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Platt’s 21st Annual Coal
Properties & Investment Conference
The Coal Business from a
Global Capital Markets Perspective
-------- Tim Alch
V.P & Senior Minerals Business Analyst
Behre Dolbear & Company (USA), Inc.
New York, New York
+1.845.480.1434
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
From a Lender’s, Investor’s and Owner’s
View – Perspective is Important
• Who is driving business
• What else has changed
• What capital looks for
• Prepare for the best/worst
• Be realistic
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Who is Driving the Bus(iness)?
• This is a Decade of the Emerging Market Consumer
People want and May get what ‘we’ enjoy.
• Urbanization and rising middle class continues to
drive energy and coal consumption, esp. in China
• In the next 20 years, the US may be out spent by a
rising ‘middle class’ in China (330M) and elsewhere
• GDP growth in China, Asia, Latin America, etc. will
likely exceed growth in the OECD nations
• Struggling to keep pace will be commodity supply
chain logistics including coal, fueling price volatility
• Growth may exceed current expectations
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Asia is Where Most People Live and
Emerging Markets Grow Faster
Source: The Economist
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
More Consumers, More Money & Minerals Consumed
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China Now Consumes as Much
Coal as the Rest of World (Source: USA EiA)
• China’s coal use grew by 325 million tons in 2011, equal to 87% of the
374 mt global increase in coal use. Of the 2.9 billion tons of global coal
demand growth since 2000, China accounted for 2.3 bt (82%) (US EIA)
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China’s Share of Global Copper, Steel, Iron
Ore, Etc. Consumption Also Exploded
Source: UBS
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Behre Dolbear Recent Coal Related Engagements (Some Detail About Behre Dolbear’s Work is Shown at Back)
• Australia
• Botswana
• Brazil
• Canada
• China
• Colombia
• Germany
• India
• Indonesia
• Mexico
• Mongolia
• Mozambique
• New Zealand
• Nigeria
• Philippines
• Russia
• USA
• Vietnam
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China and Other Emerging
Markets are Expanding • China’s GDP is growing at ±8% pa and
adding power gen capacity equal to UK’s
capacity in each of past/next 10± years
• China is largest consumer of minerals
• China shifts from export led to consumer
based economy as other emerging market
nations expand resource intense sectors
consuming resources, energy, coal, etc.
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China’s Recent Population Growth is Hard to Fathom
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China is Urbanizing & Powering On
• In each year for the next 15 years, China will move
20 million people into cities, consuming more resources
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China Produces Half Global Steel Source: http://designbuildsource.com.au
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
$ P
er T
on
ne N
ick
el
$ P
er T
on
ne
(Co
pp
er, L
ead
, Z
inc,
Alu
min
um
)
Nominal Industrial Metal Average Prices
1970 - 2012
Aluminum Copper Lead Zinc Nickel
The BIC’s Growth in the Past 10 Years
Broke a Long Period of Flat Pricing
Data Source: USGS and LME
Capital
Destruction
Capital
Creation
Capital
Destruction ?
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Coal is Different
• 96% of coal is used by PowerGen & Steel
• Two KPIs of modern economic growth
• Not as fungible as precious & base metals
• Demand patterns are more predictable
• Markets and end users are more
specifically defined
• Transport can be (a near) dominant factor
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China’s Power is Fueled by Coal
• China had an estimated total installed electricity generating capacity of 1,073 GW in 2011. The largest
in the world and increased by 9+% from 2010 and doubled from 519 GW in 2005
• Installed capacity may double again by 2030 to meet rising demand, particularly from main
urban areas in the East and South of the country (FACTS Global Energy) with gas-fired capacity too
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Robust, Tempered Coal Outlook
• Continuing modernization in Developing World is driving energy, metals at greater rates
• Estimates vary e.g. 300 GW of new coal fired plants may come online requiring about 900 mt of new supply – equal to US output now
• Declining ore grade, fewer large deposits, high capital costs, Best Practices, larger Gov ‘takes’, changing political winds etc. curtail investments and reduced capex throughout mining sector
• Thus, production may struggle to meet future demands and lead to sporadic price spikes
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Coal is Forecast to Fuel a Large Share of
Future Total Global Electricity Generation EIA AEO2013 Reference
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Future Growth of Global Electricity Production Will
Be in the Non OECD and Be Coal Fueled
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
A Rising Standard of Living is
Often Measured by Electricity & Steel BBC News 20 February 2013 Last updated at 05:53 ET
Bulgaria government to resign, PM Boiko Borisov says
• The government's resignation follows nationwide
protests against high electricity prices • Bulgaria's government has announced it is resigning after nationwide
protests against high electricity prices and austerity measures, Prime
Minister Boiko Borisov has said. The PM said he had decided to go after
protesters against rising electricity prices clashed with police in Sofia……
________________________________________________________
• There are weekly rolling ‘Black Outs’ in 1/3 of India
• Brief widespread outages after recent storms in USA
• In today’s world, People without Power is Not Good
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
In the Top Ten Commodities by Global
Projects in 2011: Gold 1; Coal 7 • Investors, lenders and speculators have been attracted to the
precious metals markets: Is the world investing enough in coal?
