How to build a mine

by Fred Sveinson, PEng

Goldcorp’s Cerro Negro Mine in southern Argentine. Miners inside the Eureka vein Photo courtesy Goldcorp Inc.

The old adage “Mines are made not found” is a good start to “How to Build a Mine”. There are thousands of mineral discoveries with very few that reach the positive feasibility stage and fewer yet where a profitable mine is actually built. There are three key components to building a mine, starting with a competent, experienced management team. The second component is the financing required to build the mine. The third component is the deposit, which needs to be technically sound and economically feasible. This article assumes that a positive feasibility study (FS) has been completed.

In a normal mining market, financing will be available to proven management teams. An experienced management team can make the most out of a marginal deposit, while an inexperienced team can botch up the best deposit. This is not to say that good teams have not failed, as a number of very successful mine builders have started with, or had at least one failure, in their careers.

An FS produces a Life-of-Mine plan with development and production schedules based on the mining method and operating rate determined. The operating rate is based on what is practically and technically achievable for the deposit. Operating costs and capital costs are developed to within +/- 20% or better. A Life-of-Mine cash flow model is developed to include all revenue, operating costs and capital costs with the cash flow generating Net Present Values for the mine at several discount rates. An after-tax Internal Rate of Return of about 20% to 30% would be considered positive, combined with a quick payback of capital of two to three years and a mine life of five to ten years with a longer mine life preferred.

Also, to allow some leeway for slower ramp up to full production, swings in metal prices and mistakes, it is very important to have sufficient cash flow, say double, to payback the initial capital. The strategy should be to develop the mine as quickly as possible with the least amount of capital and mining /processing the high-est grades first.

Armed with a positive FS, senior management and the board of directors of the company that owns the project must decide whether they want to sell the project or their company, find a joint venture partner, or to build the mine themselves. Management’s first responsibility is to do what is best for the majority of the share-holders. Thus, if the price is right, a sale of the company may be the best route. A sale of the project and not the company is more complicated, as cash or shares remain in the company.

The second option would be to find a joint venture partner with the financing and or experienced team to build the mine, which is not as desirable, as the original owner will have to give up a significant amount of ownership to attract the new partner.

The third option is for the company to build the mine itself, whereby it will need to raise funds (financing) through equity (shares), debt such as loans, convertible debentures, royalty streams, smelter off-take agreements or some combination.

Assuming that the financing is in place, the project owner needs to hire a person to manage the project through to commissioning of the mine and potentially become the General Manager (GM) of the ongoing operation. This person should have experience in managing these types of projects and preferably have operations experience to mine manager level. The GM will hire several persons, the “Owner’s Team” to assist in managing the actual building of the mine and related aspects such as environmental, permitting, human resources and First Nations communications. Alternatively, the GM could engage a management company to act as the “Owner’s Representative” with a team in place that will manage most of the aspects required to build the mine. The key components for actually building the mine are engineering, procurement and construction management (EPCM). There are large firms that carry out all of this work and smaller individual consulting firms that can do the work in conjunction with associates. The Owner’s Team or Representative selects, engages and manages all of the consultants and contractors required to build the mine and will need to be in place through the EPCM phase, including commissioning of the process plant.

Once the mine Owner’s Team or Representative is in place and has engaged the consultants and contractors to carry out all aspects of building the mine, work will begin to build the mine based on the design, plan and schedule developed in the FS. The construction of roads, rail, air-strips or ports to access the mine plus the services such as water, sewage and power will begin, with much of this work similar to the work required for establishing other types of industries except that this construction could be in remote areas with added logistical challenges.

Construction of ancillary buildings such as the office, maintenance shop, warehouse, employee camp, and kitchen/ cafeteria is also similar to other industries. The key difference in construction is the mine itself, the crushing and processing plant, the tailings storage facility, permanent waste storage areas, in particular, if the waste is considered to be acid generating. For remote mine sites, it may be necessary to charter helicopters and/or private planes of various sizes to bring in equipment and personnel.

The FS will include base line studies of all environmental aspects to determine what the current environment is for the habitat of all living things and the long-term impact of building a mine. The quantity and quality of all ore and waste to be mined plus tailings will have been determined with regard to the potential to generate acid and other deleterious metals plus how to treat these issues while operating and at closure. The quantity and quality of water used during operation, the requirement for long-term treatment will have been determined. The work carried out for the FS is the basis for submitting plans for all permits required to obtain a licence to start mining. In Canada, there are two levels of permitting, provincial and federal. For smaller mines that do not have a significant impact on fisheries and waterways or international boundaries, only provincial permitting is required. For larger mines, both provincial and federal permitting is required.

What is called social licence to operate is now high on the list of risks in building a mine. Without approval from all stake-holders that will be impacted by the mine, governments will not provide approval to build the mine. Permitting includes a full closure plan for the end of the mine. In Canada, consultation is required with First Nations prior to granting a licence to develop a mine. This has complicated the permitting process, adding time, costs and risk to the process.

Development of the mine itself will be quite different for an open pit than an underground mine and will require different experience and equipment. Porphyry deposits are often large and many of the current deposits are near surface, thus are mined as open pits with large mining equipment; however, at depth some may have suitable characteristics to convert to large underground block caving mines. Vein type deposits are often narrow, can go to depth and are mined by underground methods with smaller equipment.

Operating costs are normally a function of the size of the equipment used for the mining method. Thus, open pits with large equipment have lower operating costs than underground mines. The grade of ore that can be mined is a function of the operating costs. Thus, the lower the operating costs, the lower the grade of ore that can be mined.

An open pit requires large equipment used to mine large quantities of ore and waste with overburden of soil stripped before the start of the pit. Sufficient over-burden is stripped and waste is mined, at a large capital cost, at the beginning, to provide the start to the open pit with the first benches of ore exposed and mined to sustain the process plant at capacity once the plant has started up. The mining method and equipment for an open pit mine is determined by the type of deposit, shape, size, and depth. The key pit design parameters are the slope of the walls, the bench heights and widths, the location of the road access for equipment and sizing of the equipment.

The underground mining method and operating rate chosen in the FS is mainly dependent on the thickness of the ore, the orientation (flat to vertical), the stability of the ore and the host rock, in particular the walls adjacent to the ore. Historic mining methods included a lot of timber support for unstable ground, whereas, modern ground support has changed to mechanized support such as rock bolts, screen and shotcrete. Wide veins and larger ore zones can now be completely mechanized for drilling, blasting, ground support and mucking. More precise long hole drilling and smaller mechanized equipment is now allowing many narrow veins to convert to safer sub level long hole mining instead of the more labour intensive conventional shrinkage and cut and fill mining methods.

Development of an underground mine is more complicated than an open pit and requires different experience and equipment plus different design depending on whether a shaft, adit or decline (sloping tunnel) is the main means of access. If the mine access is via an adit or decline, then this is easier to get started, requires less equipment, expertise, less development to open up the first stopes for mining and less capital.

Once the first stopes are developed, the decline can continue downwards, opening up new stopes after production commences. If a shaft needs to be sunk instead of a decline, then a headframe needs to be constructed with a hoist installed. The shaft needs to be sunk and equipped for a man cage and skip for ore and waste. As it is difficult to sink the shaft while the mine is operating and it is expensive to setup for deepening the shaft, the initial sinking will often be to a depth that allows mining for the first five to ten years, which is a large, initial capital outlay.

If a decline is required as well, then there is an additional expense, but with the benefit that mining of ore can start as soon as the first few months of ore have been developed from the decline. Subsequently, the shaft can continue sinking while the plant is already processing ore from the mine. In conjunction with the main accesses, other development will be required for ventilation and a secondary means of egress.

The crushing and processing facility is constructed based on the testing, flow sheet and design determined in the FS. Processing of the ore starts with understanding the mineralogy, then metallurgical testing for crushing, grinding and recovery of the metals and treatment/management of the tailings.

The metallurgy is extremely important and lack of sufficient testing up front has been the demise of a number of projects. Most deposits require one or two stages of crushing and sometimes a third stage, with at least one crusher in closed circuit, via screening to provide a feed to the grinding circuit of one quarter inch to half inch size. However, if semi-autogenous grinding (SAG) is used, the ore feed to the SAG from primary crushing may be six inch, thus eliminating the need for secondary crushing prior to the SAG Mill. Conventional grinding using a rod mill or ball mill will also be used, or some combination, to grind the ore to fine powder (micron size) using rods, balls, with the ore in the SAG mill to assist with the grinding, while the mills rotate.

Once the ore is ground to the prescribed size for optimum recovery of the economic minerals, then these metals are recovered by a number of processes. Gold and silver can be recovered by gravity for the free gold/silver followed by cyanidation of the lower grade ore to make doré bars on site from both products. Alternatively, after gravity, a flotation step can be used to produce a lower grade concentrate to be shipped to smelters worldwide for final processing. Base metal and polymetallic ores usually use differential flotation to produce one or more concentrates to be sent to smelters worldwide.

Heap leaching has been used for some time for lower grade, precious metal and copper deposits, whereby the ore only has to be crushed to a size that liberates most of the economic metals and does not have to be ground, a quarter inch to a few inches in size is sufficient to achieve metal recoveries in the order of 60% to 80%. Heap leaching eliminates the need for a grinding circuit, flotation and/or large cyanide tanks, thus reducing the initial capital and operating costs. The crushed ore is trucked or conveyed to a leach pad where an impervious liner collects the leach solution from the heap, which has been sprayed with cyanide as each layer of ore is placed.

Carbon-in-Pulp, Carbon-in-Leach, Merrill Crowe, Solution-Extraction-Electro-Winning are a few of the processes to recover precious metals from the cyanide solution. Gold and silver doré that is produced on site from conventional milling and heap leaching will be sent to refineries including the Canadian mint for final refining to 99.999% purity from a doré bar that contains between 80% and 99% gold or silver. Doré bars provide quick cash flow from production with low shipment and refining costs compared to concentrates of large volumes that may require shipment halfway around the world with payments for the metals staggered over months.

Tailings from all of the processes must be deposited in a conventional tailings storage facility, near the plant, with a dam and often lined, or dried and stacked, or deposited underground after thickening, or after it has been made into a paste. If cyanide is used, then residual cyanide in the tailings stream must be destroyed prior to leaving the plant.

In summary, building a mine takes a long time from discovery to mining the deposit, usually 10 years or more with a huge amount of capital invested by many investors from the high-risk exploration stage through feasibility to building the mine. The skills and expertise of people from very diverse backgrounds are used in the conception and planning regarding the technical, environmental, social and economic impacts of the project on the local habitat, communities and the country.

Mr. Sveinson is a professional mining engineer with more than 40 years experience in exploration, development, construction, operation and financing of mining projects ranging in size from 100 to 2,000 tonnes per day in Canada, the United States, South America and Africa. Mr. Sveinson is President of International Mine Builders Inc., a consulting firm providing management and technical services to the mining industry.

Filed in: Business, Education, Industry, Resources

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