Feasibility Study Manual Guide for Study Content & Data Quality

Larry Smith David Lemon Dr. Ted Eggleston Bill Tilley Lynton Gormely Dr. Graham Davis James Sorensen © May 2006

This guideline was prepared for internal purposes by AMEC E&C Services, Inc. (AMEC). The information contained herein comprises a compilation of the best available information from AMEC internal documents, guidelines developed by AMEC during execution of client feasibility studies and publicly available information. Any use of, or reliance on, this document by any third party is at that party’s sole risk.

Feasibility Study Guidelines 2006

CONTENTS 1.0 INTRODUCTION AND CONTENT OF FEASIBILITY STUDIES.................................................. 1-1 1.1 Objectives of Workshop................................................................................................... 1-1 1.2 Introduction to Feasibility Studies.................................................................................... 1-1 1.3 Comparative Levels of Study and Study Accuracy ......................................................... 1-3 1.3.1 Scoping Study .................................................................................................... 1-3 1.3.2 Prefeasibility Study ............................................................................................. 1-4 1.3.3 Feasibility Study ................................................................................................. 1-6 1.4 Study Content.................................................................................................................. 1-9 1.4.1 Summary and Recommendations ...................................................................... 1-9 1.4.2 Country and Regional Settings......................................................................... 1-10 1.4.3 Legal ................................................................................................................. 1-11 1.4.4 Operational Ownership..................................................................................... 1-11 1.4.5 Government and Community Relations ........................................................... 1-11 1.4.6 Human Resouces and Training........................................................................ 1-12 1.4.7 Occupational Health & Safety .......................................................................... 1-13 1.4.8 Environment ..................................................................................................... 1-14 1.4.9 Geology and Mineral Deposits ......................................................................... 1-14 1.4.10 Mining ............................................................................................................... 1-16 1.4.11 Metallurgy ......................................................................................................... 1-17 1.4.12 Process Design ................................................................................................ 1-18 1.4.13 Infrastructure .................................................................................................... 1-19 1.4.14 Engineering Designs ........................................................................................ 1-20 1.4.15 Project Execution Plan ..................................................................................... 1-21 1.4.16 Operations Plan................................................................................................ 1-23 1.4.17 Capital Cost Estimates (CAPEX) ..................................................................... 1-24 1.4.18 Operating Cost Estimates (OPEX) ................................................................... 1-24 1.4.19 Markets ............................................................................................................. 1-26 1.4.20 Risk Assessments ............................................................................................ 1-27 1.4.21 Financial Evaluation ......................................................................................... 1-27 1.4.22 Work Plan ......................................................................................................... 1-28 PROJECT STUDY TEAM, EXECUTION AND MANAGEMENT.................................................. 2-1 2.1 Organization and Study Management............................................................................. 2-1 2.2 Work Location and Logistics ........................................................................................... 2-4 2.3 Study Execution............................................................................................................... 2-5 2.4 Study Execution Plan and Schedule ............................................................................... 2-6 2.5 Management.................................................................................................................... 2-7 ENVIRONMENTAL ASPECTS..................................................................................................... 3-1 3.1 Environmental Impact Statement .................................................................................... 3-1 3.1.1 Introduction......................................................................................................... 3-1 3.1.2 Environmental Assessment Basics .................................................................... 3-3 3.1.3 Layout of an EIS ................................................................................................. 3-4 3.1.4 Introduction (Handout #1)................................................................................... 3-4 3.1.5 Project Description (Handouts #1, #2, and #3) .................................................. 3-5 3.1.6 Environmental Setting ........................................................................................ 3-5 3.1.7 EH&S Management System (Handouts #4 and #5)........................................... 3-6

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3.2

3.3 4.0

3.1.8 Issues Scoping and Consultation ....................................................................... 3-6 3.1.9 Selection of Valued Environmental Components (Handouts #6 and #7)........... 3-6 3.1.10 Environmental Assessment Methodology (Handout #8) .................................... 3-7 3.1.11 The invisible “line” in an EIS (Handout #9)......................................................... 3-8 3.1.12 Treatment of a Valued Environmental Component (Handouts #1 and #9) ........ 3-8 Environmental Elements and Planning ........................................................................... 3-9 3.2.1 Introduction......................................................................................................... 3-9 3.2.2 EA Planning and Strategy .................................................................................. 3-9 3.2.3 Environmental Baseline Studies....................................................................... 3-10 3.2.4 Owner Strength ................................................................................................ 3-11 3.2.5 Schedule........................................................................................................... 3-11 Acknowledgements: ...................................................................................................... 3-12

GEOLOGY, EXPLORATION DATA AND RESOURCE ESTIMATES.......................................... 4-1 4.1 Regional and District Geology......................................................................................... 4-1 4.2 Deposit Geology .............................................................................................................. 4-1 4.3 Mineralization and Alteration ........................................................................................... 4-3 4.4 Ore Controls .................................................................................................................... 4-3 4.5 Geological Model............................................................................................................. 4-4 4.6 Exploration Data .............................................................................................................. 4-5 4.6.1 Drilling Campaigns and Drilling Conditions ........................................................ 4-5 4.6.2 Trenching............................................................................................................ 4-6 4.6.3 Underground Sampling....................................................................................... 4-7 4.7 Sampling, Sample Preparation and Assaying ................................................................. 4-7 4.7.1 Sampling Protocols............................................................................................. 4-7 4.7.2 Sample Preparation Protocols............................................................................ 4-7 4.7.3 Assay Protocols and Procedures ....................................................................... 4-8 4.8 Quality Controls on Exploration Data .............................................................................. 4-9 4.8.1 Sampling QA-QC................................................................................................ 4-9 4.8.2 Sample Preparation QA-QC............................................................................. 4-10 4.8.3 Analytical QA-QC ............................................................................................. 4-10 4.8.4 Laboratory QA-QC............................................................................................ 4-25 4.8.5 Core versus RC Grades ................................................................................... 4-26 4.8.6 Recovery Functions.......................................................................................... 4-26 4.8.7 Comparison of Drill Campaigns........................................................................ 4-26 4.8.8 Downhole Contamination ................................................................................. 4-27 4.9 Density........................................................................................................................... 4-28 4.10 Surveying....................................................................................................................... 4-29 4.10.1 Collar Survey Data ........................................................................................... 4-29 4.10.2 Downhole Surveys............................................................................................ 4-29 4.10.3 Topography versus Collar Elevation ................................................................ 4-31 4.11 Attributes for Resource Estimates................................................................................. 4-31 4.12 Database ....................................................................................................................... 4-32 4.12.1 Database Development.................................................................................... 4-32 4.12.2 Database Integrity ............................................................................................ 4-33 4.13 Exploration Data Support for Mine and Process Designs ............................................. 4-37 4.14 Resource and Reserve Estimates................................................................................. 4-37 4.14.1 Introduction....................................................................................................... 4-37 4.14.2 Mineral Resource and Mineral Reserve Definitions and Classifications.......... 4-38 4.14.3 Resource and Reserve Reporting .................................................................... 4-42 4.14.4 Reserve Support for Feasibility Studies ........................................................... 4-44

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4.14.5 Resource Estimation Methods - Quality Required in Feasibility Studies ......... 4-45 5.0 MINING......................................................................................................................................... 5-1 5.1 Open Pit Mine Design...................................................................................................... 5-2 5.1.1 Design Criteria.................................................................................................... 5-2 5.1.2 Geotechnical Studies.......................................................................................... 5-2 5.1.3 Open Pit Optimization......................................................................................... 5-2 5.1.4 Open Pit Design ................................................................................................. 5-3 5.1.5 Waste Dumps ..................................................................................................... 5-3 5.1.6 Production Rate.................................................................................................. 5-4 5.1.7 Production Scheduling........................................................................................ 5-4 5.1.8 Equipment .......................................................................................................... 5-5 5.1.9 Surface Facilities ................................................................................................ 5-5 5.1.10 Personnel ........................................................................................................... 5-6 5.1.11 Operating Cost Estimate .................................................................................... 5-6 5.1.12 Capital Cost Estimate ......................................................................................... 5-7 5.2 Underground Mine Design............................................................................................... 5-7 5.2.1 Design Criteria.................................................................................................... 5-8 5.2.2 Geotechnical....................................................................................................... 5-8 5.2.3 Cutoff Grade ....................................................................................................... 5-9 5.2.4 Mining Method Selection .................................................................................... 5-9 5.2.5 Stope Design .................................................................................................... 5-10 5.2.6 Waste Dumps ................................................................................................... 5-11 5.2.7 Production Rate................................................................................................ 5-11 5.2.8 Production Scheduling...................................................................................... 5-11 5.2.9 Ore and Waste Handling .................................................................................. 5-12 5.2.10 Mine Access ..................................................................................................... 5-13 5.2.11 Maintenance Facilities ...................................................................................... 5-13 5.2.12 Mine Services ................................................................................................... 5-14 5.2.13 Development and Construction Schedule ........................................................ 5-16 5.2.14 Mining Equipment Selections ........................................................................... 5-17 5.2.15 Surface Facilities .............................................................................................. 5-17 5.2.16 Personnel ......................................................................................................... 5-17 5.2.17 Operating Cost Estimate .................................................................................. 5-18 5.2.18 Capital Cost Estimate ....................................................................................... 5-19 METALLURGY AND PROCESS DESIGNS................................................................................. 6-1 6.1 Introduction...................................................................................................................... 6-1 6.2 Metallurgical Testing........................................................................................................ 6-1 6.3 Scoping Level Test Program ........................................................................................... 6-3 6.4 Scoping Level Process Engineering................................................................................ 6-5 6.5 Scoping Process Capital Cost......................................................................................... 6-6 6.6 Scoping Process Operating Cost .................................................................................... 6-6 6.7 Scoping Technical-Economic Report .............................................................................. 6-7 6.8 Prefeasibility Test Program ............................................................................................. 6-7 6.9 Prefeasibility Process Engineering and Report:.............................................................. 6-8 6.10 Prefeasibility Technical-Economic Report....................................................................... 6-9 6.11 Feasibility Test Program................................................................................................ 6-10 6.12 Feasibility Process Engineering and Report ................................................................. 6-11 6.13 Demonstration Testwork................................................................................................ 6-11 6.14 Specific Process Testing Methodologies....................................................................... 6-12 6.15 Metallurgical Testing QA/QC ......................................................................................... 6-13

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6.16 6.17 7.0

Flowsheet Development ................................................................................................ 6-14 Equipment Selection and Sizing.................................................................................... 6-15

INFRASTRUCTURE..................................................................................................................... 7-1 7.1 Introduction...................................................................................................................... 7-1 7.2 Infrastructure Components .............................................................................................. 7-2 7.2.1 Power Supply ..................................................................................................... 7-2 7.2.2 Port Facilities ...................................................................................................... 7-3 7.2.3 Railroads, Trucking and Shipping ...................................................................... 7-3 7.2.4 Access ................................................................................................................ 7-3 7.2.5 Water and Wastewater Systems ........................................................................ 7-3 7.2.6 Waste Water Disposal Facilities......................................................................... 7-3 7.2.7 Communications, Data Information Systems ..................................................... 7-3 7.2.8 Hospital and Medical .......................................................................................... 7-3 7.2.9 Site Utilities and Support Facilities ..................................................................... 7-4 7.2.10 Housing .............................................................................................................. 7-4 CAPITAL AND OPERATING COST ESTIMATES ....................................................................... 8-1 8.1 Capital Cost Estimates .................................................................................................... 8-1 8.1.1 Introduction......................................................................................................... 8-1 8.1.2 Feasibility Study Level........................................................................................ 8-2 8.1.3 Detailed Feasibility Study Level ......................................................................... 8-2 8.1.4 Accuracy and Probability.................................................................................... 8-3 8.1.5 Basis of Estimate................................................................................................ 8-3 8.1.6 Project Contingency ........................................................................................... 8-5 8.1.7 Quantity Takeoffs ............................................................................................... 8-6 8.1.8 Capital Cost Estimate Execution Plan................................................................ 8-6 8.1.9 Historical Data Collection ................................................................................... 8-7 8.2 Operating Cost Estimate ................................................................................................. 8-8 FINANCIAL ANALYSIS ................................................................................................................ 9-1 9.1 Introduction...................................................................................................................... 9-1 9.2 Methods of Financial Analyses........................................................................................ 9-1 9.2.1 Discounted Cash Flow........................................................................................ 9-1 9.2.2 Market-Based Valuations ................................................................................... 9-2 9.3 Discounted Cash Flow Analysis ...................................................................................... 9-2 9.3.1 Basic Principles .................................................................................................. 9-2 9.3.2 Treatment of Taxation ........................................................................................ 9-3 9.3.3 Treatment of Inflation.......................................................................................... 9-3 9.3.4 Debt-financed Projects ....................................................................................... 9-4 9.3.5 Static Cash Flow Analysis .................................................................................. 9-4 9.3.6 Cash Flow Scenario Analysis............................................................................. 9-5 9.3.7 Monte Carlo Cash Flow Analysis ....................................................................... 9-5 9.3.8 Dynamic Cash Flow Analysis ............................................................................. 9-6 9.3.9 Discount Factors................................................................................................. 9-6 9.3.10 Internal Rate of Return ....................................................................................... 9-7 9.3.11 Net Present Value Ratio ..................................................................................... 9-7 9.4 Risk Sources and Accounting for Risks .......................................................................... 9-8 9.4.1 Types of Risks .................................................................................................... 9-8 9.4.2 Discount Rates ................................................................................................... 9-8 9.5 Project Value Decisions................................................................................................. 9-10 9.6 Other Evaluation Criteria ............................................................................................... 9-11

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9.7 10.0

9.6.1 Payback............................................................................................................ 9-11 9.6.2 Project Robustness/Competitiveness............................................................... 9-11 Sensitivities.................................................................................................................... 9-12

RISK ANALYSIS......................................................................................................................... 10-1 10.1 Introduction.................................................................................................................... 10-1 10.2 Risk Identification and Evaluation Procedures .............................................................. 10-2 PROJECT EXECUTION PLAN .................................................................................................. 11-1 11.1 Introduction.................................................................................................................... 11-1 11.2 Detailed Engineering ..................................................................................................... 11-1 11.3 Procurement .................................................................................................................. 11-2 11.4 Construction .................................................................................................................. 11-2 11.5 Commissioning .............................................................................................................. 11-3 11.6 Hand-off to Operator...................................................................................................... 11-3 11.7 Structure of PEP............................................................................................................ 11-3 OPERATIONS PLAN.................................................................................................................. 12-1 12.1 Organization .................................................................................................................. 12-1 12.2 Human Resources......................................................................................................... 12-1 12.3 Conditions of Employment............................................................................................. 12-2 12.4 Supply and Logistics...................................................................................................... 12-2 12.5 Concessions .................................................................................................................. 12-2 12.6 Sales and Marketing...................................................................................................... 12-2 12.7 Environment, Health and Safety.................................................................................... 12-2 12.8 Operating Cycles ........................................................................................................... 12-2 12.9 Quality Assurance and Control...................................................................................... 12-3 REFERENCES ........................................................................................................................... 13-1

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13.0

TABLES Table 8-1: AMEC Capital Cost Estimating Requirements by Study Type................................................ 8-4 FIGURES Figure 4-1: Figure 4-2: Figure 4-3: Figure 4-4: Figure 4-5: Figure 4-6: Figure 4-7: Figure 4-8: Example of a Pair Minimum vs Pair Maximum Plot ............................................................. 4-18 Typical Cumulative Frequency of the Relative Error Plot .................................................... 4-18 Pulp Duplicate Data Showing Analytical Problems.............................................................. 4-19 Pulp Duplicate Data Showing Precision Changes with Time............................................... 4-19 Typical Control Chart For Standards ................................................................................... 4-20 Example of Check Assay Data Exhibiting no Bias............................................................... 4-22 Check Assay Control Chart Showing Significant Bias ......................................................... 4-22 Historical Check Assay Data Showing Good Correspondence between the Primary and Check Assay Laboratories ................................................................................................... 4-23 Figure 4-9: Historical Check Assay Data Showing Biased, but Acceptable Correspondence between the Primary and Check Assay Laboratories ........................................................................ 4-23 Figure 4-10: Historical Data Showing Unacceptable Bias Between Laboratories. ................................ 4-24 Figure 4-11: Example of Check Assay Data That Can Not Be Adjusted ............................................... 4-25 Figure 4-12: Idealized Example of Cyclicity and Decay ......................................................................... 4-27

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Figure 4-13: Conversion of Resources to Reserves .............................................................................. 4-42 Figure 4-14: Variations in Resource and Reserve Classification by Study Level .................................. 4-45 Figure 8-1: Relationship of Accuracy and Probability in Capital Cost Estimates ..................................... 8-3 APPENDICES A-1 A-2 B C D E Comparative Levels of Study – Study Objective Perspective Comparative Levels of Study – Engineering and Design Perspective Study Report Content Environmental Aspects Handout #1 – Generic Annotated Table of Contents for a Mine Environmental Impact Study Environmental Aspects Handout #2 – Examples, Project Environmental Interactive Matrices to Support Project Description Environmental Aspects Handout #3 - Examples: Key Project Description Information for VEC Authors, De-Linking the Project Description Chapter from VEC Authors to Allow for EIS Production/Progress Environmental Aspects Handout #4 - Example: Environment, Health and Safety Management System (partial) Voisey’s Bay Mine/Mill EIS Environmental Aspects Handout #5 - Example: Environment, Health and Safety Management System (partial) Specific EH&S Needs for Each Valued Environmental Component –Why you do an EIS Environmental Aspects Handout #6 - Example: Selection of Valued Environmental Components Environmental Aspects Handout #7 - Example: VEC Selection and Treatment Illustration – Conceptual Environmental Aspects Handout #8 - Example: Environmental Assessment Methodology Doris North Project EIS, Miramar Hope Bay Limited Environmental Aspects Handout #9 - EIS Table of Contents Side-by-Side Check List for Project Execution Plan

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H I J K L

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1.0
1.1

INTRODUCTION AND CONTENT OF FEASIBILITY STUDIES
Objectives of Workshop
The objective of this workshop is to provide a review and discussion of the technical requirements of a feasibility study that will be sufficient to support financing of a mineral project. Referred to in some circles as a “bankable” feasibility study, this work is executed to a level of confidence sufficient to eliminate significant risk in the resource estimates, metallurgy, mine designs, process designs, infrastructure, operating cost estimates, capital cost estimates, environmental conditions, permitting, legal right to mine and revenues such that the stockholders and financing sources can be assured of recovery of their investment and a sufficient rate of return. The level of study varies with the source of risk capital. A major integrated company with several profitable mines may choose to execute a level of study much short of that required by a bank, particularly if the feasibility study is for the development of a deposit adjacent to an active mine with significant operating experience. Financial institutions supporting development of a project in a setting with higher than normal political or technical risk will require a comprehensive feasibility study in all aspects as well as risk analysis. We will examine the requirements of exploration data quality, resource and reserve estimates, mine designs, metallurgical studies, geotechnical and hydrological studies, process and infrastructure system designs, capital and operating cost estimates, environmental and socio-economic studies, financial analyses and project management from the perspective of a risk-adverse, integrated company. The client in this case will have significant corporate governance responsibilities because of international resource and reserve reporting codes and legislation such as SarbanesOxley.

1.2

Introduction to Feasibility Studies
The life cycle of a mining project follows the progression of: • • • • Exploration and discovery Resource assessment Development Production

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Closure

This cycle may be repeated or modified depending on changes in economic parameters (metal prices, operating cost improvements) and discovery of additional resources or loss of reserves due to negative impacts. Resource assessment and development normally follow a progression in engineering studies which determine the optimal mine design and production rate, along with progressively detailed engineering design and cost estimation. The three generally recognized levels of study are: • • • Conceptual (scoping, preliminary assessment) Prefeasibility Feasibility

Each step requires a higher level of confidence in the project building blocks of exploration data, resource and reserve estimates, metallurgy, environmental conditions and engineering designs. Early phases of study are critical in defining the project characteristics and approach (mine type, process type, production rate). Consideration of trade offs between different project approaches and their potential economic value should be considered in the early phases or the final approach may be a well engineered, lower value project. Taking short cuts in this process, such as jumping from a scoping study to final feasibility, quite commonly results in significant problems at the feasibility stage, with the project being delayed at high cost while design issues are resolved. The level of engineering design eventually reaches a level of accuracy where at the feasibility stage the project design is relatively fixed and costs are estimated to be within +15% to -5%. The Definitive Feasibility Study includes relatively advanced and detailed engineering with costs that have been verified with individual contractor quotes. Engineering design work is still short of that required for construction therefore the remaining design work is done in the Engineering, Procurement and Construction Management (EPCM) phase when financing has been secured, the authorization for expenditure has been made and the project is being built.

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1.3

Comparative Levels of Study and Study Accuracy
It is useful to provide a comparison of the characteristics and confidence in each area of the Conceptual, Prefeasibility, Feasibility and Definitive (Detailed) Feasibility Studies because this demonstrates the progression in conceptual development of the project that cannot be achieved in one step. Appendix A-1 gives a general description of the level of work in each area from the perspective of the objectives of each level of study. Appendix A-2 presents a different perspective, that of relative levels of engineering and design necessary at each step. Relative degrees of completion are an average of those encountered by AMEC in its work with a variety of companies, each with their own internal practices.

1.3.1

Scoping Study The Scoping Study is the first analysis of the basic project parameters such as deposit geology, resource estimates, metallurgy, products, mine designs, production rates, operating costs and capital costs to determine the best project design for economic value. The Scoping Study also defines deficiencies in the basic data, establishes work programs for remedial work and establishes parameters that will need to be reviewed in detail in the next stage. Options for mine designs, process flowsheets, site plans and support facilities are defined. The Scoping Study will provide: • General features of project including the selected case to be developed in the next phase. The key business drivers for the opportunity and any potential fatal flaws for each concept being considered. Capital and operating cost estimates with a ± 35% target accuracy. An order of magnitude of the schedule of the opportunity including the overall project and a detailed Gantt chart of for the next stage. Technical issues needing further investigation, such as geological drilling, pilot plant or test work required. The costs and time to undertake further development work for the next stage. The resources, personnel and services required for completing further work on the project.

• •

• •

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• •

Minimum Indicated resource estimate required for Prefeasibility Study. Outline of project specific political, legal, environmental or social challenges in the project area. Identification of Environmental data collection and terms of reference for the Environmental Baseline Study. Outline of the permitting procedures. High level risk assessment. Preliminary financial model and economic analysis. Identify necessary Trade-off Studies Scope of work and work plan for the Pre-Feasibility Study Phase

• • • • •

The Scoping Study should define the Key Performance Indicators such as capital cost per production and operating costs per unit production to determine the project’s position in industry cost curves. 1.3.2 Prefeasibility Study The Prefeasibility Study is the first detailed evaluation of the project in which the production rate, process method, mining method are fixed after analysis of different options. The economic analysis should confirm that the project is sufficiently robust to warrant further, significant expenditures on the feasibility study. The Prefeasibility Study will: • • Assess the technical and economic strength of the project. Using the trade-off studies, optimize the different mining, process, location and project configuration to determine and recommend the preferred optimum to be engineered during the Pre-Feasibility Study Consider different capacities for the project.

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Determine if there may be any additional fatal flaws to be mitigated that were not addressed in the scoping study. Determine the risk profiles of the key performance indicators. Determine the nature and extent of the Work Plan to complete further geological, mining, metallurgical, environmental and marketing work needed to be completed or undertaken during the Feasibility Study. Estimate the costs, schedule and resources required to complete the Feasibility Study. In addition, an overall project schedule shall be prepared to indicate the overall timing of project implementation, commissioning and start-up, and ramp-up to full production. Identify resources (internal and external) and services required to undertake further work. Implement use of a pilot plant if required. Upgrade the mineral resource as required. Address interests and needs of all Stakeholders.

• •

• • •

Drilling, sampling and confirmation of grade and geological continuity will be to a level that most resources are Indicated, with some being Inferred or Measured. Metallurgy will be well understood, with metallurgical recovery and ore physical characteristics (hardness, throughput) being obtained from sufficient samples spread amongst ore types and spatially throughout the ore body to cover the mine life. Process flowsheets and designs will be relatively advanced to allow capital cost estimates. Material and energy balances will be generated. Sites for all facilities will be selected. Trade-off studies will be undertaken for water supply, power supply, ore and concentrate delivery, mine designs, tailings facilities and waste rock facilities. Environmental baseline studies will be initiated and completed.

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A document will be prepared to support initiation of negotiations for financing. 1.3.3 Feasibility Study The Feasibility Study is a refinement of the recommended project concepts, capital costs and operating costs that were developed in the Pre-feasibility stage. A plan for execution of the project is developed. Any trade-off studies that were not completed or resolved prior to the completion of the Pre-feasibility Study will be resolved at this time. Only Measured and Indicated resources are reported and diluted mineable reserves are utilized for mine production planning. Engineering is performed to basic standards, with the intent of continuing into the Engineering, Procurement and Construction (EPCM) phase. The study document might support a financial and legally binding agreement with financial institutions providing funding for the project. A rigorous project scope will be defined and controls set in place that will minimize the potential for major scope changes and capital cost growth during the detailed design, procurement and construction phase of the project. In order to be considered supportable, a Feasibility Study shall be: • Optimized with final technical and commercial parameters that are optimized for value. Project scope, cost and schedule will not change materially. All basic data, concepts, designs and estimates are well documented and supported. Control documents are developed and ready to be used for management of the project. The study will have been audited and approved by the Banker’s Independent Engineer.

• •

The Feasibility Study shall enable the providers of equity and/or debt to the project to assess and allocate the risks of implementing and operating the project. The study

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shall provide project performance parameters and completion tests that will be used as decision measures for the lenders. The Feasibility Study will design the EPCM phases of the project, subject to a positive decision by the company Board of Directors. A Feasibility Study will be considered by lenders to be a legal representation of the Project that the owners would design, construct and operate. The project scope described in the Feasibility Study cannot be materially altered before or during implementation without threatening financing. The Feasibility Study will accomplish the following objectives: • • Finalize the technical and economic viability of the project. Establish a single project configuration and investment case supported by the necessary project execution plan. Use mineral resources at a confidence level of Measured and Indicated. Provide a detailed mine production plan. Confirm product specifications and marketing agreements. Fix production rates and design criteria. Provide reliable site grading preparation plans and cost estimates. Provide detailed layouts, plans and sections of major facilities. Obtain price bids for all major equipment. Prepare for placement of orders for long lead-time equipment with cancellation clauses. Design major structure steel quantities and obtain bids for fabrication/supply.

• • • • • • • •

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Develop major foundation designs and quantity take-offs, including unit price bids for concrete supply. Develop piping and instrumentation designs and preliminary piping layouts for major process streams, piping specifications and preliminary quantity take-offs. Obtain unit price bids where possible. Provide process control and instrumentation system cost estimates. Design power supply and distribution system including main sub-station, site distribution single line diagrams, unit sub-stations, MCC's and electrical motor list. Develop layouts and capital cost estimates for all site infrastructure and support services such as sewage treatment, potable water treatment, fire protection, HVAC, offices, laboratories, gatehouse and security systems, site drainage, access roads and yard lighting, fencing, first aid clinics. Provide a detailed project execution plan including the construction schedule procurement and expediting programs. Estimate indirect costs including construction camp, major construction equipment, construction power and water supply, construction lay down areas, construction receiving and warehouse facilities, construction drainage and environmental mitigation costs, construction logistics. Establish project procedures. Develop a detailed estimate of resources required for construction and operations. Complete an Environmental Impact Assessment. Establish Environmental, Health and Safety monitoring and management systems. Perform detailed risk assessments and mitigation plans Provide detailed estimate of commissioning costs, operating costs, sustaining capital and closure costs within the target accuracy

• •

• • • • • •

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Provide Capital and Operating cost estimate with a target accuracy of +15% to 5%.

Significant risks for cost overruns exist in mining projects. AMEC and its client’s experience show that takeoffs for bulk materials and their specification is a common area of underestimation. Risks for escalation of costs are most commonly present in the following areas: • • • • • • • • • • • • • • Site grading and preparation Foundation design Concrete quantities Structural steel quantities Bulk electrical quantities Process control costs Process piping quantities Indirect costs Construction Labor Sourcing & Supply Construction Strategy Owners Costs Construction logistics Commissioning, Ramp-up and Working Capital Permits and Approvals

1.4

Study Content
AMEC and its clients have developed relatively detailed study documentation outlines to provide a report that will be adequate to support financing of the project, and provide guidance to independent auditors in evaluation of the project. Appendix B lists a recommended report format. The outline will change with the type of project and selected mining and process approaches, and specific project requirements. This template also provides a structure which can be used to organize and allocate specialists, consultants and company staff to execution of each study scope and a check list for each work area.

1.4.1

Summary and Recommendations The summary section should summarize all work completed and key conclusions. • Describe the general characteristics of the project

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Describe the scope of the feasibility study, major assumptions and items that may have been excluded. All project risks should be identified and well understood. Provide detailed mitigation plan. Summarize the key performance indicators, accuracy of estimates, and sensitivities to changes in operating costs, metal prices, capital costs, recovery, etc. Summarize the financial evaluation of the project including capital costs, IRR, evaluation methods. Provide recommendation to proceed or not to proceed. Provide a Project Execution Plan for Detailed Engineering, Procurement, and Construction.

• •

1.4.2

Country and Regional Settings Provide the following: • • Basic information on country and district settings. Evaluation of the country and regional economies should be completed. Taxation issues, particularly those that affect the project must be understood and any fiduciary incentives and/or tax advantages for the project, particularly those that are to be used in the Financial Evaluation section, should be defined at this stage. Details of climate and hydrology. Details of seismic zone and risks. Details for demographics and labor characteristics. Plans to address cultural issues. Details of country risks.

• • • • •

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• 1.4.3

Details of political, legal and judicial systems, and risks inherent in each.

Legal Provide details of underlying agreements, confidentiality agreements, heads of agreements, partnerships, mineral rights, water rights, surface rights, government project incentives, easements, access, encumbrances, royalties, fees, environmental liabilities, taxes, legal system requirements, import and services duties, export duties, intellectual property issues and technology transfer rights.

1.4.4

Operational Ownership Generally describe how the project operating company will be legally setup and managed and what stakeholders will be involved. This will involve details of: • • • • • • • • • • Percentage interests Option agreements Earn-in periods and obligations Expenditure requirements Cash calls Areas of interest (mineral and surface) and rights to acquire additional interests Assignment transfers and rights of first refusal Project company structure Dispute resolution Project termination

1.4.5

Government and Community Relations The attitudes and interests of the governmental bodies at the national, regional and local levels must be understood when evaluating a new project. The project must sufficiently integrate into the community. This is particularly true for ventures that are being considered in a new country or region. Issues are to be identified and mitigated. The following information should be provided: • Federal, State, Provincial and Local Government: Appraise the views of Governments and their authorities. Socio-Economic Considerations: Include a detailed appraisal and plan, particularly community attitudes to the proposed project, which will also be in the EIA.

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Workforce Issues: Address the impact on the community in sourcing the workforce during construction and operation. Estimate the needs for expatriate personnel. Recruitment: Assess the needs for recruitment of local and expatriate personnel and the required schedule and cost of this activity. Local Service Industry: Assess the ability of the local community to provide services and how services will be obtained. Media: Assess the impact and response by the local media to the project. Community Services: Assess the impact on local community services and provide an impact mitigation plan. Housing and site accommodation: Provide a plan for offsite and project site housing and accommodation. International Trade: Provide discussion of any international trade issues. NGOs: Assess presence and activities of NGOs and provide mitigation plan for their involvement in the project.

• •

• •

1.4.6

Human Resources and Training • • • • Provide a review of the HR issues, and requirements and plans for training. Organizational model and chart Education and culture: Work force culture, compensation and education. Recruitment & training: Recruitment and training programs, including schedule for specific disciplines. Employee relations: Employee relations structure and plan.

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Performance Management: Use of performance management and compensation incentives. Statutory Rules: comply. Describe statutory labor regulations and requirements to

1.4.7

Occupational Health & Safety Risks in safety and health are studied in detail and performance and mitigation plans are developed. • Identify safety risks: o Provide Risk Assessment Report from the Pre-feasibility Study. o o Conduct further Safety/Risk Assessment workshops as required in areas such as construction, de-construction, de-commissioning, and transportation. Conduct Formal Safety Assessment and Risk Assessment study, with the result being a detailed Safety Risk Assessment Report with a comprehensive Safety Exposure Register incorporating all of the work to date. Emergency preparedness plans and programs in place Mitigation strategies developed for known high risk elements

o o •

Safety management: Develop mitigation plans for any unique or potential health, hygiene and safety risks which ensure that all occupational health, hygiene and safety requirements are achieved and compliance is maintained. Construction strategy: Describe how occupational health, hygiene and safety will be managed during the construction phase. Operations strategy: Describe how occupational health and safety will be managed during operations. Security and access: Describe how site security is to be implemented and operated and how access is to be controlled. Community: Provide a management and mitigation plan for any safety and health impacts that may occur with the local community. Communicate with potential stakeholders.

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1.4.8

Environment • • Environmental appraisal: Detailed analysis completed. Socio-Economic Issues: Identify any known or perceived socio-economic issues. Include discussion on what expectations the government and community may have and any compensation issues that may be required. Identify efforts that have been completed or will need to be performed to continue to further develop this issue. Company policies: All policies are established. Environmental baseline and assessment: o The EIS is completed and submitted to authorities for approval. o o Ongoing data collection and requirements planned All necessary permits and approvals in place. Plan for future approvals and documentation available or planned

• •

Environmental design basis: List environmental design criteria and engineering standards and practices. Environmental mitigation: Provide major mitigation measures. Construction environmental management: environmental issues during project construction. Plan for management of

• •

• •

Closure & reclamation: Proposed closure & reclamation plan. Energy supply and management: Describe energy systems design and usage management. Cultural & archeological resources: Identify resources and provide plan for management of resources during construction and operation

1.4.9

Geology and Mineral Deposits • Geological Data: Describe how all geological data have been validated, interpreted and integrated into a final resource model.

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Mineral and surface title: Describe how mineral title has been secured and approval for exploitation has been sought. Describe how surface rights for all mine, process and infrastructure requirements have been secured. Geology: Summarize regional and district geology. Project history: Outline exploration history in detail, work completed by whom, when and the techniques used. Include a description of the various interpretations and resource estimates made over time, reconciliation between previous drill programs and resource estimates. Geological staffing: Describe plan for mine geology management, including staffing levels, grade control, infill drilling and mine exploration is finalized for implementation. Exploration Data: Describe the methods used to drill, sample, assay, log and develop databases to support resource estimation, and the quality of these data. Describe core or chip recovery, sampling, sample preparation and assaying methodologies, surveying methods, and quality control/quality assurance protocols. Describe test work and methodologies to estimate moisture content, in-situ density, swell, specific gravity and other relevant material properties. Topographic control: Describe topographical maps and control. Deposit Geology: Describe the deposit geology, mineralogy, alteration and controls of mineralization. Resource Estimates: o Describe development of resource block model. o o o Describe methods used to estimate tonnage and grade of the resources. Describe procedures for determining cut-off grades. Describe geostatistical analysis (exploratory data analysis), assessment of mineralization domains, grade interpolation methods, modeling of density and validation of estimates. Describe methods for classifying resources. Tabulate Mineral Resources by classification (Measured, Indicated and Inferred). Resource statement: tabulation of resource in accordance with the appropriate reporting code.

• •

• •

o o

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Ore characterization: Describe studies of the ore and waste mineralogy and chemistry and the potential affects on metallurgy. Hydrogeology: Describe the groundwater regime within the deposit and its likely impact on mining. Data presented should include test work results, hydrological modeling and water quality. A groundwater management plan for the construction and operating phases should be presented. If water is to be supplied to the project via a well field then present a description of the source, location, test work, and capacity in conjunction with the project’s requirements, tenure over water rights, supply methodology well field modeling and monitoring requirements. Geotechnical: Describe geotechnical domains, rock characteristics, in situ stress regime, ground conditions.

1.4.10

Mining • Design criteria: Define design criteria: o Site description o o o o o • resource description Geotechnical parameters Hydrogeological conditions Cutoff grade criteria Metallurgical recovery

Mine designs: o Methods used and accuracy o o o o o o o o o Life of mine plan Mining method selection Design parameters of mine, maintenance facilities, shafts, ventilation, backfill, dewatering. Equipment selection, productivity, cycle times, simulations Ore/waste determination and stockpiling strategy Tabulation of reserves Mine layout and mining limits Production schedule Overburden and waste disposal

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• •

Reserve statement: Tabulated according to appropriate reporting code. Mining schedules: o Preproduction stripping or development o o o o o Mine extraction of ore and waste Ore production and transport to process plant Stockpiling and reclaim Mine equipment requirements and sequencing Manpower requirements and sequencing

Mine operations and management: Organizational chart, mine services, ore control, mine operations, ore dispatch, maintenance. 1.4.11 Metallurgy • Process system: o Full characterization details of ore and waste mineralogy, grain size, mineral chemistry, relevant physical properties, (e.g. specific gravity distribution) and minor deleterious elements or minerals, that support the asset production plans, plant metallurgical performance forecasts and product quality forecasts. o Details of ore variability within ore type and the ability of mine plans, mine blending, processing equipment and plant operating strategy to accommodate such variability. Ore characterization risks are to be assessed and mitigation strategies prepared.

o

Metallurgical sampling: o Describe how metallurgical samples were obtained and how relevant to total deposit samples are. o o Description of the metallurgical relevance of single and composite samples. Describe methods used in metallurgical tests.

Metallurgical laboratory and pilot plant: o Describe any pilot plant studies to verify key operating parameters and optimize each key metallurgical unit operation (including tailings disposal), which comprises the selected metallurgical process route. o o Describe level of work conducted for each process unit. Identify risks in scale ups of metallurgical processes and plans for mitigation in correction of scale up factors.

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• •

Process selection: Describe process flowsheet and reasons for selection. Facilities: Describe metallurgical facilities and process flow diagrams, mass balances, piping and instrumentation and layouts for plant and tailings areas. Risk assessment: Outline risk mitigation plan.

• 1.4.12

Process Design • • Overview: Describe general features of process plant Metallurgical design criteria: Describe plant specifications o Product quality specifications o o o o o o o o o • Annual ore and product capabilities. Major mass flow / capacity. Assumed plant availability. Consumption rates for major operating and maintenance consumables. Utility usage. Design life. Ore blending and stockpiling strategy to be deployed. How multiple feeds and multiple products would be handled. Product handling and transportation strategy (pipeline / railing / shipping).

Site layout and capacity: Provide a detailed layout for the metallurgical plant and related infrastructure including site grading plan, foundation criteria and foundation design. Plant location: Show final plant location and detailed layout for all major facilities Operations and management: Describe operating plan including maintenance and support services, plant production schedule, ramp up from commissioning to full production and forecasted plant availability and utilization. Waste and Recycle Streams: Describe waste management plan: o Classification of waste types o o Recycling program Waste sources and rates

• •

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o o 1.4.13

Treatment methods for waste Waste impacts

Infrastructure • Describe how existing infrastructure can support the project and what new infrastructure must be provided. Describe how new infrastructure must interface with existing infrastructure. Power: Describe power supply, type and proposed delivery. Include design criteria for power plant, consumables, maintenance, fuel consumption and source. Describe electric grid, availability of alternative energy sources. Port facilities: Describe any port facilities required and design criteria. Railroads: criteria. Describe existing and required railroads and logistics, and design

• •

Access roads: Describe existing access roads and improvements required, an any necessary new roads. Water and wastewater systems: Describe proposed water sources and design of water supply. Describe water balance including mine, process plant, infrastructure and tailings requirements for water. Waste disposal: Describe existing waste disposal facilities and any required new waste disposal systems. Provide layout of on-site waste disposal facilities. Communications and IT systems: Describe communications system and design. Describe information management systems and design. Hospital and medical facilities: Describe existing medical facilities and required new site facilities. Site utilities and support: Describe and provide design for support infrastructure such as warehouse facilities, maintenance facilities, fire suppression, security, site utilities, administration and training. Include electrical substations, raw material

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stockpiles, fuels storage, fresh water storage, process water distribution, waste management and housing. 1.4.14 Engineering Designs Engineering designs shall incorporate considerations of the following factors: • • • • Operating conditions within the processing plant and other project facilities Safety parameters identified and provided for in the design basis Occupational Health issues identified and provided for in the design basis Environmental constraints to be placed on the processing plant and other facilities identified and provided for in the design basis. Off-site conditions that are likely to be reflected in supply or product transportation logistics constraints provided for in the design basis The general extent of engineering deliverables necessary to support the quality of a Feasibility Study shall be: Process Block Diagrams Detailed Process Flow Diagrams Piping and instrumentation design – Main Process, Service and Utilities Areas Site Layouts, General Arrangements and sections for processing plant facilities, product handling facilities, infrastructure and waste management facilities Equipment Lists – Mechanical, Electrical Specifications for all Major Equipment Selection of Major Mechanical Equipment items

• • • •

• • •

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• • • • • •

Site Topographical – Civil Layouts Detailed layouts, plans and sections of major facilities Single Line Electrical Diagrams Control System Design Performance Specifications for Packaged Plants and Utilities. Design, layout and sections of all major earthwork structures, site grading plan with quantity take-offs and major foundation design and quantity take-offs

1.4.15

Project Execution Plan A plan for execution of the project after feasibility has been confirmed and the project funded should be included in the study. The objective of the project execution plan is to define how the project will be built and commissioned. The project execution plan must define the following: • Scope of project: followed. Define the scope of the project and the procedures to be

Work Breakdown: Define the major components, costs and schedule from completion of detailed engineering design to handoff to operations. Cost management: Develop plan to manage contingencies, escalation, foreign exchange and working capital. Planning and scheduling: Design key completion milestone dates and critical paths to completion. Develop plans for monitoring and approving changes in the project control schedule for each stage: o Engineer/Procure/Construct o o o Commissioning and Start-up Ramp-up Full Production

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Engineering: Identify parties that will participate in engineering, the standards to be used, quality assurance, hazard operational plans and technical expertise required. Procurement and contracts: Provide commercial terms for each package, and the scope and timing for development of specifications and contracts for supplying major engineering, procurement and construction. Construction: Describe construction procedures, safety policies and procedures, and HR policies and procedures. Commissioning: Define the approach to be taken during commissioning of the project, including: o Key staffing and when required o o o o Training required Hazop Transition Plan Performance criteria

• • •

Ramp-up and Handover: Define transition plan, schedules and milestones Project Closure: Define all aspects of closure plan and schedule Occupational health, hygiene, safety and security: Health, Safety and Security plan. Describe Occupational

• • •

Environmental: Describe environmental management plan. QAQC: Describe quality assurance and control plan. Technology and Expertise: Describe plan to manage intellectual property, transfer of expertise, copyrights, patents and confidentiality agreements. Communications: Develop project reporting requirements and communications required with local community, media and NGOs.