Source: Intierra
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Closer to Home: What Has Changed
• USA crude oil production increased by 790,000
bbl/d from 2011 to 2012, the largest increase in
annual output since the beginning of U.S.
commercial crude oil production in 1859
• U.S. EIA expects U.S. crude oil production to
continue rising over the next two years
• Fuel Switching to Nat Gas by Generators drove
coal share to ~36% in Sept/Oct 2012
• Greater efficiency and slow GDP growth have
impacted U.S. power consumption
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Share of Total US Generation by Coal was Hit by
Natural Gas (Source: US EIA Short-Term Energy Outlook Feb 2013)
18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.7% 30.3% 28.2% 27.6%
49.6% 49.0% 48.5% 48.2% 44.4% 44.8% 42.3% 37.4% 39.1% 39.1%
Forecast
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U.S. Electricity Generation by Fuel, All Sectors thousand megawatthours per day
Coal
Natural gas
Petroleum
Nuclear
Hydropower
Renewables
Other sources
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Coal Prices in USA Basins are Down in 2012 and Off from 2008 Highs (US EIA Feb 2013)
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Be Realistic about Near Term Coal Use – Impact of
Nat Gas Can Not Be Underestimated U.S Coal Consumption Forecast by U.S. EIA – Feb 2013
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Higher Rail Costs Challenge USA Coal
Operators = Another Not So Favorable Trend
• From 2001 to 2010 average cost of railing coal to power plants rose by almost 50% in USA
• Railroad transport accounts for more than 70% of U.S. coal destined to generators
• So rail rates impact cost of coal delivered to power plants – often borne by producers
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
What Capital is Looking for –
More Hard Work Will/Can/May Help
• Offset higher capital, operating costs
• Other than higher prices – What can offset
higher costs?
• Hard Work, Implementing Best Practices,
Process Improvements, New Markets, etc.
• Dig in and focus on doing best possible
• There is no panecea – especially with low
Natural Gas prices
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Coal Production Costs are Rising
• Transport logistics are big factor
• Quality, grade and usage are related
• Rising costs reflect mining method: Surface coal in the Powder River Basin cost
is (±US$6.00+ per ton)
Underground coal in Alabama cost is (±US$45.00+ per ton)
• Competition is fierce
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
US Coal Exports Are Trending Higher (US$ Billions)
• Exports to Asia have grown, though not without challenges
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Can New Export Terminals on West Coast help Boost
U.S. Coal Exports to 200 mtpa = Black Gold
Source: U.S. EIA, Short-Term Energy Outlook, U.S. Census data. Note: Data for 2012 are through August. Export share by
coal type assumes a continuation of current volumes. October STEO forecast used in chart. The steam coal 95% growth
estimate assumes the STEO forecast with current year-to-date steam/met export ratio.
