as well as inform and consult with potentially impacted landowners.
During this period, firms negotiate native title agreements. The phase may also involve the creation of community endowment funds and the flagging of other sustainable development initiatives that would be created should a mine proceed.
Alongside this, independent environmental studies, also known as environmental impact assessments (EIAs), are undertaken. Once an EIA is completed, it will be open for the public’s input and feedback.
Regulatory and government permit approval
Acquiring mining rights and permits is essential for any successful mine, and only a small percentage of exploration permits are progressed to mining permits.
Respective ministers can grant or deny companies the right to mine, and no mine can proceed without the required environmental permits.
Mining and environmental permit processes are often lengthy and subject to a high level of scrutiny to ensure the project fits the eligibility criteria.
As such, companies need to prove they can mine responsibly and safely. During this process, the mining company must disclose its planned activities and associated environmental impacts, as well as outline how the impacts will be mitigated throughout the course of operations.
Feasibility assessments
In parallel with environmental studies, feasibility work is undertaken.
This can involve everything from risk assessments, capital cost estimation, and organisational modelling.
Further resource modelling is undertaken, as are project engineering and technical studies. This work is often bundled up into three key feasibility studies known in the industry as: scoping, pre-feasibility, and definitive feasibility.
The scoping study is the first cab off the rank and involves identifying potential options to confirm a likely business case.
A higher-level analysis will then proceed if the scoping study is sound, and this is known as a pre-feasibility study.
This study aims to further determine the technical feasibility and economic viability of the mineral deposit. However, the study is still preliminary and involves a range of business scenarios.
The project can then progress to the definitive/bankable feasibility phase, which is the highest level of assessment.
Often, firms only proceed to this phase if they are confident in the proposed project’s fundamentals.
The study is based on a range of test work and analysis, with the resulting figures then helping the company to determine if the mine is economically viable.
This study will estimate capital costs, internal rate of return, capital expenditure, payback period, and other key financial metrics.
Should the project stack up financially, the board will seek to approve development to move it into the construction phase.
Project financing
Before proceeding towards construction of the mine, the proponent must have enough capital to finance the development.
A mine is usually financed by a mix of debt and equity, with the amount required varying depending on the size of the project as well as infrastructure needs.
The ability to finance and underwrite a mine is determined by a range of macro and micro factors, such as the state of capital markets, the number and quality of offtake partners lined up, and the attractiveness of the commodity earmarked for mining.
Construction and commissioning
The execution phase is a burst of intense activity and involves a range of tasks such as stripping overburden and constructing roads and other necessary logistical infrastructure.
Major engineering, procurement, construction, and management contracts are signed in the lead-up to construction of the mine.
Once contracts and resources are in place, construction can commence. The two most common types of mine construction are surface and underground:
Surface
Surface mining involves extracting minerals near the surface of the earth.
The most common types of surface mining are open-pit mining and strip mining.
Surface mining is used for a range of commodities, including coal, iron ore, diamonds, gold, copper, and nickel.
Surface mining is usually less expensive than underground mining and carries fewer risks.
Underground
Underground mining involves the extraction of minerals at a greater depth than surface mining and can involve different techniques such as room-and-pillar and longwall mining.
The room-and-pillar method of underground mining is where the material is extracted on a horizontal plane. The method is the oldest underground mining technique but has been in steady decline due to the rise in more efficient technologies.
Meanwhile, longwall mining uses mechanical shearers to cut coal away while hydraulic supports hold up the roof of the mine. It is the most efficient underground mining technique, as more of the mineral resource can be extracted.
Considerations in underground mining, such as installing adequate ventilation and navigating the various technical challenges associated with mining at depth, make underground mining costlier than surface mining.
Underground mines can drive 500 metres into the earth, while the world’s deepest mines can reach more than 1 kilometre.
First ore
Once construction of the mine is complete, the company can then move into the commissioning phase.
This involves testing and verification of specific mine facilities to ensure the mine is fully functional.
Following successful commissioning, first ore ensues, and ramping up production to nameplate capacity gets underway.
Production
The production of a mine typically lasts between 10 to 30 years, depending on the size of the resource and brownfields exploration success.
During the production phase, massive haul trucks are often used to transport ore from the open pit or underground mine to the designated processing plant.
Processing is required to extract the ore from other ingredients often found in mines which hold little value.
Ore processing frequently involves activities such as heap leaching, SAG milling, crushing, and mill processing.
These undertakings ensure the economic extraction of the ore and, at the same time, involve leftover waste, known as tailings, being safely disposed of.
After the mineral is recovered and refined, it is then ready to be sold to customers.
Closure
Once all the resources and reserves are depleted from the mine and brownfields development has been exhausted, the mining company will need to shut down operations safely.
Also referred to as decommissioning, there are stringent and systematic processes that mining companies adhere to when it comes to the end of the mine’s lifecycle.
Rehabilitation
Common terminology used during the closure of mines is ‘land rehabilitation’, which involves responsibly restoring the site to satisfactory conditions.
Post-mining rehabilitation can take many forms, such as the removal of infrastructure, restoring the area’s water quality, and disposing of waste in a sustainable manner so that long-term soil erosion does not take place.
Striving for successful mine rehabilitation ensures mining companies leave a positive environmental impact for the community for decades to come.
Mine rehabilitation plans are often drawn up well ahead of the physical closure, with reclamation activities taking place throughout the production phase of the lifecycle.
Rehabilitation can encompass the restoration of native plants, cropping, and other conservation and revegetation work.
Mining companies usually have a strong vision for the use of the land post-mining, such as returning the land to traditional owners or preparing the site for other development projects that will lead to further employment and business opportunities.