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Financial administration: Describe plan for financial and administrative activities during detailed engineering, project implementation, and operations startup. Project roles and responsibilities: Define project management requirements during project detailed engineering, construction, commissioning and ramp-up. Project organization and HR: Define approach to assignment of personnel, terms and conditions for assignment, and recruiting schedule for: o Project Management o o o o o o Engineering Teams Procurement Construction Management Operations and Maintenance Teams Project Accounting External Resources

1.4.16

Operations Plan An Operations Plan should be developed that will address the following areas: Organization: Describe the organization of the production team and the extent of external providers. Benchmark the ratios of labor, supervision and administration to local country practices and international best practices. Human resources: Describe workforce plan including direct labor costs, provisions for leave, non-wage costs and training. Supply and logistics: Describe transport and logistics requirements. Sales and marketing: Describe marketing and sales plan Environment, health and safety: Describe plan after production startup. Operating cycles: Define work and leave cycles and impact on productivity, ability to attract workforce, lost time and costs. QAQC: Describe plan for quality assurance and quality control during operation of project.

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1.4.17

Capital Cost Estimates (CAPEX) Capital cost estimates will be supported with the following detail: • Scope and methods: Detail the basis of cost estimates such as take-off quantities, preliminary quotes, firm quotes, etc and any assumptions used. Cost breakdown structure: Present on a line-item basis: o Process completion o o o o o o o o o o o Engineering Project management Equipment and construction Construction management Escalation allowance Currency allowance Commissioning and startup Capitalized interest Direct capital – equipment, materials, labor, construction equipment, contract services Indirect capital –EPCM, consultants, construction facilities, construction services, construction site operation, freight, vendor support, spares. Owner’s costs – Preoperations personnel, mine equipment, mine prestripping, mine development, owner’s project team, initial fills, insurance, housing, permitting, commissioning, corporate costs, owner’s contingency. Working and sustaining capital Contingency on direct and indirect capital

o o •

Basis of estimate: Describe the basis of the estimate including currency exchange rates assumed. Accuracy of estimate: Define accuracy of estimate.

• 1.4.18

Operating Cost Estimates (OPEX) Operating costs will be supported with the following detail:

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Scope and methods: Describe the basis of the estimates including information from an ongoing operation, similar projects, budget quotes and state assumptions that were used. Cost breakdown structure: Breakdown in line with the Work Breakdown Structure and present the results on a line item basis. Define operating costs by unit areas of mine, process plant, power supply, water supply, port, conveyances, site services, marketing & distribution, general & administration. Provide details of: o Fixed labor costs o o o o o o o o o o o o o o Fixed overhead costs Labor Management Expatriate costs Variable operating costs Raw materials Chemicals and reagents Power and water Fuel Operating and maintenance consumables Product transport and insurance Contingency allowance Working capital and sustaining capital Post operational acceptance costs

Each area is broken down by unit area: o Manpower – operating and maintenance o o o o Operating costs – fuel, water, consumables, transportation, contracted services Maintenance costs – supplies, contract services Departmental costs – office supplies, safety equipment Contingency

Basis of estimate: Describe the basis of the estimate including currency exchange, rates, estimation baseline. Accuracy: Provide an estimate of the accuracy of the estimates and sensitivities.

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1.4.19

Markets The marketing section of the study document should incorporate the following documentation: • Product specifications: Define specifications required to meet market requirements. Supply and demand forecast: Provide analysis of world supply and demand with short-term, mid-term and long-term trends. These should be done by professional market forecasters. Marketing strategy: Describe marketing strategy and volume, market share, growth potential and price expected. Describe market entry strategies. Provide sales forecasts and basis of forecasts on demand and supply trends. Pricing strategy: Describe pricing strategy. Customers: Identify major customers and analysis of product quality required for each, and prices expected to achieve. Revenue forecasts: Provide a forecast of the gross and net revenues expected from sales based on: o Supply and demand analysis o o o o • Marketing strategy Start-up period Product quality Lag between shipping and payment

• •

Marketing resources: Describe marketing organization and relationship with shippers, distributors and agents. Product shipping, storage and distribution: Describe the optimal shipping, storage and distribution system, cycle times from production to customer, stockpile required, and the basis for any contracts. Competitor analysis: Provide an analysis of competitors, and advantages and disadvantages of proposed project.

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1.4.20

Risk Assessments Risk assessments will be documented by key areas. These include: • Investment risks: currency exchange fluctuations, country or regional governmental changes, changes in tax structures. Provide estimates of costs for anticipated changes. Business risks: Assess the risks for the business unit, if part of an integrated company. Evaluate size of project versus business unit and business expansion ratio. Project risks: Describe risks due to safety, technology, and performance of resources, reserves, mining, processing. Economic and financial risks: Discuss economic risk associated with prices, supply and demand, operating cost estimates and affects on rate of return. Schedule risks: Describe costs of delays in project including loss of market share, productivity, impacts on business unit. Benchmarking: Discuss project characteristics relative to other operations in the industry such as position on cost curves. Mitigation: Discuss plan to mitigate risks as defined in the remainder of the analyses.

1.4.21

Financial Evaluation The Financial evaluation of the project should be documented with the following information: • Price assumptions: Price assumptions for short-term, mid-term and long-term points. Competitor analysis: List competitors, production rates, cost curve position and performance indicators. Budget: Summarize CAPEX AND OPEX costs

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• • •

Cash flow: Provide cash flows by quarter and year Cost assumptions: Provide list of all assumptions Project returns: Document financial returns for each financing assumptions. Provide: o Internal Rate of Return (IRR) o o o o o Return on Equity (ROE) Return on Net Assets (RONA) Cash flow Net Asset Value Capital Efficiency

• • 1.4.22

Financial risks: Provide any known financial risks. Taxes: Discuss any tax issues and potential beneficial tax plans

Work Plan A work plan should be provided to cover the period from completion of the Feasibility Study to the forecast commit date of the project. This period typically covers: • • • • • Project Approval Process Project Funding Activities Project Execution Plan Pre-commitment Activities to maintaining control of the assets Project mobilization, or further definition tasks, necessary to support the overall Project Schedule.

The Work Plan shall, at a minimum, present the following: • The scope of all activities proposed.

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The objectives and benefits of completing these activities prior to project approval with consideration to the issue of continuity of key people. Budget and schedule of activities. Organization and resources required. Deliverables, which will result from the Work Plan.

• • •

The Work Plan should also present in outline the following: • • Activities warranted such as negotiation of supply or sales contract. Any external resources to be engaged during this period and their relevance to the Execution Phase of the project, should it be approved. Procedures and systems to be employed. Communication and co-ordination processes. Reporting requirements.

• • •

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2.0
2.1

PROJECT STUDY TEAM, EXECUTION AND MANAGEMENT
Organization and Study Management
A study execution must take in account integration of the Feasibility Study consulting team, the Owner’s team, other specialized consultants and testwork contractors. Primary responsibility for the study must be fixed and maintained. The Owner may chose to manage the study and obtain input from multiple sources of consultants. Alternatively, an engineering company takes on the responsibility of managing work by its own specialists, the Owner’s team and subcontractors to achieve a relatively seamless product. The latter from AMEC’s experience is the most successful and cost effective. The former is used more commonly on brownfields projects where existing operations are being expanded. Regardless, all aspects of the study must be considered and integrated into a manpower and task schedule to prevent mismatched scopes and products. Typical components of the staffing and responsibilities of a greenfields project feasibility study are: Owner’s Team • Staffing o Project manager o o o o o o o • Geologist and field technicians Resource geologist (if responsible for resource estimates) In-house Technical and Operations Specialists Site logistics manager Land and permitting specialist Finance counsel Legal counsel

Responsibilities o Permits and approvals o o o o o Project source data (may include resource estimates) Site work (additional drilling, metallurgical sampling) Contracts Insurance and underwriting requirements Market studies (if specialized to Owner)

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o o o o

Community relations, communication Organizational structure, operating plans and philosophy Corporate and Company governance principals and requirements Project coordination with Study Engineer

Feasibility Study Engineer • Staffing o Project manager o o o o o o o o o o o o o o o o • Geologist Resource geologist/geostatistician Principal mining engineer Mining technologists (designs and layouts) Materials handling specialist Principal metallurgist/process engineer CAD designers (mining, process, electrical, mechanical) Cost estimators Schedulers Contracting specialists Market specialist (if not supplied by Owner) Taxation specialist (if not supplied by Owner) Financial modeler Administrative assistants and document controls Project controls technician Peer reviewers

Responsibilities o Study management o o o o o o o Validation of exploration data and resource estimates Resource estimate upgrades (if required) Mining, mine designs and reserves Metallurgy Process selection and designs Infrastructure and designs Capital cost estimates

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o o o o o o o o o

Operating cost estimates Execution Plan and Schedule Risk assessments Market studies (if required) Financial analyses Progress reporting Feasibility study report Document controls and organization Facilitation of third party reviews (Banker’s Engineer, external audits)

Specialized Consultant – Environmental • Staffing o Project manager o o o o • Environmental specialist (site inspections, baseline studies) Environmental specialist (culture, archeological) Permitting specialist CAD designer

Responsibilities o Environmental baseline studies o o o o Cultural and archeological studies Socio-economics Environmental control plan and costs Site closure, reclamation and costs

Specialized Consultant – Geotechnical and Hyrdogeological • Staffing o Geotechnical technician (collection and organization of geotechnical logging) o o o • Geotechnical engineer (interpretation of data and development of design criteria) Hydrogeologist CAD designer

Responsibilities o Mining geotechnical information analysis (pit slopes, stope designs)

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o o

Foundation conditions (waste dumps, mine facilities, roads, tailings) Tailings and waste dump designs

Specialized Consultant – Infrastructure • Staffing o Infrastructure engineer (may be civil or mechanical background) o • Power engineer (may be civil or electrical background)

Responsibilities o Ports o o o o o Housing/Townsites (temporary and permanent) Transportation (roads, rail, air, and associated facilities) Power lines and power plants Water supply and treatment Pipelines

Specialized Consultant – Information Systems • • Staffing o IT specialist Responsibilities o Information technology o Site communications and data transfer

2.2

Work Location and Logistics
Consideration should be given to selection of the most efficient site for execution of the work. Feasibility studies are normally executed at the engineering center of either the Owner’s team or Feasibility Study Engineer team. Field offices are maintained for the purpose of continuation of infill drilling for improvements to resource estimates, geotechnical drilling, metallurgical sampling and environmental baseline work. Issues AMEC has experienced in poor execution of studies generally are related to: • Poor definition of scope between Owner’s team, Feasibility Study Engineer, and specialists. Split of study teams between multiple, geographically separate offices.

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Large time difference between Owner office, field office and Study Engineer (eg. Australian study engineer on Americas project). Inadequate coordination with project contractors (drilling, metallurgical tests, geotechnical and environmental studies) Square pegs – round holes (e.g. poorly conceived or preconceived expectations, assumptions and results – then fit the data) Project is not ready for full feasibility study (inadequate exploration data, bad resource models, project characteristics have not been properly scoped at prefeasibility level). Complex study teams (piecemealed studies).

2.3

Study Execution
Study execution begins with proper organization and analysis of project data and definition of the project scope and schedule. AMEC recommends use of Enhanced Systematic Planning (ESP) sessions at the start of the project to define the key elements of the study and finalize the study plan and schedule. The ESP will define: • • • • • • • • the study scope, key options and concepts, work breakdown structure, roles and responsibilities of all participants, the study schedule and intermediate milestones, work product relationships to study development and progress, key reporting and coordination relationships, the site visit schedules and itineraries, and required field survey programs.

All project data, databases and supporting documentation for the completed prefeasibility study will be transferred to the study engineer. Initial work will emphasize review of project data to determine if exploration data, resource estimates and other supporting technical data are sufficient to support a feasibility study. Recommendations are provided at this point for remedial work to be carried out at site during the beginning of the study.

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Severe deficiencies in exploration data and resource estimates may delay and modify the overall project plan, therefore it is advisable to conduct a thorough review of exploration data and resource estimates prior to starting the feasibility study.

2.4

Study Execution Plan and Schedule
A study execution plan and schedule is developed that considers all aspects of the project in accordance with a Work Breakdown Structure, and with critical decision points identified. Opportunities for work to be executed in tandem should be considered. Key project parameters such as production rate, processing system, metallurgical recoveries and requirements of infrastructure will have been largely decided at the conclusion of the prefeasibility study. The schedule will include (with decision points): • • • • • • • • • • • • • • • • • Study Initiation and Data Reviews Strategic Planning Exploration Data and Geology Audit (data suitable for feasibility study) Geotechnical (mine designs can be finalized) Environmental Resource Estimates (mine designs can be finalized) Metallurgy and Process Selection (metallurgical performance known well enough to develop input for final mine designs) Operating Cost Estimates (from prefeasibility study with some modifications) Mine Designs, Mine Planning and Reserves (production rate finalized) Market Analysis Operating Cost Estimates (final) Process Designs (capital cost estimates can begin) Infrastructure Selection and Designs Capital Cost Estimates Financial Analyses Risk Assessments Reporting

All work up to the completion of resource estimates can be undertaken simultaneously. Mine Designs and Mine Planning can be done in tandem with Process Designs once the process options and metallurgical recoveries have been determined. Geotechnical recommendations and metallurgical recoveries will significantly impact the inputs to cutoff grade selections and mine designs therefore these should be finalized concurrent with finalizing resource estimates. Final mine designs and production plans

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will be developed once final operating costs, metallurgical recoveries and product sales price are confirmed. Capital cost estimates will begin at the point that mine, process and infrastructure scopes are finalized and designs are advanced. All inputs from the final mine production schedule are applied to the financial model. The results may lead to re-examination of development and production schedules to maximize the value of the project.

2.5

Management
The Study Manager will be responsible for managing and controlling progress, the cost, schedule and the overall quality of the work. At the ESP session starting the project, the communications protocols and procedures will be established that address the following: • • • • points of contact, authority levels and decision-making roles, turnaround times for comments and approvals, and documentation requirements.

Secure ftp or web sites are setup to transfer large databases, drawings and other information. Regular communication with the study participants by means of frequent meetings, webcasts or video/teleconferences will be held to address: • • • • • • • schedule progress (% work completed by the Study Engineer, Owner’s team and third-party consultants), manning levels and consultant resources, technical queries and outstanding requests for information, work completed in last period and planned to be undertaken in next period, definitions of concerns and issues with mitigation/resolution plans contractual issues, and other business.

Bi-weekly or weekly events will be minuted and distributed. In addition to the meetings and teleconferences, team members should maintain frequent informal contact with the Owner’s team via face-to-face and telephone discussions, e-mails and faxes.

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Formal monthly reports will be prepared that will include: • • • • summary of activities carried out during the month, planned activities for the following month, costs expended for the month, and costs to date against the planned expenditure, and schedule updates.

A project financial and document control system should be used that will accommodate budgeting, manpower use and cost reporting, forecasting, schedule tracking and schedule changes. Studies at all levels are learning processes that develop confirmation of the work plan or identify the need for change as information becomes available. It is essential to identify potential changes as early as possible. The Study Manager will record issues as they arise, and develop a plan to handle them at the earliest opportunity. Each change will be analyzed to determine if it is required to meet specified production or quality requirements; contract-specified codes or standards; or specified project operability or maintainability. If the change is necessary to satisfy one or more these requirements, the Study Manager will consider it as a design development change and fund it, if necessary, from the contingency account. If the change does not meet any of these requirements, it will be treated as a scope change, and any resulting cost increase will be covered by the Owner’s contingency account. Examples of scope changes include work required by the Owner that is not part of the Study Engineer’s original scope; a change in the project execution philosophy that affects cost or schedule; and rework of an area that already meets the project criteria. The Owner’s team and the Study Engineer’s representatives will review potential changes at regularly scheduled meetings.

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3.0
3.1
3.1.1

ENVIRONMENTAL ASPECTS
Environmental Impact Statement
Introduction Environmental assessment and planning is a critical component of any successful project. Contemporary expectations for the overall environmental management aspects of a project include the full consideration of environmental concerns and issues from as early on in the project planning sequence as practical. “Life-of-Project” environmental management planning requires a serious high-level commitment on behalf of the Owner to ensure the necessary integration amongst engineering, environment (biophysical and socio-economic), construction and operations. Such planning and considerations ideally should extend back into exploration as the overall environmental performance of a company at exploration is noticed and remembered by many stakeholders by the time an Environmental Impact Statement (EIS) is produced on the preferred project at the completion of a definitive feasibility study (DFS). “Major” mining companies sometimes end up paying for the “sins” of “Juniors” and/or its own exploration activities and practices at the EIS review stage. It gets noticed when Owner conducts its activities in the way it should vs the way it must. Exploration is typically exempt from environmental assessment yet many “impacts” occur in this phase. It doesn’t take much to be better. The environmental material in this section of the course is presented with the EIS material first followed by the section addressing how you get set up to prepare the EIS. Although the EIS is prepared at the DFS stage it is extremely important on a critical path schedule to count backwards and understand what is involved from the Scoping study stage through Pre-Feasibility, Basic Feasibility to DFS to ensure a timely environmental assessment review and approval process. It is important to emphasize that environmental assessment is a process not a permit. The successful completion of the environmental assessment process typically enables the Owner to proceed to permitting for Project construction etc. Delays in integrating environmental considerations can only be problematic. The early integration of environmental considerations at the Scoping Study level allows for a strong defensible position at the stage when the EIS is under review and has to be defended. Environmental assessment started as a process whereby decision-makers can be assured the environmental implications of a project are fully considered before any irrevocable decisions are made. The Owner must carefully show it has integrated

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environmental considerations through the development of the preferred project, analysis of alternatives and the management of concerns and issues.
Scoping Study:

• • • • • •

Minimal field work needed Integration of engineering and environmental functions of the project team Desk top analysis, data gap analysis – information needs Start of the issues scoping process, issues tracking database Early understanding of environmental review and assessment process Early understanding of the permitting requirements (early works and start of construction) Early understanding of information needs and permitting requirements for early works (exploration, clearing, land tenure, permits to take water etc.) Establish relationship with regulators, resource managers and key stakeholders Transparency on environmental considerations with respect to alternatives to and within the project (sorting) Develop environmental management plan for the project

• •

Pre-Feasibility:

Information gathering (preliminary field work) to support application for permits, authorizations and approvals for further exploration and engineering early works needed to support analysis Continued refining of issues and concerns, further development of issues tracking database Prepare guidelines for the EIS (Internal)

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Preliminary planning/strategy for EIS, baseline data needs and commence long term needs, strategic use of models (Zone of Influence etc.) Refining of analysis of alternatives Further engagement with key regulators and resource managers, key stakeholders Strategic relationship development development/management well in advance of EIS

• • •

Support for early works programs

Basic Feasibility:

• • •

Complete environmental baseline studies/information gathering Strategic use of models to support the EIS Draft EIS development (mock-up), internal adequacy review, review baseline data needs Knowing what constitutes the “submission”…the EIS, the EIS and key supporting documents etc. (has implications on scheduling and availability of manpower) Adequacy of information review (internal) Detailed scheduling and choreography with timing for completion of DFS

• •

Definitive Feasibility Study:

Defensible EIS should be ready at the same time as the completion of the DFS and a go forward decision on the project

3.1.2

Environmental Assessment Basics Successful EISs and overall environmental management planning for a project is all about meeting the expectations of the review process and participants. There are no real “rules” and EISs that are successful in one jurisdiction may not meet the

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requirements of another. Moving environmental planning up in the project planning sequence allows for a better understanding of the requirements and thus the possibility of a more complete and defensible EIS and/or an understanding of potential hazards/risks due to known deficiencies. Requirements for supplemental information, additional studies etc. can delay the start of construction of a project and delay the environmental assessment process thus delaying ability to proceed to permitting. There are some fundamental components of any defensible EIS such as: • • • • • • Describe the potential adverse environmental effects Identify mitigation Identify residual adverse environmental effects Determine the significance of residual adverse environmental effects Determine if significant adverse environmental effects are likely Describe potential benefits and enhancement strategies

A successful EIS provides a balanced presentation of potential residual adverse environmental effects (“a statement of impacts”) and potential benefits. The EIS is the Owner’s contribution of information to decision-makers so they can make decisions in a timely manner. The EIS is one piece of information used by decision-makers in the environmental assessment and review process. 3.1.3 Layout of an EIS A typical layout of an EIS is provided as a handout. • 3.1.4 Annotated layout as a hand out of a generic EIS in Handout #1

Introduction (Handout #1) • Owner piece, corporate history and environmental performance (good and bad) etc., usually the best place to provide the context for the EIS and owner behaviour addressing contemporary notions such as sustainable development, biodiversity, and the precautionary principle

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• • 3.1.5

Environmental performance and stewardship Detailed table of concordance (EIS contents vs Guideline requirements)

Project Description (Handouts #1, #2, and #3) This chapter can become a real bottleneck in EIS production if it isn’t managed properly. It is usually the key chapter that requires Owner’s involvement and is often a crutch for environmental consultant’s…”I can’t do my analysis because the Project Description isn’t complete”. The Project Description is usually the last chapter to get Owner sign off and methods are needed to de-link the completion of the Project Description from the EIS production. • • • • Policies, practices and procedures Analysis of alternatives Scope of Project for detailed effects analysis Clear descriptions of the phases of the project “what are we assessing?” (Scope of Project) o Construction o o o o • Operation Decommissioning (Closure) Post-decommissioning (Post-Closure) Accidents, malfunctions and unplanned events

Scope of Assessment o Other projects and activities

3.1.6

Environmental Setting • The requirements for this section are highly variable. It sets the context for issues scoping, VEC selection and contributes to overall EIS transparency. It can be used to present highly integrated information (landscape perspective, holistic views, processes and pathways), depending on the expectations. Owner’s chance to demonstrate it has an adequate knowledge base to conduct a balanced environmental assessment

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Compare Doris North Gold Project EIS chapter 2 with Voisey’s Bay Mine/Mill EIS. Both worked by meeting expectations but are very different chapters

3.1.7

EH&S Management System (Handouts #4 and #5) This is likely the key chapter in an EIS. This is the chapter that makes sense of it all. • Plans supporting the system that address the EH&S needs of the project based on the detailed environmental effects analysis This is why you do the EIS and how you use the findings to improve EH&S performance Key Plans such as Environmental Protection Plans (EPPs), Occupational Health and Safety plans, Emergency Response and Contingency Plans and Closure Plan EPPs are very important to show Owner’s understanding of the environmental rules and best practices and its EH&S performance expectations and those of all employees, contractors and sub-contractors

3.1.8

Issues Scoping and Consultation • • • • Project/environment interactions Identification of interested parties, stakeholders, regulators and resource managers Concerns/issues tracking and management Bringing the reader/reviewer along to a logical position on how the EIS is going to be focused on VECs

3.1.9

Selection of Valued Environmental Components (Handouts #6 and #7) This is another key chapter in the set up of an EIS. VECs can really be anything but need to be reflective of the potential project-environment interactions and the issue scoping process. VECs need to be carefully selected as these become the focus for the detailed environmental effects analysis. VEC selected is a strategic decision in an EIS. Handout #6 is an actual chapter from a recent EIS in Canada (Doris North Gold Project, Nunavut).

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• •

A VEC is something that the environmental effects analysis will focus on The concept of VECs is not new and reflects a general acknowledgement that it simply isn’t practical to assess everything in the environment to the same level of detail. We place values on things and typically Peregrine Falcons or Grizzly Bears are more valued than mosquitoes. Cartoon showing information inputs into VEC (Handout #7) Integration and justification, VECs need to be justified and logical Be careful when selecting a VEC, some VECs are better than others (walleye vs a lake, Peregrine Falcon vs Raptors etc.) VECs and the criterion used to determine significance may be something you are required to monitor or do follow-up studies on. Again, be careful and know what you and/or your consultants are doing Try to reduce the number of VECs. Based on the EA methodology, each VEC will then have 7 “impact” predictions that may have to be defended. Do the math…10 VECs result in 70 “impact” predictions

• • •

3.1.10

Environmental Assessment Methodology (Handout #8) Whether the VEC represents some component of the biophysical or socio-economic environment, it should be treated the same from an environmental assessment methodology perspective. This is an important feature of a consistent and balanced EIS. Handout #8 is an actual chapter from the recent Doris North Gold Project EIS and reflects a robust and defensible approach to conducting a defensible EIS in a contemporary framework. Remember, it is hard to defend a poor EIS. • • • • Baseline studies Use of models (zone of influence, predictive) Traditional/Local Knowledge Approach to considering cumulative environmental effects

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• • • 3.1.11

Describing potential environmental effects Determination of significance Residual adverse environmental effects

The invisible “line” in an EIS (Handout #9) • Layout of an EIS showing set-up side, (“break”) then environmental effects analysis side

3.1.12

Treatment of a Valued Environmental Component (Handouts #1 and #9) A subtle but very important aspect of a successful EIS is the layout and presentation of materials to help the reviewer rather than frustrate the reviewer. The suggested layout results in virtually “stand alone” chapters for each VEC so all the information the reviewer needs on Caribou, for example, is contained within one chapter. Reviewers get aggravated when they have to keep on flipping back and forth in a document or amongst many documents to follow the logic. Reviewer fatigue is real. • • • • • • • • Show layout All VECs exactly the same Separate steps Existing conditions, boundaries, environmental assessment area Environmental effects analysis, mitigation, enhancement measures Residual adverse environmental effects – determination of significance References Appendix showing effects analysis: factors to be considered (magnitude, duration frequency, reversibility, socio-environment context etc.)

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3.2

Environmental Elements and Planning
NOTE: This section will be supported by a presentation to be made available at the Conference Workshop. There aren’t any “Handouts” specifically supporting this section of the topic.

3.2.1

Introduction
Getting in Shape

The environmental components of the project team need to achieve the following: • A highly defensible EIS that is “match cast” with the preferred project (DFS) in such as way as to reduce or eliminate time between when the DFS has been completed and the EIS is submitted for review; and Protect the schedule by being able to address any requirements for supplemental information following the review of the EIS to clarifications and analysis. Supplemental information requests that require additional environmental baseline data can cause significant delays in the environmental assessment process

3.2.2

EA Planning and Strategy Getting ready for the EIS: • Guidelines (internal), style guide for authors. Guidelines and expectations are easily anticipated with a high degree of confidence. Don’t fall into the trap of waiting for guidelines from the regulators. Craft your own internal guidelines that will serve to provide justification and context for the work until such time as official guidelines are produced as appropriate in the regulatory regime. This is a calculated hazard not a real risk. It is a risk only if the planning is not supported from the top on the Owner’s team and the commitment to the environmental piece is weak. It is better to be on the conservative side (usually more $$$, though) than have a serious delay due to real deficiencies in baseline for example when final guidelines are produced. Costs vs time is the balance being sought Requirements for baseline studies or Technical Data Reports (purpose, methods and data only…no interpretation, conclusions or recommendations – only adds inconsistencies and liabilities), when the “crunch” comes down (as it always does) on EIS production you don’t want your key authors tied up on meaningless and costly “fluff” on supporting documents

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Tools and “formwork” for authors (Handouts #1 and #8) to ensure a high level of consistency amongst a number of contributors. Allows EA manager to easily check progress and completeness of individual work, allocate additional support or resources as needed. Key Project Description information (Handout #3), VEC structure and EA methods (Handout #8) Full consideration for the use of strategic models to support environmental effects analysis (Zone of Influence [ZOI] studies, future conditions etc.) Manage your consultants, know what they are doing and why. A good Ownerconsultant relationship requirements an involved and strong Owner Work Plan Development: scope of studies, standard operating procedures (SOPs) etc. On complex projects on a short time line it is prudent to develop a baseline studies work plan (purpose, scope, deliverables, schedule etc.) with standard operating procedures in case you need more than one supplier/consultant collecting the same type of data. Such a Work Plan is also useful in providing to key stakeholders as information only (not for review and comment) so you can show information sharing in a collegial sense

3.2.3

Environmental Baseline Studies Why you do environmental baseline studies. There are a wide range of purposes for environmental baseline studies in addition to the obvious with respect to supporting the environmental effects analysis. • • • • Issues scoping To meet future and unknown expectations of reviewers/guidelines Strategic use of models (practical limits, ZOI, future conditions) Modification of project design/alternatives analysis (environmental considerations before irrevocable decisions are made) Consideration and evaluation of alternatives Advance EIS set up and production (VEC selection)

• •

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• •

Functional EH&S Management System (Handouts #4 and #5) Currency – collegial relationship with resource managers, stakeholders information sharing Design and Operational flexibility: engineer “proofing” the EIS schedule. A strategic approach to environmental baseline can accommodate significant changes to the general arrangement of facilities late in the Feasibility stages. “We decided to put the airstrip over there…is that a problem?” Cumulative environmental effects assessment Minimizes risks beyond the EIS submission when addressing supplemental information requests, e.g. another spring migration survey for something really affects the schedule if the information request comes to Owner in September.

• •

Message: You can go a long way on a good baseline 3.2.4 Owner Strength Owner position of knowing more about its project and the environment where the project will be developed than anyone else (strength and confidence, respectful development). 3.2.5 Schedule Scheduling and “choreography” of a successful EIS requires a high level of engagement and integration between engineering and environmental inputs into the overall project. • • • • • Critical path Supplemental information needs Dead time or Owner time, need to minimize Taking calculated risks, conservativeness Time is the driver

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3.3

Acknowledgements:
Permissions to use referenced materials were obtained from: • The Doris North Gold Project EIS (Nunavut Impact Review Board) provided by Mr. David Long, V.P Legal, Miramar Mining Corporation, North Vancouver, BC; and The Voisey’s Bay Mine/Mill EIS (Joint EA Panel Review by: Government of Canada, Government of Newfoundland and Labrador, the Labrador Inuit Association and Innu Nation) provided by Mr. William Napier, V.P. Environment and Health, Inco Limited, Toronto, ON.

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4.0
4.1

GEOLOGY, EXPLORATION DATA AND RESOURCE ESTIMATES
Regional and District Geology
The feasibility report should demonstrate a high level of understanding of the regional and district geology. Existing reports discussing the regional and district geology should be summarized. These aspects must be well understood because the will typically have an impact on the location and geometry of the mineralization. The auditor will review these documents to judge how well these aspects of the deposit are understood. This should be accomplished before the auditor arrives.

4.2

Deposit Geology
The feasibility report should demonstrate a very thorough understanding of the geological setting of the deposit and contain a detailed summary of the geological setting of the deposit. At the feasibility level, the lithology, alteration, structural geology, and mineralogy of the deposit should be very well understood and adequately represented on cross sections as well as surface and bench maps. The industry is moving from working on paper to using only the computer screen or a projector. The latter are acceptable for simple displays of data; however, paper plots provide the opportunity for the modeler, checker and auditor to make permanent annotations. This is best practice. Paper plots are very useful when viewing complex geology and comparing adjacent sections or plans using a light-table. Sometimes viewing of drill holes, assays and geological models in three dimension on the computer screen provides important clues for understanding the geometry of mineralization and ore controls. Cross sections should be checked for consistency of interpretation between geological drill logs, surface mapping, database, and report descriptions. Interpretations should be consistent from hole to hole and from section to section. In general, best practice is to interpret the lithological, alteration, and other boundaries on orthogonal sections and plan maps and then reconcile those views. Interpretations based on only one section orientation typically create strongly biased geological models and are not acceptable. This is an iterative process that can be tedious; sufficient time should be allocated to make sure that a good product can be achieved. It is easiest when all holes are drilled so as to lie on sections. Interpretation is then a matter of connecting the dots. When this is not the case, the cross sectional interpretation must reflect projection of contacts indicated in the holes to the section line. This can be a difficult exercise when the contact reflects folding, or the strike is not parallel to section. Best practice is to prepare sections that are parallel to holes, even if this results in many sections with varying orientation.

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Interpretations tend to be conservative where data are sparse. Often orebody or other key contacts are not extended halfway to the next hole, but a lesser distance. Very often it is helpful to use a light-table and use the interpretation on adjacent sections to refine the interpretation on the intermediate section, particularly where there is a local absence of data. Unfortunately, when the interpretation is being done on the computer screen, this is difficult to do. Checks and audits of the geological interpretations performed during the feasibility study should include the following: • Cross sections, plans, and long sections plotted on paper, at suitable scales, should be reviewed. Sections and plans should show the drillholes, primary logged or assay data, and the interpreted contacts. It is useful to show patterns for digitized polygons. This provides a check that the polygons are closed. Have discontinuities been adequately reflected by faults, and have fault planes been superimposed correctly? Is there a feasible alternative interpretation, for example folding versus faulting? Does a nearest-neighbor or polygonal projection of rock types show a similar volume to that reflected in the interpretation? Do orebody or grade zone boundaries reflect lithological, alteration or structural controls, particularly where there is sparse or absent data?

During the last 10 years, three-dimensional solids models have become a popular alternative to use of sections and plans, particularly where the contacts are relatively simple. Usually a surface is snapped to contact intersections in drill holes. Where contacts are irregular, construction of a reasonable three-dimensional solid can be very time consuming. Phantom holes or contact points must frequently be added to obtain a reasonable surface. Alternatively solids can be constructed from digitized perimeters on a set of close-spaced plans or sections. Where there are several rock types or zones being modeled, care must be taken that overlaps and gaps do not occur in the finished product. Checks include: • Existence of gaps and overlaps in models when cut by sections and plans

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Use of color-coded drill holes to see that contacts in the drillholes are honored by the wireframed surfaces.

A popular short-cut is to use extrusion models, where the digitized surfaces are projected orthogonally halfway to the next plan or section. In these cases contacts are necessarily projected vertically or horizontally. Problems may occur when the contacts have a different attitude. Sample or lithological intervals near contacts, particularly in angle holes may be improperly tagged within the extruded solids. Checks and audits should measure the amount of misclassification and its possible impact on resource estimation. Extrusion models are useful where drill hole spacing is relatively dense and the geometries of individual ore types are complex, therefore increasing the probability of gaps and overlaps in a three-dimensional wireframe approach.

4.3

Mineralization and Alteration
The style, intensity, and extent of mineralization and alteration within the deposit should be well understood and documented with summary descriptions in the feasibility report. Where there are more than one style of mineralization or alteration, each style should be described and the inter-relationships between styles should be understood and documented. Relationships between mineralization and alteration should be identified and described. These relationships should be demonstrated on cross sections and maps at appropriate scales.

4.4

Ore Controls
Why is the deposit where it is and what controlled deposition of the mineralization? The answer to that question is the fundamental ore control. By the time that the feasibility study is started, ore controls should be well understood. By completion of the feasibility study, few questions should remain. Does this mean that we need to know the isotope and fluid inclusion history? No. What this means is that we need to know whether mineralization is controlled by structure, lithology, permeability, etc. If it is structurally controlled, what are the preferred orientations? If lithology controls; which lithology is the most important and what is the orientation of that lithology? These questions must be answered in order to adequately interpret the mineralization in three dimensions. Significant gaps in understanding should be tested by drilling, analysis, or mapping during the feasibility study; none should remain at the end of the feasibility study. The feasibility study should contain detailed descriptions of ore controls and the ore controls should be adequately portrayed on cross sections and maps.

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The feasibility report should summarize the conceptual depositional model and the current thought regarding the genesis of the deposit in the context of the resource model (e.g., is the model at odds with the concept?). How has the genetic model and the geological interpretation changed over time? Again, the answer to these questions will help to adequately interpret the outlines of the mineralization in three dimensions. Mineralogy as it relates to zoning and processing should be well known and documented. Mineralogy zones can, and frequently do, provide important information related to the ore controls. Detailed mineralogical studies also provide important information relating to extraction processes. Deleterious minerals must be identified and the concentrations of deleterious elements associated with those minerals quantified. This is typically done in conjunction with the metallurgical team.

4.5

Geological Model
The geological model is something more than a few lines on a schematic cross section on the back of a bar napkin. It should be an integrated view of the rock types, alteration, mineralization, estimation domains, metallurgical domains, etc. presented, at appropriate scales, on cross sections and plan maps and accurately portrayed in the block model. Geological interpretations must be reviewed for consistency between plan maps, cross sections, and long sections and corrected as appropriate during the feasibility study. Assignments of lithologies, alteration, etc., in the block model must be reviewed for consistency with the interpretations. The methodology used for construction of lithological, alteration, and grade models must be reviewed and summarized. Review the models for adequacy for resource modeling purposes. Confirm that the variables to be estimated in the resource are adequately modeled. Are there attributes other than grade that should be considered (density for example)? How many different sources exist? Do all the data originate from drilling only? Much of this work is typically called exploratory data analysis (EDA) and it should be documented and summarized in the report. The EDA report should be appended to the feasibility report. Examine records of previous production and mining history. Identify areas of old workings and possible interference of old workings with resource model and current mine plan. The size and location of underground workings must be carefully documented where possible. It is not always possible to locate old workings prior to

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mining. Many of those workings were never mapped. Estimate and discuss the effects on grade and tonnage of the deposit resulting from removal of the material.

4.6
4.6.1

Exploration Data
Drilling Campaigns and Drilling Conditions The feasibility report should describe the exploration history of the deposit in detail. This summary should include who did the work, when it was done, the type and amount of work performed, and summarize the results. Where known, the type of drill equipment used, bit diameters, and drilling conditions should be discussed. (For example, one campaign utilized RC drilling with water injection from the collar. Others utilized only HQ core.) Drill holes produced by each operator should be tabulated in an appendix to the report. This summary should include descriptions of any resource estimates produced by previous operators. Known problems with any particular drilling campaign should be discussed and remedies for problems described in detail. Delineation drilling should be complete when the feasibility study complete. Problem areas will have been identified during earlier studies and adequate drilling performed to resolve problems. Significant geological uncertainties should be eliminated by adequate drilling. During the course of the feasibility study and prior to resource estimation, the following should be reviewed in detail: Drill Hole Orientation. Is the orientation appropriate for the structural geological regime, that is, are the holes drilled down or across structures? Vertical holes are normally adequate for flat-lying deposits, but angle holes should be used for any deposit that is suspected of having any type structural control. If there are questions, adequate drilling should be performed to determine that the drilling is adequate and that the orientation of the drill holes will not adversely affect the resource estimate. Sample Handling Procedures. The procedures at the drill should be evaluated carefully during periodic visits by senior geological staff to the drill(s). Is the core properly placed in boxes, are RC cuttings properly split and labeled? Is the RC split and weight recorded properly. Is the splitter (for RC) level? Logging Consistency. Randomly selected drill core and or cuttings should be inspected to verify consistency with the geological logs and that the core/cuttings were logged according to the protocols used at the time for all drill programs. If discrepancies are discovered, identify and report the reason; if the problem is significant to the resource estimate, the core or cuttings should be relogged prior to

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inclusion in the feasibility study database. The effects of improper alteration logging, for example, should be evaluated. If alteration is not part of the model, then problems in logging will not translate to problems with the resource estimate. In many projects, logging protocols change with time (generally due to improved knowledge of the deposit). If this has happened, the reinterpreted lithologies, alteration, etc., from earlier drilling programs must be checked for consistency with the current protocols. Drill Density. Is the density of drilling adequate to support the resource estimate? This varies with deposit types; 100 m-spaced holes may be adequate for porphyry copper deposits, but are probably not adequate for massive sulfide deposits or narrow vein deposits. Is the mix of core and RC drilling adequate to provide necessary structural and density data for the deposit? For most deposits, a minimum of 10% core is required for adequate coverage. Are RAB (rotary air blast) or similar drill system results included in the resource estimate? If so, what is the possibility of contamination of those samples? If some holes, RAB holes, for example, are excluded from the resource estimate, is there adequate coverage by other drill types? Sample Interval. The logic utilized to determine sample intervals should be ascertained and drill logs checked for consistency of sampling practice. Regular, twometer-long sample intervals are probably adequate for porphyry deposits, but may be much too long for narrow vein deposits. The sample interval must be appropriate for the deposit. Geotechnical Data. Procedures used to collect geotechnical data during geological logging should be reviewed and verified if possible. Although geotechnical contractors are frequently used for this purpose, routine geological logging can provide valuable geotechnical data if the logging is performed and recorded properly. Especially important is how core recovery is measured and recorded. Metallurgical Samples. In most projects, metallurgical samples are collected during the exploration process. Locations and methods of collecting and transporting of those samples should be verified as appropriate. The distribution of the samples must be evaluated. Are all of the ore types adequately represented spatially? Are low-grade areas within the deposit adequately represented? 4.6.2 Trenching If trench data are to be included in a resource estimate, the locations of trenches and samples must be precisely surveyed. Sampling methods and sample sizes must be documented. Carefully cut channel samples are generally adequate to be included into the resource estimate. Random chip or continuous chip samples generally should not be included in the resource estimate.

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4.6.3

Underground Sampling As with all data to be used in the resource estimate, the location of underground samples must be well documented. Sampling methods and sample sizes should be recorded. Channel samples can generally be included in resource estimates; however, chip or continuous chip samples, are generally not adequate for resource estimates.

4.7
4.7.1

Sampling, Sample Preparation and Assaying
Sampling Protocols Sampling protocols for all sampling programs should be summarized in the feasibility report. Deviations from the protocols should be discussed and the reasons for the deviations clearly explained. Unique sampling problems, for example, RC drilling at 40o below zero in a blizzard, should be described, deviations from the sampling protocols discussed, and the impact of the deviation analyzed. Detailed sampling protocols should be appended to the feasibility report. Sampling protocols for core should include the sample interval, whether the samples are continuous, even intervals (2 meters for example), or controlled by lithological contacts, how much core is taken for the sample and how much is archived. If no core is archived, that is, all of it is consumed for analysis, photographic records must be made and included with the drill logs. Sampling protocols for RC drilling are, of necessity, somewhat more complex. They must outline the procedures used to collect and split the sample in wet and dry conditions, how recovery is measured, how much is split for analytical samples, how much is split for archived samples, and how the sample is bagged, tagged, and transported to the analytical laboratory. The protocol should clearly explain procedures for leveling splitters, when and why capping rotary splitter chambers is appropriate, leveling splitter tubes, how recovery is to be calculated, etc.

4.7.2

Sample Preparation Protocols Sample preparation protocols should be summarized and results of audits of the sample preparation laboratory described. Are the protocols appropriate for the material prepared? Review procedures used to package and ship samples. Audits of the sample preparation laboratory should be performed regularly to confirm that the protocols are performed as written. Audit reports should be written and become part of the project record. During the audit, quality control records, such as

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periodic screen tests, are collected and analyzed to confirm conformity with the protocols. Summaries of audit findings should be included in the feasibility report and the complete reports appended to the feasibility report. In the case of a nuggety gold deposit, has an appropriate sampling study been performed to optimize the sample preparation procedure? If not, the rationale for not doing the study should be discussed and results of testwork performed showing that it was not necessary should be presented. There is a tendency for “one size fits all” sample preparation in the industry. While this may work well for most deposits, enough projects have found that standard sample preparation was inadequate to indicate the need for detailed review of sampling by a qualified professional for most projects. 4.7.3 Assay Protocols and Procedures The feasibility report should contain a detailed summary of the assay protocols and procedures used for all samples that are included in the feasibility database and complete protocols should be appended to the feasibility report. Protocols and procedures should be appropriate for the type of mineralization and mineralogy present in the deposit. Analytical procedures must have precision and accuracy consistent with the type and grade of mineralization. Aqua regia digestion followed by MIBK extraction for gold, for example, is rarely, if ever, adequate for resource estimation; metallic screen assays should be considered for a deposit with high nugget effect. Samples that have not been analyzed with appropriate procedures must be reassayed or re-collected. Analytical laboratories should be audited periodically and summaries of the audit results included in the feasibility report with complete audit reports appended to the report. During the audits, written lab procedures should be reviewed and those procedures should be observed. General laboratory practice should also be observed and reported on. A laboratory that does not follow the written procedures or that has generally poor procedures overall should be replaced. The laboratory’s internal QAQC procedures should be reviewed and checked for adequacy. If the procedures are not adequate, then they need to change or the laboratory is changed. Most laboratories will insert a duplicate sample on the order of 10 to 20% of the time, insert a standard at about the same rate, and carefully monitor those results. These data should be made available by the laboratory and should include failure as well as successes. If not, consider changing laboratories. Calibration histories for instrumentation should be available from the laboratory and should be reviewed. Too frequent or infrequent calibrations may indicate problems at the lab that require added scrutiny.

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If results from any laboratory are questionable, a portion of those samples should be sent for check assaying at a second laboratory without hesitation. If problems are discovered, all of the samples involved should be reassayed using appropriate procedures and QA-QC. Historical data may pose problems in that analytical procedures may not be identified on assay certificates, assuming that the certificates exist. Results of unidentified analytical procedures should be verified by reassaying approximately 5% of the samples using the protocol currently used. If those samples are not available, approximately 5% of the holes should be redrilled for verification. If the results compare well, the data may, under most circumstances, be used for the resource estimate. If the results indicate significant biases or other differences, the data should be discarded and reacquired by drilling or other sampling methods.

4.8

Quality Controls on Exploration Data
As a result of various scandals in the mining industry, quality assurance-quality control (QA-QC) programs have become an important aspect of any analytical program in the mining industry. Problems with analyses can be detected and corrected in a timely manner and the quality of the overall data can be evaluated. Quality control refers to the ongoing, real time evaluation of the quality of the data; quality assurance refers to the body of data that describes the overall quality of the data. Quality control is a dayto-day process in which all of the control samples are evaluated as they are returned from the laboratory.

4.8.1

Sampling QA-QC Sampling QA-QC includes weighing of RC samples, measuring core recovery, weighing samples sent to the laboratory, etc. These actions are aimed at insuring sample quality and integrity. All RC samples should be weighed at the drill and a recovery calculated using a theoretical density and the calculated volume of the hole. Similarly, core should be carefully measured to determine the recovery. The splitter used for splitting RC samples All samples sent to the laboratory should be weighed prior to shipment and the laboratory should then weigh the samples and report the weight. This is aimed at preventing sample swaps and at detecting them if they occur. Sample (bag) swaps are a constant nuisance and source of errors. Anything that minimizes this type of error is useful. Bar codes, attached at the drill (RC) or core shed (core) on all of the samples is also a useful way to minimize bag swaps if the laboratory has the ability to read the codes. Where possible, the bar codes should be adequately unique so that the laboratory does not have to use a “laboratory number” that then is back translated

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when the analytical work is complete. Although this is a common practice, it has been, and will continue to be, a source of errors (typically bag swaps). 4.8.2 Sample Preparation QA-QC Crushed samples should be screened at a rate of about 1 in 20 to 50 samples to insure that the crusher is working properly. Those data should be compiled and charted. Similarly pulverized samples should be screened at a similar rate and the results compiled and charted. The laboratory may be somewhat reluctant to do this. They must do it to insure that the sample preparation protocol is being followed. Any deviations form the sample preparation protocol must be corrected immediately and documented. The screen data should be obtained from the laboratory summarized in the feasibility document. 4.8.3 Analytical QA-QC Analytical QA-QC refers to all QA-QC procedures related to a sample from collection to final inclusion of the results in the project database. In this discussion, precision and accuracy are discussed. Precision is the reproducibility of the data and accuracy refers to the nearness (on average) of values to some “best” or “actual” value. Precision, actually, the lack of precision is easily quantified; accuracy is somewhat more difficult to quantify, but can easily be evaluated in a relative sense. Precision is rarely, if ever, directly measured. Imprecision is normally measured and reported. Sample preparation, in theory, causes a reduction in variance within the sample with each preparation step. This reduction in variance must be tracked and evaluated to determine if the sample collection and preparation protocol is adequate for the materials being sampled. In porphyry copper deposits, this may not be a serious concern, but must be tracked. In gold deposits, especially those containing coarse or free-milling gold, it is critical. An improper sampling and sample preparation protocol can produce extremely erratic and fundamentally useless analytical data, no matter the care taken in the analytical step. Control samples for sample preparation and analytical QA-QC consist of various duplicate samples, blank samples, and standard samples as well as check assays sent to a second laboratory. Those samples are discussed below.
Duplicate Samples

Duplicate samples are collected at various stages of the sample preparation and analytical process. Each sample type is collected in order to evaluate specific aspects

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of the process. In general, four types of duplicates are adequate; field duplicates, crusher duplicates, blind duplicates, and pulp duplicates.
Pulp Duplicate Samples

Pulp duplicates are used to determine the analytical precision of the specific analytical procedure used for analysis of geological materials. For this type of sample, two aliquots of a sample pulp are analyzed sequentially in the sample stream. Analysis of these data will provide the best estimate of the analytical precision of the analytical procedure in question. These samples should have the least amount of variance (highest precision) and are the basis for evaluation of the other types of duplicate samples which will have somewhat higher variance (lower precision). These samples must be taken from the same pulp and analyzed in the same batch of samples. It is best if they are analyzed sequentially to eliminate the possibility of mistaking identities if the samples are inserted randomly. These samples are typically inserted by the analytical laboratory at the analytical stage. They should be inserted at a rate of at least 1 in 20 samples and each analytical batch (generally 20 to 30 samples) must contain at least one pulp duplicate. Most laboratories insert pulp duplicates at a rate of 1 in 10 samples. These data must be collected from the laboratory and analyzed as part of the routine QA-QC program.
Blind Duplicate Samples

Blind duplicates consist of pulps of previously analyzed materials that are renumbered and reinserted into the normal sample stream at some time after the original analysis. These samples are inserted to aid in detection of drift of the calibration of laboratory instruments, detection of sample handling problems, and other problems at the laboratory. All pulps should be obtained from the laboratory soon after the original assay is completed. Those pulps can then be used as blind duplicates. These samples will normally exhibit somewhat higher variance than the pulp duplicates. That increased variance typically reflects drift of analytical instruments, changes in reagent concentrations, etc. These samples can also aid in detection of laboratory reanalysis of duplicates that have failed their internal QA-QC. Laboratories will sometimes re-assay only those duplicate samples that fail their internal QA-QC, providing a somewhat distorted view of the actual precision of the analytical procedure. These samples should be inserted at a rate of 1 in 20 samples.

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Crusher Duplicate Samples

Crusher duplicates (Sample preparation duplicates) are splits of the crushed material taken before the sample is pulverized. These samples are used, primarily, to evaluate possible sample preparation problems. Sample preparation problems typically arise in gold projects, but problems can be seen in base metal projects. The sample is split after the crusher and then both splits are pulverized and analyzed normally. These samples will exhibit higher variance than either the pulp or blind duplicates. This variance is a combination of crushing and splitting, sample handling, and analytical variances. During the early stages of a project, these samples should be collected and inserted into the sample stream at a rate of 1 in 20 samples. This insertion rate will aid in detection of any sample preparation problems that may occur and allow them to be resolved. After the sample preparation protocol has been verified, typically after several tens of these samples have been analyzed, it is normal to reduce the number of insertions to 1 in 50 or 100. This allows the sample preparation to be monitored on a continuing basis.
Field Duplicate Samples

Rig (Field) duplicates are collected at the RC drill when the sample is split or in the core shed when core is split. RC rig duplicates are collected when the samples are split the first time, wherever that occurs. The two splits are then sent through sample preparation and assaying in a routine manner. Core field duplicates are collected when the core is split. At the current time, there seems to be a growing consensus that the core should be split and one-half sent to the laboratory for analysis. The other half is then split and a quarter core sent to the laboratory as the field duplicate. This upsets geostatisticians because of the difference in sample size and because the two samples are not, in fact duplicates, but are individual samples separated by the thickness of the core saw. Some projects send both halves as a duplicate sample and photograph the core as a record of what was sent to the laboratory. Both procedures are acceptable at this time. It is very important to document the split sizes for both RC and core. These samples are normally dominated by the geological variance inherent in the rock. RC samples typically exhibit substantially less variance than core samples because of mixing that occurs during sample recovery. Split core samples are basically two different samples separated by a very small distance. These samples are useful for evaluation of sampling problems and for evaluation of short-term variance and correlation by geostatisticians working on resource models.

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These samples are normally inserted at a rate of 1 in 20 samples. Some projects reduce the number of insertions to 1 in 50 samples after several tens of results have been obtained.
Standard Reference Materials

Standard reference materials (standards) are used to monitor accuracy and drift in the analytical equipment. These materials should have very well known metal concentrations and should be very homogenous. Three types of standards are available, blanks, internal standards, and certified reference materials. Blanks are a type of standard that contains none of the analyte in question. It should be truly blank. Internal standards are typically produced from materials found on the project site. Certified reference materials (CRM’s) are commercially produced standards that have been rigorously tested by numerous laboratories and a certificate of analysis is issued by the company or organization that produced the standard.
Blank Samples

Blank samples are typically inserted into the sample stream at three locations. The first location is at the drill rig. These blanks are inserted by the rig geologist, typically following suspected high-grade samples to determine if sample preparation equipment is contaminating samples. A second location is at the crusher where blanks are inserted to determine if the pulverizer is contaminating samples. The third insertion point is at the analytical stage where blank samples are analyzed as any other pulp. Blanks should be inserted as needed (at the rig) or as part of a normal standards insertion program which normally requires 1 in 20 samples be a standard. Each analytical batch should include at least one blank. Blanks should not contain any of the analyte in question, thus any result more than about 5 times the detection limit is suspect.
Internal Standard Samples

Internal standards are typically produced from materials on the project site. Reject RC cuttings, coarse core rejects, channel samples from outcrops, etc., all are candidates for internal standards. The sample should be crushed and pulverized in quantities that allow for long-term use of the standard. This normally means collecting 15 to 50 kg of material, crushing it, and then pulverizing it in a rod or ball mill (a service provided by many commercial laboratories). The pulverized sample is then analyzed by several laboratories and a best value is determined.

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Homogeneity is confirmed or not during the process. One commercial laboratory places the sample in a rod mill for several days and after about 2 days, begins collecting and analyzing about 10 samples of the resultant pulp every day. The milling continues until the sampling shows that the pulp is homogenous. Other laboratories mill the sample for several days and then perform a homogeneity test which requires very careful analysis of 50 to 100 samples of the pulp. Limited testwork suggests that the standard must be pulverized to 100% passing 200 mesh to be truly homogenous. Screening of the pulp is normally required to produce 100% passing 200 mesh. Either process is adequate so long as the standard can be shown to be homogenous. If it is not homogenous, it can not, under any circumstances, be used as a standard and must be discarded or reprocessed and retested. This is a bit of a problem for gold samples containing more than a few ppm Au. Cu samples do not normally present a problem. The best value can be determined many ways, but a common procedure is to send 1 or 2 aliquots of sample to several labs and then average the results after outlier exclusion. This gives a good approximation of the best value and the standard deviation can be used as the basis for limits. There is no generally accepted way to calculate the best value. A somewhat simplistic approach is to calculate the average and standard deviation of the data, remove all data outside three standard deviations from the mean and then re-average. That value can then be used as a best value. The range of values considered to be within practical limits is another value that is somewhat controversial. Some practitioners use confidence intervals, others use two standard deviations from the mean, some use three standard deviations from the mean and others use other statistical measures. A somewhat simplistic, but practical and defensible, procedure is to use two standard deviations from the mean calculated when the best value was calculated. This simple approach will flag any samples that differ significantly from the best value which is the purpose for using standards. It is most efficient if the laboratory pre-packages the sample in packages that are sized to the type of analyses required. Two assay ton analyses require 75 g aliquots; total and soluble copper assays require 2 to 5 g aliquots. Most laboratories will use a rotary splitter (highly recommended) to split the samples. The pre-packaged samples are randomized, numbered and inserted into the sample stream.
Certified Reference Materials

Certified reference materials (CRM’s) are commercially produced standards with well known analyte concentrations and well characterized homogeneity. These materials are typically quite expensive and are available from a number of sources. They are typically available in bulk or pre-packaged to user specifications. These materials

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cover a range of sample types, analyte concentrations, deposit source types, and cost. CRM’s should be chosen to match the deposit type and oxidation state of the material to be analyzed.
Use of Standards

Standard samples should be inserted at a rate of 1 in 20 samples. This insertion rate will typically have a standard in every analytical batch (20 to 60 samples depending on equipment). This rate is minimum. Additional standards can be inserted whenever they may be useful. A typical project should have at least five standards (including blanks) that are in use at all times during routine analytical work. The standards should cover the entire grade range expected, with the possible exception of very high-grade samples. A general guide for the grades of samples required: • • • • • Blank or zero grade sample Expected cutoff grade Expected low average grade Expected average grade Expected high average grade

These suggestions are a minimum and assume one analyte. Additional standards are required for additional analytes. In a copper-molybdenum project, for example, both copper and molybdenum grade ranges need to be covered. At the present time, there is a very limited selection of certified molybdenum standards. Similarly, if soluble copper is required, some of the standards should contain measurable soluble copper in the grade range expected. When inserting standards, it is generally best if the standards reasonably match the oxides state and grade of the surrounding samples. This is not always possible. In the event that the laboratory identifies the standards that are inserted (they frequently do) and “adjust” the values, use blind duplicate samples with similar color and analyte concentrations to replace a standard or use a duplicate with a similar CuT

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concentration and a very different Mo concentration, for example. This allows for discovery of “adjustments” to standards. It does not happen often, but it happens.
Check Assays

Check assays, those samples sent to a second lab for analysis, are a very good way to evaluate the overall accuracy of the primary laboratory. One in 20 samples should be sent to a second laboratory for analysis. The samples, ideally, should be every twentieth sample from the first sample to avoid selection bias which occurs when only ore-grade samples are selected. The average grade of re-assays of high-grade samples is always lower than the original average. Check assays are also used to detect and evaluate bias between laboratories. Bias of more than about 5% is cause for concern and action.
Evaluation of Analytical QA-QC

Analysis of control data should be made as simple as possible. This allows the process to be performed very quickly and in real time. The following discussion provides a simple and reliable methodology for identification of problem samples and analytical batches. Other, more complex methodologies exist, but are generally not significantly more reliable.
Duplicate Sample Data

Graphical methods are possibly the quickest way to evaluate the precision of duplicate sample pairs. This procedure produces graphs that allow the data to be quickly visualized and problems highlighted. The first graph is a simple X-Y graph that plots the maximum value of the duplicate pair (Y axis) against the minimum value of the duplicate pair (Y axis) disregarding which is the original or duplicate assays. This is acceptable because there is no dependence of one sample on the other. This plot allows all of the data to be plotted on the upper side of the X=Y line which allows evaluation of the scatter and possible outliers by the use of a warning line. The warning line is: y = 1.1x + 0.030 where 1.1 is a slope that approximates + 10% relative error and the constant, 0.030, is approximately 30 times the normal detection limit for CuT, CuS (Acid) and CuS (CN) above which precision is normally somewhat constant. The constant for Mo is typically 30 ppm which is 30 times the normal detection limit. Samples that fall above the envelope formed by the warning line and X=Y need to be evaluated as possible outliers. Figure 5.1 is an example of this type of plot.

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The second graph (Figure 5.2) plots the relative error versus the cumulative frequency of relative error where relative error (RE) is defined as:
2*(a-b) RE= ⏐------------⏐ (a+b)

Where a and b are the samples in the sample pair. Precision is inversely related to relative error, i.e., the higher the relative error, the lower the precision. A relative error of 1 (100%) is extremely poor precision and a relative error of 0 indicates perfect precision. Because relative error near the detection limit is generally + 100% (the precision is very poor), values used for this plot are restricted to those more than 30 times the detection limit. It is easiest to inversely sort the data and choose only those relative error values for samples above 30 times detection. In this case, where the detection limit for CuT is 0.001%, the data used to generate the graph were greater than 0.030% CuT. Relative error values are ordered from least to greatest and plotted on the Y axis. The cumulative frequency is calculated by inserting 1/n in the cell adjacent to the first relative error. The second and subsequent cells equal the previous cell plus 1/n. The last cell adjacent to the relative error should have a value of 1. This plot then graphically shows the precision as a function of relative error. The precision estimate, as measured by the relative error, is standardized and reported as the relative error at the 90th percentile. These plots are used to evaluate all types of duplicate data. The slope of the warning line must increase for samples such as field duplicates because those samples will have an inherently higher relative error because the relative error will be driven by the geological variance which is generally much higher than the analytical variance. Examples of these graphs showing problem data are shown in Figure 5-3 and 5-4. Figure 5-3 shows the results of pulp duplicates that were analyzed over a period of time in which sample handling and analytical procedures were changing and adequate quality control was not performed. The results that fall above the red warning line indicate precision problems that require immediate attention. Figure 5-4 is the same data presented as the cumulative frequency of the relative error. This graph shows that as changes progressed from Type 1 to Type 3 analyses and sample handling procedures. The precision at Type 1 was adequate (+ 8% at the 90th percentile). As time passed, the precision decreased to Type 3 where it is unacceptable (+ 40% at the 90th percentile). Precision monitoring in this manner is typically more sensitive to minor changes in methodology than are standards and may highlight problems before standards do.

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Figure 4-1: Example of a Pair Minimum vs Pair Maximum Plot
Pulp Duplicate Data - CuT
2.0 Data X= Y Warning Line 1.5

CuT Pair Maximum (%)

1.0

0.5

0.0 0 0.5 1 1.5 2

CuT Pair Minimum (% )

Figure 4-2: Typical Cumulative Frequency of the Relative Error Plot
Pulp Duplicate Data -- CuT
Cumulative Frequency of the Relative Error
50%

40%

Relative Error

30%

20%

10%

0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative Frequency

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Figure 4-3: Pulp Duplicate Data Showing Analytical Problems

Duplicate Samples
7.0 6.0

Pair Maximum Assay (%)

5.0 4.0 3.0 2.0 1.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Pair Minimum Assay (% )

Figure 4-4: Pulp Duplicate Data Showing Precision Changes with Time
Duplicate Data
Cumulative Frequency of Relative Error

50% TYPE 1 40% TYPE 2 TYPE 3

Relative Error

30%

20%

10%

0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative Frequency

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Standard Samples

Graphical methods are used to present standards data. Figure 5-5 is a typical control chart for standards. It plots the grade of the standard against the date that it was analyzed. The control lines are + 2 standard deviations from the mean. The standard deviation used in this case is the standard deviation calculated when the best value was calculated. In the absence of this value, use the standard deviation calculated from the data to be plotted. This is not the best control, but provides a very useful and justifiable control and will normally identify problems. As additional data are obtained, the standard deviation typically decreased to a constant value (after 35 samples or so). Control limits are subject to substantial controversy. In this case, 2 standard deviations from the mean is a simple and reliable way to identify standard values that deviate significantly from the mean. It may not be the best approach, but it works and the object of the exercise is to identify possible problem samples not exhibit our prowess with statistics. All standards, blanks, internal standards, and CRM’s are evaluated in this manner. Blanks have only an upper control line which is 5 times the detection limit.
Figure 4-5: Typical Control Chart For Standards
Standard A - CuT
CuT % 0.072 0.070 Best Value Upper Limit Lower Limit

0.068

CuT Grade (%)

0.066

0.064 0.062

0.060 0.058 26-Aug-04 31-Aug-04 10-Sep-04 15-Sep-04 20-Sep-04 25-Sep-04 30-Sep-04 5-Oct-04 10-Oct-04 5-Sep-04

Date of Analysis

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Check Assays

Check assays are also easily evaluated using graphical methods. The original and check assay are plotted on an X-Y graph (Figure 5-6). It is useful to also plot an X=Y line on the graph for reference. A simple linear regression is then calculated using the data on the graph. The slope of this line is an estimate of the amount of bias between the two groups of samples (Figure 5-6) and should not be used to determine the absolute bias. There are other procedures that are better for that, but this procedure provides a quick estimate of the bias. Significantly biased data (slopes below 0.95 and above 1.05) should be questioned because a problem is indicated. (Figure 5-7 is an example of significant bias). These slopes closely approximate a + 5% bias which is considered by the industry to be the limit for bias between laboratories. A somewhat better approach to calculating the slope and intercept of the line is Reduction to Major Axis (RMA) (Till, 1973). This method does not introduce any underlying assumption about which data set is correct nor does it assume any dependence or independence between the sample pairs as does a linear regression. It also allows for any difference in population variance between the two data sets. The RMA slope is the ratio of standard deviation of the y population to that of the x. The intercept b is calculated by solving the linear equation, y = mx + b, for b, using the mean of the x population for x, the mean of the y population for y, and the RMA slope for m. There are other approaches to evaluate check assay data and to quantify the bias. Again, this approach only estimates the bias and should not be used to adjust data. Those approaches are typically used when two data sets are biased and only one has adequate quality control data to define it as the “better” data. The data set without adequate quality control is adjusted to remove the bias. That type of data manipulation is well beyond the scope of this workshop and is generally used for historical data that lacks significant quality control. Most of the approaches are controversial. Historical data can cause significant problems because prior to about 1994, duplicate and standard samples were not routinely inserted into the sample stream by most mining companies. Periodic check assays were the norm for quality control and these were not commonly analyzed routinely. Figure 5.8 is an example of historical data where the original and check assay data correspond well. Figure 5.9 shows a comparison of three laboratories that show minor biases that are probably acceptable for resource estimation. The biases are on the order of 5 to 6 %, including outliers. When obvious outliers are excluded, the biases are less than 5 % which is generally acceptable.

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Figure 4-6: Example of Check Assay Data Exhibiting no Bias

CuT Check Assay Data
1.0 y = 1.0161x - 0.0022 R2 = 0.9918 0.8

Check Assay

0.6

0.4

0.2

0.0 0.0 0.2 0.4 0.6 0.8 1.0

Original CuT Assay

Figure 4-7: Check Assay Control Chart Showing Significant Bias

CuT Check Assays
1.5 y = 1.1377x + 0.0024 R2 = 0.9989 1.2

C heck A ssay

0.9

0.6

0.3

0.0 0.0 0.3 0.6 0.9 1.2 1.5

Original Assay

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Figure 4-8: Historical Check Assay Data Showing Good Correspondence between the Primary and Check Assay Laboratories
Check Assay Data
5 X= Y CHECK ASSAY DATA Linear (CHECK ASSAY DATA) 4

CHECK ASSAY Data (%)

REGRESSION y = 0.9737x + 0.0697 R2 = 0.989 3

2

1

0 0 1 2 3 4 5

ORIGINAL Data (% )

Figure 4-9: Historical Check Assay Data Showing Biased, but Acceptable Correspondence between the Primary and Check Assay Laboratories
INTERLAB COMPARISON
12
LAB 1 VS LAB 2 LAB 1 VS LAB 3 LAB 2 VS LAB 3 X= Y Linear (LAB 1 VS LAB 2) Linear (LAB 1 VS LAB 3) Linear (LAB 2 VS LAB 3)

10

DUPLICATE METAL (%)

8

6

LAB 1 VS LAB 2 y = 0.9314x + 0.3936 R2 = 0.8699

4
LAB 1 VS LAB 3 y = 0.9493x + 0.011 R2 = 0.9555 LAB 2 VS LAB 3 y = 0.9142x + 0.1748

2

0 0 2 4 6 8 10 12

R2 = 0.8837

LAB 1 METAL (% )

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Historical data can sometimes exhibit unacceptable bias that may be adjusted if one of the data sets is well controlled with QA-QC data (Figure 5-10). In this example, there is an obvious constant bias between the original data and Lab 1. This bias is likely due to a calibration difference between the two laboratories. If the data for Lab 1, for example, is well controlled, the bias may be quantified and the original corrected. In the absence of QA-QC data, the data, if corrected, must be corrected to represent the lower grade laboratory. Because of the scatter of the data, it is unlikely that this data set can be corrected even if one of the data sets is well controlled. In the absence of QA-QC data for any of the laboratories, none of these data should be used in a resource estimate until they are somehow verified by reassaying of archived samples or drilling of twin holes and comparing the twin hole results to the original results, or redrilling the deposit.
Figure 4-10: Historical Data Showing Unacceptable Bias Between Laboratories.
INTERLABORATORY COMPARISON

12.0

ORIG VS LAB 1 ORIG VS LAB 3 X= Y Linear (ORIG VS LAB 1) Linear (ORIG VS LAB 3)

10.0

DUPLICATE METAL (%)

8.0

ORIG VS LAB 1 y = 1.0151x + 0.8044 R2 = 0.5557 ORIG VS LAB 3 y = 0.9107x + 0.7373 R2 = 0.4886

6.0

4.0

2.0

0.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0

ORIGINAL METAL (% )

Figure 5-11 is an example of a data from three laboratories that exhibits biases will be unacceptable and have no possibility of being adjusted. The biases that can only be described as extreme and are likely the result of very different analytical procedures. The origin of these biases was not determined, but none of the data can be used in a resource estimate. In the event that one of the data sets was well controlled, only the controlled data can be used. All of the other data must be discarded. If two laboratories had well controlled analyses, all of the data must be discarded. In this

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specific case, none of the laboratories had control data so archived samples must be reassayed or the deposit must be re-drilled to obtain reliable data.
Figure 4-11: Example of Check Assay Data That Can Not Be Adjusted
INTERLABORATORY COMPARISON
2.0 ORIG VS LAB 1 ORIG VS LAB 3 X= Y Linear (ORIG VS LAB 1) Linear (ORIG VS LAB 3) 1.5

D U P L IC A T E A S S A Y (% )

ORIG VS LAB 1 y = 0.4746x + 0.0845 R2 = 0.8202 ORIG VS LAB 3 y = 0.0955x + 0.069 R2 = 0.194

1.0

0.5

0.0 0.0 0.5 1.0 1.5 2.0

ORIGINAL ASSAY (%)

Historical data with no comparison assays between laboratories or drill programs is particularly difficult to deal with. Since direct comparison of analytical results is not possible, results of twin holes and/or local block grade estimates are sometimes used to compare results between laboratories. If significant biases are discovered, it is very difficult to adjust assays if neither of the laboratories was well controlled. If one of the laboratories was controlled, it may be possible to adjust to it, but if neither is well controlled, then any adjustment must be to the lower grade laboratory. The amount of the adjustment is generally taken to be the percentage differences between the data sets. This type and magnitude of adjustment must be well documented and it will be controversial. 4.8.4 Laboratory QA-QC Laboratories routinely analyze duplicate, standard, and blank samples as part of their internal QA-QC program. These data should be provided by the laboratory as part of their normal reporting process. These data should be reviewed as part of the project QA-QC program and the results included in the feasibility document. It is rare when these data are at odds with findings from QA-QC data generated by the project, but

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the checks must be made because laboratories can, and do, let problem data slide through their QA-QC programs. 4.8.5 Core versus RC Grades RC cuttings and core from the same area can, in some instances produce very different grades. The causes for these discrepancies are thought to be winnowing of coarse gold in RC, loss of gold to fines (dust) in RC, washing of fine gold from fractures during core drilling, etc. There are lots of hypotheses, but few solid studies of the causes of the differences. Cases have been found where RC or core are more or less reliable for different areas, for example RC may be better (more representative) in the oxidized zone than in the sulfide zone. Twin holes (RC vs core) must be part of the exploration program and the results must be carefully analyzed to determine if problems exist. If problems are discovered, the source will likely be difficult to determine. Adjustments or decisions to use RC or core exclusively for specific parts of the deposit must be well documented in the feasibility report. 4.8.6 Recovery Functions Core and/or RC sample recovery must be investigated closely. A very important question is whether or not grade is related to core or RC weight recovery. This can seriously complicate resource estimation if grade can be correlated with recovery. If grade is found to correlate with recovery, adjustments, if they are made, must be carefully documented. This will be controversial, but if, for example, low recovery areas yield high grades, then it may be necessary to adjust the grades. 4.8.7 Comparison of Drill Campaigns On projects that span several drill programs or that have utilized different drill contractors, it is useful to compare results from those various programs or contractors. If the analytical work is well controlled, the first check is to separate the drill results into the various programs or contractors and compare the precision and accuracy of the programs. Calculating average grades from the various programs is not really appropriate unless the various programs or contractors drilled randomly across the deposit. This is rarely the case. It is sometimes useful to do some local grade estimates using data from the various drill programs or contractors to insure that the estimated grades are similar. If they differ significantly, there may be a problem that must be resolved during the feasibility study. This type of study should be documented in the feasibility report and any problems encountered and resolutions of those problems discussed.

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4.8.8

Downhole Contamination Downhole contamination of RC cuttings can have serious consequences for gold resource estimates. This contamination occurs when high-grade zones are friable and continue to collapse into the hole, adding gold to samples being collected below. Typically, contamination is characterized by decay and cyclicity. Decay is the overall reduction of contamination with depth of the hole and cyclicity refers to the peaks that occur whenever drilling is paused, typically at rod breaks. Figure 5-12 is and idealized example of downhole contamination. The figure shows examples of both decay and cyclicity. In this hypothetical, extreme example, the high-grade peak provides excess material that produces cyclic peaks at points 1 through 4 which are typically at rod breaks and the overall grade and amount of contamination decays from point 1 through point 5. The area between the red and magenta lines is proportional to the tonnage added to the resource at more or less zero grade. Downhole contamination is difficult to prove and adjustments are always controversial, but the possibility of contamination must be investigated whenever it is suspected. Downhole contamination of other metals, copper, for instance, is generally not a problem and is exceedingly difficult to prove. Review twinned holes and results. Particular attention should be given to core holes twinned with reverse circulation (RC) holes
Figure 4-12: Idealized Example of Cyclicity and Decay

3.5 3.0

Au (opt)

2.5 2.0 1.5 1.0 0.5 0.0 0 3 6

1 2 3 4 5
9 12 15 18 21 24

Depth

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4.9

Density
Three general measurements are needed to define resources; volume, density, and grade. Density is used to convert volume to tons. There is a tendency in the industry to want volume and grade data to 3 or 4 decimal points (5 is better yet) and to pull a density value from a little black book. A number pulled from your favorite black book is not acceptable for resource estimation at the feasibility level. Density values used for resource estimation must be determined using materials from the deposit. Density determinations are, in many cases, done as an afterthought and without much care. This can be, in some instances, a nearly fatal mistake. Density determinations demand the same care that the assays demand. A density discrepancy of 10% is 10% more or less metal in the resource estimate. The methodology must be appropriate for the materials in question. In general, the most acceptable method is a wax-coat immersion method using core or hand samples. This procedure typically includes weighing the wet sample, drying the sample, weighing the dry sample, coating the sample with wax, weighing the coated sample in air and then while suspended in water. The density is then calculated accounting for the volume and density of the wax. Other methods can be used but their effectiveness must be documented. For example, if the samples are not wax coated, it must be shown that the materials are not significantly porous. If a pycnometer is used, it must also be shown that the porosity is negligible. Materials such as saprolite typically require special procedures. Those procedures should be described and the results documented. For porous materials, it is generally better to use some sort of measuring procedure where the length and diameter of core is measured with accurate callipers and the volume calculated from the average dimensions. The sample is weighed in air and the density calculated. Density of porous rock has been successfully determined by immersion procedures using various wrapping techniques (saran wrap, packaging tape, etc.) but the procedure must be performed very carefully. Myriad techniques exist for density determinations. Many are useful, some are not, but any procedure must account for porosity if it is present and all of the procedures probably produce a slight overestimate the bulk density because the open fracture porosity of the rock is not accounted for. The amount of overestimation depends on the fracture density. The minimum number of samples is a subject of some debate. In most cases, a minimum of 35 samples of each ore and waste type is adequate to characterize the materials. A better procedure is to perform a density determination every 5 to 10 m downhole in core holes. This will generally provide adequate data to determine the

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overall density as well as local density variations. In projects that rely entirely on RC sampling, this is a problem because RC cuttings can not be used for reliable bulk density determinations. In some cases, such as skarns, where density contrast can be extreme over short distances, it is useful to have a density determination for each assay and to produce a density model at the same time that the grade model is produced. It must be noted that specific gravity and density are not the same measurement. Specific gravity, a unitless ratio, is converted to density by multiplying the determined specific gravity by the density of the water used for the determination. (Density of water is proportional to the temperature and amount of dissolved solids. These factors are normally not significant. Specific gravity determinations done in areas where temperatures exceed 45oC should be corrected. In most other instances, the correction is negligible.) One in twenty density samples should be sent to a second laboratory for check density determinations. Discrepancies should be immediately investigated and resolved.

4.10
4.10.1

Surveying
Collar Survey Data Collar locations must be well known. The type of instrumentation and coordinate system used for the survey(s) must be documented. The declination used must be documented. Declination changes with time and the data should be checked to insure that the appropriate declination was used. If more than one coordinate system is used, coordinate transformations should be checked in detail. Transforms will typically include a rotation that must be checked. It is useful to plot hole locations using mine and UTM coordinates on separate maps and then overlay them.

4.10.2

Downhole Surveys Downhole surveys should be performed for all core and RC holes deeper than about 100-150 feet. Depending on the rock types involved and tool diameters, deflections can be extreme over relatively short distances. At least 5 to 10 % of the downhole survey data should be compared to primary source documents. In the case of Sperry Sun type instruments that use photographic film to record the orientation, the films should be re-read and compared to the recorded values. Digital data from gyroscopic or light-tube tools should be compared to the database. If acid tubes are used, the methodology used should be discussed, including strength of the acid, tube diameter,

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and methodology used for meniscus correction. If possible, the tubes should be reread and corrected to confirm the original work. For Tropari or similar instruments, there is no physical record of the survey so the survey notes must be checked against the database. If surveys are made with magnetic tools (Sperry Sun, Tropari), the susceptibility to error related to magnetic minerals must be evaluated. If magnetic tools are used, the declination at the time of the survey should be determined and the correction verified. When gyroscopic tools are used, the hole is sometimes surveyed as the tool goes both down and up the hole. It is useful to compare those surveys to insure that the tool is working properly and provide a modicum of QA-QC for the measurements. Gyroscopic tools can record data every few centimeters, but rarely is all of the data used. The selection of data used should be discussed and confirmed. It is rare, but holes are sometimes surveyed by more than one method. It is useful to discuss comparisons between methods and justifications for the method selected. In many cases, some of the holes drilled during the course of a project were not surveyed. It is useful to measure the average deflection of drill holes versus depth in the area of unsurveyed holes. In this way, a depth can be selected beyond which unsurveyed holes are not to be trusted. This exercise is also useful to determine whether a correction can be applied for unsurveyed holes. If trajectories of holes are estimated, the number of holes involved and the methodology utilized must be documented. It is useful to compare the survey file against the collar file to ensure no surveys have been recorded beyond the end of the hole. It is not unusual to find 5% (or more) error rates in a downhole survey database. This is typically a combination of misreading photographic disks, inappropriate declination corrections, and data entry errors. Examination of the primary documentation is very useful to determine the quality of the surveys. Collar surveys are sometimes done using azimuths related to a true or local grid system, and down-hole surveys are related to magnetic north. The survey file used for modeling should be checked to make sure that the readings are consistent. Plotting traces of the drill holes on plans and sections can sometimes quickly reveal inconsistencies, which may not be systematic. In some mines and exploration programs, survey notes are of poor quality or nonexistent. Best practice is to have a paper certificate of collar and downhole survey data signed by the responsible person filed with each geological log.

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Resource modeling software presents the user with a number of options as to how to use the down-hole survey data to generate the trace of the hole. These options allow a) changing the hole direction at survey points (useful when tunnels are entered as pseudo drill holes), b) changing the hole direction halfway between survey points, or c) smoothing the trace of the hole by interpolation of the azimuth and inclination of the hole between survey points. The method used for drill holes may not be appropriate for tunnels, and this should be investigated and documented. Care should be taken to understand the resource modeling software’s conventions for specifying azimuths and dips. The sign of the dip for a downward inclined hole may be positive for some software and negative for others. 4.10.3 Topography versus Collar Elevation The origin of the data used for the topographic model should be documented. The topographic data should be compared to collar elevations by posting collar elevations on topographic contour maps and to see if they honor the contours. All of the collars should be checked. Another way to compare the data is to prepare a digital terrain model of topography and determine the DTM elevation at collars. Compare with actual collar elevations by visual inspection and make a histogram of the differences between DTM and collar elevations. If a significant number of errors is discovered (>5 ft; 1.5 m), the source of the discrepancies must be investigated. Frequently transcription of surveyor’s notes proves to be the source of error. Sometimes the photography used to produce the digital terrane model (DTM) is poor (taken with low sun angle at beginning or end of day) and significant errors are introduced.

4.11

Attributes for Resource Estimates
Frequently, data groupings are used to simplify the modeling process. In many cases, these groupings are the basis for control of the resource estimation process. These groupings typically include, but are not limited to, lithological combinations, alteration combinations, structural domains, grade zones, metallurgical domains, and geotechnical characteristics. These groupings of data are assigned codes or other attributes that must be checked for consistency and appropriateness. The rationale for the groupings must be documented.

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Cross sections and plan maps, at the appropriate scales, are used to check for consistency. Those same sections are also compared to the block model to insure that block have properly assigned attributes.

4.12
4.12.1

Database
Database Development Databases tend to be somewhat like amoebas, they start out very small, usually a single spreadsheet, and grow into multi-tabled, multifaceted monsters that consume huge amounts of time in maintenance and all of the available disk space. This need not be the case if the database is well planned at the outset. It is all too frequently left to the summer intern to start the database and maintain it until he or she goes back to university. This is generally a mistake, the various core data tables should be planned much with as much deliberation and detail as the exploration project is planned. Additional tables should only be added when truly required, not just when it is convenient. A well planned and executed master database facilitates use and helps to minimize problems. The database must be stored in a database manager (Access is commonly used and other, more robust managers are becoming common) which has limited editorial access. Permission to change any of the database must rest with a small group of senior staff members that fully realize how important the database really is. Any data to be incorporated into the database should be entered into a database table separate from the main database and appended to the database only after review by one or more of those few that have editorial access. Everyone involved with the project needs to have access to the data, but very few need editorial access. Best practice is to have a log of changes to the database made by those that made the changes. This provides details of who did what, when and why. This log should include routine additions of assay data and geological or geotechnical logs. Spreadsheets are very poor database managers and typically turn into random number generators when improperly used. The use of spreadsheets for data storage is very poor practice and will always cause problems. Data entry into spreadsheets is common, but is a poor practice. A much better practice is to enter data into database tables with appropriate filters that ensure that the data is within appropriate ranges. The data is secure and can then be appended to the master database with few problems. Backup the database daily if changes are made. This is especially important during drilling campaigns where data are added routinely in large quantities, at frequent

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intervals. The price of a CD and a few minutes time may save many days, weeks, or months of work rebuilding the database. A missing sample or a sample not analyzed are not the same thing as a value below detection limit and must be coded differently. Typically, one-half the value of the detection limit is inserted for below detection limit samples; other conventions are used, but what ever convention is used, it must be used consistently. Software packages handle these values differently. A below detection limit value will be averaged with the composite to which it belongs and most likely reduce the composite grade. Some software allows skipping a missing sample or missing assay so that it has no effect on the composite grade. Never use zeros (0) in a database to indicate missing data, below detection data, or any value other than a measured value. An example that is permissible is, for example, the percentage of material retained on a 25 mm screen if all of the particles in the sample are smaller than 25 mm. That can, and should, be zero (0). 4.12.2 Database Integrity Database QA-QC is possibly the most overlooked aspect of QA-QC. The accuracy and integrity of the data stored in the database is of paramount importance to the accuracy of any resource estimate and/or mine models based on the database. In today’s world, most assay data is transferred electronically and the possibility of errors due to data transcription is minimal. Errors occur, especially when the program used to transfer the data is a spreadsheet. Extreme care must be exercised when using spreadsheets to transfer and/or manipulate data from an analytical laboratory. Macros used to automate the data transfer must be checked and re-checked. An improperly written macro can produce a database full of errors. Always verify any data transfer against the original documents. The database to be used for the resource estimate needs to be verified prior to use for resource estimation. If the modeling software uses a proprietary database manager that requires importing data from the master database, then the database from the software used for modeling must be dumped and checked. There is little value in auditing the master database when it will be queried and the data exported to modeling software; errors caused by the queries will not be identified. The best procedure is to start with the first line in the database and check every 20th line in the database against original documents, i.e., assay certificates and drill logs. This type of checking can be difficult if the data are all stored in folders by hole, but it is by far the best method. It insures that no drill program or assay lab will be missed. A commonly used procedure is to randomly select a number of assay certificates and compare them against the assay data entered into the computer data base and the geological

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drill logs. This method risks missing problems with a certain time period or laboratory. Database verification requires that a minimum of five percent of the data be checked against original documents. When data are extracted from the master database, best practice is to run statistics (count, min, max, sum, mean) on the external database and again after importation to the modeling software’s data files or database to see that a match was achieved. These statistics should be documented. If a model is being updated, best practice is to compare all data for old holes in the new model files or database against the previous model data files or database, and to resolve discrepancies before proceeding. If multiple data values are available for a given sample, for instance assays by different procedures (Cu by AA and ICP for example), the methodology and rationale used to select the data values used for modeling should be documented, and the number of data values of various types used should be tabulated. All drill hole collars should be verified. Random checks are not adequate. Approximately 5% of the downhole survey data should be verified. Another important check is to order the assays and compare the uppermost 2% against original certificates. This will help spot outliers that can have significant impacts on local area estimates and may contribute significantly to the metal tally. It is not uncommon to find that a significant percentage of the uppermost 2% are typographical errors where the decimal points are slipped one or two places to the right. It is useful to compare each assay with the average of the assays in adjacent intervals. Identify assays that have large differences. If the values are well above the detection limit, relative differences are used; for values near the detection limit, absolute differences are used. This check can identify anomalously low or high values that were improperly entered. This is the only check that can identify values that have had decimal points slipped to the left, that is, the entered grade is one or two orders of magnitude lower than assayed grade. Geological data is typically entered by the geologist responsible for collecting the data and is then not verified. This leads to untold errors. Entirely too many geologists make corrections, change codes, re-interpret rock types on the fly and do not document those changes. This leads to problems with auditors and subsequent workers that do not know the source or reason for the changes. In general, it is better practice to have a technician enter the data and then have it verified by the geologist.

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Any changes to the data must be documented with a file note in the log. This includes all forms of logged data, whether lithological, mineralogical, structural etc. The geological, geotechnical, density and other pertinent tables in the database must be verified in the same manner as the assay data, that is 5% of the data. It is common to find high error rates in these data. This is particularly the case if spreadsheets are used to enter data. The reviewer must consider the impact of errors in lithological and other categorical data on the resource estimate. Usually only a few fields (data types) are critical, and checks and audits should concentrate on these. Lithological data should be plotted on sections or plans and inspected for reasonableness. These sections and plans should be generated by the software actually used to perform the modeling and not some other package (like AutoCAD) used in geology and drafting offices, but not for resource modeling. A database integrity check should be made to identify unique or inappropriate rock codes, sample lengths and assay values (such as improper treatment of un-assayed intervals, less than detection limit default values, etc). For any type of data that must be hand entered into the database, the best practice is to have the data double entered by two people. The resulting databases are then compared and discrepancies resolved. Typically a number of the holes are reviewed and the logging, i.e., lithology, alteration, structures, etc., is checked for accuracy and consistency. If core or chips are not available, photographs can be used. Examine the database to determine the number and types of codes used for various geological aspects of the project. Is it possible to simplify by combining codes? Are there codes with only one or two occurrences in the database? Data are often simplified for modeling, that is, codes are combined for various reasons. A thorough discussion of the rationale for these combinations should be available to defend the simplification and formation of lithological codes. Procedures used to integrate assay, survey, and geology data into the database must be documented and verified. Queries of master databases are typically used to extract data that is then transferred the mine modeling software. These queries should be documented and summarized in the feasibility report. Examine procedures used to transfer data and validation procedures

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After the database verification is complete, the number of errors is tabulated and the percentage of errors calculated. An error rate of one percent or less is generally acceptable. Error rates more than one percent typically indicate that problems exist in the database and the database must have a more thorough check to insure its integrity. Frequently these tasks are all left for the auditor. Best practice is for the modeling team to perform these checks in advance of the resource estimate and to document their results in the feasibility report. In the process the team will sort out many database issues in advance of modeling and can take corrective action. This will obviate the need for the auditor to identify and evaluate problems after the model is finished and to perform additional investigations to enable determination as to the impact on the model and its acceptability. The auditor will still make his own checks, but it will be far more easy to do so and remedial action is less frequently required. Original documents for historical data are frequently unavailable. That is, assay certificates or geological logs were left in the project office when the work was done and all that remains is the digital database based on those documents. This poses a significant problem in that most regulators now require those documents; they form the legal basis for the resource estimate. In most cases, this problem requires drilling twin holes near 5% of the problem data and comparing the data. If the data compare well, the twin holes will generally provide adequate verification of the historical data. If the comparisons are questionable, the historical data should be discarded and the holes from which those data came, re-drilled. This is a difficult decision to make, especially if a lot of data are involved, but if the data can not be verified, they have little or no value and if the data were somehow corrupted, they can be very detrimental to the resource estimate. In many mines and exploration programs, assay certificates are not generated by the laboratory. Digital data are passed directly to the database and thus to the modeling staff. This is not best practice; it is not good practice. All laboratories should issue paper certificates signed by the responsible person, with assay data that can be filed with the geological logs. An archive organized by data types should be maintained for all electronic data sources that were used to create the Master Drill Hole Database. These include electronic drill logs, collar and downhole survey results, assays and assay certificates, density measurements, geological mapping and core photographs. At most mining operations and many exploration projects, the use of original paper files, such as drill hole logs and assay certificates has been replaced by electronic data recording from the original source. These files, in most cases, are not being archived in an organized manner or, in some cases, are discarded. In some cases, the files are modified before

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they are exported to the master database. The ability to audit the master database is disappearing along with the ability to examine source data when the master database is altered or corrupted. Unaltered electronic source files should be organized and archived with the same care that paper drill logs and assay certificates originally were.

4.13

Exploration Data Support for Mine and Process Designs
The density of exploration data must be evaluated to determine if there are adequate data to support mine and process designs. Too frequently, data density is adequate in some areas and not in others. This should be identified early in the feasibility study and corrected prior to completion of the study.

4.14
4.14.1

Resource and Reserve Estimates
Introduction Resource estimates at the Feasibility Study stage should be based on significantly detailed information such that there is a level of confidence suitable to support detailed mine designs and cash flows. Drilling spacing, sampling intervals, assay accuracy and precision, and grade interpolation methods should produce a resource block model with tonnes and grade similar to that which will be extracted with the chosen mining rate and equipment, and selective mining unit. In general, a good resource estimate has an element of smoothing that equals the natural mixing of ore and waste that occurs in the mining process. Once the deposit is mined, there should be good reconciliation between the tonnage and grade of ore predicted in the resource estimate with the tonnage and grade actually mined. If the ore controls are poorly understood, the geological model is inaccurate, the continuity of ore/waste contacts and grade is poorly defined, sampling is deficient, or the assays are inaccurate and imprecise there will be poor reconciliation with mining and the mine will not meet its forecast production. The quantity and quality of exploration data supporting resource estimates at the feasibility stage was presented in detail in the previous section. Good resource estimates are based on data with high quality in the following areas: • • • Drilling density and orientation relative to ore zones Drilling recovery and sampling Accurate drill hole locations and downhole surveys (location of samples)

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• • • •

Quality logging and use of this logging to establish ore controls (grade domains) Density measurements for all ore and waste types (measurement of tonnage) Accurate and precise assays for pay metal, byproducts and contaminants Error-free database of drill logs, geological attributes, drill hole surveys, assays and densities. Accurate geological models of lithology, alteration and mineralization that will provide boundaries to grade and density domains.

Resource and reserve classification is a function of the degree to which the continuity of the grade or quality, position and density is known, or in other words the confidence in the continuity of grade and geology. Estimation and reporting of resources and reserves, and classification of resources and reserves in the western world follow standards and guidelines that are similar in most regards, but having differences in the level of confidence required in each category. The most reliable standards and guidelines have been adopted in Canada (CIM, 2005; CIM, 2004) and the USA (SEC Reserves Working Group / SME Resources and Reserves Committee, 2005) 4.14.2 Mineral Resource and Mineral Reserve Definitions and Classifications The following discussion of Mineral Resource definitions is largely taken from the CIM Standards and Definitions, November 2005, which is incorporated by reference in Canada National Instrument 43-101, and adopted by the Canada Securities Commission as of December 30, 2005. These definitions and standards are similar to those adopted in Australasia (JORC Code), South Africa (SAMREC) and Europe (IMMM), and those recommended by the SME of the USA, but not adopted by the SEC. The CIM Standards and Guidelines (and SME recommendations to the SEC) are somewhat stricter in definition of resource classification, but the general nature of all codes is similar. AMEC has added bold text for emphasis. A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.

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The term Mineral Resource covers mineralization and natural material of intrinsic economic interest which has been identified and estimated through exploration and sampling and within which Mineral Reserves may subsequently be defined by the consideration and application of technical, economic, legal, environmental, socioeconomic and governmental factors. The phrase ‘reasonable prospects for economic extraction’ implies a judgement by the Qualified Person in respect of the technical and economic factors likely to influence the prospect of economic extraction. A Mineral Resource is an inventory of mineralization that under realistically assumed and justifiable technical and economic conditions, might become economically extractable. These assumptions must be presented explicitly in Reports. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource. Inferred Mineral Resource An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Due to the uncertainty which may attach to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies. Indicated Mineral Resource An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable

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exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. The Qualified Person must recognize the importance of the Indicated Mineral Resource category to the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of sufficient quality to support a Preliminary Feasibility Study which can serve as the basis for major development decisions. Measured Mineral Resource A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. Mineralization or other natural material of economic interest may be classified as a Measured Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such that the tonnage and grade of the mineralization can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability. This category requires a high level of confidence in, and understanding of, the geology and controls of the mineral deposit. Mineral Reserve Mineral Reserves are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve. A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical,

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economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral Reserves are those parts of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Qualified Person(s) making the estimates, is the basis of an economically viable project after taking account of all relevant processing, metallurgical, economic, marketing, legal, environment, socio-economic and government factors. Mineral Reserves are inclusive of diluting material that will be mined in conjunction with the Mineral Reserves and delivered to the treatment plant or equivalent facility. The term ‘Mineral Reserve’ need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals. Figure 5-1 shows the principles of conversion of resources to reserves, where in modifying factors must be considered. In some cases, issues with uncertainty of metallurgical or legal issues may warrant conversion of Measured Resources to Probable Reserves instead of Proven Reserves. Proven Reserves are “money in the bank”.

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Figure 4-13: Conversion of Resources to Reserves
M IN ER AL R ES O U R C ES M IN E R AL R ESERVES

IN FER R ED
Increasing level of geological knowledge and confidence

IN DICATED

PR O B ABLE

MEASUR ED

PR O VEN

C onsideration of m ining, m etallurgical, environm ental, m arketing, legal social and governm ental factors

Probable Mineral Reserve A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. Proven Mineral Reserve A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. Application of the Proven Mineral Reserve category implies that the Qualified Person has the highest degree of confidence in the estimate with the consequent expectation in the minds of the readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect potential economic viability. 4.14.3 Resource and Reserve Reporting Public disclosure of resources and reserves are governed by rules enacted by government agencies responsible for regulating sale of securities. Disclosure of

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mineral resources and mineral reserves generally follow relatively strict legal procedures and in most cases are required to conform to standards and guidelines developed by professional organizations such as the Canada CIM, Australasian Institute of Mining and Metallurgy, Institute of Materials, Minerals and Mining (UK), South African Institute of Mining and Metallurgy. These codes are similar and, with the exception of the U.S., the requirements of data quality, resource estimation methods, resource and reserve classification, and resource and reserve reporting are similar. The U.S. is still governed by SEC Industry Guide 7, which does not include most of the specific guidelines and standards of JORC, CIM, IMMM and SAIMM, as well as those recommended by SME. General guidelines for reporting mineral resource and mineral reserves in all jurisdictions other than the United States: • Mineral reserves are those mineral resources, which after application of mine designs, dilution and allowances for ore losses (planned and unplanned), metallurgical recovery, geotechnical factors, operating costs and reasonable metal prices, can be extracted economically. “Economically” is not defined. Mineral reserves are determined by technical studies generally equivalent to a prefeasibility study or better. Reserves are not determined at scoping or conceptual study level. Mineral reserves must be supported with a life-of-mine production schedule with positive cash flow. Mineral reserves are derived from Measured and Indicated Resources after application of modifying factors. Mineral reserves cannot include Inferred Resources. Inferred Resource inside the pit design or stope designs that are above the breakeven cutoff grade are assigned to waste, but can be later upgraded to reserves with additional drilling and sampling. Mineral reserves are reported as Proven and Probable. If reported combined, they must also be reported separately. Note metal price and cutoff grade used to estimate reserves, and the date of the reserve declaration.

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Mineral resources are those materials outside of the pit designs or underground mine designs that have “reasonable expectations for economic extraction”. The test of reasonable expectations can rely on higher future metal prices, combined with a more optimistic pit design, or a lower grade envelope around underground mine designs with consideration of a lower cutoff grade at higher metal prices. Measured, Indicated and Inferred Resources are reported separately. Measured and Indicated Resources can be reported combined if they also are reported separately. Inferred Resources must be reported separately from Measured and Indicated Resources.

Reporting of reserves in the U.S. is governed by SEC Industry Guide 7. This governs reporting of reserves. General guidelines are: • Reserves are reported as Proven (Measured) and Probable (Indicated). These can be combined without being reported separately. Reserves are determined as in other jurisdictions, but the life-of-mine operation needs to be profitable only to the extent of making one dollar. Estimation of reserves must be supported by a feasibility study. The requirements of this feasibility study are vague. Reporting of resources is not allowed unless the company is required by other reporting jurisdictions (such as Canada or Australia) to report resources. Disclosure of resources is allowed in some other cases, such as where resources were disclosed in an offering of a majority of shares in a merger or acquisition. The SEC prefers use of the term “Other Mineral Deposits”. Resources must be restricted to Measured and Indicated categories and cannot include Inferred Resources.

4.14.4

Reserve Support for Feasibility Studies Figure 5-2 shows the concept from one major company of how the basis of Measured, Indicated and Inferred Resource may vary from the early, scoping phase of a project to the final feasibility study.

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Figure 4-14: Variations in Resource and Reserve Classification by Study Level
Percent Classification Category 100 80 60 40 20 0 Exploration Exploration Exploration Measured Measured Measured Indicated Indicated Indicated Inferred Inferred Inferred 100 80 60 40 20 0

Scoping

Prefeasibility

Feasibility

1. Scoping Study: Relatively wide-spaced drilling with estimates of Inferred Resources and limited demonstrated continuity. 2. Prefeasibility Study: Detailed infill drilling to confirm Inferred Resources, local areas of close-spaced drilling suitable to declare Measured Resources. 3. Significant infill drilling to establish controls in areas of complex geology and mineralization. Measured Resources suitable to support payback period.

Feasibility Studies are generally based on Measured and Indicated Resources (Proven and Probable Reserves), with a varying percentage of Proven to Probable Reserves based on company policy and sensitivity to risk, or on requirements set by sources of financing. AMEC has seen policies ranging from the requirement of 10 years of Proven Reserves to Proven + Probable Reserves totaling twice the life of the loan. A good rule is to have 3 to 5 years of Proven Reserves and this should represent a majority of the payback period. Banks will require Proven + Probable Reserves sufficient to cover the payback period plus a reserve tail that may be twice the payback period. This is to ensure that the project has a mine life far in excess of the originally calculated payback period in the event that negative changes in metal prices decrease the cash flows and lengthen the payback. 4.14.5 Resource Estimation Methods - Quality Required in Feasibility Studies Resource estimates supporting Feasibility Studies should be developed from highquality exploration data of sufficient density, when combined with appropriate estimation methods, produce locally accurate predictions of grade and tonnage. The mine plan and reserve estimate produced from the resource model should yield the

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same tonnes and grade over at least quarterly to annual periods as predicted by the resource model or there will be significant financial impacts to the operation. A good model will be “tuned” to the scale and type of mining, and the equipment selected. Equipment and mining method determines the amount of selectivity, or conversely the amount of ore dilution by waste that will occur. The following sections provide a discussion of the various issues involved in producing a resource estimate and the steps taken to ensure both a locally and globally unbiased estimate. Too often AMEC has found critical errors in resource estimates that will materially affect the products produced in mine designs and reserve estimates, with the result that the Feasibility Study must stop for months while the source data, resource estimation procedures and resource models are fixed. The following description of resource estimation quality parameters and checks was developed by Dr. Harry Parker of AMEC, utilizing 30 years of experience in evaluation of resource estimates. Block Models Most resource models comprise rectangular blocks. The size of the model blocks used is subject to debate. This usually is determined by the spacing of sample data, the mining method anticipated and the limitations of estimation software. Large blocks result in faster resource estimates, produce more accurate estimates of average grade and reduce conditional bias. They do not honor geological boundaries very well, may have to contain percentages of rocktypes, and separate grade estimates for each, leading to a very complex final model, and may incorporate too much contact dilution. Small blocks result in slower resource estimates, are sometimes affected by memory limitations of software or hardware, provide less accurate estimates of grade, and are prone to local conditional bias. They honor geological boundaries well, can be simpler with one rocktype per block. They may be so small that it is not possible to see all blocks on a set of sections or plans, and may incorporate too little or no edge dilution. Checks of block models should include the following: • • Volumes of rocktypes in blocks equal volumes of rocktypes within solids models Topographic and bedrock percentages are assigned correctly

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There are no gaps (air under topography, undefined areas), overlaps (more than 100% volume assigned to a block). Checks that the predominant rocktype has been correctly assigned to blocks. This is best done by viewing blocks and digitized perimeters, one rocktype at a time on the computer screen, or better using a projector at a larger scale on a screen or whiteboard. Checks that the secondary, or tertiary rocktypes have been correctly assigned to blocks. Again, this should be done one rocktype at a time on the computer screen, or better using a projector at a larger scale. Checks of a few blocks located near contacts in detail to ensure that volume percentages have been properly assigned. This is done in various ways by the software, and some knowledge of the algorithm used is required. The appropriateness of the algorithm or its calibration settings should be assessed.

Sometimes a block is assigned an attribute based on that of the rocktype or zone with majority volume. This may lead to a bias, as narrow zones less than a block-width wide will be under represented. It is better to make the assignment based on the rocktype or zone that occurs at the block centroid. It is good practice to record the origin and extents of the block model, rotation angles etc. The assignment of real world coordinates to blocks in rotated models should be thoroughly checked, as very often the composite coordinates used in resource estimation are unrotated, even if the block model has been rotated. Composite selection will be with respect to the unrotated coordinates of the block. Exploratory Data Analysis Exploratory data analysis is the statistical analysis of assay data that will be used to generate resource estimates. This work generally focuses on composite samples of equal length because the variance of the frequency distribution is related to the support or composite length. Best practice is to archive parameter and run files used to perform exploratory data analyses, so they can be checked. Unfortunately, much of this work is often done interactively, and checking of the work is difficult.

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Assessment of Metal-at-Risk (Capping or Top Cutting) There are a number of methods available, and all are subjective: • • Inspection of probability plots and cutting to the grade of a certain percentile Inspection of probability plots and adjusting grades so the lognormal law is followed Inspection of probability plots and cutting grades, where the points become “erratic” Using the decile method of Irv Parrish Using Monte Carlo Simulation to evaluate the variability of the upper tail of the distribution Inspection of adjacent sample grades and determining a cutting strategy based on their distribution.

• •

The implementation of the methods can sometimes involve use of a high-grade assay up to a certain distance, with its grade being cut beyond that distance, or its use being discontinued beyond that distance. AMEC favors the Monte Carlo simulation approach because the metal-at-risk depends on the data density and the amount of metal-at-risk declines as the data density increases. Compositing In general equal-length composites are used for grade interpolation. The choice of composite length is a matter of some debate. The following factors are relevant: • Composites should be short enough so they tend to reflect the same rocktype or other attribute governing deposit grade. This is particulary important if domains used in grade estimation are separated at rocktype or other attribute boundaries. In some cases new composites are started whenever there is a lithological change. This leaves the previous composite as having less than the nominal length. In such cases one can reject short composites for resource estimation, or add them into the previous composite.

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Larger-length composites tend to show lower nugget effects; the effect of sampling errors is dampened; short range spatial variability is masked, but longer range variability is enhanced. The coefficient of variation is lowered, compared to shorter length composites. Use of a composite length equal to one of the block dimensions permits the composites to be used to build a nearest-neighbor model that in turn can be used for validation of resource estimates.

Best practice dictates the following: • The mean grade and coefficient of variation be tabulated by classes of composite length. If there is little difference between classes, all can be used. A lengthweighted frequency distribution should be compared with the distribution of intended composites to be used: a) all composites regardless of length, b) composites with length greater than a threshold, c) composites which have shortlength composites stitiched back to previous composites. The comparisons should involve calculation of the mean grade and coefficient of variation. Density weighting, where there are contrasts in density between lithologies included in a composite, or where there is a strong relationship between density and grade. Where equal-length down-hole composites are used regardless of rocktype, the proportion of mismatch between percentage of as-logged rocktype and majority coded rocktype should be tabulated. The average grades of composites should be compared with the average grade of “pure” rocktypes within them. Some form of declustering should be done before preparing histograms. Nearest neighbor models are particularly useful, as they give a first-look at the spatial distribution of grade.

These investigations are usually neglected. For massive deposits that will be mined with non-selective methods, the impact of composite length will be small. Where there are intricate contacts between rocktypes with strong grade contrasts, these investigations are mandatory.

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Histograms and Probability Plots Most software packages permit rapid generation of histograms and probability plots for subsets of the data, as for example by rocktypes. Best practice is to prepare these plots so that the frequency distributions for subsets can be compared and assessed if populations can be combined for estimation. A good approach is to prepare a histogram and probability plot on the same page, annotated with at least the mean and standard deviation and preferably also the minimum, maximum, key quantiles etc. Boxplots These enable rapid comparison of subsets of data. They are not as informative as histograms and probability plots, but much less bulky. They give basic statistics as well as a summary graphical display of mean, median, range, 25th and 75th quantiles. Extraction of the data is usually automated. It is useful to make a manual extraction for one of the subsets to check the reported statistics. Boxplots are very useful to assess if populations can be combined for estimation, but sadly are not widely used. Contact Plots Contact plots measure the grade profile in the vicinity of contacts. These are extremely useful in evaluating whether contacts are to considered soft, firm or hard for data selection during grade interpolation. Scatterplots These are sometimes used to compare two variables. They are usually generated automatically, but the user has some control over scaling of the axes, symbols used, etc. Best practice is to plot regression lines for y on x and x on y, the correlation coefficient and means and coefficients of variation for the x and y variables. It is very useful to plot an experimental conditional expectation line of y on x, as this shows how well locally the regression line predicts the conditional expectation.

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Interpolation Domains A major and often forgotten resource estimation principle is that there should be local stationarity of the mean grade within the composite selection neighborhoods used for block-grade interpolation. In most deposits this requires use of domains to constrain interpolation within areas of similar mean grade. The exploratory data analysis must be considered in formulating domains. In addition the amount of data available must be considered and the uncertainty in the definition of domain boundaries. Use of domains reduces the coefficient of variation. Where the coefficient of variation is below 1.5, linear interpolation methods are usually robust. If the coefficient of variation is higher, non linear interpolation methods are appropriate. These methods are less robust and require considerable validation for acceptance. It is best if domains reflect some geological feature that appears to control the grade. Often these geological features are more continuous and their boundaries can be modeled with less uncertainty. In some deposits, there are either insufficient geological data to discern ore controls or the available data do not correlate well with grade. For example in some gold deposits structure is the key control on ore deposition, particularly high-grade ore, and the host rocktype is a weak control. During early-stage drilling the controlling structures may not be identifiable. Grade zones or shells are often used to broadly identify areas of similar grade. These can sometimes be discarded as more data become available and geological controls emerge. In other deposits, it is impossible to spatially breakout zones of similar grade. Probabilities may be used to predict whether a block is high or low grade. If the probability of either is high it is estimated with the composites that belong to the appropriate group; otherwise the grade may be estimated by some form of weighted average of high- and low-grade estimates. Domains may be assigned manually by interpretation. Alternatively, sometimes domains are defined probabilistically by interpolation of indicator variables. It is useful to check the domain volumes versus those indicated by a nearest neighbor model. Once the domains are set, composites must be assigned to domains. several ways to do this: There are

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Assigning composites the domain of the block in which they occur. This may lead to misclassification, particularly if large blocks are used. Assigning composites to the domain polygon or three dimensional solid. This usually results in less misclassification. Assigning composites to a domain based on the grade, rocktype or other attribute of the composite without reference to the domain in which the composite occurs.

The following checks should be made: • Percentage of misclassified composites by comparing backtagged to as logged features Determine contrast in grade between composites where the grade or rocktype of the composite matches the domain versus when there is no match. Has there been and what is the effect of any manual adjustments to the backtagged domain assigned to a composite?

Risk Assessment It is important to assess the risk of uncertainty on domain boundaries and to identify critical gaps that should be filled by more drilling. This is best done by careful inspection of plans and sections. The mis-tagging of composites can be critical near the edges of a deposit that is sparsely drilled with respect to a higher-grade core. If a few high-grade composites are allowed to slip into waste domains, they can easily create expanses of ore in geologically unreasonable environments. Typically domains, particularly grade zones, may contain 15 to 20% misclassified composites which may belong to pods too small to domain given the data available. If the domains have been too constrained, there is risk that conditional bias will occur. For example in one gold deposit, half the highest grade material was found during production to lie outside the highest grade zone interpreted from exploration data.

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Assessment of Spatial Continuity - Variography There are numerous techniques used to assess spatial continuity or its inverse, spatial variability, the most common being: • Traditional variograms. These are often influenced by outliers, and a great deal of data must be available to obtain meaningful models. Relative variograms. These can be pairwise or lag relative. They are fairly robust where there is sparse data. Correlograms. These are also robust, but can give inaccurate models where there are trends to the data or zonal anisotropy (as in bedded deposits). Lognormal variograms. These are often used where the data are noisy. Their models require adjustment when applied to raw data, usually forgotten. In addition the adjustment requires the data to be lognormal, and this must be verified.

Whichever method is used, there are several best practices that should be followed: • Variograms should be computed in a large number of directions and a threedimensional model fitted. The model should be displayed for all the directions in which the experimental variogram was computed. Down-hole variograms should be used to fix the nugget effect. It is better to run variograms on a shorter composite length and regularize the nugget effect. For directions which represent drillhole inclinations, the lag should be set to the composite length. Plots of variograms should show at most data and models for one or two directions. Some software allows superimposing many variograms on the same plot, making interpretation difficult/impossible Annotating in some way the number of pairs of data used at each lag. Allowance for independent rotation of the axes of anisotropy for each structure

• •

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• •

Allowance for at least three structures Clear statement of models including type, sense and order of rotation, azimuths and inclination of axes of anisotropy. If an exponential model is used, whether it is stated with the traditional or practical range (traditional range is 1/3 practical).

Checks should include: • • • Review of the parameter and run files Independent extraction of data and running of a check variogram in other software Review of models for geological reasonableness of nugget effects, directions of major continuity and anisotropies seen

Variography is often viewed as a dark art, and models are often poorly fitted or not updated for new drilling. Grade Interpolation Linear Methods Linear methods are appropriate where the coefficient of variation is 1.5 or less. most common methods are ordinary kriging and inverse distance to a power. The

Ordinary kriging employs the variogram and gives the theoretically most accurate unbiased estimate. It is usually preferred because it forces evaluation of spatial continuity in various directions. The claim is made that it declusters data, and is superior in situations where the data are clustered. In fact the effect of declustering is often weak, particularly where the variogram nugget effect is relatively high. It is mandatory to use a search scheme that restricts composites to a certain number per octant and/or a certain number per hole. Usually different search strategies are employed depending on the data spacing. Inverse distance to a power permits some control over the smoothness of the estimation process. A high power puts more weight on the closest or closer composites and tends to produce a distribution of estimates which is broader (less smooth).

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In recent years with the advent of domaining, simple kriging has sometimes been used, particularly where there are sparse data. The technique places a weight on the data captured in the interpolation neighborhood and a mean grade for the whole domain. Where the sample spacing is tight, little weight is placed on the mean; as the sample spacing broadens, the weight on the mean increases. Where the samples captured are so far from the block that the correlation is non-existent, 100% of the weight is placed on the mean. There has been heated debate as to the number of composites that should be used in grade interpolation. If a large number of composites have been used, the distribution of kriged estimates will have in general a higher tonnage and lower grade than will be recovered at the time of mining. This can cause suboptimal and incorrect mine planning, plant sizing etc. Using a smaller number of composites, or high power in the case of inverse distance estimation allows the distribution of block-grade estimates to be tuned to match the distribution that will be recovered at the time of mining. Individual block estimates will be conditionally biased. Blocks estimated to be low-grade will turn out to be higher grade and vice versa. In many deposits, particularly where the ore is controlled by multiple structures, the high and low grade areas are intermingled. Mining will sweep through a large area in planning time periods (quarterly or greater) and the effect of conditional bias will be negligible. A problem will occur when the mine plan is concentrated on a small apparently highgrade area to maximize return on investment. In these cases it has been sadly and wisely learned that very close-spaced drilling is required in advance to outline the ore. Otherwise it is likely that the grade of ore found will be disappointingly lower. It is best practice to evaluate the impact of the smoothing effect of interpolation by taking a declustered composite distribution (nearest neighbor model) and correcting it for change of support (hermetian method preferred over affine or indirect lognormal method). The support should be that of the selective mining unit, the smallest practical volume that can be segregated to ore or waste. The distribution of selective mining units is compared to the distribution of block-grade estimates at various cutoff grades. In some cases, local block-grade estimates are adjusted to unsmooth their distribution. This is acceptable, but some warning as to local conditional bias introduced should be given. Where domains with hard boundaries are used, there will be smoothing of grade estimates within domains. The global frequency distribution of block grades should be

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compared to the global frequency distribution of composites. Very often the blockgrade estimates will show local peaks and valleys that are artifacts of the domaining process. The solution is to introduce a limited exchange of composites across domain boundaries, particularly where grade zones or shells are used. It is also best practice to make contact plots for block-grade estimates to see that similar grade profiles to those displayed by composites have been reproduced in the block model. Finally, some form of swath plots should be made that compare the mean block-grade estimates versus mean nearest neighbor estimates for horizontal and vertical slices through the deposit. This will ensure the interpolation plan has not introduced biases in local areas. Non Linear Methods These methods produce a conditional frequency distribution of selective mining unit grades within panels. The most common methods are uniform conditioning and multiple indicator kriging. In the hands of a skilled practitioner, either method will give about the same results. The uniform conditioning method relies on a very robust estimate of the mean grade of a panel. The local data surrounding the panel are used to produce this estimate by ordinary kriging. The domain histogram and variogram model are used to predict the conditional distribution of selective mining unit grades. This distribution will be the same for all panels with the same estimated mean grade. The multiple indicator kriging method finds the local conditional distribution of composite-support volumes. This is based on the data available in the search neighborhood. The domain variogram model is used to perform a change of support to produce a conditional distribution of selective mining unit support data within the panel. Panels having the same mean grade will have different conditional distributions (different from uniform conditioning). The non-linear methods are mainly used where data variability is high and drill spacing is so broad that there is weak sample to block correlation. Under these conditions, the locally estimated conditional grade distributions will be elegant but inaccurate. Best practice would be to check: • Panel means versus a nearest neighbor model by means of swath plots

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Global distribution of selective mining units matches the distribution obtained by a hermetian change of support on composites

In recent years, conditional simulation has been proposed and implemented on a limited basis to determine the conditional distributions of selective mining units directly. This has the advantage that the uncertainty of selective mining unit distributions (recoverable resources) can be determined at any scale. However, if the conditioning data available are not representative, this factor will not be incorporated in the uncertainty analysis. This will be more of a problem where small areas are being evaluated. Other Checks The parameter and run files used to perform interpolation are often complicated and automated. These need to be checked in detail, particularly the variogram model tables, search ellipsoid parameters and rotations, composite files used etc. It is helpful to have a text file listing the steps taken and files used in the interpolation runs. It is best practice to interpolate at least one block using other software to check composite selection, interpolation weights and the estimate. Color-coded block grade estimates should be examined on sections and plans with composites superimposed for reasonableness. Attention should be focused on sparsely or irregularly drilled areas. The computer screen or projector can be used for these checks, provided the computer is powerful enough to rapidly move between sections and/or plans. Adjustment for Edge Dilution and Ore Loss This should be considered before any final resource summaries are published. Adjustments are appropriate when hard interpolation boundaries are used between ore-bearing and all waste domains. The irregularity of contacts and ability of mining to follow them should be evaluated. The philosophy of the intended mining operation should be considered. In some deposits waste has deleterious metallurgical characteristics, and ore loss is taken to keep dilution out of the ore stream. In other deposits, the ore is so valuable compared to mining and processing costs that dilution is taken to ensure little or no ore is lost.

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Typically adjustments are made by subtracting a requisite volume of ore and adding a requisite amount of dilution for each face of a block where a contact occurs between an ore-bearing and an all waste domain. Best practice is to ensure: • • The assumptions made are reasonable The algorithm was correctly implemented by manual checks for a few blocks.

Resource Classification Resource classification should involve some assessment of confidence in block estimates. This can be done quantitatively using variography, but studies have shown that local estimates of uncertainty are data dependent, and conditional simulation provides a better tool for this purpose. It is better if mining experience is available on the deposit or similar deposits. Increasingly it is becoming apparent that the uncertainty on the location of orebody contacts or high-grade zones is more important than evaluating uncertainty on grade. In general, resource classification should involve assessment of the spacing of drill holes in the vicinity of a block as well as distance to the closest drill hole. Possibly a single-hole rule could be used for Inferred Resources. At least a two hole rule should be used for Indicated Resources and a three-hole rule for Measured Resources. Best practice guidelines should include: • Inferred Resources should be defined using enough samples to enable local grade Interpolation. Block-grade estimates will be typically conditionally biased. The continuity of ore at the intended operating cutoff grade will be so poor that mine planning is impossible or tentative. It is impossible with the data available to estimate the accuracy of annual and global production increments. Indicated Resources should define well the margins of orebodies at the intended operating cutoff grade. Definitive location of high-grade zones can be tentative. Some conditional bias can be tolerated in local block estimates. The tonnage, grade and contained metal intended to be mined should be known ±15% with 90% confidence on annual production increments. Measured Resources should define well the locations and grade of high-grade and low-grade zones. Minimal conditional bias should be tolerated in local block

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estimates. The tonnage, grade and contained metal intended to be mined should be known ± 15% with 90% confidence on annual production estimates. • For all classes there must be a reasonable expectation that the resources could be exploited in the foreseeable future. This requires statement of resources at reasonable cutoff grades and within computer generated pits or stope blocks to the extent practical

The algorithm used to classify blocks should be documented and checked. There are strong cultural differences between continents. These guidelines are typical of those used in North America. In Australia and South Africa, classification is often more loose. Resources categorized as Measured there would be termed Indicated in North America. Resource and Reserve Summaries and Statements Most software provides a means for outputting resource and reserve summaries. These tend not to be pretty, and they are often imported into spreadsheets for formatting. Best practice is to make the following checks: • Dump out the tonnage and grades of all blocks on a level, along with pit or stope perimeters and percentages of blocks in pit or stope. Import these data into a spreadsheet and summarize them. See if the summary matches that generated by the modeling software. Select two vertical stacks of blocks; use the modeling software to summarize them. Dump out the tonnages and grades for these blocks. Import the data into a spreadsheet and summarize them. Compare the two summaries, level by level and in total.

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5.0

MINING
Present a comprehensive life-of-mine plan for the selected case based on measured and indicated resources addressing the following general issues: • • • • • • • • • Mining method selection Mine design Production rate Material movement Equipment Support facilities Personnel Operating cost estimate Capital cost estimate

Final design parameters are known and all key technical issues have been validated in previous studies. No major changes are expected in the resource block model. Tonnage and grade are known with a high level of confidence for mining blocks which are sized to suit the smallest mining unit (SMU). Clearly define all design criteria. Describe the methods used to acquire data and facilitate mine design, and where possible, include an assessment of data accuracy and precision. There are subtle differences to the approaches used for feasibility evaluation of open pit and underground projects. Each type of project is discussed separately below.

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5.1
5.1.1

Open Pit Mine Design
Design Criteria Provide a comprehensive listing and description of key design criteria associated with items such as pit slopes, bench height, minimum bench width, crushing and conveying systems, maintenance facilities, dewatering systems, and power distribution. Include any constraints that limit mining.

5.1.2

Geotechnical Studies Summarize the geotechnical and hydrological work performed and the parameters adopted for mine design. Make note of geotechnical constraints and any other limitations or operational impacts. • Implement previously-recommended target drilling and/or trial excavation programs to allow for final determination of slope designs and protection mechanisms such as dewatering systems, bolting, and berms. Summarize identified subsidence issues and define pit slope monitoring requirements. Finalize geotechnical design parameters for crushers, conveyors, dumps, leach pads, tailings dams, buildings, and access roads. Perform preliminary engineering for in-pit or ex-pit foundations.

5.1.3

Open Pit Optimization After documenting the key criteria for maximizing open pit value, optimization is typically performed using commercially-supplied software with Lerches-Grossman (or similar) routines. Input data should include the following: • Geotechnical design parameters – Open pit slopes defined by cell mapping and oriented core from each sector. Hydrological considerations should be incorporated, if appropriate. Haul road design parameters – Initial runs are generally done without concern for road allowances. Latter iterations will generally incorporate flatter slopes in areas where ramps will be placed.

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Operating cost estimate – Includes mining (ore and waste), processing, and G&A costs, estimated to an accuracy level of +/-15 to 20%. Mining recovery – Sometimes only considered after pit limits are established. Processing recovery – Can vary by rock type, with depth, or over time. Should be defined to a fairly high accuracy level (+/-5%). Smelting, refining, and royalty terms – Based on firm quotes and should include effects of deleterious elements, marketing, transport and insurance costs for final saleable product. Taxes – Can be incorporated into the operating costs, where applicable, but typically excluded. Metal price(s) – Can be constant or vary (particularly for long duration projects). The prices selected must represent long term averages that incorporate complete metal price cycles.