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Export Markets = USA’s Coal Hope
• China’s efforts to consolidate and improve its coal
industry is a massive undertaking
• China will continue to rely upon coal imports to fuel its
power generating sector for many years to come
• Likewise, as India modernizes and expands its coal-
fueled generating capacity – it too requires significant
imported coal for blending and primary fuel
• India’s metals, steel industry is forecast to be another
large consumer of metallurgical coal
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Coal Trade Has Its Challenges
• There continues to be a shortage of skilled laborers
and experienced professionals
• The U.S. needs to resolve export logistics to compete
and aggressively expand into seaborne markets
• Others face logistical, transport, etc. hurdles
• Environmental, permiting and social concerns defer
investment and development of new capacity
• Increased government take and NGOs slow expansion
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
Global Growth and Fear –
Suggest Coal Acquisitions
• Global paradigm shifts as Middle Class and Urbanization drives resource demand
• Minerals markets subject to price spikes may provide sufficient investment returns to attract capital from some investors
• Stability and security of fuel supply is key
• Valuations of USA coal on a long term basis – may now be attractive
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Some See the Value in Coal –
M&A Targeted Coal in 2012 (US$B) (Source E&Y)
21.4
17.9
14.2 13.4
7.3
5.3 4.0 3.9 3.6
2.3
10.6
0
5
10
15
20
25
$ B
illio
ns
2012 M&A Activity by Target Commodity
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China’s Outbound Acquisitions Have
Grown (US$ Billions and Volume)
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
China’s Coal Deals Rank #2 After Gold
Source: Ernst and Young
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
M&A Drivers in Coal
• Coal share valuations over corrected in 2H12
• Low profits force sale of low margin, downstream assets
• Significant cross-border investment and M&A likely
• Majors and Strategic investors with strong balance
sheets may opportunistically acquire key assets
• Increased price volatility and resource nationalism,
including higher government taxes and royalties may
contribute to stability of supply and quality concerns
• Risk management is very important to acquirers
• There are less undeveloped attractive assets in
developed countries
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Consolidation Likely to Continue
• Valuations are less expensive than greenfield
investment
• Consolidation to form Super and Larger Majors is likely
• Strategic M&A may buoy coal assets and share prices
• SOEs, SWFs e.g. Japan, Korea, India may continue to
acquire strategic metals and coal resources, etc.
• Fewer companies control larger share of minerals –
giving some producers greater market leverage
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Where are Assets are On Value Curve - and Cost Curve Source: BMO
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Getting and Keeping Business
• Quality Control is essential & challenging
• Consistent quality product is key
• Bid realistic achievable coal specs
• Respond to customer problems
• Focus on What you are Best at: Remind
all stakeholders, What that is
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
Capital Ideas for 1H2013
• Equity markets in 2012 were turbulent and hit lows
• Banks, investors, and operators are risk adverse
• Alternative, strategic interests, private equity, SWFs,
SOEs are opportunistically stepping into resources
• This trend may / will likely continue in 2013
• Management, stakeholders, employees, partners, and
customers should be realistic about options
• Now is not the best time to over reach
• Thank you
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
Behre Dolbear’s Coal Services
• Specializes in executive level consultancy to financial institutions, independent investors, large and small coal producers, coal consumers, and government agencies.
• Our technical advisories address full spectrum of engineering and operating activities, including exploration, resource and reserve definition and review, mine design, project development, coal preparation, production and operations planning, sales, transportation, coal characterization, and coal utilization.
• Our business advisories address project justification and finance, capital budgets, operating costs, organizational structures, and planning for profit optimization.
• We also support legal and accounting firms and insurance companies with litigation and arbitration assistance, business interruption valuations, and expert opinion statements.
