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  • Raymond Philippe

Modifying Factors

A couple of years ago, a client of mine requested me to review the water management strategy of a major greenfield copper project that they were interested investing in. At the time, the Canadian Junior Mining Company had recently released a NI43-101 pre-feasibility technical report that stated “sufficient water rights were secured for the requirements of the mining operation”. The report did not indicate whether these water rights could be exercised or were restricted in any way. It should be noted that the water requirements were quite relevant considering the size of the project. At the same time, from a processing perspective, the calculated water requirements seemed very underestimated when benchmarked against similar projects.


The well-known consultant that prepared the technical report did not include a financial analysis based on possible Modifying Factors. According to the CIM definition standards, Modifying Factors are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. In other words, the Junior Mining Company, the consultant and its qualified persons, did not estimate that water supply would be any restriction to the project.


Directly after the release of the technical report, in 3 weeks time the junior mining company saw a 60% increase of its stock value. One year later, all gains were gone, stock price to levels below pre-NI43-101 report, and the company had lost time, energy and money in an inaccurate and incomplete project definition.


Fast forward to today, an updated NI43-101 technical report has been released, including the incorporation of several water management and supply modifications (at much higher Capex and Opex). Even a caution: Mineral reserve estimate could be materially affected by future changes in the Modifying Factors.


The market perception? No company value change. My client? Decided at the time not to invest in this project. The picture: Surface of Mount Sharp, planet Mars, potentially abundant Mineral Resources, just apply for water rights to convert to Mineral Reserves.


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