COSTING
> By Brad Terhune
COSTING THE MINE OF THE FUTURE Costmine describes how to include ESG considerations in cost estimates
T
here are many reasons for which we might estimate costs in the mining industry. Several of them, representing very specific needs spanning the full life cycle of a project, starting at the early stages of a project and progressing to later stages of development and production are outlined in the graphic below.
Points of consideration
There are several points of consideration that may help us better understand this relatively new ESG lens and its effects on both mine costs and the estimating process itself. This article will briefly discuss several of them, but the list is not exhaustive by any means.
COSTING NEEDS ACROSS A PROJECT’S LIFECYCLE, FROM EARLY TO LATER STAGES Exploration Decisions
Development Decisions
Pit Optimization Studies
Contract Negotiations
Acquisitions
Research and development
Research and development (R&D) for new, ESG-friendly technologies and proTaxation / cesses costs money, and as such, suppliFinancing Appraisals Legal Royalties ers will inevitably need to pass this cost to consumers. Cost estimators should Mining Claim Resource Equipment consider this when conducting their Validity Analysis / Mineral Leasing Selection – Life Mine Closure trade-off studies for alternative ESG“Discovery” Cut-off Grade Cycle Costing friendly equipment and processes. The The reader may note that there are common threads con- good news on this front is that costs should come down over necting each of these. Cost estimates provide companies with time as ESG assumes a mainstream role. a means for making decisions. They can also provide an indication of whether a project will be profitable. Permitting Of course, success is no longer just about profitability; it is We are going to see extended permitting times for various reaalso about environmental protection and social buy-in. And as sons, including additional environmental studies, continued such, the traditional lenses through which we view projects and public pushback to mining, and government bottlenecks to companies – jurisdiction, permitting, reclamation, commodity, name just a few. What does this mean for the estimator? The geology, investor sentiment, capital and operating costs, etc. – reliability of cost predictions wanes the further into the future are not enough to gauge success. We must add environment, we make our estimates, so we will be required to deal with the social, and governance (ESG) factors to the list, because ESG is additional uncertainties (risks) associated with project timdriving the mine of the future. ing and cost predictions. One way to mitigate some of this risk ESG concepts have been around for a while now, but our would be to improve upon and add to our industry’s public and industry moves slowly and we’re having to play catch up when government outreach/education programs. This could potenwe should have been leaders from the start. Surely, there are tially stabilize or shorten the permitting period. many reasons for this, but the author suggests a leading cause is related to ESG costs, associated with both compliance and Appropriateness/practicality/reliability non-compliance. ESG initiatives are certainly driving positive and much-needed NI 43-101, JORC, CRIRSCO Guideline Compliance
28 | CANADIAN MINING JOURNAL
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