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
© 2011 Behre Dolbear Group Inc. All Rights Reserved
The Behre Dolbear Group
• Behre Dolbear has 12 offices in 8 countries and completed 210+ jobs in 55+ countries in each of the last 5 years using our global network of 125+ professionals in all major mining markets
• We perform studies and advise a wide range of entities in the mining, banking, investment, financial, legal and accounting sectors, and government agencies around the world
• Our experience spans technical, operating, and financial issues in the base, precious and ferrous metals, coal, uranium, fertilizer and industrial minerals, gemstones, and construction materials
THANK YOU Tim Alch
V.P. & Senior Minerals Business Analyst Behre Dolbear & Company (USA), Inc. 100 Park Avenue, New York City 10017
+1.845.480.1434 [email protected]
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
The Behre Dolbear Group
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Appendix
• Characteristics of Scoping, Pre Feasibility
and Full Scale Feasibility Studies
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A1
Potential Areas of Investigation
for Proposed Mining Projects
PROPERTY INFORMATION
Location, topography and climate
Land ownership and royalties
Property history
Current status
GEOLOGY AND RESOURCES
Geological description
Mineralogy
Drilling, sampling and assaying
Evaluation techniques
Mineral resource estimate
MINING
Ore reserve estimate
Mining method and plans
Mining equipment
Material handing
Material handling equipment
Historical and forecast production
Consumables
Mining capital estimates
Mining operating cost estimates
PROCESSING
Ore sampling and testwork
Processing method
Other required processes
Process equipment
Historical and forecast production
Consumables
Processing capital estimates
Processing operating cost estimates
INFRASTRUCTURE
Industrial infrastructure facilities
Social infrastructure facilities
Utilities, power, water
Infrastructure capital estimates
Infrastructure operating cost estimates
MANAGEMENT AND LABOR
Management organization requirements
Labor requirements
PRODUCTS, MARKETS AND SALES
Products
Markets
Prices
Sales
ENVIRONMENTAL AND PERMITTING
Permit list
Environmental impact
Compliance costs
Compliance cost timing
Reclamation expenses
FINANCIAL ISSUES
Taxes
Royalties
Fees
Licenses
DEVELOPMENT COSTS AND SCHEDULE
Development cost estimate
Development schedule
Development methodology
POLITICAL & SOCIAL CONSIDERATIONS
Economic benefits and costs
Government considerations
Other issues
PROJECT ECONOMICS
Economic parameters
Discount rate determination
Cash flows
Investor returns
Debt analysis
Sensitivities
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A2 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY
INTRODUCTION
Location, Topography, and Climate
Site location map
Ownership and Royalties
Claims list
Claims map
Current Status and History
Historical chronology
Information on past production, if any
•Yes
•No
No
No
No
•Yes
•No
Yes
No
No
•Yes
•Yes
Yes
Yes
Yes
GEOLOGY AND RESOURCES
Geological Description
Geological map
Geological cross-sections
Drilling, Sampling, and Assaying
Parameters
Drill hole location map
Sampling/assaying flow diagram and assessment
Assay check assessment and graph
Mineral Resource Estimate
Resource methodology determination and approach
Geologic model limits
Lithology/tonnage factors/code
Cumulative frequency of samples verses grade
Variograms
Resource Estimate
Yes
No
Yes
Yes
No
No
Yes
Yes
No
No
No
Industry Standards (NI 43-
101, JORC, etc.)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Industry Standards (NI 43-
101, JORC, etc.)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Industry Standards (NI 43-
101, JORC, etc.)
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A3 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY
STUDY FEASIBILITY STUDY
MINING
Ore Reserve Estimate
Reserve and resource calculation parameters
Cutoff grade equations
Reserve and resource estimate
Mining Method and Plans
Mining parameters
Hydrology/geotechnical parameters
Mining equipment list
Consumables list
Material handling systems
Material handling equipment
Personnel list
Surface mining
Final pit and dump outlines
Incremental pit and dump outlines
Underground mining
General mine development
Mining approach (stoping, cut and fill, etc.)