• •

Properly selected optimization parameters will result in an optimized pit which is representative of the final pit design. An accuracy level of less than +/-10% (on a net operating cash flow basis) is considered to be acceptable. 5.1.4 Open Pit Design Open pit design includes pushbacks and haul roads for each phase of operation including the final pit configuration. Overburden, waste, and ore production data are tabulated and summarized on an annual basis providing a mechanism for calculating fleet requirements, expenditures, and cash flow. A variable cut-off grade and low grade stockpiling strategy is employed, if appropriate, and resulting changes in reserves are documented. Finally, a check is performed to ensure the final open pit design is representative of the optimized pit shell which was used as a design guideline. 5.1.5 Waste Dumps Overburden and waste dump locations and heights have been determined from geotechnical investigations to complement the final mine layout. Operating practices

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are established. Waste dumps are designed in annual increments, which include road designs and quantity take-offs. Waste may be categorized to allow for segregation deleterious elements, sulfide versus non-sulfide dumps, or even low grade stockpiles. 5.1.6 Production Rate The production rate is finalized to optimize project value and suit other technical or economic constraints such as practical mining limitations. Ore and waste production requirements are balanced to smooth mining fleet requirements. 5.1.7 Production Scheduling Prepare ore and waste production schedules with increasing phase durations; for example, monthly for the first year, quarterly for the next 2 years, and annual thereafter. Pre-production stripping/development scheduled on an annual basis, or shorter durations, if required. In addition to tonnage and grade, production schedules should report NSR, deleterious elements, and resource classifications. The production schedule can include categories such as mine production (ore and waste), ore delivered to the processing plant, ore delivered to the stockpile and stockpile reclaim, where warranted. Ore and waste production requirements can be balanced to level mining fleet and personnel requirements. Summary schedules are typically presented in the report body with detailed bench-bybench schedules and “end of period” drawings in appendices. Descriptions should include the following: • The criteria for ore/waste determination (include the calculations supporting the determination). The process used to optimize the mining sequence and schedule and the associated constraints. The stockpiling strategy for various ore types – Are we optimizing the mine production schedule or satisfying other constraints such as plant feed composition?

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5.1.8

Equipment Ore and waste haul cycles are calculated for each phase of the production schedule to determine loading/hauling fleet requirements and associated costs. Blast pattern designs are used to determine drill and explosives vehicle fleet requirements. Other support equipment requirements are based on engineering calculations and benchmarking exercises. Final recommendations for full fleet numbers and types are based on the calculated requirements and an assessment of availability and utilization. Equipment purchase schedules are developed to satisfy the initial fleet requirements. Rebuild and replacement schedules are used to generate an overall equipment expenditure schedule (Note: routine maintenance costs are included in operating cost estimates). Equipment costs are based on quotations obtained from suppliers. Three quotes are preferred for key items (value greater than $100,000), and a single quote will suffice for others. Quotations include (or are amended to include) development allowances, spares, and freight costs. Equipment recommendations often include an analysis of new versus used equipment; however, feasibility study fleet costs are based on new equipment prices unless ownership of used equipment (and its condition) or firm quotations are provided. Contractor versus owner-operated fleets can also be considered as a way to reduce initial capital costs. The effect of the resulting operating cost increase is dependent on the project life. Short duration project economics can improve; whereas, long duration project economics might be reduced. Maintenance and Repair Contracts (MARC) can also be considered as an alternative to owner maintenance.

5.1.9

Surface Facilities Surface facilities work to be completed includes the following: • Truck shop and offices - Detailed design of facilities with consideration given to the surface area requirements, accessibility, surface runoff/flooding, and the location of services such as water and power supply lines. Other surface facilities can include offices, warehouses, training facilities, observation points, and septic systems.

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Prepare layouts with building designs for all major items such as roads, pipelines, power distribution, and fire protection. Ensure adequate parking and clearances are provided. Designs must conform to local building codes. Finalize transportation routes and site access and storage requirements for ore/concentrate/metal, personnel, and consumables such as fuel and explosives. Prepare detailed layouts of water supply from source to user for potable, service, and fire water. Finalize communications systems designs. This may include confirmation of external facility availability with local authorities. Finalize power supply requirements. Selection of power supply type (generated versus local grid) and prepare preliminary agreements with local authorities. Design the power distribution with appropriate substations, safeties, etc. Identify long lead items.

5.1.10

Personnel A personnel schedule is developed that illustrates the staff and hourly labor requirements over the project life, with key staff and management relationships shown in an organization chart. Typical disciplines include management, mine engineering, geology, mine, plant, and maintenance supervision, logistics, safety, assay, accounting, security, warehousing, information systems, clerical, and human resources. Labor classifications can be equally broad-ranged to cover the suite of activities performed on site. The personnel schedule is particularly important in a camp mining environment where housing and transportation is provided by the owner.

5.1.11

Operating Cost Estimate Mine operating cost estimates include all direct and indirect costs associated with mine production. Operating cost estimates are developed on a task basis, then combined to give overall average unit costs and annual expenditure totals. Following are examples of typical operating cost categories: • • • • Drilling Blasting Loading Hauling

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• • •

Material handling Services General and Administrative

Drilling, blasting, and hauling are often calculated separately for ore and waste, as the associated drill patterns and haul distances can vary. Other site-specific categories such as “re-handling” can apply. An operating philosophy is required to determine whether contractors are used for any or all activities. If contractors are to be used, assessments of contractor indirect costs and margins are required. Operating cost estimates for each category are typically subdivided into labor, materials, and other. Logistics associated with each of these sub-categories can be of significance, depending on the job site location. Electrical power is often reported as a stand-alone item. Labor costs are developed from first principles with base labor rates and allowances for vacation, holidays, overtime, shift differential, bonuses, sickness, training, FICA, FUTA, Medicare, SUTA, Workers Compensation, basic life insurance, AD&D, 401k, medical, and dental insurance. Hourly labor rates are developed for all hourly labor classification. Monthly labor rates are calculated for staff positions. Quotations are solicited for key consumables such as fuel and explosives. significant items are estimated based experience and benchmarking exercises. Less

It is important to state the basis for the estimate, exclusions, currency used, and whether any escalation is included. 5.1.12 Capital Cost Estimate Open pit capital cost estimates generally comprise of a pre-stripping program followed by a mobile fleet build-up and operations. As such, the capital costs are typically estimated along with the other site capital costs.

5.2

Underground Mine Design
There are a wide variety of underground mining methods - some induce caving and some do not; some require fill (with or without cement) and some do not; and others rely on continuous mechanical mining equipment such as raise borers and continuous miners. As such, the key technical considerations and evaluation process in a feasibility study are largely a function of the mining method selected. This section

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contains a generic description of the elements required for the mining portion of a feasibility study, which should be modified to suit project-specific requirements. 5.2.1 Design Criteria Provide a comprehensive listing and description of key design criteria associated with items such as stope dimensions, ground support requirements, shafts, material handling systems, maintenance facilities, ventilation, backfill systems, dewatering systems, and power distribution. Include any constraints that limit mining. Descriptions of operating philosophies related to work schedule, employment of contractors, leasing equipment, and maintenance and repair contracts can be included. 5.2.2 Geotechnical Summarize the geotechnical and hydrological work performed and the parameters used for mine design. Make note of geotechnical constraints and any other limitations or operational impacts. • Implement previously recommended test development and/or stoping programs to validate rock mass characterization models, ground support requirements, and productivity rates. Specify stope design parameters such as dimensions, orientation, and fill strength/quantity, if needed. Specify ground support regimes for stopes, drifts, drift intersections, and large openings. Specify ground support requirements for shafts, orepasses, and raises. Prepare ground water inflow estimates. Specify depressurization requirements. Specify subsidence parameters and prepare fragmentation analyses, if applicable. Finalize geotechnical design parameters for crusher, conveyor, transfer, bin, fan installation, hoist, headframe, and building foundations.

• • • • •

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5.2.3

Cutoff Grade After documenting the key criteria for maximizing mine value, the cutoff grade is calculated using the following parameters. • • • • • • Operating cost estimate. Production grades – fully diluted. Metallurgical recovery. Smelting, refining, and royalty terms. Taxes (in some cases). Metal price(s).

A variable cutoff strategy can be employed to optimize cash flow and/or the production profile. 5.2.4 Mining Method Selection The mining method(s) should have been selected in precursor studies based on deposit characteristics (geometry and grade), geotechnical parameters, productive capacity, cash flows, and sensitivity analyses. Discussion related to the mining method selection should include the following: • • • • • • Selected mining method description and selection justification. Eliminated mining methods. Basis for comparison. Geotechnical parameter summary. Productive capacity conclusions. Risks and opportunity summary.

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Fall-back opportunities.

It is possible to have two mining methods worthy of feasibility level evaluation. In this case, it could be argued that the method selected is irrelevant, as each returns a similar economic outcome. A more prudent approach is to identify areas of uncertainty, investigate these areas further, and evaluate both alternatives at feasibility level independently. The ultimate selection can be economically-driven or influenced by a variety of non-mining parameters such as subsidence area, supply logistics (cement for fill), or labor requirements. 5.2.5 Stope Design Prepare stope designs using the most current resource model, cutoff grade, and geotechnical design parameters. Grade shells are often used as stope design guidelines, but commercial programs are available that are efficient, unbiased, and remove the guesswork associated with manual stope design. Summarize the following information and quantities for each stope: • Name – typically using key coordinates such as elevation and easting or northing to help identify the stope location. Stope access drift – waste – full-face development. Stope access drift – ore – full-face development. Stope access slash – waste – typically for drift and fill type accesses, but can apply to undercuts/overcuts for blasthole stopes near resource boundaries. Stope access slash – ore. Stope drill – in-situ resource. Stope load and blast – in-situ resource. Stope muck – in-situ resources adjusted for dilution and extraction.

• • •

• • • •

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• •

Stope backfill – if required. Stope ground support – if required.

Note: Terminologies can differ to suit the mining method or the local dialect (“slabbing” in the US versus “slashing” in Canada). The intent is to summarize quantities into categories that allow for efficient scheduling, equipment assignments, and cost estimating. 5.2.6 Waste Dumps Although underground mine waste dumps tend to be much smaller than those for open pit mines, designs are required nonetheless. The waste dump locations and heights are determined from geotechnical investigations. In some cases, mine access layouts can be modified to suit waste dump requirements. Waste dumps can be designed in annual increments or final designs, depending on the size and nature of the waste. Waste may be categorized to allow for segregation deleterious elements, sulfide versus non-sulfide dumps, or even low grade stockpiles; however, underground mine waste dumps are typically assumed to be uniform and designed as such. 5.2.7 Production Rate The production rate is finalized to optimize project value and suit other technical or economic constraints. Productivity rates for critical production activities are combined to determine the productive capacity for a stope. The stoping sequence is then used to determine a practical mining limitation or total production rate. Plant capacity and the associated capital “steps” are an example of a technical constraint that could limit the mine production rate, particularly on a brown field site. 5.2.8 Production Scheduling Underground mine production scheduling generally includes scheduling all activities associated with accessing, developing, mining, and if necessary, filling each stope. Production schedules are prepared with increasing phase durations; for example, monthly for the first year, quarterly for the next 2 years, and annual thereafter. Activities which produce mill feed are ultimately combined to provide a mill feed grade profile. In addition to tonnage and grade, production schedules should report NSR, deleterious elements, and resource classifications.

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The production schedule can include categories such as mine production (ore and waste), ore delivered to the processing plant, ore delivered to the stockpile and stockpile reclaim, where warranted. Ore and waste production requirements can be balanced to level mining fleet and personnel requirements. Summary schedules are typically presented in the report body with detailed schedules and “end of period” drawings in appendices. Written descriptions should include the following: • • The criteria for ore/waste determination. The process used to optimize the mining sequence and schedule and the associated constraints. The stockpiling strategy for various ore types

• 5.2.9

Ore and Waste Handling Underground mine ore and waste handling systems can be as simple as truck haulage from the stope to surface or as complex as a network of orepasses, crushers, conveyors, bins, hoists, and overland conveyors. Complex ore and waste handling systems tend to be on the critical path for mine development and construction schedules, adding to the importance of the design, productivity, and cost estimating processes. The ore and waste handling system selections and conceptual designs should be documented in precursor studies. Geotechnical parameters needed to estimate foundation and structural support requirements are final. Sufficient engineering is required to support the preparation of general arrangement drawings for the following facilities (where applicable): • • • Rock breakers. Ore and waste passes – including grizzlies and discharge arrangement. Crusher – with intake and discharge feeders.

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• • • •

Belt conveyors. Chutes, bins, transfers Haulages (truck, conveyor, or rail) Production and service shafts – with loadout facilities, discharge arrangements, skip and rope changing arrangements, and shaft stations. Hoisting plants – with hoist house, hoists, and headframes.

Ore and waste handling system designs should be coordinated with mine access and services requirements, where practical, to minimize development requirements. Include descriptions of the ore and waste handling systems along with design criteria and key specifications, and a schematic diagram of the key elements of the system. 5.2.10 Mine Access Mine access development provides primary and secondary egress between surface facilities and underground work places during the mine development and production periods. These accesses are typically multi-purpose headings with secondary uses such as ventilation, power supply, and material handling. Describe the mine access strategy as it pertains to the preproduction and full production periods. 5.2.11 Maintenance Facilities Mining operations typically require fairly extensive maintenance facilities to provide efficient repair services and ensure a high level of availability. Following are examples of typical services associated with the maintenance facilities. • • • • Service bays – crane bay, lube bay, welding bay, wash bay. Warehousing – parts, fuel, and explosives. Offices and lunch room Control center

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• •

Refuge chambers – Underground only. Training facility – Sometimes on surface.

Describe the support facility functions prepare adequate general arrangement drawings to support cost estimating. In addition to the MARC contracts addressed for open pit mining, the underground operator must define the types of services provided in the shops, build and equip for those services, and assess the costs associated with remaining services provided off site. For example, it is common to provide minor repairs underground, but perform major rebuilds off site. 5.2.12 Mine Services The mining method, production rate, and resulting fixed and mobile equipment fleet, require a variety of mine services. A list of typical services with engineering and design work descriptions follows: • Backfill plant – this is really a production activity but the supply and distribution is considered a service. o State design basis and calculate overall requirements. o o o Model the distribution to determine pump or fleet requirements. Note: This can be done in a phased approach if the network varies significantly over time. Prepare general arrangement drawings for the backfill plant, and pumping and booster stations, if applicable. Include a schematic diagram of the mine backfill system and a description of the operational philosophy.

Main ventilation o State design basis and calculate overall requirements. o o o Model distribution to determine main fan specifications. Note: This can be done in a phased approach if the network varies significantly over time. Prepare general arrangement drawings for main fain, bypass, air door, and bulkhead or regulator installations. Prepare a schematic diagram of the mine ventilation network and a description of the ventilation philosophy.

Auxiliary ventilation o State design basis and calculate requirements per heading type.

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o •

Calculate fan motor size and operating point.

Water management – service water, potable water, and fire water o State design basis and calculate overall requirements. o o Calculate pump motor sizes and operating points. Prepare a description of the water supply/distribution philosophies.

Ground water – clean o State design basis investigations. o o

and

determine

overall

inflows

from

hydrological

Calculate pump motor sizes and operating points. Prepare a description of the ground water removal philosophy. Include depressurization drilling, dewatering galleries, or other remedial measures. Prepare general arrangement drawings for sumps, pump stations, or water treatment facilities.

Mine water - dirty o State design basis and determine investigations and mine equipment use. o o

overall

inflows

from

hydrological

Calculate pump motor sizes and operating points. Prepare a description of the dirty water removal philosophy. Prepare general arrangement drawings for settlers, sumps, pump stations, or water treatment facilities.

Diesel fuel and oil supply o State design basis and determine overall requirements for mobile equipment fleet. o Prepare a description of the fuel supply, storage, and distribution systems. Prepare general arrangement drawings of fuel storage areas.

Explosives supply o State design basis and determine overall requirements for development, stoping, and secondary breaking. o Prepare a description of the explosives supply, storage, and distribution systems. Prepare general arrangement drawings of explosives storage magazines (surface and underground).

Waste disposal o Prepare a description of the waste disposal plans for solid waste, waste oils, and hazardous materials.

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Electrical power supply and distribution, and communications o State design basis and calculate overall requirements using a load list and calculated operating times. o o o o o Model distribution to determine main substations specifications. Note: This can be done in phased approach if the grid changes significantly over time. Selection of power supply type (generated versus local grid) and prepare preliminary agreements with local authorities. Identify long lead items. Consider emergency power supply requirements and design appropriate secondary power supply systems. Prepare sufficient single line diagrams to define the equipment requirements for all substations. Prepare general arrangement drawings for main substations. Prepare a description of the power distribution philosophy with details on key aspects of the power supply.

Other areas that might require descriptions if any special arrangements are needed include access and service roads, training facilities, transportation (for personnel, supplies, or concentrates), and camps. 5.2.13 Development and Construction Schedule A mine development and construction schedule is prepared to sequence all preproduction and sustaining capital development and construction activities. The schedule is resource loaded, providing insight into the site personnel buildup and allowing for resource leveling. Besides defining the pre-production period duration, a significant use of the schedule is to define durations over which contractor’s indirect costs are assessed. Other uses of the schedule follow. • Provide a visual representation of the preproduction development plan which can be optimized by revising logic, adding/removing crews, or changing development strategy. Provide a check to ensure pre-production development requirements are balanced against the production build-up schedule and that an “achievable” plan is proposed. Perform sensitivity analyses including full risk assessment.

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The schedule should contain contingency which is determined through risk analysis, with full contractor indirect costs assessed over the contingent period. 5.2.14 Mining Equipment Selections Provide a list of fixed and mobile equipment selected to complement the final mine layout. The list can include an identification number, descriptions (including make, model, and key specifications), diesel and electric motor sizes, and shipping weight. Fixed equipment quantities are generally determined by mine layouts (i.e. number of crushers) or calculations (i.e. the number pumps in a sump); whereas, mobile equipment quantities are determine from productivity calculations with allowances for availability and utilization. Equipment purchase schedules are developed to satisfy the initial fleet requirements. Rebuild and replacement schedules are used to generate an overall equipment expenditure schedule. Equipment costs are based on quotations obtained from suppliers. Three quotes are preferred for key items (value greater than $100,000), and a single quote will suffice for others. Quotations include (or are amended to include) development allowances, spares, and freight costs. 5.2.15 Surface Facilities The extent of surface facilities can vary significantly depending on the type of mine and/or the ability to build on surface. Typical surface facilities can include backfill plants, maintenance shops, offices, warehouses, training facilities, camps, observation points, and septic systems. Detailed designs are prepared with consideration given to the surface area requirements, accessibility, surface runoff/flooding, and the location of services such as water and power supply lines. Building designs include all major items such as roads, pipelines, power distribution, and fire protection. Ensure adequate parking and clearances are provided. Designs must conform to local building codes. 5.2.16 Personnel Personnel schedules illustrate the staff and hourly labor requirements over the project life, with key staff and management relationships shown in an organization chart. Typical disciplines include management, mine engineering, geology, mine, plant, and

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maintenance supervision, logistics, safety, assay, accounting, security, warehousing, information systems, clerical, and human resources. The schedule typically has both owner’s and contractor’s crews. Labor classifications can be equally broad-ranged to cover the suite of activities performed on site. The personnel schedule is particularly important in a camp mining environment where housing and transportation is provided by the owner. Staffing discussions should address the philosophy behind all personnel assignments. 5.2.17 Operating Cost Estimate Mine operating cost estimates include all direct and indirect costs associated with mine production. Operating cost estimates are developed on a task basis, then combined to give overall average unit costs and annual expenditure totals. Following are examples of typical operating cost categories: • • • • • • • • • • • Drilling Blasting Loading Hauling Material handling Ground support Backfilling Drifting Slashing Services General and Administrative

An operating philosophy is required to determine whether contractors are used for any or all activities. If contractors are to be used, assessments of contractor indirect costs and margins are needed. Operating cost estimates for each category are typically subdivided into labor, materials, and other. Logistics associated with each of these sub-categories can be of significance, depending on the job site location. Electrical power is often reported as a stand-alone item. Labor costs are developed from first principles with base labor rates and allowances for vacation, holidays, overtime, shift differential, bonuses, sickness, training, FICA, FUTA, Medicare, SUTA, Workers Compensation, basic life insurance, AD&D, 401k,

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medical, and dental insurance. Hourly labor rates are developed for all hourly labor classification. Monthly labor rates are calculated for staff positions. Quotations are solicited for key consumables such as fuel and explosives. significant items are estimated based experience and benchmarking exercises. Less

It is important to state the basis for the estimate, exclusions, currency used, and whether any escalation is included. 5.2.18 Capital Cost Estimate Mine capital cost estimates can be divided into two phases: pre-production and sustaining. Pre-production capital costs typically include all expenditures through to the start of the production buildup period. Sustaining capital costs include mobile equipment purchases, rebuild, and replacement costs, subsequent capital development phases (i.e. additional lifts in a block cave), and/or ongoing development performed concurrent with mine operations. Direct costs are assessed for each item in the mine development and construction schedule based on calculated productivity rates and the appropriate labor and materials costs (contractor and owner rates can vary). The indirect costs assessed in the mining portion of the capital cost estimate are a function of the development philosophy and the overall project capital cost estimating philosophy, but could include any or all of the following: • Contractor indirect costs – calculated to suit project-specific support and management requirements. Contractor margins, insurance, and bonding – assessed as a percentage of the total direct and indirect costs (preferably supported by a quotation). Owner’s costs o Fixed equipment purchases – based on vendor quotes with appropriate development, spares, and freight allowances. o o o Mobile equipment purchases – based on vendor quotes with appropriate development, spares, and freight allowances. Mobile equipment rebuild and replacement – based on vendor quotes with applicable development and freight allowances. Engineering – Costs are assessed for all detailed design drawings required for all mine facilities.

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o o o

Procurement – A procurement team is defined and costs are allocated over the duration the team is active. Construction management – A construction management team is defined and costs are allocated over the appropriate duration. Owner’s project team – An owner’s team is defined to perform all mine engineering and planning. This team works in parallel with the EPCM teams, which are implementing plans. Owner’s personnel training – An allowance is included for training operations personnel prior to production startup. Electric power – May be generated or sourced from a local utility grid.

o o • •

Taxes – typically incorporated into the overall project capital cost estimate. Contingency – can be assessed against different cost categories such as labor, equipment, and supplies with appropriate rates for each or developed from a risk analysis.

Feasibility capital costs are estimated to +/-15% accuracy with 95% probability. The basis for the capital cost estimated is stated, along with the currency terms, exclusions, and any other statements to help the reader understand the scope of the estimate. Summarized capital costs are typically presented in the report body with details in appendices.

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6.0
6.1

METALLURGY AND PROCESS DESIGNS
Introduction
The pattern for process technical and economic studies is to develop a plant design, then estimate costs for the selected plant. • Design concept evolves from a study of the resource: o Chemistry of the minerals suggests processing methods. o o Market economics and history provide a guide as to what product to make. Literature review and awareness of industrial practice are fundamental inputs at this point.

Result is a conceptual process design, conceptual flowsheet and equipment selection. Conceptual design is the basis for testing. Testing yields design criteria and flowsheet refinement. Design criteria allow calculation of balance. Calculated balance flows allow equipment sizing. Sized equipment can be costed from experience or vendor quotes, and factored up into an estimated plant capital cost. Factors are replaced by design engineering as the required level of accuracy increases. Operating cost components are estimated from balance quantities, utility requirements for the various unit operations, and judgment about labour inputs, together with cost information from experience, research, or quotation. Estimated capital and operating costs are the inputs to financial analysis, “by others”.

• • • • •

6.2

Metallurgical Testing
A necessary precedent to design is metallurgical testing.

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Why testwork? • The objectives of testwork: o Design criteria for the process plant. o Reduction in perceived risk by showing that the selected process sequence can produce the desired products.

Why can’t we design from first principles and conventional wisdom in the way that other process industries can? o We process natural products that are never exactly the same from design to design. o o Consequently, there is not a “one fits all” process design that can be reused indefinitely. Instead, there are general principles that can be used to select approaches to processing. These then need to be proven, and appropriate design data for each situation needs to be developed. This introduces a level of risk in mineral process design that is not so prevalent in other processing: We cannot build a commercial scale plant from the get-go to prove our ideas. We must start with something far less expensive, which means smaller. We go to a laboratory and, over time, execute a sequence of activities that come closer and closer to mimicing an industrial process. Getting closer generally means: • • • • o o larger scale, batch to continuous operation, all recycles implemented, and use of industrial-type equipment as opposed to lab equipment.

o

o

This means greatly increasing costs as we get closer to final design. These costs buy us better fidelity with the ultimate product, and hence, reduced risk.

Most of the activities required for a definitive feasibility study have their counterparts in earlier, less comprehensive study levels. Making these earlier studies definitive requires more intensive work in the same areas rather than different types of activities. Accordingly, and for context, it is appropriate to present the study sequence rather than focus solely on the highest level of intensity.

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6.3

Scoping Level Test Program
The most important point is: is the metallurgy being developed on samples representative of what will be produced from the mine ultimately? • • At this time, we may not be able to forecast mine production with any certainty. It will be essential to go over what is known about the resource with the geologists and ensure that all rock types that could give rise to variations in metallurgical response have been sampled. Not only should they be representative, but they should be fresh, and preserved, if necessary. o sulfide and native metal samples are especially subject to aging by oxidation and corrosion. Basis for test program design: o assay for valuable constituents, and o • visible (i.e., hand lens) mineralogy.

Look for parallels with conventional practice, e.g.: o Visible coarse gold suggests a gravity process component. o Evidence of primary sulfides could suggest: concentration by flotation and precious metals are refractory. o Evidence of secondary sulfides could suggest: concentration by flotation, acid ferric leaching, and bacterial leaching. o o Low grade could suggest heap leach approach. High grade could suggest agitation leach approach.

Look for expected associations, e.g.: o with chalcopyrite, look for Mo, o o with Au, look for Ag, and with Ni, look for Co and PGMs.

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Now, with this in hand, set up some basic investigative and amenability tests to see what can be achieved. • Objectives: Identify technically feasible approaches to value extraction and Highlight metallurgical problems that may require intensive investigation and focus by the proponents. The samples are whatever are available. o Since the geological and mining understanding of the resource may be limited at this stage, there may be no guarantee that the sample(s) are “representative.” Mineralogical examination: o Identify both valuable and gangue minerals as all may participate in the processing. o Chemical association of the valuable constituents (as indicated by the minerals present) provides a clue to the methods and ease of extraction (e.g. oxide minerals vs sulfide minerals). Associations between valuable and gangue minerals. Forecast likely liberation sizes for minerals of interest and infer the degree of grinding and ease of physical separation.

o o

Diagnostic leaches to determine deportment of valuable constituents, e.g: o Copper deportment among primary, secondary sulfides and oxides o o o o o Gold: Cyanide leach -> free gold HCl leach followed by cyanide leach -> Au in iron oxide, labile sulfides and coatings HNO3 leach followed by cyanide leach -> Au in remaining sulfides including pyrite Residual gold in quartz

• • •

Determine Bond work index. Conduct batch flotation tests. Conduct cyanide bottle roll tests.

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• • • •

Conduct bottle roll acid leach tests. Conduct bacterial shake flasks. Testing scale could be 250 – 1000 g per test depending on the type of test. Some work could be completed in laboratory glassware, without the need for specialized industrial-type equipment.

These tests are not comprehensive. For example, at this level, if we get the valuable constituents to leach, we would assume we can recover them from solution, and wouldn’t seek to prove this at this stage (e.g., we wouldn’t electrowin the copper or refine the gold). If we get the values to float, we assay the product, and report how we think it would be accepted by a smelter, e.g., what penalties might apply. We wouldn’t actually subject the concentrate to smelting procedures.

6.4

Scoping Level Process Engineering
On the basis of this work, a process concept can be advanced. • • Flowsheets and equipment lists can be developed. If the geologists/mining engineers can give an indication of probable head grade and production rate, balances can be calculated. o The balance tool most widely used is the computer program Metsim. o Given sufficient metallurgical design criteria derived from testwork, industrial practice, and professional judgment, an accounting model for the minerals, elements, and/or size fractions of interest can be constructed. The flows which are calculated are the basis for sizing the equipment.

o

We need to make a judgment about the probable recovery. At this stage, the estimate is not very accurate, because the testing does not mimic industrial methods, but it has great bearing on the likely economic feasibility of the project. The estimate will be arrived at by considering the recoveries achieved in the testing that has been completed, together with what we know about current industrial practice, and how the testing methods that have been employed relate to industrial practice.

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We also need to make judgments about the quantity of reagents required, e.g., acid consumption or cyanide consumption in kg/tonne. These are also very important to the economics, and are not well indicated by the testing at this level. Considerable professional judgment will be needed to make this determination. In making these judgments, it is important that we not be too conservative, and thereby kill a project before we are sure it cannot succeed.

6.5

Scoping Process Capital Cost
From the estimated flows, equipment can be sized and costed and factored up into a scoping level capital cost estimate. Costs are predominantly derived from previous studies and published information. Vendors are not usually contacted, and professional estimators are used in an advisory role rather than having them build the estimate themselves.

6.6

Scoping Process Operating Cost
• • • • From the balance, estimate reagent consumptions. From the equipment list, estimate power requirements. From the flowsheet, assemble a manpower list and estimate labour costs. From the installed equipment cost, estimate the annual maintenance cost.

Sum the above and report as $/mass of the valuable constituent, e.g., $/lb Cu. In building an operating cost estimate, some practitioners like to add a contingency. Because the project net revenue is calculated as the difference between two numbers (selling price and operating cost) that may be relatively close in value, this practice could seriously distort the net revenue prediction, and we believe it should be avoided. First pass economics can then be projected based on the estimated recovery of valuable constituents, and an appreciation of what returns they might bring in the market place. Sometimes it is relatively easy, e.g., the price of gold is well-known, and the cost of getting it to market is relatively small and quantifiable. Sometimes it is hard, e.g., for nickel concentrate, there are relatively few buyers, so that current smelter schedules may not be that easily obtained (remember, each one is the result of a negotiation). With industrial minerals, it is even worse, as there are seldom any

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posted prices or publicly available information on commodity trading. premiums may vary widely from buyer to buyer.

The quality

6.7

Scoping Technical-Economic Report
The resulting report will need to be combined with a report on mine design and costs to provide an initial understanding of overall project economics. If there are major project issues beyond mining and processing (e.g., access, power line, environmental mitigation, etc.), specialists may be enlisted to provide perspective and rule-of-thumb economics indicating the likely impact. However, reports at this level usually have relatively few authors. Discipline costs (e.g., structural, instrumentation, HVAC, electrical, etc.) are usually covered by factors or allowances.

6.8

Prefeasibility Test Program
Objectives of this program are: • • • • • prove initial concepts, evaluate alternatives, consider more representative material, either by blending, or evaluating the different types which must be accommodated by the design, investigate effect of circulating loads by running with recycles or in locked cycle, and perceived risk reduction: additional demonstration of technical feasibility.

What do we mean by locked cycle? One of the features of industrial processing is the use of recycles: streams may be produced (e.g., flotation middlings) which do not meet final requirements and require further processing. These streams may be recycled to an earlier process stage to make an additional effort at achieving the desired separation. When we do this, we increase the burden on the earlier process, and we should attempt to account for this in testing. To do so, we conduct a repetitive series of batch tests in which the middling product from each iteration is recycled back as feed to the next iteration. This is called “locked cycle” testing. An industrial process would probably not run in batches like this, but incorporating the recycles is still a significant advance in making the testing simulate industrial operation. Features of the program:

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More comprehensive and “representative” sample suite is available due to advanced drilling, better understanding of the resource. Locked cycle batch or continuous with recycles and balance calculations provide better fidelity with industrial performance. Depending on the type of test, perhaps 1-2 kg batches will be used. Bond rod and Bond ball mill indices are obtained on a range of samples. Column leaches for potential heap leach are done on 50-100 kg each. Mineralogy is obtained for various process streams. Extent is driven by the need for information, i.e., the perceived success of the processing methods under investigation. More variability testing is done (use a simple test to tie variability samples to main process sample, e.g., bottle roll). Basic engineering tests are performed, e.g.: o flocculant selection, o o settling rates, and filtration rates.

• • • •

6.9

Prefeasibility Process Engineering and Report:
A refinement of the scoping study; some items are removed from the process engineer’s scope and instead executed by specialists, e.g.: • • • estimate assembly, tailings disposal costs, and ancillary buildings and infrastructure.

More comprehensive material balance calculations are based on and congruent with the balances measured in testing. These carry all significant elements, with speciation where appropriate (e.g., S(S=), S(So), S(SO4=), S(t)). Sized equipment list are based on balance. Site layout and equipment general arrangement plan and sections are developed.

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Costs are based on telephone/e-mail quotes from vendors and preliminary quantity takeoffs from the few layout drawings that are created: At this point, the study may start to use services of some senior discipline engineers for better definition, depending on particular issues to be resolved. Examples are power delivery and distribution, tailings systems, geotechnical issues. Better predictions of operating costs are possible due to better data on reagent consumptions: • • • batch vs continuous testing, better sample selection, and better fidelity with industrial operation.

Better prediction of value recovery and marketability are possible for same reasons. Engineering is sufficiently limited that it is reasonable to investigate process alternatives that may offer optimization, e.g.: • • • • whole ore cyanidation vs cyanide concentrate vs separate cyanidation of concentrate and flotation tails, optimum crush size for heap leach, heap leach with fines removal vs whole ore heap leach, and etc.

6.10

Prefeasibility Technical-Economic Report
The result of the above activities is a contribution to the project pre-feasibility study report. At this level, the report will have some similarity to the feasibility report; the difference is the amount of work that has gone into the various components. The process section of a prefeasibility study might contain: • • • • • review of testwork, process description and flowsheet, with discussion of assumptions, design criteria and the resulting balance calculations, equipment general arrangement drawings, costed equipment list and factored capital cost, and operating cost description of components and tables

These are also not very different from the items that would be contained in a Scoping report, but again, reflect a different level of effort.

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6.11

Feasibility Test Program
Objectives of the feasibility study test program are: • Demonstrate process technical feasibility using industrial processing operations (as much as possible). Generally are not for evaluation of alternatives (too expensive). Use best samples that can be procured: drilling or test mining. either metallurgical (large diameter)

• •

• • • •

Obtain data for inclusion in process equipment specifications. Produce products for marketing evaluations. Train operating staff. Generate samples for environmental testing.

Feasibility study metallurgical tests provide continuous bench-scale pilot plant with major recycles. For the most part, these tests are conducted in small scale industrial equipment. • • • Sample consumptions are 50-100 kg/day or more. Run for 1-2 weeks at steady state. Investigate a small number of alternate operating conditions (not alternate processes). Full material balances on elements of significance. Deportment of impurities.

• •

SAG mill testing is undertaken using:

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• •

JK testing and McPherson testing

Vendor test programs are undertaken, typically involving: • • • filtration, flocculation, and thickening.

The intent is to get a performance guarantee from the vendor for his equipment. Try more than one vendor for similar equipment, compare results, make judgment.

6.12

Feasibility Process Engineering and Report
• • • • One process concept is selected for study. As a result of the test program, process design criteria are modified or confirmed. More engineering will take place than previously to provide estimating quantities. Vendors will (hopefully) do more work to pinpoint their quotes based on the most comprehensive test results available. Items that previously were factored based on equipment costs will now be estimated based on material quantities and current costs, e.g., concrete, piping, structural steel. Metallurgical plant results will be integrated with output of other disciplines, as shown in the table of contents for these notes (geology, mining, environment, etc.).

The report contents will be comprehensive, and will follow the table of contents shown in Appendix B.

6.13

Demonstration Testwork
Objectives are: • • further demonstrate process technical feasibility, risk reduction,

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• • •

produce products for marketing evaluations, train operating staff, and generate samples for environmental testing.

Demonstration testwork is not a feature of all projects: • Need for this stage may be indicated by novelty of process, hence perceived technical risk. Small industrial equipment will be used throughout. Usually is done at minesite due to sample quantities required, and required disposal of tails. May provide introduction and training of locals by this means. Report may be generated for plant activities, but not usually associated with another stage of engineering/economic evaluation.

• •

• •

6.14

Specific Process Testing Methodologies
• Milling o Bond Index o o o • abrasion index JK drop weight McPherson

Flotation o batch Denver cell o continuous pilot plant

Heap leach o coarse bottle roll o o o columns cribs pilot heap

Autoclave

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o o o •

batch Parr autoclave continuous 30 litre demonstration (e.g., CESL)

Agitation leach o titrations o o o o bottle roll bench top batch reactors pilot plant continuous trains demonstration plant continuous trains

Filtration o filter test leaf o o batch pilot units (filter presses) continuous pilot units (vacuum belt, disc, etc.)

Thickeners o jar test flocculant evaluation o o o o batch 2 L cylinder settling test, Kynch analysis semi-batch cylinder test, continuous feed, no product withdrawal high rate continuous thickener test slurry rheology (rake and mechanism design)

6.15

Metallurgical Testing QA/QC
• • Choose reputable laboratory, and review their assaying QA/QC procedures. Quality of process testing is checked largely by the balances: it is essential to get back what you thought you put in! Also consider duplication, and examine the resulting variation in results: o High variances might not represent poor technique: e.g. nugget effect in gold projects but you need to be aware of it, and interpret accordingly! may dictate expanded program

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6.16

Flowsheet Development
• The flowsheet is developed based on the process concept using standard industrial unit operations. Balance flows may be shown on the flowsheet, or flows may be keyed to a table that is presented separately. The latter is gaining in favor as computer-generated balances become predominant. Principals to follow in developing the flowsheet can include: o Keep the flow scheme as direct and simple as possible. number of unit operations. o

Minimize the

Several balances may be produced to represent different situations that the plant may encounter – seasonal or ore-type variations, for example. First put down and logically connect all the unit operations that must take place in order to accomplish the desired processing, e.g.: SAG mill ball mill cyclopac conditioner flotation filtration drying etc.

o

o

Then the flowsheet must be analyzed for placement of surge: Batch operations (e.g., filter presses) must be surrounded with adequate surge storage so that the continuous operations will not be impeded by the cyclic operation. Surge serves no purpose in gravity overflow operations (e.g., solvent extraction, agitated reactor trains). The probability and impact of maintenance requirements will determine surge in some circumstances. Some operations are difficult and expensive to shut down (e.g., autoclaves), so additional surge should be specified to assure continuity.

o

Finally, show the pumps that move the slurry from unit to unit:

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Indicate the type of pump using appropriate symbols. Choose pumps appropriate to the operation, e.g.: • positive displacement pump to feed a pressure filter or an autoclave, • rubber lined pumps for slurry and corrosive applications, • vertical cantilever pumps for sumps, and • progressive cavity pump for flocculant solutions (minimum shear). Proper pump selection needs a mechanical layout to see where gravity can be used, and to estimate head requirements. Overflows (e.g., from a continuous agitated reactor) need a pumpbox before the pump to provide the necessary suction head. Decisions need to be made about a policy for installed spares.

6.17

Equipment Selection and Sizing
Equipment selection is usually based on current industrial practice. precedents that are identical with or close to what we want to do. We look for

Sizing of equipment is unique to each unit operation. Some examples are: • • • • • leach tank, autoclave, flotation cell: residence time, sand filter: superficial fluid velocity, e.g. m/h, heat exchanger: heat transfer coefficient, W/m2/oK, thickener: sedimentation rate, t/h/m2, and clarifier: rise rate, m/h.

Ultimately, the equipment sizing will likely be recommended by the vendor, based on service conditions that are specified by the design engineer. However, engineering needs to take place before the equipment has been finally selected and purchased, so the process engineer needs to estimate sizing early in the study. These estimates are useful checks against the bids received from vendors, and in making the bid comparisons. Materials of construction are an important issue: • Select for erosion. o ceramics o rubber, or

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o •

hard metal.

Select for corrosion, minding the temperature: o carbon steel, o o o o o o rubber lining (triflex for corrosion), stainless steel, many grades, exotic alloys, e.g. titanium, Hastelloy, fibreglass reinforced plastic (FRP), low or high density polyethylene, and polyvinyl chloride.

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7.0
7.1

INFRASTRUCTURE
Introduction
Infrastructure covers all aspects of the project not directly part of the mine and process facilities (mill, tailings, waste rock dumps) and essential to the project operation. Care must be taken to ensure that critical components of infrastructure are not omitted due to assumptions of inclusion in mine and process facility design and cost estimates. Selection, engineering and cost estimating of infrastructure must consider the following: • • • • • Relevant site conditions Operating conditions within the processing plant and other project facilities Safety parameters identified and provided for in the design basis Occupational Health issues identified and provided for in the design basis Environmental constraints to be placed on the processing plant and other facilities identified and provided for in the design basis. Off-site conditions that are likely to be reflected in supply or product transportation logistics constraints provided for in the design basis

The engineering designs of infrastructure will include: • • • • Process Block Diagrams Detailed Process Flow Diagrams Piping and instrumentation designs – Main Process, Service and Utilities Areas Site Layouts, General Arrangements and sections for processing plant facilities, product handling facilities, infrastructure and waste management facilities Equipment Lists – Mechanical, Electrical

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• • • • • • • •

Specifications for all Major Equipment Selection of Major Mechanical Equipment items Site Topographical – Civil Layouts Detailed layouts, plans and sections of major facilities Single Line Electrical Diagrams Control System Design Performance Specifications for Packaged Plants and Utilities. Design, layout and sections of all major earthwork structures, site grading plan with quantity take-offs and major foundation design and quantity take-offs

7.2

Infrastructure Components
Development of plans for infrastructure should emphasize the main elements of access, site support facilities (fuel, maintenance, concessions, fire and security), power and supply distribution, ore transport, water & waste treatment, communications & data and housing. Designs are completed to the level of detail referenced above.

7.2.1

Power Supply Determine the final selection for power supply, whether it be an existing electrical power grid, alternative energy types (hydroelectric) or on-site diesel power. Design delivery of the supply (power lines off of grid, or truck delivery of diesel) and confirm the contractual terms that will be necessary to secure adequate power for the project. Contract terms should be in writing. Designs of the power supply should include design criteria for the power plant, operating consumables, maintenance consumables, fuel consumption and source.

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7.2.2

Port Facilities Selection of port facilities, if required, should consider existing ports and modifications required, or development of new facilities.

7.2.3

Railroads, Trucking and Shipping Determine need for use of existing railroad facilities, trucking, and general shipping, and any additional facilities used for shipment of supplies and delivery of products.

7.2.4

Access Design improvements of existing roads and new alignments required for delivery of equipment and routine operations.

7.2.5

Water and Wastewater Systems Determine the source and availability, and design the water supply. Include a water balance calculation which takes in consideration all components of the mine, process plant, infrastructure and tailings. Develop design for water treatment system and standards for discharges.

7.2.6

Waste Water Disposal Facilities Develop designs for facilities related to disposal of solid and liquid wastes, or any required additions to existing public facilities. Determine annual quantities of waste to be treated.

7.2.7

Communications, Data Information Systems Develop design for communications and data information systems, including voice and data transfer via public systems and/or transmission via satellite and wireless. Provide design for linking to company information management and IT systems.

7.2.8

Hospital and Medical Describe existing public facilities and requirements for additions of site medical facilities, mine rescue and medical training.

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7.2.9

Site Utilities and Support Facilities Develop designs for administration, site utilities, concessions, warehousing, maintenance, fuel storage and distribution, fire and security facilities and determine requirements for link to existing public facilities and services.

7.2.10

Housing Develop designs for on-site housing facilities and concessions to support accommodations and mess hall.

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8.0
8.1
8.1.1

CAPITAL AND OPERATING COST ESTIMATES
Capital Cost Estimates
Introduction Development of capital costs estimates will involve the following components: • Scope and methods – provide a capital cost estimate with an accuracy of ±15% and identify the basis of cost estimates, including take-off quantities and preliminary quotes. Document assumptions. Cost Breakdown Structure (CBS) – this is developed in line with the Work Breakdown Structure (WBS) and presented as line items for each cost center: o Process completion, o o o o o o o o o Engineering, Project management, Equipment and construction, Construction management, Owner’s expense, Contingency allowance, Commissioning and start up, Working capital and sustaining capital., and Capitalized interest.

Capital is reported as: • Direct Capital, which is broken down into equipment, materials, labour, construction equipment and contract services. Indirect Capital, which typically includes EPCM, Third Party Consultants, Construction Facilities, Construction Services, Construction Site Operation, Freight, Vendor Support and Spares. Owner’s Costs, which typically include Pre-operations personnel and training, Mine Equipment, Mine Pre-stripping, Mine Development, Owner’s Project Team, Initial Fills, Insurance, Housing, Permitting, Commissioning, Corporate and Owner’s Contingency.

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• • •

Working and Sustaining Capital Contingency - on direct and indirect capital Basis of estimate will include an overview of the definition, currency exchange rates used, estimate time baseline and definition of costs. Accuracy assessment will include the basis for estimating accuracy.

• 8.1.2

Feasibility Study Level At the feasibility study level capital cost estimates are expected to be +/- 15% accurate with an 85% probability of achieving the reported capital cost after the application of project contingency. Some workers believe that the accuracy is more likely in the range of -5% to +15% because over estimates are much less common that underestimates. This is due to the stronger likelihood that some aspect of the project will be affected by cost increases, and that some components may be neglected or underestimated. The intent of the capital cost estimate at the feasibility stage is to provide an estimate with defined and manageable risks. These estimates must be suitably accurate to secure financing that will be adequate to build and start the operation without returning to the financing source for addition funds.

8.1.3

Detailed Feasibility Study Level The difference from a normal Feasibility Study is that there remains a significant amount of detail to be developed in areas of piping, low voltage electrical and instrumentation to adequately estimate costs. After approval of the project by the company Board of Directors, detailed engineering continues to provide more detailed designs and estimates to allow actual construction of the project. Specific firm quotes are obtained for all equipment, materials and site preparation. The Detailed Feasibility Study estimates may be known as “budget” or “control” estimaes and these are expected to be +/- 10% accurate with an 85% probability of achieving the reported capital cost after the application of project contingency.

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8.1.4

Accuracy and Probability It is important to understand the relationship between accuracy and probability in terms of project estimating. Accuracy refers to the range of accuracy that would normally be expected, based on the level of information and the estimating methodology applied. Probability refers to the degree of confidence that we place on the estimated value. The guideline of 85% probability indicates that the project’s final cost, when executed for the defined scope of work, will not over-run the estimated value 8.5 times out of 10. Figure 8-1 demonstrates the relationship. In both cases, the project contingency is included.
Figure 8-1: Relationship of Accuracy and Probability in Capital Cost Estimates
Accuracy and Probability
50% 40% 30% Accuracy Range 20% 10% 0% -10% -20% -30% -40% -50% Order of Magnitude Prefeasibility Feasibility Detailed Estimate Classification 85% Probability

The following table 8-1 is a cost estimation requirements guideline used by AMEC. This lists the requirements for each level of detail under major cost centers. 8.1.5 Basis of Estimate For an estimate to be meaningful, it must be accompanied with a Basis of Estimate document. The Basis of Estimate will state the assumptions, parameters, conditions and enumerate the exclusions to the estimate.

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Table 8-1: AMEC Capital Cost Estimating Requirements by Study Type CAPITAL COST ESTIMATING INFORMATION REQUIREMENTS GUIDELINE
R = Required Order of Magnitude R R R R R ESTIMATE CLASSIFICATION Pre-feasibility Feasibility R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R Detailed R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R R

Project Scope and General Requirements

Product(s) and Process(es) Defined with associated capacities Location of Proposed Project Define Scope of work c/w Battery limits. Work Breakdown Structure Basis of Estimate Location specific unit cost criteria. for bulks Location specific craft labour rate Location specific craft labour productivity factors Location specific taxes, tariffs, duties, & freight type costs Temporary site facilities & services Construction Mobile equipment plan EPCM services estimate c/w manpower plan Capital Cost Estimate Execution Plan Logistics Plan Procurement Plan Project EPC Schedule Owners costs Mining Engineering Mine Pre-production mining plan & costs Mine Infrastructure Mine equipment list Process Engineering Process Area(s) Flow Diagrams P&ID's and Specifications Design Criteria Utilities Rough Utility requirements (steam, water, electricity etc...) Requirements Utilities Heat Balance Utilities Process Flow Diagrams Quantity Take-offs Detailed drawings Civil / Structural Site development requirements, Clearing, Demolition, Relocations, etc Engineering Geotechnical and Hydrogeological Study Location & Dimensions of site access Roads, Airstrip, Rail lines etc.. Site plot plan & topographical map Site Drainage & Sewer Systems Layout Building dimensions & type of construction Quantity takeoffs General arrangement(s) Design Criteria Detailed Drawings Mechanical Mechanical Flowsheet Engineering Mechanical Equipment list Specifications & data sheets for mechanical equipment Combination of Historical & Budget prices used to cost Mech. Equipment Budget quotes received for a minimum of 80% of total Mech. Equipment cost Firm quotes received for a minimum of 80% of total Mech. Equipment cost Design Criteria General Arrangement(s) Piping Piping Layouts and takeoffs with line list quantities (spec., dia., length) within process area Engineering Piping Layouts and takeoffs with line list quantities (spec., dia., length) offsite Design Criteria Electrical Single line drawing Engineering HV power sizing & distribution and take offs MV power sizing & distribution and takeoffs LV power sizing & distribution and takeoffs Interlock and control specifications Detailed Drawings Design Criteria Instrumentation Instrument list Engineering Process Control philosophy (automated vs manual)(OCS, DCS) Detailed Drawings Design Criteria

R

R R R R R R R R R R R R

R R R R R R R R R R

R R R R R R R R R R R R R R R R R R R R R R

R R R R R

R R R R R

R

R R R

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These establish the bounds of the estimate, to which variations can be identified as changes of scope, and must be subjected to the change management processes. It is therefore necessary that the estimate represent the Scope of Facilities, Scope of Services, Project Master Schedule and other key definition criteria. The Basis of Estimate must clearly identify the following items as a minimum: • • • • • • • • • 8.1.6 Estimate classification, accuracy and/or probability. Financial base date and currency. Base currency conversion rates. Escalation and/or De-escalation rates and schedule. Procurement and Contracting Plan. Craft labor rate and productivity. Engineering assumptions used to define the scope of work and services. Exclusions. Project Contingency

Project Contingency Project Contingency is an integral component of the estimated cost of a project. It is required in order to satisfy the accuracy requirements set out by the estimate classification criteria. It is intended to cover the inherent errors, omissions and undefined cost elements which are expected to be uncovered during the project implementation phase. The project contingency does not include any allowance for changes to the scope of work or services. Project Contingency is assessed by evaluating independent cost aspects of the project with respect to AMEC experience and judgement, basis of quantity take-off and costs, and other considerations unique to the project or commodity. AMEC acknowledges two acceptable methods of establishing project contingency levels.

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The first method, begins with a sort of the project estimate totals by prime account. To each of these prime account values, a reasonable growth percentage is established. These growth percentages are developed by the appropriate project team members and are intended to be realistic reflection of the risk level contained within the scope of work as defined. This method must consider a number of factors including, traditional growth experience and reasonable judgement. The second method is computer generated and is based on statistical analysis. This method requires that the project cost estimate be broken down into independent cost elements, referred to as “the model”. Absolute values are developed for cost underrun and over-run for each element in the model. These values are developed in conjunction with the appropriate project team members. The model simulation is then performed, resulting in the production of a probability curve and table containing the recommended project value for which there is an 85% probability that the project costs will not exceed. The contingency is extracted as the difference between the 85% probability value and the defined estimate value. Some projects may require that both methods be performed in order to establish the appropriate project contingency level. 8.1.7 Quantity Takeoffs In addition to the equipment list and other engineering discipline deliverables, the engineering disciplines are also responsible to generate bulk material quantity takeoffs for estimating. The takeoff format will be in accordance with the project work breakdown structure and code of accounts and units of measure as specified by the Capital Cost Estimate Execution Plan. 8.1.8 Capital Cost Estimate Execution Plan Capital cost estimate execution plans are required on all estimates that can practically benefit from them. The practicality issue is left to the discretion of the Project/Study Manager and the Estimator. In the event that an execution plan is not deemed practical, an execution basis must be understood by all disciplines involved. A Capital Cost Execution Plan will establish the following guideline as reference during the study execution. • Capital cost estimate methodology and financial basis. This will establish a clear basis for engineering deliverables and materials and equipment pricing.

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Procurement strategy. This will define the approach between engineer supply and contract supply and well as offshore supply and domestic supply. Work breakdown structure complete with code of accounts information. This will allow an orderly assembly of engineering input into the estimate. Quantity take-off basis, units and formats. This will define to the engineering disciplines, the basis of quantities as well as the formats that are acceptable for inclusion in the estimate. Responsibility matrix. This will define the responsibilities of each discipline in regard to estimate deliverables. Exclusions. This will clarify items that are known to be outside the scope of services or facilities. Study Schedule. This will allow progress monitoring as well, provide a base for manpower planning.

8.1.9

Historical Data Collection In order to provide a basis for estimating and/or analyzing the new work that is produced, a basic and detail information from past projects and studies must be maintained. Historic information can provide valuable benchmarking for reality checks as well as reference information that may be relevant to any class of estimate. The estimating departments in major engineering firms generally create and maintain a list of all estimates on file, in order that detailed information relevant to future work may be found and used. In addition to the details contained in the estimating files, the following information might be available in summary form. • Percentages of the Total Installed Mechanical Equipment (T.I.M.E.) cost for each Prime Account in each Process Area. Buildings organized by type of construction, should be evaluated on a cost per square area and cubic volume basis. Each Indirect section (I.e. EP and CM) should be reported as a percent of the Total Direct Cost and Total Project cost.

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Craft Labor rate build-up and All-found rate. This should include construction mobile equipment. Project Contingency as a percent of Total Project Cost, if not included in Indirects section.

8.2

Operating Cost Estimate
Operating cost estimates are normally done within each major work area of Mining, Processing, Power Supply, Water Supply, Port, Site Services, Marketing and Distribution, General & Administrative and Environmental. Operating cost estimates within each area will be developed under the following guidelines: • Scope and methods: Operating costs will be provided with a target accuracy of ±15%. The basis of the cost estimates will be provided including use of current operating costs, public information on similar operations and budget quotations. Assumptions must be stated. Cost Breakdown Structure. This will be broken down in line with the Work Breakdown Structure (WBS) and presented as details on a line-by-line basis. Costs for each operating unit (above) are broken down into: o Fixed labor costs o o o o o o o o o o o o o o Fixed overhead costs Labor General & Administrative Management Expatriate costs Variable operating costs Raw materials Chemicals and reagents Power and water Fuel and petroleum Operating and maintenance consumables Product transportation and insurance Contingency allowance Post operational acceptance costs

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Basis of Estimate: The definition, currency exchange rates used, estimate time baseline and definition of costs are provided. Accuracy assessment: Document the estimate of accuracy and provide sensitivities to changes in costs.

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9.0
9.1

FINANCIAL ANALYSIS
Introduction
The financial analysis component of the feasibility study analyzes the financial merit of the project. The financial analysis can only begin once all of the engineering and costing, outlined above, has been completed. The goal of the financial analysis is to identify whether or not the project, as planned, will create value for the firm and/or its shareholders. Other equity and non-equity partners, such as those holding debt, royalty or tax interests, also use the financial analysis to identify the financial returns to their potential participation in the project. The financial analysis requires as much care and expertise as is required for the various engineering and costing functions of the feasibility analysis. Because of the financial nature of the analysis, only those with extensive training and experience in engineering economics and finance should conduct this part of the feasibility study.

9.2

Methods of Financial Analyses
There are several methods of financial analysis that have been adopted by the mining industry. Some methods are different ways of getting to the same primary financial indicator, net present value, while other methods produce secondary financial indicators that provide supporting information, but do not by themselves indicate the financial worth of the project. The two main methods that assess net present value are Discounted Cash Flow analysis and Market-Based analysis.

9.2.1

Discounted Cash Flow Discounted cash flow analysis estimates the cash flows expected to be sunk into or thrown off by the project from the time of the analysis forward. It then estimates the present market value of these negative and positive cash flows, adjusting for both the timing of the various cash flows and their risk as viewed by the various project participants. The output of the discounted cash flow analysis is the project net present value (NPV). A positive NPV project will create value for the firm should it proceed with the project, while a negative NPV project will destroy firm value if undertaken. Methods of discounted cash flow analysis include a static one-point NPV estimate, several static scenario-level estimates, static Monte Carlo analysis that produces a probability-weighted NPV estimate, and dynamic analyses that include managerial decision making as uncertainties about the project parameters become partially or fully resolved over time. The static one-point NPV estimate has been used as a project

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valuation tool for over 70 years. The other methods have been developed more recently, with dynamic analyses still not fully adopted by the industry. 9.2.2 Market-Based Valuations In some cases it may be possible to identify comparable projects that have been sold via arm’s length transactions. If the financial details of the transactions are available these details can serve as valuation benchmarks. In most cases mining projects are different enough, either along temporal, geological, geographical, economic, or ownership dimensions, that comparable projects do not exist. In this case a mineral appraiser is typically called upon to adjust the available comparable sales information to make it informative to the task at hand, valuing the subject property. Market-based valuations may also be used to estimate a value of in-ground ounces, which can then be used to estimate project net present value. In most cases the outcome of this type of analysis only serves as a check on the NPV calculated using the discounted cash flow analysis, and is not a replacement for this type of analysis.

9.3
9.3.1

Discounted Cash Flow Analysis
Basic Principles Discounted cash flow analysis begins with the construction of a spreadsheet listing, either by quarter or by year, each of the revenue and cost components associated with the project in each period from the date of analysis through to the completion of the project and the termination of reclamation. If there is to be perpetual care and maintenance cost at the end of the project, these should be capitalized and included in the reclamation costs. If there are earn-in or acquisition costs associated with the project, these should be included in the quarters or years in which they occur. An example of a spreadsheet is given in Appendix S. Past revenues or expenses are “sunk,” and are not considered in the cash flow calculation. Where future cash flow items are uncertain, which is usually the case, the mean of the projections is used. The spreadsheet typically lists production and commodity price forecasts first, along the top rows, followed by operating and capital costs. Cash flow forecasts should be modeled in the currency in which the revenue or expenditure will be received or paid. If there are multiple currencies involved in the cash flow analysis a single currency of analysis should be chosen. Currencies should be converted using the forward rate in existence at the date of valuation.

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Once the cash flows have been modeled the portion of the cash flows attributable to royalty and tax obligations is calculated. These are treated as costs and deducted from the cash flows to produce a net cash flow attributable to the majority equity owner. The net cash flows are then , and then discounted to the present and added to present a project NPV. The discount rate used to bring the cash flows to the present is the bond rate for the chosen currency plus a risk premium appropriate for the level of risk in the cash flow stream. This discount rate is referred to as a risk-adjusted discount rate (RADR). Traditional practice uses a constant RADR for all project cash flows, which, because of the exponential formula used, creates exponentially declining discount factors. Newer, more sophisticated approaches use a different discount rate for each period’s cash flows, depending on the cash flow risk, which in turn depends on the structure of the cash flows, the nature of royalty and tax charges, and the nature of the uncertainty impacting the cash flow projection. 9.3.2 Treatment of Taxation Taxation has two main impacts on project value calculations. The first is a direct value effect. Profits taxes are proportional costs that reduce a project’s value. In essence, a valuation study that excludes taxes assesses the value of a project to all participants. The government, through taxes, is a project participant, and their share of the project is deducted from total project value when an after-tax project analysis is conducted. The second valuation impact is an indirect effect on the riskiness of the project. Since taxes are higher when project revenues are higher, and lower when project revenues are lower, taxes reduce the variability of project cash flows. This risk-reducing effect lowers the project discount rate. Some firms argue that since taxes only reduce a positive project value, it is sufficient to conduct a pre-tax analysis to determine whether or not a project should go ahead. This is true to the extent that the firm is not facing competing projects, and must decide where to allocate its capital. But taxes impact project value via both the direct tax bill effect and via the indirect risk reduction effect. 9.3.3 Treatment of Inflation Where a cash flow projection contains the impacts of inflation, it is called a nominal analysis. Where inflation has been netted out of the analysis, it is called a real analysis.

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Engineers typically think in terms of inputs required per unit of output, which is equivalent to real economic analysis. Yet financial data, such as price forecasts and interest rates, are in nominal terms. This means that the various units of analysis must often be converted into the same nominal or real units in a cash flow analysis. Nominal analysis is the preferred analysis since all tax allowances on capital and operating costs are based on nominal cash flows. 9.3.4 Debt-financed Projects If the project is debt financed the cash inflow from the debt is added to the cash flow stream as a credit, and the periodic principle and interest payments are added as a debit. Debt financing will generally not affect the value of a project other than through tax shield effects. 9.3.5 Static Cash Flow Analysis Static cash flow analysis began in the 1930s as a method to value bonds. In the 1950s its use was extended to valuing streams of risky cash flows, and it remains the standard today. Static cash flow analysis creates a single, expected-value forecast of the various revenue and cost items associated with a project. This forecast is used to create a single cash flow expectation, which is then discounted to the present using a constant risk-adjusted discount rate. This technique was initially adopted because of its simplicity and the ease by which it could be implemented in the absence of calculators or computers. It does, however, violate financial theory, something that was recognized in the 1970s. It also is likely to underestimate taxes due to Jensen’s Inequality, where non-linear functions cannot be evaluated at their expected value. The NPVs created by static cash flow analysis of projects include: • • • The undervaluation of high margin, high grade deposits The undervaluation of long-lived projects The undervaluation of projects that are marginal, many of which are promoted as having significant “strategic” value that firms recognize is not captured by the static analysis The overvaluation of the benefits of scale economies Valuations that in general have a wide deviation from observed market values where these are available

• •

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• • •

A particularly severe undervaluation of gold projects A NPV that can increase as the discount rate is increased to account for increasing project risk An absence of management advice as to how to manage the project, including optimal timing of project initiation, contraction, or expansion

Despite these problems, the static technique continues to be taught in engineering economics and business-school finance courses today. 9.3.6 Cash Flow Scenario Analysis Scenario analysis emerged in response to managers’ wishing to know more about the risks of a project, with the possible upside and downside enumerated. Scenario analysis produces several NPVs, one for each scenario. Project value is unaffected by this extension, since the project value is still the mean of the various probably outcomes, with risk appropriately taken into account. As such, scenario analysis provides no new information in the feasibility study. The temptation is to use scenario analysis to adjust the project valuation outcome of the static model. Projects with a significant probability of upside, as with the proving up of new reserves, will be viewed more favorably than a project with substantial downside. Of course, upside and downside outcomes, appropriately weighted, have already been included in the NPV calculation, and so to adjust that NPV after a scenario exercise is to bias the NPV calculation. 9.3.7 Monte Carlo Cash Flow Analysis With the advance of computing power in the 1970s Monte Carlo analysis began to be used. A Monte Carlo analysis simulates the various random outcomes that the uncertain cash flow elements can take, producing a histogram of cash flow values in each period of the project. After discounting the cash flows, the NPV again is presented as a histogram. Monte Carlo analysis has been widely mis-used in the mining industry. Some, thinking that modeling the uncertainty in the cash flows is equivalent to removing the risk in the cash flows, use a risk-free discount rate in performing the present value calculation. Others use a risk-adjusted rate, but then penalize the project for risk a second time by ignoring the mean of the NPV distribution that they calculate, and take as value something above or below the mean.

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There is no inherent reason for a Monte Carlo analysis to yield a project value different from a static analysis other than in correcting Jensen Inequality effects. To this end Monte Carlo analysis must be used when there are non-linearities in the uncertain cash flows, but the output of the analysis, a risk-adjusted present value, needs no further manipulation. The spread of values around the mean NPV value are redundant, since all of the project risk has already been enumerated in the discounting technique. 9.3.8 Dynamic Cash Flow Analysis In the 1980s and 1990s dynamic cash flow analysis recognized the considerable flexibility in most mining projects. This flexibility allows design and extraction plans to adjust as uncertain price, cost, and geological information becomes known with more precision. For example, should commodity prices drop precipitously once a project is underway, management may exercise an option to temporarily suspend or even abandon the property at some cost, avoiding large operating losses. Such operating flexibility creates value not identified in a static analysis. It also reduces the risk of the cash flows, warranting a reduction of the cash flow discount rate. Initial attempts to incorporate dynamic analysis into project valuations involved placing ad hoc decision rules such a closure or expansion rules into a Monte Carlo analysis. These decision rules are not optimal, but may reflect set decision rules that the firm is likely to use in managing a project. The Monte Carlo analysis, where the uncertainty in the economic and geological variables is correctly modeled, will reflect the value creation (or destruction) imposed by these decision rules, but there remains the problem of adjusting the discount rate for the reduced cash flow risk. Since the mid 1980s a new technique, real option pricing, has been developed to reflect the impacts of non-linearities in the cash flows, optimally-managed project flexibility and the project value that this creates, and the appropriate discounting of the resultant cash flows for time and risk in the face of these project management possibilities. Early indications are that this technique resolves many of the problems with the traditional spreadsheet cash flow methods, though at the cost of considerable numerical sophistication. The technique also produced project management advice, such as whether to go ahead with or delay a project’s development. 9.3.9 Discount Factors Once the net cash flows have been estimated, they are brought back to the present via an adjustment for timing. This discounting for time arises because of the opportunity cost of a delayed cash flow expense or receipt, as reflected in the cost of debt or bond rate. For example, if the cost of money is 5% per year, a $100 investment now will

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yield $105 in 1 year. As such, receiving $100 now is more valuable than receiving $100 in one year. For that reason cash flows whose receipt is delayed by one year are penalized using a discount factor of 1/1.05 or 0.9523 cents on the dollar. Cash flows whose receipt is two years distant are worth 0.9070 cents on the dollar. Similarly, negative cash flows in future years are discounted for time, since they require a lower investment today to finance. The traditional discounted cash flow technique also uses the discount rate as a mechanism for adjusting project value for risk. A “risk premium” is added to the riskfree rate to create a “risk-adjusted discount rate.” This discount rate results in an exponentially increasing penalty of risky cash flows as they become more and more distant. That cash flows may not be increasing in risk exponentially over time was recognized in the 1960s, but no suitable alternative to this approach became evident until the 1980s. Then, the introduction of advanced finance techniques allowed for more appropriate discounting of risky cash flows. 9.3.10 Internal Rate of Return The internal rate of return is the discount rate that causes the project NPV to be zero. It is not a measure of project value, and nor is it a measure of the rate of return on invested capital, a common misunderstanding. Roughly, the internal rate of return is the rate of return on project capital that has yet to be recovered via positive project cash flows. Once calculated, the internal rate of return is often compared with a corporate-wide hurdle rate. If the internal rate of return exceeds the hurdle rate the project is deemed acceptable. Hurdle rate analysis only provides a go/no go decision on a project, and does not provide a valuation. It also uses the same return metric to evaluate all projects, regardless of their risk. Given a hurdle rate of 10%, a very risky project that exposes the company to severe liability exposure and has an internal rate of return of 12% will be preferred to a quality project with very little cash flow risk that has an internal rate of return of 9%. 9.3.11 Net Present Value Ratio The net present value ratio is the ratio of present value of project operating cash flows to initial investment cost. A net present value ratio of greater than one indicates a positive NPV project, and a net present value ratio of less than 1 indicates a negative NPV project. Net present value ratios are used to provide an idea of the investment multiplier generated by a project, though it fails to identify project value to the firm. The net present value of a $1 investment that returns $2 would be 2.00, while a $1

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million investment that returns $1.5 million would only have a net present value ratio of 1.50.

9.4
9.4.1

Risk Sources and Accounting for Risks
Types of Risks Many of the elements that go into a cash flow forecast are uncertain as of the date of analysis. If the uncertainty in these cash flows has randomness that is correlated with broad market indicators, this translates into project risk. Risk-aversion on the part of investors requires that risky cash flows be discounted not only for their timing, if they occur in the future, but also for their risk. Risk-adjusted discount rates, discussed above, are the most common, if flawed, method of valuing the impacts of project risk. Uncertainty, and therefore project risk, arises in almost every aspect of a project. The sources of uncertainty can include economic, technical geological, environmental, political, and social factors. It is important to distinguish between factors that increase uncertainty around a cash flow estimate and those that shift the mean of the density function surrounding the cash flow estimate. The former truly increase project risk, and need to be taken into account in the project valuation either through an appropriate adjustment to the discount rate or through an adjustment to the cash flow component’s certainty equivalent. The later is not an increase in uncertainty, and should be dealt with directly via an adjustment to the mean value of the cash flow. Political risk is an example of this, where the presence of an expropriation event lowers the expected production from the project, and can be taken into account directly via a lower planned project output rather than via an ad hoc increase in the project discount rate.

9.4.2

Discount Rates As mentioned above adding a risk premium to the discount rate is the common way of penalizing a project for risk. There are several methods of calculating the project’s risk-adjusted discount rate.
Weighted Average Cost Capital

The weighted average cost of capital (WACC) is the opportunity cost of the marginal dollar of capital used by the firm in its capital investment projects. It reflects the desired returns by shareholders, taking all tax implications into account, as well as the required returns by debt holders, again taking tax implications into account, with weighting of these desires in concordance with the relative magnitudes of each form of

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capital. Standard discounted cash flow practice uses this WACC as the discount rate in project-level analysis. This is only appropriate where the riskiness of the project is identical to the riskiness of the entire profile of current and likely future projects, or options on projects, that the firm owns. No project is likely to even approximate this requirement, and so, ideally, the firm needs to discount each project at its own, unique discount rate that reflects that project’s risk. Projects that have a high-quality cash flow stream, with large margins and low variance around the expected outcome, are less risky and should be subject to a lower discount rate than those that have a small margin and high cash flow variance. Using a corporate WACC to discount both types of projects will tend to over discount and therefore reject the low-risk project, while under discounting the high-risk project. The net result is a bias towards accepting high-risk projects and rejecting low-risk projects. The WACC is also intended to take the tax shield effects of debt into account, and so if this approach is used the debt flows should be removed from the cash flows. Since each project’s need for tax shields is different, the WACC is again unlikely to adequately capture project risk and generate the correct project value.
Project-specific Discount Rates

As a response to the inadequacy of WACC for project-level analysis, there have been attempts to create project-specific discount rates. Exploration projects might thereby have a higher discount rate than producing properties, and projects in politically unstable developing countries may have a higher rate than the equivalent project in a developed country. These adjustments are largely ad hoc and unlikely to give a more accurate project valuation than the use of a single WACC across all projects. Proxy projects are sometimes used to find the appropriate discount rate, where a WACC is calculated for that proxy project. Here, as with the comparable sales approach, mining projects are unlikely to have reasonable proxies, and again the approach is subject to wide valuation error.
Endogenous Discount Rates

Since the 1970s finance theory has realized that the discount rate appropriate for each project is endogenous to that project. It also realized that there may be no single endogenous cash flow discount rate that can correctly reflect the risk of the project. Real options advances in the 1980s took up this challenge and produced a method of cash flow discounting that avoids both of these issues. In the real options approach individual cash flow components are discounted for risk directly at the level of the component. Gold price uncertainty is replaced with a certainty-equivalent gold price, grade risk is replaced with a certainty-equivalent grade, and so on. Portfolio theory is used to deduce the risk adjustment required, supplanted in some cases by decision

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analysis. The result is a set of risk-adjusted cash flow components that need only be discounted for time using the risk-free rate. Note that this does not mean that the real options approach advocates discounting at a risk-free rate. Rather, the real options approach deals with risk directly in the cash flow elements, and not via a discount rate premium. Therefore, the only role for the discount rate is to adjust cash flows for their timing via a bond rate or other cost of debt. The use of this technique will reveal a project value from which the appropriate projectlevel constant cash flow discount rate can be estimated. This discount rate, called an endogenous discount rate, is the rate which, when applied to the cash flows in the standard static discounted cash flow technique, would give the same project value.
Real and Nominal Discount Rates

When the cash flow analysis is nominal, any discount rate used, be it for time only or for time and risk, must be in nominal terms. When the cash flow analysis is real (inflation adjusted), any discount rate used, be it for time only or for time and risk, must be in real terms.
Compounding Method and Discounting Period

Discounting can take place via a continuously compounded or discretely compounded discount rate. The two approaches, if conducted properly, will yield the same project valuation, and so the choice of which compounding method to use is irrelevant. The discounting period is usually taken to be the same frequency as the frequency of the cash flow analysis. Quarterly cash flows are assumed to occur at the end of the quarter, while annual cash flows are assumed to occur at the end of the period. The first period’s cash flows are assumed to occur at the beginning of the period and sop are not discounted, the second period’s cash flows are assumed to occur at the beginning of the second period and are therefore discounted for one period, and so on.

9.5

Project Value Decisions
The calculation of project value finds the equivalent present value of the forthcoming stream of uncertain revenues and costs associated with a project. That present value is fully adjusted for the timing of the forthcoming cash flows and for their risk. For example, a project may be anticipated to produce a cumulative cash flow of $1.3 billion over its life. Adjusting those cash flows for the time value of money may reveal a present value of $700 million. Adding the discount for risk may reduce the value of these cash flows to a present-value equivalent of only $20 million, with a $680 million penalty or discount for cash flow risk. Since all risks are taken into account, the firm

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can take this NPV as the equivalent and certain cash payment today that the market would offer for this project if NPV is positive, or charge for this project is NPV is negative. A positive NPV thus means that the project is a valuable asset, and that the project should go forward. A negative NPV means that the project is a liability should it go forward. If the project can be disposed of for less value that the liability associated with going forward, the project should be terminated. The NPV result produces the value of the project that accrues to the equity owner after royalty and tax interests have been deducted. If a portion of the project is to be debt financed that debt can be included in the analysis – the capital cash flows are reduced by the amount of debt financing, while the operating cash flows are increased for interest and debt repayments. The net effect of the debt financing depends solely on whether the debt structure increases or decreases the tax burden associated with the project. The project value decision is independent of past expenses that have gone into the project. It is a forward-looking measure, assessing the merits of going ahead with the project. As noted above, the static cash flow method is prone to error, and many firms take the NPV result that the technique generates as only a guide to project value and whether a project should proceed to the development stage. It is easier to ignore the NPV result when the project is being internally financed than when external equity or debt finance is involved, as not all parties will agree in the ad hoc adjustments to NPV that the majority equity participant is recommending.

9.6
9.6.1

Other Evaluation Criteria
Payback Payback period is the time it takes for the cumulative cash flows associated with a project to become positive. A companion is the discounted payback, which is the time it takes the cumulative discounted cash flows associated with the project to become positive. Payback does not provide a valuation tool, and nor does it reveal the financial attractiveness of the project.

9.6.2

Project Robustness/Competitiveness Even though the project NPV has already penalized a project for its riskiness, there is often a desire to evaluate the project along lines other than its financial merits. This attempts to incorporate “strategic value” and other concerns into project value. Even if these items are difficult to quantify, it is better to attempt to perform this robustness

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exercise by monetizing the additional factors and including them in a satellite cash flow calculation, rather than adding qualitative project attributes into the decision process.

9.7

Sensitivities
Each project’s estimated value will be sensitive to the assumptions made about the timing and magnitude of various cash flows. A sensitivity analysis can reveal those cash flow elements that have the most impact on project value. It may be beneficial to spend additional time and money further analyzing these cash flow items in an attempt to reduce their uncertainty and thereby increase the assurance that the estimated project net cash flows will be achieved.

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10.0
10.1

RISK ANALYSIS
Introduction
Evaluation of risks has become an important part of feasibility studies. Relatively sophisticated tools are becoming available to assess technical risks in a project, such as determination of confidence limits in resource estimates using conditional simulation or stochastic mine designs (a large number of separate simulations) to determine the range of values in different mining sequences. Methods for assessing financial risk are evolving as well. Recent applications of Real Options theory in determining more accurate project values have great potential for quantifying financial risk and financial values of different development options. Risk is the potential for something happening that can be adverse to the project. The adverse impact could be increases in capital or operating costs that reduce the project’s value, environmental damage, personal or public property injury, and loss of company reputation. Other risks are matters of uncertainty (such as metal prices), which can change for the negative or positive. Risks occur in the following areas: • • • • • • • • • • Natural Environment Socio-Economic and Political Economic (external) and Financial (internal) Markets Labor Health and Safety Legal and Commercial Technical – Project Design, Geology, Resources, Mine Designs, Metallurgy, Process Management Project Execution

Risk management is the mitigation of risk after its identification and assessment. This requires review of all potential areas of change, assessing the potential for the event to happen and then developing a plan to manage the change. Risks with negative consequences must be identified and plans developed for mitigation. They include environment, safety and health, labor and community relations, and project performance.

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Risks with variable consequences may be either negative or positive. Their potential for happening must be evaluated, but mitigation plans may not be necessary. These include currency exchange rate and metal price changes.

10.2

Risk Identification and Evaluation Procedures
Risk identification and evaluation is a subjective process. The project team evaluates the relative likelihood of a negative event happening in each risk area and then rates the impact this event would have on the project and company. Risk analysis should provide: • • • • Identification of all potential risks Identification of the most significant risks A means to make management aware of the risks A motivation for the company to develop contingency and mitigation plans.

Some of AMEC’s clients use a mathematical matrix of likelihood of occurrence and magnitude of impact (monetary, legal or reputation) to assess the relative importance of the risk. Although subjective, this produces mathematical rankings than can be used to separate the risks needing mitigation plans and those that do not. A major, vertically integrated base metal company uses the following risk likelihood and impact rating system. Frequency: 1 Very low frequency (not expected to occur in the project life) 2 Low frequency - may happen once every 20 years, and maybe 5% chance in one year, could happen once in the project. 3 Moderate frequency - 50% chance it will occur in one year, will probably happen during the project life. 4 High frequency – expected to occur more than once per year, will occur more than once in the project life. Impact: 1 Very minor – minor injury, minimal public health affect, small environmental impact, small production loss, small capital asset loss, minimal reputation damage.

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2 Minor – Minor injury but with required medical care, minor health effect, relatively expensive cleanup but minor legal impact, significant financial loss but not affecting viability of operation, some reputation damage but will go away with time. 3 Moderate – Lost time accidents, disabilities, major fine and expensive cleanup, significant financial loss with negative financial period, loss of significant capital asset, significant reputation loss with long term impacts. 4 Significant – fatality, serious long-term health effects, significant fine and cleanup costs, significant financial loss with negative year, significant equipment loss, very significant reputation damage in community. 5 Very significant – multiple fatalities, multiple and severe health effects, environmental disaster with long-term effects, long-term financial damage to project, loss of major capital assets, damage to national and international reputation. The process will be to examine each of the following areas and subjectively assess the likelihood and significance of a negative (or positive) change in each: Political • • • • • • • • • Political Administration in power Government Policies Public Opinions Disorder (war, terrorism, riots) Legislation (in place, proposed) Socio-economic impacts Previous experience in country Language/custom differences Legal system reliability

Commercial/Legal • • • • • • • • Guarantee of mining rights, persona property Defined liabilities Performance bonds Liquidated damages Responsibilities defined Definition of handover, completion or acceptance Applicable law (English or other) Contract language

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• • • • • • • • • • • • •

Payment and invoicing procedure Supplier and subcontractor default Currency of payment Import duties and other imposts Insurances – standard or project specific Estimate accuracy and agency fees etc. Escalation Force Majeure definition Cancellation or postponement of project Contract/subcontract issues Patents and royalties Warranties Confidentiality

Economic • • • • • Taxation Cost inflation Interest Rates Exchange Rates Exchange controls

Financial • • • • • Bankruptcy Margins Insurance Risk Share Project funding

Market • • • • Demand (forecasts) Competition Customer satisfaction Obolescence

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Natural Environment • • • • • • • • • Site investigations Unforeseen ground conditions Services, contamination, mine workings Archaeological discovery Weather Earthquake Flooding Fire and Explosion Settlement and landslides

Environmental Regulation and Management • • • • • • • • • • • • • • • • • • Contaminated land Pollution Nuisance (eg. Noise) Permissions Public Opinion Environment law or regulations Environmental impact assessment Required/Completed Minimising measures Particular local issues Public Enquiry Waste disposal and treatment Archaeological and heritage issues Working environment for personnel Accessibility Spills Fire EIA Commitments Reputation loss

Community • • • • Community relations Stakeholders response NGO activities Public relations

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• •

Community impacts Social impacts

Safety • • • • • • • • • • • • Regulations and legislation Hazardous substances Collisions Flooding Fire and explosion Collapse Confined spaces Access Health requirements Site location and local labour Healthcare/evacuation Lifting, dropping and falling

Technical and Design • • • • • • • • • • • • • • • • • • Design and construction Design adequacy Reliability Recognized codes and standards defined Certification/verification requirements New technology Unfamiliar codes and standards Design responsibilities adequately defined Specifications and responsibility for errors or deficiencies, etc. Design risks arising from surveys and investigations etc. Geotechnical Likelihood of change (design development) Design approvals Interaction between design and construction IT strategy for project Quality assurance requirements Constructability Durability and maintenance

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Construction • • • • • • • • • • • • • • • • • • • • • • • • • • • • Performance requirements Quality Control Planning and program Critical path activities Complexity New construction methods Construction methods feasibility Sequence of activities Labor and resources, experience and availability Workmanship Records Long deliveries M&E services, plant and equipment Construction plan, cranes and equipment Defects and errors Labor relations Brownfield or Greenfield site Safety Permits and licenses Restrictions on access, working hours Storage, marshalling and assembly areas Completion, commissioning and handover Liabilities for program overrun Accuracy of tender program Weather downtime responsibilities Programs from major suppliers/subcontractors Defined shutdown periods, holidays Third party relationships

Project Execution • • • • • • Project definition/scope Joint Venture or Consortium partners, experience and ability Personnel defined Provisional experience with subcontractors Clients or suppliers approval of personnel Interface with third parties

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• • • • • • • • • •

Nominated subcontractors or suppliers Previous experience with sub contractors or suppliers Clients level of involvement in design, procurement, construction and commissioning Clients procurement procedures Procurement procedures Shipping Communications and culture Transport Logistics Organization (maturity, commitment, competence, experience and leadership)

A matrix of likelihood and impact is developed from the analysis of each risk. The position of each in the following matrix determines the need for mitigation plans. 4 Frequency 3 2 1 VL VL VL VL 1 M L VL VL 2 H M L VL 3 Impact H H M L 4 H H H L 5

The position of the risk in this matrix mandates the following action plans: VL: No mitigation required L: M: H: Establish controls and safeguards Risk reduction is necessary in the period in which risk most likely to occur. Risk reduction required for life of project before project can move forward

Risk reduction can be achieved by lowering the likelihood of the incident happening or reducing the impact of the incident. Means for reducing the frequency of occurrences

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are generally limited to those items within the company’s control. reduced through: • • • •

These can be

Quality assurance and quality control procedures (design and technical issue control, environment, etc) Suitable training, policies and cultural development (safety, labor, etc.) More rigorous selection of contractors and vendors (equipment quality, delays, etc) Inspections (equipment quality, safety hazards, etc.)

