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FINEX ‘10 Exploration meets the City. Technical Reports. Who needs them?. An early miner. UGH !. The first technical report?. Las Medullas, Leon, Spain. Roman gold mine. Hydraulic mining. Las Medullas, Leon, Spain. Major alluvial gold mine Over 1km across 500 million m 3 extracted

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Technical reports

FINEX ‘10 Exploration meets the City

Technical Reports

Who needs them?


An early miner

An early miner

Finex '10 October 2010


The first technical report

UGH !

The first technical report?

Finex '10 October 2010


Roman gold mine

  • Las Medullas, Leon, Spain

Roman gold mine

Finex '10 October 2010


Hydraulic mining

Hydraulic mining

Finex '10 October 2010


Roman gold mine1

  • Las Medullas, Leon, Spain

  • Major alluvial gold mine

  • Over 1km across

  • 500 million m3 extracted

  • Grade 3 g/t

  • 60,000 workers (slaves)

  • 200,000 oz p.a.

Roman gold mine

Finex '10 October 2010


Mediaeval mining agricola 1555

Mediaeval mining-Agricola 1555

Finex '10 October 2010


The industrial revolution

The Industrial Revolution

Finex '10 October 2010


Britain 17 th and 18 th century

  • Britain leads the world in mineral production

    • Iron ore

    • Coal

    • Copper

    • Tin

Britain 17th and 18th century

Finex '10 October 2010


The 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

The Stock Exchange, London

Finex '10 October 2010


London global mining finance

London-global mining finance

Finex '10 October 2010


London global mining finance1

  • London capital backed:

    • Californian gold rush 1849

London-global mining finance

Finex '10 October 2010


London global mining finance2

  • London capital backed:

    • Klondike gold rush 1897

London-global mining finance

Finex '10 October 2010


London global mining finance3

  • 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

London-global mining finance

Finex '10 October 2010


Gold 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

Gold Fields of South Africa Ltd

Finex '10 October 2010


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”

Where was the CPR?

Finex '10 October 2010


London global mining finance4

  • 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

London-global mining finance

Finex '10 October 2010


Chapter 19

  • Special LSE Rules for mining companies

  • Exempt from 3 year trading record

  • Listing particulars must contain a Competent Person’s Report

  • Required to demonstrate proven reserves for at least 2 years operation

  • Aggregate value of proven and probable reserves must exceed 50% of the expected market capitalisation

Chapter 19

Finex '10 October 2010


Reign of the mining finance house

  • Consolidated Gold Fields

  • Anglo American

  • Union Corporation

  • General Mining

  • Selection Trust

Reign of the Mining Finance House

Finex '10 October 2010


Canada and australia

  • Local mining industries

  • Need for local capital

  • Listing of exploration companies allowed

  • Boom and bust in various commodities

  • Attracted unwary international investors

  • Little regulation of trading or reporting

  • Poseidon nickel boom

  • Led to tighter regulation in Australia

Canada and Australia

Finex '10 October 2010


London s response

  • Still unable to list exploration companies

  • Major changes in 1995

  • OFEX market set up

  • LSE established AIM

  • European market of choice for resources

  • Unique regulatory model

  • Relatively light & flexible

  • Regulated by Nominated Advisers

London’s response

Finex '10 October 2010


Requirements for mining listing on aim

  • Suitability for listing

  • No minimum free float

  • Working capital

  • Independent Competent Persons Report

  • Ongoing reporting obligations

Requirements for mining listing on AIM

Finex '10 October 2010


Technical reports vital

  • Competent Persons Report

  • Exploration updates

  • Resource estimates

Technical reports vital

Finex '10 October 2010


Standards vary

  • Convergence in Australia, Canada, South Africa

  • US regulators much more restrictive

  • Russia-an acquired taste

  • China-not yet

Standards vary

Finex '10 October 2010


The russian system

The Russian system

Finex '10 October 2010


Russian reserves

  • VMS deposit

  • C1 +C2 “reserves”

  • 24.0Mt

  • 5.87% 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)

Russian reserves

Finex '10 October 2010


Western reserves

  • 9.7Mt

  • 8.94% 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)

Western reserves

Finex '10 October 2010


Chinese system

Chinese system

Finex '10 October 2010


Australian resources

  • Volcanic hosted sulphide deposit

  • Measured, 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)

Australian resources

Finex '10 October 2010


Recalculation to chinese standard

  • Total mineral resources 25.253Mt

  • 3.08% 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)

Recalculation to Chinese standard

Finex '10 October 2010


An australian lesson

  • An alluvial tin project

  • Periods of historic production

  • Massive historic database of drilling

  • CPR by reputable consultant

  • Measured and indicated resources

  • Upgrade to reserve status

  • Plant construction

  • Outcome?

An Australian lesson

Finex '10 October 2010


Impact of bre x

Impact of Bre-X

Finex '10 October 2010


What 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

What to look out for

Finex '10 October 2010


What to look out for1

  • Beware of silence after a run of news

What to look out for

Finex '10 October 2010


What to look out for2

  • Independent oversight

    • Ensure the consultant really is competent

What to look out for

Finex '10 October 2010


What to look out for3

  • Are the samples selective?

  • Is the cut off grade stated?

  • Are they true widths?

What to look out for

Finex '10 October 2010


What to look out for4

  • 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

What to look out for

Finex '10 October 2010


Conclusions

Conclusions

Finex '10 October 2010


Conclusions1

  • Investors today are given more information than ever before

Conclusions

Finex '10 October 2010


Conclusions2

  • Investors today are given more information than ever before

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

Conclusions

Finex '10 October 2010


Conclusions3

  • Agricola put his finger on it-

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

Conclusions

Finex '10 October 2010


Lastly

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

Lastly

Finex '10 October 2010


Always bear in mind

  • Mark Twain’s immortal words

Always bear in mind

Finex '10 October 2010


Technical reports

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

Finex '10 October 2010


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