Production Schedule
Historical production, if any
Annual ore and waste tonnage and grade
Mining Capital and Operating Cost Estimates
Mining operating cost estimates
Mining capital cost estimates
Assumed Values
No
Industry Standards
Yes, minimal engineering basis
No
No
No
No
No
No
No
Yes, simple outline
No
Yes, general outline
Yes, general approach
Yes
Yes, division of total
Yes, factored ±45%
Yes, factored ±45%
Test-Based Values
Yes
Industry Standards
Yes, some geotechnical data
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±30%
Yes, from engineering
manuals ±30%
Test-Based Values
Yes
Industry Standards
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes and
take-offs ±15%
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A4 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY
PROCESSING
Ore Sampling and Test Work
Test work data
Processing Methods and Plans
Processing methods
Processing parameters
Equipment list
Consumables list
Personnel list
Material balance
Flow diagram
Site plan
General arrangement drawings
Production Schedule
Historical production, if any
Annual production tonnage and grade
Off-site Processing Cost Estimates
Concentration charges
Smelting and refining charges
Other charges
Material handling and transport
Insurance and sales charges
Processing Capital and Operating Cost Estimates
Processing operating cost estimates
Processing capital cost estimates
No, assumed values
Yes, general approach
Yes, minimal engineering
No
No
No
No
No
Yes, simple block diagram
No
No
Yes
Yes, division of total
No
No
No
No
Yes, factored ±45%
Yes, factored ±45%
No, preliminary data
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes, preliminary estimate
Yes, preliminary estimate
Yes, preliminary estimate
Yes, preliminary estimate
No
Yes, ±30%
Yes, from engineering
manuals ±30%
No, preliminary data
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, quote
Yes, quote
Yes, quote
Yes, quote
Yes, quote
Yes, ±15%
Yes, from vendor quotes and
take-offs ±15%
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A5 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY
INFRASTRUCTURE
Industrial Infrastructure Facilities
Facilities list
Power and water parameters
Full site plan
Social Infrastructure Facilities
Facilities list
Housing
Schools
Hospitals
Other
Infrastructure Capital and Operating Cost Estimates
Consumables list
Personnel list
Infrastructure operating cost estimates
Infrastructure capital cost estimates
Yes, with minimum detail
Yes, preliminary
No
Yes, with minimum detail
No
No
No
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes
Yes
Yes, ±30%
Yes, from engineering
manuals ±30%
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes &
take-offs ±15%
MANAGEMENT, LABOR & ADMINISTRATION
Personnel
Personnel lists
Training requirements
Personnel Capital & Operating Cost Estimates
Consumables list
Personnel operating cost estimates
Personnel capital cost
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
No
Yes, ±30%
Yes, ±30%
Yes
Yes
•Yes
Yes, ±15%
Yes, ±15%
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A6 (continued)
CATEGORY
CONCEPTUAL
STUDY/SCOPING STUDY
PRE-FEASIBILITY STUDY FEASIBILITY STUDY
MARKETS, PRODUCTS AND SALES
Markets, Products and Sales
Products
Volume
Prices
Sales organization
Sales Related Capital and Operating Cost Estimates
Personnel list
Consumables list
Sales related operating cost estimates
Sales related capital cost estimates
Yes, preliminary
Yes, preliminary
Yes, preliminary
No
No
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes, preliminary
Yes
No
Yes, ±30%
Yes, ±30%
Yes
Yes
Yes
Yes, preliminary
Yes
No
Yes, ±15%
•Yes, ±15%
ENVIRONMENTAL AND PERMITTING
Environmental
Permit list
Environmental Impacts
Environmental Compliance Cost Estimates
Personnel list
Environmental related operating cost estimates
Environmental related capital cost estimates
No
Yes, preliminary
No
Yes, factored ±45%
Yes, factored ±45%
Yes
Yes
Yes
Yes, ±30%
Yes, ±30%
Yes
Yes
Yes
Yes, ±15%
Yes, ±15%
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A7 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY
DEVELOPMENT SCHEDULE AND COSTS
Development Schedule
Development methodology
Development schedule
Development Costs
Personnel list
Development related operating cost estimates
Development related capital cost estimates
•Yes, preliminary
Yes, preliminary
No
No
No
•Yes
Yes
Yes
Yes, ±30%
Yes, ±30%
•Yes
Yes
Yes
Yes, ±15%
Yes, from vendor quotes &
take-offs ±15%
PROJECT ECONOMICS
Financial Issues
Taxes
Royalties
Fees
Licenses
Economic Issues
Economic parameters
Discount rate determination
Cash flows
Investor returns
Debt analysis
1.Sensitivities
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
Yes, preliminary
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes, preliminary
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
Characteristics of Scoping, Pre-Feasibility, and
Full-Scale Feasibility Studies – A8 (continued)
CATEGORY CONCEPTUAL
STUDY/SCOPING STUDY PRE-FEASIBILITY STUDY FEASIBILITY STUDY
SUMMARY AND RECOMMENDATIONS
Operational Parameters
Title and ownership
Geology
Ore reserves
Mining and processing rates
Development period and mine life
Metal/mineral recoveries
Sales
Operating cost estimates
Capital cost estimates
Financial Parameters
Cash Flows
NPV, IRR, and ROI
Mostly assumed and factored
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Some engineering basis
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Some engineering basis
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes