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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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an early miner
An early miner

Finex \'10 October 2010

the first technical report

UGH !

The first technical report?

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

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 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

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

slide44

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

Finex \'10 October 2010

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