Reductions of impacts will be required where prevention of occurrences are beyond the company’s control. This includes incidences such as currency exchange rate changes, metal prices swings, civil strife, etc. Risk reduction will need to include contingency plans such as hedging or other financial assurances, insurance, specialized contracts, etc. Feasibility studies require that risks be revisited quarterly to ensure that conditions have not changed or new conditions are not emerging. This process should continue throughout the detailed engineering, procurement, construction and hand off phases.

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11.0
11.1

PROJECT EXECUTION PLAN
Introduction
Development of a Project Execution Plan (PEP) begins at the prefeasibility stage and reaches a fixed, detailed state at the detailed feasibility stage. The purpose of the PEP is to describe how the project will be built and delivered to the production team through a project implementation process. Project implementation includes: • • • • • • • Detailed engineering, Procurement, Construction, Commissioning, Start-up and Ramp-up, Hand-off to the operator, and Project closure.

During the detailed feasibility study the final PEP is developed and approved. The scope, budget and schedule for the PEP are defined in the feasibility study. The PEP describes how the work will be completed and who will be responsible for each component. The PEP defines milestones, decision gates/stop points and timing. It also describes and includes any known project constraints that will apply (e.g. cash/expenditure flow, contractor resource levels, accommodation/housing limitations, etc), The PEP also includes mitigation plans for identified risks. The PEP will be executed by a combination of teams, such as the detailed engineering team, procurement teams, construction management teams and owner’s teams.

11.2

Detailed Engineering
Detailed engineering commences after Board approval of the project. Detailed engineering will progress either in parallel with procurement of major equipment items (already designed) and construction of major facilities, or these activities will be delayed until completion of the engineering. The latter is no longer common as fastest track planning is typical. Technical documentation and drawings are produced in detailed engineering to support procurement and construction of individual facilities. Detailed engineering documents are used also to provide criteria for quality assurance and performance.

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Detailed engineering produces a definitive scope, cost estimate and schedule for completion of each work package suitable for detailed construction planning and control. The definitive cost estimate provides an updated forecast of the total installed cost of each work package and thus the entire project. The cost estimate and schedule allows management of future work and trends, ensuring that the project will meet its financial objectives and commitments while identifying areas of risk to be managed or communicated

11.3

Procurement
Procurement is acquisition of the necessary goods and services required to deliver the approved project. Procurement activities are completed in parallel or sequentially based on the PEP, and are adjusted to meet the requirements of the individual cost estimates and schedules. Negotiations, contracts, review meetings and the details of any agreed upon changes or agreed upon dispute resolutions must be well documented. Delivery schedules and timing for manufactured goods and materials are finalized in the procurement plans, including vendor/supplier engineering, manufacturing and assembly, shipping and transportation logistics, and field handling/assembly requirements. Contracts for goods and services are established to meet project needs for cost, schedule, quality and, performance in a predictable fashion. Procurement plans should also address any prevailing and foreseeable market conditions for goods and services within the context of the project scope and timeline and provide strategies to maximize value for the expenditure.

11.4

Construction
Construction will commence after completion of detailed engineering and procurement. This may occur at the work package level for faster tracked projects. Construction activities focus on safe and responsible implementation of the work described within the PEP. All aspects of construction are coordinated, managed and controlled by the EPC/CM team. Emphasis will be given to equipment, materials and systems being installed on schedule and on budget. The equipment and materials are installed and then assigned to the commissioning team. The transition from construction to commissioning can only occur upon

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successful mechanical completion, ready for operation as per the scope criteria outlined in the Feasibility study. Discrete pieces of equipment, systems consisting of multiple pieces of equipment, processing units, or complete processing or facility lines are mechanically complete when ready for no-load tests of components and systems. Appropriate construction and mechanical certificates are provided upon completion of installation.

11.5

Commissioning
During commissioning the first feed is introduced to the various unit operations and processing streams. Feed to processing facilities are introduced in a controlled manner and may follow several progressive stages and feed materials/conditions before production type feed material is introduced. Following this, product quality and character are emphasized, and then production is ramped up to design rates. Performance tests are performed during commissioning to verify the desired quality of products and the capability of the plant to produce at designed rates.

11.6

Hand-off to Operator
Project implementation is completed by an orderly handover of the commissioned facilities to the Operator. This is ideally accomplished when the desired production rates and product quality are achieved and operations staff are adequately trained. This phase could include final performance testing to satisfy financing and owner requirements. The final stage of handover to the Operator is project closure. Project closure includes an orderly wrap up of all project activities and administrative closure of all remaining work and activities.

11.7

Structure of PEP
The PEP will include the following components: • Work Breakdown Structure: Work is broken into separate activities required to complete the project. Cost Management: A cost management system is used to ensure the proper tracking of costs, budgeting, forecasting and audits of costs.

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Planning and Scheduling: A project baseline is developed with key milestone dates, critical paths, resource loadings, monitoring methods and progress reporting. Engineering: Responsibilities for detailed engineering, standards to be used, engineering roles, engineering quality are laid out. Procurement and Contracts: Commercial terms for each package are documented. Detailed plans for procurement schedules and activities will be provided. Construction: The construction procedures, methods, requirements of contracts, QA/QC, safety policies and procedures, HR and IT policies and procedures will be documented. Temporary facilities, utilities, communications, emergency services, security, housing, concessions/food services, staging/warehousing, contractor work areas, waste disposal and site fabrication areas must be addressed. Commissioning: Pre-commissioning and commissioning methods and hand-off points will be defined and will be integrated in the project schedule. Operator training, vendor/supplier representation and assistance, and specialist support must also be well defined and relevant to the project specific conditions. Ramp-up and Hand-off: Document the responsibilities of the EPCM and Operating teams during this period and provide budgets, schedules and milestone dates for completion of each component. Testing, sampling and evaluation methods need to be addressed. Project Closure: Develop documentation required to complete closure. Occupational Health, Hygiene, Safety and Security: Detail the plan for each through the project implementation period. Relevant regulatory standards and jurisdictions are identified and compliance plans provided. This also includes emergency medical services plan, sanitary facilities and treatment, waste disposal, hazardous materials training and notification compliance, and security levels/technology requirements in all areas of the facilities. Environment: Detail the environmental management plan though project implementation. When applicable, hazardous materials handling and storage

• •

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plans are required, waste disposal (construction and longer term) facilities, temporary and permanent aspects of environmental management for project implementation phases and/or stages must be addressed. • • • Risk Management: Risk management plans are provided. Quality Assurance: An approach to ensuring project quality is developed. Technology and Intellectual Property: Plans for permissions and licenses for copywrites, patents and other intellectual property are provided. Confidentiality and information security plans may be required. Communications: Communication plans will be developed to address the information needs of all stakeholders. Financial Administration: Develop the approach for financing, cash flow, accounts payable, and financial administration through to hand-off to the Operator. Project Roles and Responsibilities: Define the responsibility matrix. Project Organization: Define project staff organization for each component and responsibilities through execution of each phase.

• •

Appendix L provides check lists for each component of the PEP.

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12.0

OPERATIONS PLAN
The operations plan covers the proposed methods of conducting the mining and processing operation after start up and commissioning. The basic structure of the Operations Plan will include the following components: • • • • • • • • Organization, Human Resources, Conditions of employment, Supply and logistics, Sales and marketing, Environment, health and safety, Operational cycles, and Quality assurance and control.

12.1

Organization
An organizational chart is developed to show the staffing and responsibilities to the production team level. Providers of external services such as mining contracts, transportation, concessions, shipping, etc will be shown. The ratios of labor, supervision and administration to workforce will need to be benchmarked to: • • Local country practice; and International best practice.

Organization must also consider recruitment, induction, initial skill level and training as well as potential roles in commissioning. Adaptation of an “existing workforce” needs to be realistic, well defined and documented, including supplemental training needs to account for new technology and practices.

12.2

Human Resources
Human Resources must consider the entire workforce and scheduling of use of the workforces. Provisions must be made based on local conditions for leave, lost time due to industrial relations and training. Provide structure of HR department and basic requirements to comply with labor laws and standards.

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12.3

Conditions of Employment
Conditions for employment will be summarized for each class of labor. These will condsider local policies and labor agreements. These estimates will be used in developing operating costs estimates.

12.4

Supply and Logistics
Provide a detailed forecast of the requirements for transport of supplies and logistical considerations in maintaining these supplies. Develop estimated costs based on quotes and proposed contracts.

12.5

Concessions
Describe the concessions required and contracts necessary for provision of food, housing, transportation and supplies for the mining operation where man camps and site housing will be required. Estimates of costs should be based on quotes.

12.6

Sales and Marketing
Provide staffing and description of functions of the Marketing Department and detailed descriptions of the functions and responsibilities of this department.

12.7

Environment, Health and Safety
Provide detailed structure of environmental compliance and monitoring plan, as developed in Environmental section of report. Develop staffing and assign responsibilities for each function within the plan. Provide structure of site health staffing and facilities, and operating practices. Example is the unique requirements of health checks and medical facilities at a highaltitude mine. Provide staffing, monitoring responsibilities, education, training and record keeping necessary to develop and maintain a safety culture that will ensure low incidents.

12.8

Operating Cycles
Establish and document the work shift and leave cycles that will be used in routine operation of the mine, plant and infrastructure. These should consider: • • Local practices, Productivity,

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• • • •

Ability to attract the workforce, Lost time, Costs, and Interaction between operational units.

12.9

Quality Assurance and Control
Develop plans for setting quality assurance guidelines and monitoring of quality in each area of mine and plant operation, maintenance, environmental compliance, supplies and human resources.

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Feasibility Study Guidelines 2006

13.0

REFERENCES

AMEC, 2003, Project Controls Procedures, Chapter 5, Capital Cost Estimating, internal AMEC document. AMEC, 2004, Minimum Standards of Documentation for Feasibility Studies, AMEC internal document. CIM, 2003, Estimation of Mineral Resources and Mineral Reserves, Best Practices Guidelines, May 30, 2003, adopted by CIM Council November 23, 2003. CIM, 2005, Definition Standards on Mineral Resources and Mineral Reserves, CIM Standing Committee on Reserve Definitions, November 14, 2004. Parker, H.M., 2006, Mineral Resource and Mineral Reserve Audits – Visions for the Future, AMEC internal memorandum, March 17, 2006. SME, 2005, Recommendations Concerning Estimation and Reporting of Mineral Resources and Mineral Reserves, The SEC Reserves Working Group of the SME Resources and Reserves Committee, April 2005.

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Feasibility Study Guidelines 2006

APPENDIX A-1 COMPARATIVE LEVELS OF STUDY – STUDY OBJECTIVE PERSPECTIVE

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Feasibility Study Guidelines 2006

Comparative Levels of Study – Study Objective Perspective
Area Project Phase Scoping Study Conceptual Risk General Conditions Define major unknowns. Eliminate fatal flaws. Establish project characteristics Existing databases checked, identify deficiencies to be fixed Preliminary map 20 ft accuracy First check of drilling procedures and comparison of methods, assessment of data quality Historical sampling and assaying checked with minor validation Brief mineralogical study for metallurgical use, metallurgical parameters are assumed, some metallurgical tests performed. Checks for deficiencies Preliminary understanding of controls of grade domains. Geological domains roughly defined, recommendations for additional tests made. Assumed or limited data. Existing geological mapping or reconnaissance grade mapping Preliminary to define principal rock units and identify minerals of interest. Checks of available data. Pre-Feasibility Study Preliminary Eliminate significant technical and commercial unknowns. Study and quantify risks and identify solutions. Formal risk assessment Verify and fix old data. Collect most of the project’s detailed data in this stage. Produce error free databases. Detailed photogrametry 10 ft accuracy Comprehensive checks on drilling types and biases, sample recovery, drilling conditions, collar and downhole surveys. Assessment of logging. Twin hole confirmation of old drill holes. Full quality controls on sampling and assaying, checks of biases, validation of historical data, check assays. Comprehensive mineralogy for ore characteristics. Comprehensive metallurgical tests, may be geometallurgical modeling. Comprehensive surveying, adjustments for deviations, resurveying of holes. Detailed studies of ore controls, establish clear domaining of mineralization. Interpretation of boundaries of geological domains and grade domains are advanced. 3D geological models for mineralization. Detailed measurements of 50-hundreds of samples per lithological, alteration or mineralization unit. Surface and underground geological mapping reasonably detailed, stratigraphy and structure well defined. Full mineralogical studies to characterized ore types and influences of mineralogy on metallurgical characteristics and mill throughput. Full validation of available historical data and development of comprehensive, errorfree databases for new data. Feasibility Final No significant unknowns. Acceptable risks in all areas. Formal risk assessment carried out. Data added to improve confidence in estimates Detailed photogrammetry 10 ft accuracy Infill drilling and specialized drilling for geotechnical, metallurgy, hydrogeology, sterilization Additional sampling and confirmation of historical data as necessary to produce unbiased assay database. Bulk sampling, pilot tests

Project Data Topography

Drilling

Sampling/Assaying

Mineralogy/Metallurgy

Exploration Data Collection/Geology/Geologic al Models

Downhole Surveys Geological Controls Geological Interpretation/Model Rock Densities

Complete Models refined with additional data. Refine models to benefit estimation of grade, density, geometallurgy, mining units, ore type domains. Refinements for subtypes with additional sampling. Detailed geological mapping of surface and workings, geological controls well understood. Continued studies in support of refining metallurgy.

Geological Mapping

Mineralogy

Database Validation

Complete

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual

Pre-Feasibility Study Preliminary High percentage of resources are Indicated with some Inferred, some Measured. Total outline of mineralization is defined for mine designs. Meet Standards and Guidelines for jurisdictions, follow Best Practices. Detailed drilling support thorough data analysis, domaining of mineralization, and development of resource estimates with low bias. Estimate tuned to selective mining unit and anticipated mining method. 20% Inferred, 60% Indicated, 20% Measured. Detailed mine designs using well established design criteria, geotechnical support, metallurgical recoveries and operating costs. Reserves declared from Measured and Indicated Resources in pit design Detailed geotechnical study support for pit designs. Mining rate optimized for deposit, resource estimate and expected operating constraints (bench height, selectivity) Developed from detailed knowledge of metal prices, metallurgical recovery, final resource estimate and operating costs. Estimated from evaluation of mining rate and selectivity. Waste dumps designed, geotechnical investigations undertaken, condemnation drilling undertaken, volumes confirmed. Detailed with consideration of equipment selected, pit access requirements, phasing, and geotechnical constraints. Sensitivities of each mining rate and method to incremental changes in operating costs and metal prices are examined. Evaluation of cutoff grade strategies,

Feasibility Final Majority of resources are Measured and Indicated. May be very minor Inferred included in pit but not used in designs or cash flows. Meet Standards and Guidelines for jurisdictions, follow Best Practices. Finalized with additional drilling and modified to improve stationarity and match with mining method and mining rate. 50% Indicated, 45% Measured, 5% Inferred. Optimized for variable cutoff grades and maximum pit value Reserves declared from Measured and Indicated Resources in pit optimized for value. Finalized geotechnical support by domain or sector.

Input Data Resource/Reserve Standards

Preliminary resource estimate with preliminary zoning and classification Meet Standards and Guidelines for jurisdictions. Preliminary based on available drilling. Mostly Indicated and Inferred. Insufficient drilling for high quality estimates. 80% Inferred, 20% Indicated Preliminary based on assumed mine design criteria, metallurgical recovery and operating costs. No reportable reserves Assumed pit slopes based on similar deposits. Nominal cut off grades based on general assumptions. Mining rates assumed based on experience and comparable deposits. Preliminary identification of different options. Approximate from assumptions of metal prices, metallurgical recovery and operating costs. Recovery and dilution assumed from similar operations. Assumed designs of waste dumps.

Resource Estimates

Reserve Estimates

Reporting

Resources/Reserves Surface Mining

Design Constraints

Mining method

Final design based on optimal mining selectivity and mining rate. Optimized to maximize value of pit from detailed knowledge of metal prices, metallurgical recovery and operating costs. Finalized for optimized mining rate and selectivity. Final designs with access roads, and phases. Incorporation of handling of separate material such as ARD susceptible material. Final design for pit optimized for maximum value. Full review of sensitivities and development of risk assessment. Final optimization of schedule to

Cutoff Grades

Mining Factors

Waste Rock

Roads/Ramps

Assumed for preliminary design. Preliminary scoping of impact of different production rates and mining equipment. Preliminary identification of means

Sensitivity in Design Project value

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual to increase project value.

Pre-Feasibility Study Preliminary stockpiling and scheduling. Scheduled on annual basis but generally average over life of mine. Detailed review of equipment alternatives and selection of fleet based on mining rate and selectivities determined in mine design. Develop manpower requirements from selected mining methods and equipment. Developed from preliminary designs for specific facilites. Preliminary estimates based on estimates of each cost center such as fuel, drilling, blasting and on productivities. Preliminary costs based on book quotes and preliminary supplier quotes. Full geotechnical study is undertaken to determine average pit slope angles, dewatering requirements, foundation conditions of waste dumps, tailings leach pads and roads. High percentage of resources are Indicated with some Inferred, some Measured. Total outline of mineralization is defined for mine designs. Meet Standards and Guidelines for jurisdictions, follow Best Practices. Detailed drilling support thorough data analysis, domaining of mineralization, and development of resource estimates with low bias. Estimate tuned to selective mining unit and anticipated mining method. Detailed reserves from Measured and Indicated Resource with dilution and mining recovery adjustments. Reserves declared from Measured and Indicated Resources in mine design. Geotechnical data from drill core is used to refine stope designs.

Feasibility Final maximize value. Detailed schedule with opportunities for optimizing high grades early. Detailed prestripping and waste rock handling. Complete economic analysis of selected fleet and alternatives with incorporation of accurate replacement capital. Detailed staffing and organizational chart and assessment of labor sources and training requirements. Final designs of facilities with selection of specific components. Final detailed estimates developed from evaluation of each activity and cost center, including allowances for incremental changes with pit depth. Final estimate based on supplier quotes for all major items. Final geotechnical designs by sector in pits, waste dumps, tailings, leach pads, roads. Majority of resources are Measured and Indicated. May be very minor Inferred included in pit but not used in designs or cash flows. Meet Standards and Guidelines for jurisdictions, follow Best Practices. Finalized with additional drilling and modified to improve stationarity and match with mining method and mining rate. Reserves optimized for cutoff grade strategies, modifications in mine plan to maximize value. Reserves declared from Measured and Indicated Resources in design optimized for value. Final designs based on more detailed geotechnical data from drill core.

Production rate

Averaged over life of mine. Assumed equipment sizes, number, productivity. Generalized numbers based on equivalent operations. Assumed based on similar operations. Approximated from similar operations. Factored from similar operations. Basic assumptions based on similar deposits, rock types, alteration. Preliminary resource estimate with preliminary zoning and classification Meet Standards and Guidelines for jurisdictions. Preliminary based on available drilling. Mostly Indicated and Inferred. Insufficient drilling for high quality estimates. Preliminary based on simple dilution and mining recovery assumptions. No reportable reserves Assumed stope designs based on similar operations. Dilution and mining recovery based on

Equipment

Manpower Surface Facilities Shops, fuel, waste facilities, power Operating Costs

Resources/Reserves Surface Mining

Capital Costs

Geotechnical Investigations

Input Data Resource/Reserve Standards

Resource Estimates Resources/Reserves Underground Mining Reserve Estimates

Reporting

Design Constraints

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual comparable mines and methods. Cutoff determined by selected mining method.

Pre-Feasibility Study Preliminary

Feasibility Final

Resources/Reserves Underground Mining

Mining Method

Assumed based on similarities to other deposits and operations.

Mining methods evaluated within the context of specific ore zone geometry and dimensions. Trade offs examined to select combination of methods. Developed from detailed analysis of each mining option, detailed estimates of each cost center, metal price forecasts and established metallurgical recoveries. Determined from detailed analysis of each mining method using preliminary geotechnical data. Preliminary designs of actual waste dumps, incorporation of consideration of waste backfill in mining operations. Preliminary designs of ramps and shafts Preliminary designs and calculations of required volumes. Evaluate sensitivities of each mining method to changes in costs, metal prices and grades. Assess cutoff grade strategies, stockpiling and production schedule options. Scheduled on annual basis with average tons and grade over life of mine and one production rate. Detailed waste rock schedule, consideration of ARD, waste rock treatment. Detailed review, selection of specific equipment based on production rate, mining method, productivities. Support equipment lump sum. Developed from specific requirements of mining method and production rates. Costs by average skill groups.

Finalized design with geotechnical input and optimized to maximize production value. Detailed design of development, stoping system, ventilation, roof control, utilities, haulage. Developed from detailed cost estimates and optimized for changing cutoff grade strategy.

Cutoff Grades

Based on approximate operating costs and forecasts of metal prices, metallurgical recovery.

Mining Factors Dilution, recovery

Assumed from similar operations.

Confirmed.

Waste Rock Underground Access Ventilation Sensitivities Optimization

Assumed waste dump designs. Generalized designs Generalized Preliminary analysis of impact of different production rates and mining methods. Identify options for improvements. Average tones and grade over life of mine. May examine several production rates. Assumed waste dump locations, general design. Major equipment from comparable operations, with assumed size, productivities costs. Generalized based on similar operations.

Final waste dump designs in annual increments with access and phasing. Final detailed designs of ramps and shafts. Detailed designs, electrical and volume requirements completed. Complete sensitivities and provide risk assessment of options. Final optimization based on project value. Detailed on quarterly or monthly basis with variable tons and grade as available. Detailed development schedule. Detailed waste rock schedule on annual basis, including handling of different materials and establishment of operating practices. Final recommendations for detailed equipment selections based on selected mining methods. Detailed analysis of operating costs and productivities. Detailed staffing of mining department with organizational chart, specific costs for each function. Training considered.

Production Schedule

Waste Rock

Equipment

Staffing

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual

Pre-Feasibility Study Preliminary Preliminary design and costing of shops, offices, fuel storage, change house. Preliminary estimates developed from specific cost centers, productivities and selected mining method and rate. Preliminary estimates using book values and preliminary quotes for specific facilities and equipment. Examine sensitivities of range of mining options to major parameters of operating costs, metal prices. Full geotechnical study from geotechnical holes to access dilution, support, dewatering requirements for each mining option. Preliminary designs. Detailed mineralogical studies, ore type definition, study of contaminants, characterize ore types for process parameters (throughput, extraction). Bench scale tests on drill core. Grade & recovery relationships, leaching times, grindability. Fixed production rate and product/byproduct production. Defined flowsheets for mass and energy balances in each section of process stream. Establish on site facilities required. Basic drawings of major equipment. Preliminary estimates developed from specific cost centers, productivities and selected processing methods and rates. Preliminary estimates using book values and preliminary quotes for specific plant equipment.. Preliminary calculations from topography, some soil conditions known.

Feasibility Final Final mine layout with all facilities tuned to mine design and staffing, development and production rate. Detailed cost estimates by activity. Cost increments by mine stage considered. Detailed estimate from quotes. Full study of impact of grade, production rate, metal prices, metallurgical recovery and operating prices. Optimized designs for differences in geotechnical character of sectors and materials. Finalized mine support requirements. Further work to optimize geometallurgy and model variable process performance throughout mine life. Continued laboratory tests and potentially pilot tests for more specific ore types. Fixed production rate and product/byproduct production. Detailed flowsheet defined and detailed mass and energy balances are established. Finalize on site designs, if utilized. Negotiate offsite treatment charges. Scaled drawings of major equipment and detailed as necessary for cost estimation. Detailed cost estimates by activity. Cost increments by treatment stage and ore stream considered. Detailed estimate from supplier quotes. Detailed topography and quantities measured, soil and foundation conditions

Surface Facilities

Total cost allowance based on comparable operations. Factored from comparable operations. Average cost per ton mined. Factored from similar operations.

Operating Costs

Capital Costs Resources/Reserves Underground Mining

Sensitivity Studies

Identification of major risks.

Geotechnical Investigations

Basic assumptions on behavior of ore zones and waste rock dumps.

Mineralogy

Preliminary mineralogical studies

Metallurgy

Preliminary metallurgical tests. Preliminary assumptions based on preliminary mine life, alternatives evaluated in trade off studies. General design. Preliminary assessment of requirements. Sketch layouts. Factored from comparable operations. Average cost per ton processed. Factored from similar operations. Preliminary topography, amounts assumed.

Production Rate

Flow Sheets Processing/Metallurgy Smelting/Refining Drawings

Operating Costs

Capital Costs Civil Work

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual General assumptions on water, pipelines, roads and living facilites. Assumed based on comparable operations. Initial research of power supplies and cost. Assumed. Factored from comparable operations. General requirements assumed. Identify all potential impact areas and data required for assessment. Develop program for collection of base data. Compile existing data on environmental conditions and regulatory requirements. None

Pre-Feasibility Study Preliminary known. Preliminary identification and design of all road, pipeline, water, living and support facilities. Preliminary assessment of communications and data facilities available and requirements for additional facilities. Power sources and availability identified, preliminary unit costs obtained. Preliminary hydrogeology study completed. Preliminary estimates of volumes and cost. Preliminary estimates based on hydrogeological studies. Data collection and assessment of project alternatives. Compile existing data from databases and initiate baseline studies; information requirements for management plans have been identified and information is being collected. Draft EIS or EA has been initiated. Preliminary management and monitoring plans for sediment and water control, reclamation, acid rock drainage treatment, environmental monitoring and emergency response plans. Comprehensive review of required permits; negotiations are initiated. Analysis of potential impacts of project alternatives, preliminary development of social programs. More detailed design of project engineering, construction and operating life developed after production rate and reserve set. Preliminary scheduling of engineering and

Feasibility Final Final design of road, pipelines, water, living and support facilities. Final design of communication and data facilities. Detailed design of power supply facilities; and preliminary negotiation of contracts to set prices. Detailed hydrogeology study completed with specific sources and quantities known. Final estimates derived from detailed engineering. Final estimate and design of dewatering facilities. Continued data collection and assessment of results. Initiation of permits. All required data are collected and evaluated, regulatory reports are in progress. Draft EIS or EA submitted to lead regulatory agency. Management and monitoring plans for sediment and water control, solid and hazardous waste handling, impact mitigations, reclamation, acid rock drainage, spill and emergency response are finalized. Detailed analysis of required permits and development of schedule for acquiring permits. Detailed assessment of impacts derived from selected project plan, detailed social program developed. Detailed engineering, construction, mine life and reclamation schedule. Detailed project schedule developed with

Infrastructure

Facilities Communications /Data

Infrastructure Power

Water Source Hyrdogeology Water Usage Dewatering

Impact Assessment

Supporting Data

EIS/EA Environmental/Social Environmental Management Plans

Conceptual plans, general outlines for managing each area.

Permits

Initial research of requirements. Consideration of impacts on local communities. Preliminary estimate of project EPCM period and mine life. General assumptions

Social/Community

Project Implementation

Project Development EPCM Schedule

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Feasibility Study Guidelines 2006

Area

Project Phase

Scoping Study Conceptual

Pre-Feasibility Study Preliminary construction depending on project design parameters developed. Preliminary project execution plan and procedures developed.

Feasibility Final all work levels and deliverables defined, engineering tasks defined in detail, procurement schedule defined, major milestones identified and scheduled, project controls organized, safety and training manuals prepared.

Property Ownership

Mineral and surface rights known, agreements in place. Preliminary assessment of additional surface and access rights. Simple model based on preliminary operating plan with major revenues and costs. Review of NPV of alternatives. Identify significant influencing factors. Preliminary analysis sufficiently positive. Generalized, based on public knowledge. Long-term metal prices; include product specifications if appropriate and byproducts to be recovered. Assumed based on comparable operations. Identify specific permits required and permit process timelines. Assume permits will be received. Identify all requirements in areas of labor, supplies, imports, health & safety. General analysis

Mining concessions and agreements secured or being converted to exploitation concessions. Negotiations for additional surface and access rights are in progress Detailed financial model incorporating detailed mine production plan and more accurate revenues and costs for multiple options. Project value sufficient to warrant continuation of project. Research details for all specific tax and duty areas from government sources and determine if tax holidays or credits are possible. Assess long-term prices for product and byproducts, product specifications, contaminant penalties. Preliminary contract discussions. Preliminary quotes from smelters; assessment of penalty terms, price participation. Preliminary quotes from shippers. Detailed analysis of permitting requirements and development of terms with government authorities. Assess data requirements and initiate negotiations with stakeholders as required. Preliminary fatal flaw analysis; evaluation of sensitivities to identified risks.

Mining rights, surface use and access secured.

Financial Model

Detailed analysis of selected mine plan with comprehensive sensitivity studies. Use of advanced modeling techniques to model variable metal prices, etc. Value sufficient to finance project. Finalize negotiations for tax and duty agreements. Final product and byproduct price forecasts, contaminant penalties. Variable product prices over life of mine and variable contaminant penalties by mine plan. Firm terms for smelter and shipping contracts based on predicted concentrate quality, grade and metal prices. Permitting advanced and no significant impediments exist. Advanced compliance with all regulations, with most required licenses in place. All risks identified; Monte Carlo analysis of project risks.

Project Valuation

Taxes & Duties Financial/Legal/Commercial Product Prices

Smelting, Refining, Freight

Permitting

General Regulations Risk Assessment

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Feasibility Study Guidelines 2006

APPENDIX A-2 COMPARATIVE LEVELS OF STUDY – ENGINEERING AND DESIGN PERSPECTIVE

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Feasibility Study Guidelines 2006

Comparative Levels of Study – Engineering and Design Perspective
Project Phase Engineering % Complete
Project Scope Plant product and capacity Geographical location Plant Layout Plant Description Site Conditions Topographical maps Soil/geology reports Mining claims/tenements Geology, Resource Estimates, Reserves Resource Classification Reserve Classification Resource / Reserve Estimates Geology and Ore Controls Geotechnical Investigations Mine Plan Production Schedule Mine Equipment Mine Services Plant and Infrastructure Process selection Metallurgical testwork Geometallurgical models Site Plan Process Piping &Instrument Design Process Flowsheets Equipment Flow Diagram Process Automation Energy Balance Material Balance Heat Balance Major Equipment Minor Equipment List of Motors General arrangement drawings Detailed G.A.'s Mechanical

Scoping Study Conceptual <5%
Approximate Usually known Optional Required Approximate Preliminary Held or in negotiation

Pre-Feasibility Study Preliminary 15%
Selected Approved Firm Approved Detailed (small scale) Preliminary Held, minor parcels in negotiation

Feasibility 20-30%
Fixed Exact Fixed Fixed Detailed (small scale) Detailed Firm title to all essential lands

Definitive Feasibility Detailed Engineering 60%
Fixed Exact Fixed Fixed Detailed (large scale) Complete Firm title

Minimum Inferred None Preliminary Preliminary Preliminary Sketch Only Assumed Assumed Assumed Assumed Preliminary None Optional None Preliminary Preliminary None None None None Preliminary None None None/sketches None

Indicated Preliminary Block model Preliminary Preliminary Preliminary Preliminary Approximated Budget quotes Sketch Plan Preliminary Preliminary Preliminary Preliminary None or Preliminary Fixed Approved Preliminary Preliminary Preliminary Preliminary Selected Preliminary Selected Approved Preliminary

Indicated/Measured Probable/Proven Detailed Block Model Detailed Detailed Detailed, optimized Detailed Written Quotes Detailed Outlines Fixed Completed Completed Fixed Preliminary Finalized Fixed Approved Frozen Frozen Frozen Finalized Finalized Finalized Fixed Approved

Indicated/Measured Probable/Proven Detailed Block Model Detailed Detailed Detailed, optimized Qtrly & yearly after Quoted Specifically Firm Design Fixed Completed Completed Fixed Fixed P&ID’s Finalized Fixed Fixed Fixed Fixed Fixed Complete Complete Complete Fixed Complete

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Feasibility Study Guidelines 2006

Project Phase Engineering % Complete
Civil/structural drawings Building Size Piping drawings Electrical drawings single line IS/IT Management Systems Major Equipment Vender Eng. Tailings Waste rock facilties Mine services Power, water, waste handling Conveyances (pipelines) Specifications (all of above) Environmental Environmental Policy Environmental Plan Environmental Risks EHS Compliance Health and Safety Emergency Preparedness Environ. Impact Assessment Environmental Permits Environmental Monitoring Plan Environ. Communications Plan Statutory Requirements Closure Plan Project Implementation Project Plan (EPCM) Project Controls Cash Flow Forecast Construction work plan Construction contract configuration Construction schedule Future work Labor Rates Labor Productivity Construction Equipment

Scoping Study Conceptual <5%
None/sketches Conceptual None Preliminary None None Assumed Assumed Assumed Assumed Assumed None/basic criteria For Site Works Mgt System in place High Level Assessment / Mitigations Strategies identified Compliant Compliant Major issues known / In effect for site works Major issues known Preliminary Investigation/ Permits Scheduled Specification Completed Draft Plan Major issues known Concept Level None None None None None Bar chart Identified Not evaluated Not evaluated Not evaluated

Pre-Feasibility Study Preliminary 15%
Sketches Preliminary Preliminary Preliminary and detailed Outlined Established Preliminary Preliminary Preliminary Preliminary Preliminary Outline Criteria Prelim. Outline EHS plans in place Detailed Assessment / Mitigations Strategies identified Compliant Compliant Outline and Listed Major/Medium Issue Known All Issue Understood /Permits Issued for Pre-development Data Collection Plan Draft Issued Plan Outline and Listed Closure Plan Verified Outline identified Outlined Preliminary Selected Outlined Selected Bar chart Current best Assumed $ / Hour

Feasibility 20-30%
Buildings Sized and located Final Fixed Fixed Selected Complete Fixed Fixed Fixed Fixed Fixed Outline Spec/Criteria Selected Detailed EHS Plan Issued for use Mitigation Strategies Developed Compliant Compliant Detailed and Underway Mitigation Strategies Developed Permits Applied For Data Collection Plan issued Issued Plan Detailed and Underway Fixed Detailed schedule Complete Complete Scheduled Selected Scheduled Detailed & Scheduled Current best Evaluated $ / Hour

Definitive Feasibility Detailed Engineering 60%
Complete Complete Complete Complete Complete Manuals Complete Complete Complete Complete Complete Complete Approved and in progress Approved and in progress Approved and in progress Compliant Compliant Approved and in progress Approved and in progress Approved and in progress Data Collection Implemented Approved and in progress Approved and in progress Fixed Detailed schedule In use Complete In use In use In use In progres Actual Evaluated Quotes

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Feasibility Study Guidelines 2006

Project Phase Engineering % Complete
Capital Cost Estimates Site visit by project estimator Estimate basis

Scoping Study Conceptual <5%
Unnecessary Factored from comparable operations and production rate Current Similar Data Current Similar Data Not evaluated Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Factored/cost capacity Not evaluated Not evaluated Not evaluated Not evaluated Not evaluated Incl. in unit cost Factored Factored from comparable operations Some Often excluded 35% % Of total costs None – Benchmark Data

Pre-Feasibility Study Preliminary 15%
Required Estimated from unit costs

Feasibility 20-30%
Required Estimated from detailed designs, equipment lists, drawings, quotes

Definitive Feasibility Detailed Engineering 60%
Required Estimated from more complete designs, equipment lists and quotes. PO to Fabricator Awarded Quotes Quotes Quotes Quotes Quotes Quotes Complete takeoffs from detailed items. Quotes Quotes Quotes Quotes Quotes Current area labor rates Evaluated/Project Experience Spreads + rental rates PO's w/detailed quotes Contracts/written quotes % Of direct cost Final estimates of all components Final estimate updated for current costs Complete Detailed analyses 5-15% depending on specific risks Per contract/Forecast of hours Equipment on order, tendered or

Major Equipment Bids Minor Equipment Bids Site Preparation, Earthwork Piling Building Foundations Equipment Foundations Structural Steel Cladding Architectural Mechanical - HVAC Mechanical - Piping Electrical Services Equip Electrical – Other Labor rates Labor productivity Construction Equipment usage Material pricing Subcontract pricing Contractors' EH&S Owners costs and preproduction expenses Working capital Risk Analysis & Sensitivities Escalation Contingency EPCM Costs Quotations / Tenders –

Received & Analyzed PO Bid for Engineering Info. Budget Quotes Received & Analyzed Preliminary from takeoffs from major Prelim Quantities/Historical Pricing, items Bid & Possibly Award Preliminary/Parametric Quantities Estimated Quantities from Drawings Parametric/Estimated Quantities Preliminary/Parametric Quantities from Drawings Parametric/Estimated Quantities Preliminary/Parametric Quantities from Drawings Parametric/Estimated Quantity Bids Preliminary/Parametric Quantities in if possible Preliminary/Parametric Quantities Estimated Quantities from Drawings Preliminary/Parametric Quantities Parametric/Prelim. Estimated and takeoffs from major items Quantities from Drawings Parametric/Prelim. Estimated Preliminary/Parametric Quantities Quantities from Drawings Parametric/Prelim. Estimated Preliminary/Parametric Quantities Quantities from Drawings Prelim. Estimated Quantities from Preliminary/Parametric Quantities Drawings Prelim. Estimated Quantities from Preliminary/Parametric Quantities Drawings Current area labour rates Current area labor rates Assumed productivity Evaluated CE based on $/man-hour CE based on $/man-hour Historical/Tel. Quotes Telephone quotes/Historical Pricing Historical Telephone quotes/Historical Pricing % Of direct cost % Of direct cost Factored + preliminary estimates of Final estimates of all components major components Preliminary estimates using similar Estimated from details specific to projects project Preliminary Done %/Year to mid-point %/Year to mid-point 20% 15% % Of total costs % Of total costs Equipment Quotes and benchmark Multiple firm equipment quotes.

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Feasibility Study Guidelines 2006

Project Phase Engineering % Complete
Supporting the Estimates

Scoping Study Conceptual <5%

Pre-Feasibility Study Preliminary 15%
material supply and construction rates

Feasibility 20-30%
Multiple material supply and construction quotes and rates checked. Defined Defined Defined Defined +15% -5% Complete Detailed Estimate Known basis Estimated Estimated Factorized Detailed Review Calculated Firm written quotes Firm written quotes Firm written quotes Quotes and Calculations Detailed Calculations Detailed Calculations Detailed Review Detailed Review Firm written quotes Detailed Review Detailed Review +15% to -5%

Definitive Feasibility Detailed Engineering 60%
firm quotes available. Tenders for Material Supply and Construction costs. Some contracts awarded. Defined Defined Defined Defined +10-15% -5% Complete Known Known Estimated – Detailed Estimated Some quotes Detailed Review/Updated to Actual Calculated and updated to Actual Detailed Calculations and updated to Actual Firm quotes Firm quotes Detailed Calculations and Quotes Detailed Calculations Detailed Calculations Detailed Review Detailed Review Firm quotes Detailed Review Detailed Review +10% to -5%

Work Breakdown Structure Project Code of Accounts Escalation Strategy Foreign Exchange Strategy Target Accuracy Operating Cost Estimates Basis of Estimate Staffing Levels Labour Rates Consumable/Utility consumption Maintenance supplies Spares Labour Rates Labour Burden Power & Water Unit Costs Fuel Unit Costs Supplies & Reagents Unit Costs Transport and Logistics Working Capital Sustaining/Replacement Capital Training Ramp Up Insurances Escalation Foreign Currency Provisions Target Accuracy

Outline None None None ±30% Outline Factorized Factorized Factorized Factorized Factorized Assumed average Assumed average Data bank Data bank Data bank Factored % of total estimate Factored % of total estimate Factorized % Factored % of total estimate Factored % of total estimate Factored % of total estimate Factored % of total estimate Factored % of total estimate ±35%

Preliminary Preliminary Preliminary Preliminary ±20% Preliminary Estimated Calculated Estimated Factorized Factorized Separate categories Calculated Budget Quotes Budget Quotes Budget Quotes Preliminary Calculations Preliminary Calculations Preliminary Calculations Preliminary Calculations Preliminary Calculations Budget Quotes Preliminary Calculations Preliminary Calculations +20% to -10%

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Feasibility Study Guidelines 2006

APPENDIX B STUDY REPORT CONTENT

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FEASIBILITY STUDY REPORT CONTENT
1. SUMMARY AND RECOMMENDATIONS 1.1 Summary Project Description 1.2 Scope of Study 1.3 Risk Analysis 1.4 Key Performance Indicators 1.5 Financial Evaluation 1.6 Recommendations 1.7 Next Stage Work Plan 2. COUNTRY AND REGIONAL SETTING 2.1 General 2.2 Economy and Taxation 2.3 Climate and Geography 2.4 Seismic Zone and Risk 2.5 Demographics and Labor 2.6 Cultural Issues 2.7 Sovereign / Country Risk 2.8 Political / Legal / Judicial System 3. LEGAL 3.1 Underlying Agreements 3.2 Confidentiality Agreements 3.3 Heads of Agreement 3.4 Partner Agreements 3.5 Mineral Rights 3.6 Water Rights 3.7 Land Ownership and Surface Rights 3.8 Land 3.9 Sovereign Risks 3.10 Government Project Incentives 3.11 Easements 3.12 Access Road Development 3.13 Reclamation and Rehabilitation 3.14 Encumbrances, Liens, Royalties, Charges 3.15 Environmental Issues 3.16 Tax Issues (including Unincorporated JV or Project Company) 3.17 Legal System 3.18 Restrictions on Transfer of Rights 3.19 Products and Take Off 3.20 Intellectual Property 3.21 Technology

4. OWNERSHIP AND BUSINESS 4.1 Agreement (Exploration/Option Agreement)

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Feasibility Study Guidelines 2006

4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.1.6 4.1.7 4.1.8 4.1.9 4.1.10 4.1.11 4.1.12

4.2

Percentage Interest Acquired Earn-in period Earn-in obligations Operator Expenditures Cash calls Mining properties (Area of Interest) Abandonment of mining properties Right to acquire additional interest Assignment-Transfers Rights of first refusal Formation of Project Company (Shareholder agreement) or Unincorporated JV (Business Structure triggered by acquisition) 4.1.13 Confidential information 4.1.14 Dispute Resolution 4.1.15 Termination of agreement 4.1.16 General conditions Business Structure 4.2.1 Project company 4.2.1.1 Owner percentage interest 4.2.1.2 Operator 4.2.1.3 Shareholder agreement (Board, Technical Committee) 4.2.1.4 Right to purchase and process product 4.2.1.5 Right to acquire additional interest 4.2.1.6 Dilution (dilution to royalty) 4.2.1.7 Deemed expenditures for dilution formula 4.2.1.8 Work program, budget and approval process 4.2.1.9 First refusal 4.2.1.10 Intellectual property 4.2.1.11 Technology (including relationship to any potential partners) 4.2.1.12 General conditions 4.2.2 Unincorporated JV 4.2.2.1 Owner percentage interest 4.2.2.2 Operator 4.2.2.3 Management Committee (representatives each) 4.2.2.4 Right to purchase and process product 4.2.2.5 Right to take product in kind 4.2.2.6 Right to acquire additional interest 4.2.2.7 Dilution (dilution to royalty) 4.2.2.8 Deemed expenditures for dilution formula 4.2.2.9 Work program, budget and approval process 4.2.2.10 First refusal 4.2.2.11 Intellectual property 4.2.2.12 Technology (including relationship to any potential partners) 4.2.2.13 General conditions 4.2.3 100% Ownership (underlying royalties, if any) 4.2.4 Alternative business structure

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5. GOVERNMENT AND COMMUNITY RELATIONS 5.1 Federal, State & Local Government 5.2 Socio-Economic Considerations 5.3 Workforce Issues 5.4 Recruitment 5.5 Local Service Industry 5.6 Media 5.7 Community Plan and Services 5.8 Off-site Housing and Accommodations 5.9 International Trade Considerations 5.10 Non Government Organizations 5.11 Indigenous / Aboriginal Issues 6. HUMAN RESOURCES AND TRAINING 6.1 Organization Model 6.2 Education and Cultural Fit 6.3 Recruitment and Training 6.4 Employee and Labor Relations 6.5 Performance Management and Total Compensation 6.6 Statutory Obligations 7. OCCUPATIONAL HEALTH AND SAFETY 7.1 Safety Risk Identification 7.2 Safety Management 7.3 Design and Engineering 7.4 Construction Strategy 7.5 Operations Strategy 7.6 Security and Access 7.7 Community Issues 8. ENVIRONMENT 8.1 Appraisal 8.2 Socio-Economic Issues 8.3 Policies 8.4 Permit and regulatory framework 8.5 EIS or EIA requirements 8.6 Ecological Risk Assessment (if required) 8.7 Environmental baseline studies 8.7.1 Flora and fauna 8.7.2 Air and water quality 8.8 Cultural/Archeological studies 8.9 Impact mitigation plans 8.9.1 Air quality abatement 8.9.2 Noise abatement 8.10 Construction Environmental Management 8.11 Mine waste management plan 8.12 Solid and hazardous materials handling 8.13 Spill prevention and emergency response plan

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8.14 Cyanide code compliance (if applicable) 8.15 Reclamation and closure plan 8.16 Risks 9. GEOLOGY AND RESOURCE ESTIMATION 9.1 Geology and Exploration Data 9.1.1 Regional and district geology – map 9.1.2 Deposit geology and ore controls – map and representative sections 9.1.3 Exploration methods 9.1.4 Drilling programs – documented by campaign – drill hole location map 9.1.4.1 Drill hole numbers, meterage and locations 9.1.4.2 Drilling methods and equipment 9.1.4.3 Drilling conditions 9.1.4.4 Drilling recovery 9.1.4.5 Drill hole surveying 9.1.4.5.1 Equipment 9.1.4.5.2 collar and down hole surveys 9.1.4.5.3 validation of collar locations relative to topography 9.1.4.5.4 magnetic declination corrections (relative to time) 9.1.5 Trenching 9.1.6 Logging protocols 9.1.6.1 Geological 9.1.6.2 Geometallurgical 9.1.6.3 Geotechnical 9.1.6.4 Geotechnical measurements 9.1.7 Sampling and sample preparation 9.1.7.1 Sampling method 9.1.7.2 Sample intervals 9.1.7.3 Sample recovery (core recovery or RC sample weights) – graph recovery and grade relationships 9.1.7.4 Sample weight 9.1.7.5 Sample preparation protocols (weights and specifications) 9.1.8 Assaying 9.1.8.1 Analytical methods for ore and deleterious elements 9.1.8.2 Detection limits 9.1.8.3 Analytical accuracy and precision 9.1.9 Assay quality assurance and quality control 9.1.9.1 Blanks, standards and duplicates submissions – frequency and protocol for preparation and submission 9.1.9.2 Procedure for review and evaluation of accuracy and precision 9.1.9.3 Protocol for identifying and correcting failures 9.1.9.4 Check assay program and results 9.1.9.5 Evaluation of QA-QC data collected for project 9.1.10 Density measurements 9.1.10.1 Measurement method 9.1.10.2 Location and representiveness of ore and waste units 9.1.10.3 Adequacy of measurements and proposed adjustments 9.1.11 Topographic data and accuracy 9.1.12 Database 9.1.12.1 Database development and validation

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9.2

9.1.12.2 Database structure 9.1.12.3 Database security 9.1.13 Geological interpretations and assessment of ore controls 9.1.14 Development of digital geological model to guide resource estimates 9.1.15 Consideration of need for geometallurgical units and characterization of units 9.1.16 Drill hole spacing and adequacy to support resource estimates and mine designs 9.1.17 Exploration reclamation and consistency with permit requirements 9.1.18 Risks Resource Estimates 9.2.1 Assessment of mining selectivity and choice of selective mining unit (SMU) 9.2.2 Development of resource block model and model block size 9.2.3 Compositing strategy 9.2.4 Exploratory data analysis (evaluation of grade domains and statistical analysis of data) 9.2.4.1 Histograms 9.2.4.2 Scatter plots 9.2.4.3 Variograms 9.2.4.4 Box plots 9.2.4.5 Contact plots (grade profiles) 9.2.4.6 Metal ratios 9.2.5 Assignment of geological, geotechnical and geometallurgical attributes to resource model blocks 9.2.6 Assessment of need for grade capping or other methods of restricting high grade values that put metal at risk 9.2.7 Use of domaining to control grade estimates (deterministic or probabilistic geological models or grade domains) 9.2.8 Grade interpolation strategy (assignment of grade to model blocks) 9.2.9 Assignment of density values to blocks 9.2.10 Incorporation of contact ore loss and dilution (if appropriate) 9.2.11 Resource classification (Measured, Indicated and Inferred) 9.2.12 Verification of grade interpolation 9.2.12.1 Inspection of run files 9.2.12.2 Manual verification of compositing, data selection and interpolation 9.2.12.3 Check of mineral inventory summaries 9.2.13 Validation of resource estimates, for instance: 9.2.13.1 Visual comparison of block grades to drill hole composite grades 9.2.13.2 Comparison to nearest-neighbor estimates 9.2.13.3 Comparison of grade-tonnage curves from nearest neighbor estimate adjusted for SMU 9.2.13.4 Evaluation of conditional bias 9.2.14 Risks

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10. MINING 10.1 Basis of Evaluation 10.2 General Design Criteria 10.2.1 Site Description 10.2.2 Resource Description 10.2.3 Geotechnical Parameters 10.2.4 Hydrological Considerations 10.2.5 Economic Criteria 10.3 Cutoff grade calculations (including potential use of variable cutoffs) 10.4 Mining rate 10.5 Equipment selection 10.6 Equipment productivities 10.6.1 Physical availability 10.6.2 Use of availability 10.7 Equipment maintenance and replacement 10.7.1 Routine maintenance 10.7.2 Overhauls 10.7.3 Replacement 10.8 Major mine consumables 10.9 Mine designs - open pit mines 10.9.1 Pit design criteria 10.9.1.1 Metal prices 10.9.1.2 Geotechnical/hydrogeological support 10.9.1.3 Haul road width and gradient 10.9.1.4 Mining and metallurgical recovery 10.9.1.5 Operating costs 10.9.1.6 Net smelter returns, royalties and taxes 10.9.2 Criteria for maximizing pit value 10.10 Mine designs - underground mines 10.10.1 Optimization parameters 10.10.2 Mining methods 10.10.3 Dilution and recovery factors 10.10.4 Stope, access and ore pass designs 10.10.5 Geotechnical/hydrogeological support for designs 10.10.6 Development schedule 10.10.7 Backfill requirements and design 10.10.8 Access 10.11 Tabulation of Proven and Probable Reserves 10.12 Location of waste dumps 10.13 Dewatering 10.14 Production plan frequency 10.14.1 Monthly for year one 10.14.2 Quarterly for second year 10.14.3 Annual thereafter 10.15 Production plan components 10.15.1 Production phasing of ore and waste 10.15.2 Pre-production stripping 10.15.3 Haul cycles 10.15.4 Equipment schedule 10.16 Blast hole design and spacing

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10.17 Mine geology and exploration 10.17.1 Grade control 10.17.2 Production drilling 10.18 Staffing 10.18.1 Operations, including geology and exploration 10.18.2 Maintenance 10.18.3 Technical and management 10.19 Risks 11. METALLURGY AND PROCESSING 11.1 Metallurgy 11.1.1 Characterization of ore types and metallurgical domains 11.1.2 Metallurgical test work 11.1.2.1 Ore and gange mineralogy 11.1.2.2 Comminution tests 11.1.2.3 Flotation tests 11.1.2.4 Leaching tests (CN, acid-soluble, etc) 11.1.2.5 Gravity tests 11.1.2.6 Metallurgical recovery 11.1.2.7 Deleterious elements (As, Bi, Tl, etc) and enrichment in concentrates 11.1.2.8 Tailings characterization 11.1.3 Interpretation of metallurgical test results 11.1.4 Geometallurgical models 11.2 Metallurgical Plant Design 11.2.1 Process design options 11.2.2 Flow Sheet and Specifications 11.2.2.1 Block Process Diagram 11.2.2.2 Process Flow Diagrams 11.2.2.3 Primary Mass Balance and Flows Diagram 11.2.2.4 Plant, Infrastructure and Tailings Site General Arrangements 11.2.2.5 Equipment Lists and Specifications 11.2.3 Primary and secondary crushing, and grinding facilities 11.2.4 Recovery facilities (flotation, leaching, gravity, etc) 11.2.5 Concentrate dewatering and storage 11.2.6 Mine water treatment 11.2.7 Waste Evaluation 11.2.7.1 Classification of Waste Types 11.2.7.2 Recycling Program 11.2.7.3 Waste Sources and Rates 11.2.7.4 Treatment of Wastes 11.2.7.5 Waste Impacts 11.2.8 Tailings pumping and pipeline 11.2.9 Tailings technology selection 11.2.10 Tailings management system location and water reclaim system 11.2.11 Reagent requirements, mixing and distribution 11.2.12 Material balances 11.2.13 Analytical laboratory 11.2.14 Staffing

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11.2.15 Process general facility arrangement drawings 11.2.16 HVAC 11.2.17 Piping 11.2.18 Electrical 11.2.19 Instrumentation 11.2.20 Equipment selection – major items 11.2.21 Equipment maintenance and replacement plan 11.2.21.1 Routine maintenance 11.2.21.2 Overhauls 11.2.21.3 Replacement 11.2.22 Risks 12. GEOTECHNICAL 12.1 Geotechnical support for pit designs 12.1.1 Geotechnical logging and core testing program 12.1.2 Physical property measurements 12.1.3 Characterization of faults, fracture systems and other structures 12.1.4 Principal geotechnical units and characterization of units 12.1.5 Pit slope designs 12.1.5.1 Inter-ramp angles by sector 12.1.5.2 Support and dewatering requirements 12.2 Geotechnical support for underground designs 12.2.1 Geotechnical logging and core testing program 12.2.2 Physical property measurements 12.2.3 Characterization of faults, fracture systems and other structures 12.2.4 Principal geotechnical units and characterization of units 12.2.5 Evaluation of backfill options and backfill properties 12.2.6 Identification of support options and requirements 12.3 Blasting requirements 12.4 Tailings management system facility design 12.5 Waste dumps slopes 12.6 Characterization of foundations for facilities 12.6.1 Roads and pipelines 12.6.2 Mill and concentrator 12.6.3 Tailings 12.6.4 Waste dumps 12.6.5 Administration and ancillary facilities 12.7 Identification of hazards for roads, pipelines and water courses 12.8 Seismicity 12.9 Risks 13. Hydrology 13.1 Climate and drainage basin characteristics 13.2 Ground water and surface water baseline data 13.3 Ground and surface water geochemistry 13.4 Dewatering requirements 13.5 Tailings and waste rock characterization (acid mine drainage, heavy metals, TDS etc.) 13.6 Water quality monitoring program design and management 13.7 Risks

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14. INFRASTRUCTURE 14.1 Power and Energy Systems 14.2 Pipelines 14.3 Port Facilities 14.4 Railroads and Shipping 14.5 Access Roads 14.6 Mine Security 14.7 Water and Wastewater Systems 14.8 Waste Disposal Facilities 14.9 Communications and Information Management Systems 14.10 Hospital and Medical Facilities 14.11 Site Utilities and Support Systems 14.11.1 Electrical Substations and Power Distribution 14.11.2 Raw Material Stockpiles and Handling 14.11.3 Fuel Storage and Distribution 14.11.4 Fresh Water Storage, Treatment and Distribution 14.11.5 Process Water Intake, Treatment and Distribution 14.11.6 Waste Management 14.11.7 Fire Protection 14.11.8 Medical 14.11.9 Communications/IT Systems 14.11.10 Management Information Systems 14.11.11 Mobile Equipment 14.12 Housing 15. PROJECT EXECUTION PLAN 15.1 Scope and Project Approach 15.2 Work Breakdown Structure (WBS) 15.3 Cost Management 15.4 Planning and Scheduling 15.5 Engineering 15.6 Procurement and Contracts 15.7 Construction 15.8 Commissioning 15.9 Ramp up and Handover 15.10 Project Closure 15.11 Occupational Health, Hygiene, Safety and Security 15.12 Environmental 15.13 Risk Management 15.14 Quality 15.15 Technology and Expertise 15.16 Communications 15.17 Financial Administration 15.18 Project Functions 15.19 Project Organization

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16. OPERATIONS PLAN 16.1 Organization 16.2 Human Resources 16.3 Conditions of Employment 16.4 Supply and Logistics 16.5 Sales and Marketing 16.6 Environment, Health and Safety 16.7 Operating Cycles 16.8 Projects Controls 17. OPERATING COSTS (OPEX) 17.1 Scope and Methodology 17.2 Codes and Areas of Accounts 17.2.1 Fixed Labor Costs 17.2.2 Fixed Overhead Costs 17.2.2.1 Labor 17.2.2.2 G&A 17.2.2.3 Management 17.2.2.4 Expatriate Costs 17.2.3 Variable Operating Costs 17.2.3.1 Raw Materials 17.2.3.2 Chemicals and Reagents 17.2.3.3 Power and Water 17.2.3.4 Fuel and Petroleum 17.2.3.5 Operating and Maintenance Consumables 17.2.3.6 Product Transportation and Insurance 17.2.4 Contingency Allowance 17.2.5 Working Capital and Sustaining Capital 17.2.6 Post Operational Acceptance Costs 17.3 Mining 17.3.1 Fuel and power 17.3.2 Labor 17.3.3 Maintenance and spares 17.3.4 Miscellaneous 17.4 Processing 17.4.1 Labor 17.4.2 Power 17.4.3 Consumables 17.4.4 Maintenance and spares 17.4.5 Miscellaneous 17.5 Concentrate shipping 17.6 Smelting and refining 17.7 Administration 17.7.1 General 17.7.2 Labor 17.7.3 Electrical power 17.7.4 Living facilities 17.7.5 Concessions 17.7.6 Maintenance 17.7.7 Insurance

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17.8 17.9 17.10 17.11 17.12

Community Environmental Reclamation Accuracy Assessment Risks

18. CAPITAL COSTS (CAPEX) 18.1 Scope and Methodology 18.2 Codes and Areas of Accounts 18.2.1 Direct Costs 18.2.1.1 Mine 18.2.1.2 Preproduction Stripping 18.2.1.3 Processing 18.2.1.4 Tailings 18.2.1.5 Infrastructure 18.2.2 Indirect Field Costs 18.2.3 Engineering 18.2.4 Project Management 18.2.5 Equipment and Construction 18.2.6 Construction Management 18.2.7 Owner’s Expenses 18.2.8 Contingency Allowance 18.2.9 Escalation Allowance 18.2.10 Currency Allowance 18.2.11 Commissioning and Start-up 18.2.12 Initial fill up of reagents and consumables 18.2.13 Working Capital and Sustaining Capital 18.2.14 Capitalized Interest 18.3 Accuracy Assessment 19. MARKETING 19.1 Product Specification 19.2 Supply and Demand Forecast 19.3 Marketing Strategy 19.4 Pricing Strategy and Basis 19.5 Customers 19.6 Marketing Contacts and Contracts 19.7 Revenue Forecasts 19.8 Marketing Resources and Organization 19.9 Product Shipping, Storage and Distribution 19.10 Competitor Analysis 20. RISK ASSESSMENT AND MANAGEMENT 20.1 Investment Risks 20.2 Business Risks 20.3 Project Risks 20.4 Economic and Financial Risks 20.5 Schedule Risks 20.6 Benchmarking

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20.7 Peer Reviews 20.8 Mitigation 21. FINANCIAL EVALUATION 21.1 Economic Evaluation Parameters and Input 21.1.1 Financial basis (current or constant dollars) 21.1.2 Exchange Rates 21.1.3 Financing Options 21.1.4 Tax Basis 21.1.5 Technical Risk Factors 21.1.6 Inflation and Escalation of Costs 21.2 Input Parameters 21.2.1 Metal Prices 21.2.2 Net Smelter Return 21.2.3 Production Schedule 21.2.4 Operating Costs 21.2.5 Capital Costs 21.2.6 Royalties 21.2.7 Taxes 21.2.8 Other Cash Items 21.3 Project Returns and Business Unit Financial Impacts 21.3.1 Internal Rate of Return (IRR) 21.3.2 Return on Equity (ROE) 21.3.3 Return on Net Assets (RONA) 21.3.4 Free Cash Flow (FCF) 21.3.5 Net Asset Value 21.3.6 Capital Efficiency and Capitalized Interest 21.3.7 Sensitivity Analysis 21.3.7.1 Commodity Prices 21.3.7.2 Metallurgical Recovery 21.3.7.3 Capital Costs 21.3.7.4 Operating Costs 21.3.7.5 Project Life 21.3.7.6 Currency Exchange Rates 21.3.7.7 Country Tax Regime 21.4 Summary of Financial Model 21.5 Financial Risks 21.6 Other Tax Considerations (holidays, potential incentives) 21.7 Project Financial Controls

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22. FUTURE WORK PLAN 22.1 Scope 22.2 Scope Execution Plan and Resources Required 22.3 Budget 22.4 Schedule 22.5 Test Work 22.6 Risk Analysis 22.7 Technology and Pilot Plant LIST OF FIGURES LIST OF TABLES LIST OF MAPS LIST OF REFERENCE REPORTS SAMPLE APPENDICES A Key Process Assumptions B Metallurgical Test Work C Process Design Criteria D Process Flowsheets E Environmental Design Basis F Mechanical Equipment List G General Arrangement Drawings H Site Plan I Electrical Drawings J Process and Instrumentation Diagrams K Capital Cost Spreadsheets L Operating Cost Spreadsheets M Engineering Calculations N Geology and Resource Estimates O Mining P Schedule Q Authority Matrix R Infrastructure S Risk Management

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APPENDIX C ENVIRONMENTAL ASPECTS HANDOUT #1 – GENERIC ANNOTATED TABLE OF CONTENTS FOR A MINE ENVIRONMENTAL IMPACT STUDY

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EXECUTIVE SUMMARY Stand alone document in English. VOLUME 1: ECOLOGICAL CONTEXT, PROJECT DESCRIPTION, AND PLANNING PREFACE Short introductory piece for the Volume, as schematic presentation of the layout of the document and to provide and remind the reader as a “you are here”. Preface will contain a simple and clear drawing of the general region the project is located in, key points of reference and a scale “footprint” of the project and key project features (e.g. roads and related infrastructure, open pits, pipelines, buildings, waste rock/coal storage placement areas, explosives magazines, transportation/port facilities, outfalls, as appropriate etc. etc.). Preface will also contain a Table of Concordance for the reader should he wish to find explicit locations in the document for specific items as laid out in the Guidelines. Note: Depending on the length of the EIS the Table of Concordance may only be presented once in the EIS. However, if the EIS is formatted into several volumes the entire Preface including the Table of Concordance should occur in each Volume. Chapter 1 INTRODUCTION Very important introductory piece as it sets the tone for the entire submission. As a minimum or a first line of defense I think we should front end the notions such as sustainable development, biodiversity and the precautionary principle as more important, context pieces that are fully considered in the approach to Project planning and general corporate EH&S policy/philosophy rather than simply something that gets tacked on to the EIS in an awkward fashion or, heaven forbid, a VEC. The Proponent The Project and its History Environmental Policy Aboriginal Peoples in the Area Recent Resource Development in the Region This could be a real cool piece, strategically. Depending on the tactics selected for the EA, there is an opportunity to show the reviewers and the regulators a high level of understanding of other projects and activities in the region and provide a practical justification for focusing or justifying a short list of VECs,

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workable VECs and allowing the environmental effects analysis to really focus on the real issues. Environmental Planning to Date “piece” needed to provide assurances that the knowledge base required to bring forward a strategic and defensible EA for the Project has been achieved. We’re smart, so let’s show it. Sustainability, Biodiversity and the Precautionary Principle “piece” needed to address contemporary “notions” in resource development projects and EA Scope of the Project and the Environmental Assessment Scope of Project and Scope of Assessment are extremely important determinations in an EIS and it isn’t the Owner that determines these in many regulatory jurisdictions. Study Strategy and EIS Organization Study Team Acknowledgements NOTE: message…focus, focus, focus…tactfully, collegially and compassionately of course. Know your strengths and weaknesses to be able to carve out a defensive position. It is the Owner’s knowledge and rational approach to conceptualizing in the EIS that allows concerns to be sorted through to identify the real issues and allow a responsive and respectful treatment of the issues in an EIS. Chapter 2 ECOLOGICAL SETTING These sections can range from relatively straight forward (clunky) descriptions of the environment to highly integrated perspectives on regional ecology. Strategy depends on the perceived expectations of the review. Both can work and the costs can range considerably. Check Chapter 2 in the Voisey’s Bay Mine/Mill EIS and Chapter 2 in Doris North Project EIS, both worked because they met the expectations, however the effort and costs varied considerably. Information sources should be acknowledged and the section should be thorough enough to allow the reader to track the arguments and analysis presented later in the document with respect to: key project-environment interactions, issues scoping, rationalization and selection of VECs, the layout of a VEC chapter and a reasonable context and appreciation for the adequacy of mitigation measures, significance criteria for residual adverse environmental effects, including cumulative environmental effects. This chapter also provides a great opportunity to front-end the integration of Traditional Knowledge into the EIS.

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Chapter 3

PROJECT DESCRIPTION The project description is a key chapter for the authors of the VECs chapter and the reader alike. For the reader, this is a layout of all the project features, processes and activities to fully understand the scope of the project on which he is being asked to eventually draw conclusions with respect to the potential adverse environmental effects and whether those effects are acceptable or not. Subtle shift here, whereas the technical requirements for the EA are to determine whether or not adverse environmental effects are significant or not significant, the reader and more importantly the local residents and land users must be able to determine acceptability of potential environmental effects. Project description material must be lucid, well presented and organized. Alternatives to the project and alternatives within the project must be provided. The Planning for Mine Development section or something like it is useful to remind the reader of the process and purpose of environmental assessment in a contemporary framework for project planning. The project description piece is the set up piece for the methodological approach to conducting the environmental assessment. Rigour is needed in terms of setting out the planned activities and accidents, malfunctions and unplanned events that may occur for each of the project phases being assessed: construction, operations, closure and post-closure. There is a subtle but important purpose in the layout and set up of the project description so that the reader implicitly connects or can “match cast” activities described for each of the project phases to later topics in the document such as evaluating project-environment interactions, the rationalization and justification of VECs, the focus and thoroughness of the environmental effects analysis presented in each of the VECs, and the contribution the project has, in combination with other projects and activities in terms of potential adverse environmental effects. “What are we assessing?”, is the question the VEC authors always ask and a clear project description provides for EIS production, consistency and completeness through out the mock-up and final production stages. Rationale and Purpose Need for the Project Alternatives To the Project Within the Project Existing Site Infrastructure and Activities Mineral Resources Planning for Mine Development Approach to Project Planning

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Access Power Tailings placement Airstrip Effects of the Environment on the Project The treatment of the effects of the environment on the Project should be placed up front in the project description. This is where we describe the effects of the environment on the Project and although this isn’t necessarily a large section it is used to address construction and operations in cold and/or extreme climate and weather conditions, human health and safety in remote areas, socio-economic conditions, politics etc. Construction Simply generic material for illustration. Site Preparation Accommodations Personnel Water and Sewage Solid Waste Disposal Access Roads/Trails Fuel Requirements Construction Earth Works Concrete Production Storm Water Management Rock Disposal Areas Construction of Dams and Embankments Roads, Pipelines and Distribution Lines Roads Pipelines and Power Lines Buildings and Other Structures Mill Location (?) Quarries and Borrow Areas Explosives Storage and Handling Marshalling and/or Staging Areas Transportation of Workers Transportation, Handling and Storage of Hazardous Materials Labour Force Procurement – Goods and Services • Potential Project – Environment Interactions: Construction “Punctuation piece” to simply re-focus the reader: matrix format…see Handout #2 for sample matrices. Operation Mine Plan Explosives Storage and Handling Mill Complex Mill Process

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Reagents Mine Rock Management Waste Rock Characteristics Acid Rock Drainage Potential Non-mineralized Rock Disposal Water Treatment and Discharge from Tailings Management Area Water Management Water Requirements Wastewater/Stormwater Water Balance and Diversions Transportation Traffic Workers Ancillary Facilities Power Supply and Distribution Accommodations Complex Maintenance and Warehouses Fuels and Hazardous Materials Storage Explosive Manufacturing Waste Management Sewage Solid Waste Disposal of Other Materials Labour Force Procurement – Goods and Services • Potential Project – Environment Interactions: Operation “Punctuation piece” to simply re-focus the reader: matrix format…see Handout #2 for sample matrices. Project Closure and Post-Closure Planning for Closure Surface Facilities and Infrastructure Rock Placement Areas Quarries and Borrow Areas Open Pits Sedimentation Ponds and Diversion Channels Buildings and Warehouses Roads, Pipelines and Power Distribution Lines Explosives Storage Dams and Dykes Temporary Shutdown Labour Force Procurement – Goods and Services • Potential Project – Environment Interactions: Closure

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“Punctuation piece” to simply re-focus the reader: matrix format…see Handout #2 for sample matrices. • Potential Project – Environment Interactions: Post-Closure “Punctuation piece” to simply re-focus the reader: matrix format…see Handout #2 for sample matrices. Human Resources Human Resources Policy Hiring Practices and Procurement Harassment Medical Program Pre-Orientation Skills and Entry Requirements Alcohol and Drugs Firearms, Hunting and Fishing Smoking Training and Education Cross-Cultural and Gender Sensitivity Training Wildlife Awareness Cold or Extreme Climate Awareness Labour Relations Concerns and Procedures (disciplinary etc.) Employee Benefits Health Care Work Clothing and Safety Equipment Employee Assistance Program Vacation Leave/Special Needs Leave (hunting) Salary Occupational Health and Safety Accidental Events Spills in the Mill Complex Dyke/Berm Failure Fuel/Oil Spill at Storage Facilities Vehicle Accident Oil in Open Water Oil on Snow/Ice Oil Under Ice Fire Hazardous Materials Spills Explosions Fall of Ground Other Projects and Activities Need to decide what other projects and activities are factored into cumulative effects analysis. A key ‘piece’ in the overall scope of the assessment.

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Chapter 4

ENVIRONMENT MANAGEMENT SYSTEM This chapter provides the reader with an understanding of the Owner’s awareness of current concepts and notions in mine development and regional issues. The awareness of contemporary expectations for mine development is shown through not only a good understanding of the project and the environment in which the project will be developed but showing a high level of integration and feedback from environment, health and safety concerns into an environmental management framework. Owner must continue to show it has a high level of knowledge and understanding of environmental management. This is one of the few areas where information and conclusions from the environmental effects analysis in each VEC (e.g. key mitigation and monitoring/follow-up etc.) are actually brought back into the approach to life-of-project environmental management planning that meets the expectations of the Owner, guidelines, decision-makers, Aboriginal peoples and other stakeholders. THIS IS WHY YOU DO AN EIS, RIGHT? The EA must at a minimum provide a meaningful framework for an effective environment, health and safety management system and Owner should provide some substance in certain areas like Environmental Protection Planning (EPPs), Occupational Health and Safety, Emergency Response and Contingency Planning, Closure Planning at the time of EA submission and have a schedule for the development of Plans. EPPs are a good opportunity to show how Owner can put knowledge into actions and lay out the environmental performance expectations of its leadership, employees, contractor and sub-contractors. A detailed layout of the regulatory framework (permits, approvals and authorizations) shows the Owner’s understanding of its knowledge of the behavioural and operating rules. Several plans have been highlighted to indicate where substantial completion is anticipated at the submission stage of the EA. Other plans will be developed as appropriate prior and according to expectations and the review process schedule. Environmental Management System • Purpose • Environment, Health and Safety • Implementation • Corporate commitment and EH&S Policy • Corporate Commitment • Environment, Health and Safety Policy • Roles and Responsibilities 8

• •

Environmental Assessment and Design Environmental Protection Plans • Purpose • Content • Implementation Most illustrative at the EA review stage and Owner should front-end such procedures, for example, prepare one for ongoing exploration activities. Again the scope of Project issue will have implications here. If we can show we know how to behave and operate during exploration then we have a stronger argument for the new project and activities instead of “trust us”. Emergency Response and Contingency Plans • Purpose • Content • Implementation Occupational Health and Safety Plan • Purpose • Content • Implementation Human Resources Plan • Purpose • Content • Implementation Reclamation Plan • Purpose • Content • Implementation Education and Orientation Plan • Purpose • Content • Implementation Aboriginal Involvement Plan • Purpose • Content • Implementation Community Relations Plan • Purpose • Content • Implementation Monitoring and Follow-up Plan • Purpose • Content • Implementation

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Auditing and Continuous Improvement Plan • Purpose • Content • Implementation • Specific Environmental Management Needs Brief text and explicit summary tables for EACH VEC showing how all the environment, health and safety needs of the Project, based on the detailed environmental effects analysis, are going to be captured by the various Plans that support the Environmental Management System. See Handout #X. Impact and Benefits Agreement (s) Context piece needed. Applicable Laws, Regulations, Permits and Approvals Needs to be comprehensive to show we know the rules of the road. NOTE: There is a critical need for some clear and lucid chapters on issues scoping, selection of VECs and the EA methodology or treatment of a VEC as transparent, set-up chapters in a defensible EA. Chapter 5 SCOPING OF ISSUES Key chapter that demonstrates to the decision makers that an adequate issues scoping and consultation process has occurred and that issues and concerns identified during the process have been tracked and accounted for in the EA and forward planning for the project. This is a key step in the overall defensibility of the EA. A detailed summary of all the issues and concerns identified to date, sources of issues and concerns and where the issues and concerns have been addressed should be provided as an appendix to this chapter. Introduction Aboriginal Consultation and Participation Public Communication and Consultation Environmental Baseline Studies and Monitoring Workshops and Meetings Other Similar Projects and Activities in the Region Traditional Knowledge Gathering Issues Scoping Summary Appendix: Perhaps…A detailed compilation of all the issues and concerns identified throughout the issues scoping and consultation process ... this could be an important piece if done properly. Issues tracking and management is very important in the successful defence of an EA.

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Chapter 7

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) This chapter needs to be lucid and bring the reader to conclusions on how the environmental assessment is going to be focused in the VEC chapters. The selection of VECs on which to focus the environmental effects analysis is a very key step because it both focuses and limits the range of topics addressed in the effects analysis. Owner needs to provide a rational justification of VECs at this point and get the reader in agreement, logically. This is a critical step in a defensible approach, Owner needs to be firm here but not dismissive. VEC selection is strategic and needs to be well thought out. Need to fully consider the implications of broad “groupings” type VECs versus highly specific VECs that can be argued to be representative of key environmental features and/or processes, “pathway” type VECs (e.g. air, water, cash flow), transition VECs (careful, check Doris North Project VEC called Environmental health) and how they can be attacked in the environmental effects analysis. Introduction The Need to Focus an Environmental Assessment Project-Environment Interactions (reminder) General Strategy Identification of VECs Pathway VECs Can be a little problematic because they are typically not population based but rather air quality or water quality or things like ice. Identify rationale/justification for each VEC, show key issues/concerns, indicate linkages to other VECs and integration or relationships to project design and EMS…bring the reader along. Biophysical VECs More standard or typical VECs (fish and fish habitat, or Arctic char, Giraffe etc.). Identify rationale/justification for each VEC, indicate key issues/concerns, show linkages to other VECs and integration or relationships to project design and EMS…bring the reader along. Transition VECs Be careful on bridging effects to the biophysical environment to dependant socio-economic components of the environment, particularly if you shift into risk based arguments. Risk and Value based approaches are fundamentally different. Identify rationale/justification for each VEC, indicate key issues/concerns, show linkages to other VECs and integration or relationships to project design and EMS…bring the reader along. Socio-economic VECs

11

Identify rationale/justification for each VEC, indicate key issues/concerns, show linkages to other VECs and integration or relationships to project design and EMS…bring the reader along. Candidate VECs in bold (just pulled out of the sky for now) Atmospheric Environment (air quality and climate issues) Water Quality (I suggest truncating the water issue to water quality and leave water quantity (increased flows, decreased flows and alterations to a description in the Project Description and deal with the environmental effects in fisheries or fisheries related VECs. Water as a VEC including both quality and quantity makes for a very difficult VEC, particularly when it comes to determining significance criteria – but it can be done). Freshwater Fish and Fish Habitat, or better yet some fish species. I tend to prefer more specific VECs like a fish species or population than general VEC like Fish as there are different ecological aspects to manage when it comes to significance criteria. VECs need to be carefully chosen. Marine Fish and Fish Habitat Waterfowl Songbirds Raptors Heritage Resources NOTE: Be careful about vague VECs and certainly too many VECs. Each VEC has seven “impact” predictions that have to be defended. If you have 20 VECs then you end up with 140 impact predictions. Environmental Health, suggest nesting all the mechanics associated with risk based methods (fish, wildlife and human) in one VEC that may indeed result in several mini-VECs within one treatment of health issues. The reason I would tend to go this way is that the presentation and integration of risk methods in largely a values based approach to environmental assessment can be problematic from a public perception viewpoint. Thus by nesting it all together in one section of the document Owner take any flack once rather than having to battle the concerns (either valid or perceived) in every VEC. Carefully carve out the battlefield and support it in our methodological approach. Land Use and Culture, to address the environmental effects of the project in terms of adverse environmental effects on the biophysical environment on Aboriginal Land Use and Culture. Family and Community Community Services and Infrastructure Employment and Business Local, Regional and National Economy

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Chapter 8

ENVIRONMENTAL ASSESSMENT METHODOLOGY This chapter lays out the methodological approach to conducting the environmental assessment of the project phases, the project overall and the project in combination with other projects and activities on the VECs selected. Key aspects are the significance criteria or thresholds for determining the significance of residual adverse environmental effects, the careful use of language and appropriate guidance materials. This chapter establishes the “ formwork” for a consistent and highly defensible EIS. This chapter has to be well thought out, tactful and lucid. This is important to allow efficiencies and consistency in the presentation of the environmental effects and to allow for document production and scheduling. Traditional Knowledge Experience in the North Relevant Environmental Assessments to Date Environmental Baseline Studies Strategic Use of Models Approach to Evaluating Cumulative Environmental Effects I am getting comfortable addressing the potential environmental effects of the project in combination with other project and activities either as an integrated approach (thereby reducing the number of “impact” ratings at the end of the day) or having a separate or additional “impact” rating of the planned Project overall in combination with other projects and activities as described in the Project Description (scope of the assessment issue). I believe the approach to considering the issue of cumulative environmental effects to be the most defensible when approached at various levels: An adequate environmental baseline actually describes the existing taking into consideration the adverse environmental effects of past and present project and activities which addresses a substantial portion of the cumulative effects considerations (past, present and future projects and activities); Rating the residual adverse environmental effects of each Project phase is actually making a cumulative environmental effects statement (i.e., construction may result in a range of environmental effects on White-tailed Deer such as habitat loss, habitat avoidance, increased energy expenditures etc.) and by rating the effect of construction on White-tailed Deer is actually making a cumulative effects rating within the Project phase; We should make a residual adverse environmental effects rating for the planned Project overall after rating the effects of each Project phase (construction, operation, closure, post-closure) thus making another level of cumulative effects assessment;

13

Then if we make a separate statement of residual adverse environmental effects of the planned Project in combination with other projects and activities we are addressing the notion of cumulative environmental effects at 4 different levels. Environmental Effects Methods We need to be firm here in our methods as this is where many EAs get rather garbled and result in very awkward and difficult to follow environmental effects analyses that really need to be lucid and simple. Typically there is a range of factors that need to be considered in the environmental effects analysis such as: magnitude, geographic extent, reversibility, ecological/socio context, timing/frequency/duration. There are other factors that need to be considered for residual adverse environmental effects (see next section) such as: likelihood/ probability of occurrence, effect on ecosystem function and capacity of renewable resources to meet future needs. Too many consultants naively think that some combination of minor this, low that, short-term this etc. forms the left hand side of an equation where the right hand side says significant or not significant. This approach results in an extremely frustrating and difficult to review EA. The first “bunch” (for consideration in the environmental effects analysis) simply comprise the factors to be considered when conducting or describing the potential environmental effects. They may or may not have anything to do with whether or not a residual adverse environmental effect is significant. Historically only those residual adverse environmental effects (see next section) that are considered significant are further described in terms of likelihood, effect on ecosystem function and the capacity of renewable resources to meet future needs. However, this subtlety is gradually getting bastardized and recently there have been requirements that these descriptors be provided for all residual adverse environmental effects. Residual Effects Methods - Determination of Significance Clear and concise significance criteria (or “thresholds”) will be crafted for the determination of significance for each VEC. This is a very important step in the presentation of residual adverse environmental effects and must be reflective of our knowledge base, make sense and have the reader understand it and to the extent possible...”seems to make sense to me”. Simple tables will consistently occur in this sub-section of each VEC summarizing the statement of “impacts” or the residual adverse environmental effects for each of: construction; operation; closure; post-closure; accidents, malfunctions and unplanned events; the planned Project overall. There will be a brief summary

14

text describing the residual adverse environmental effects predicted and a clear statement on the effect being significant or not significant. A separate text piece will address the issue of the effects of the Project in combination with other projects and activities using the same significance criteria established for the VEC.

VOLUME 2 Each VEC Chapter TREATMENT OF A VEC VECs should be presented consistently and treated in a compassionate way to improve the readability of the document and avoid sending the reader on a wild goose chase throughout the document in an attempt to gather all the relevant information he needs to gauge whether the treatment of the VEC is sufficient and the conclusions reached acceptable or justifiable. VECs should be stand-alone chapters (to the extent practical) where the reader can understand the issues, analysis and conclusions with all the necessary information pertaining to the VEC contained in the chapter. This will make the document more enjoyable to read and thus for a better turnaround time on the review. Try to keep the VECs lean and mean and focused…remember if there are 15 VECs and each are 30 pages long…….do the math. Each VEC will appear the same and have the following sub-sections: Chapter X VEC NAME (e.g. Caribou) Existing Environment • Environmental assessment boundaries (spatial, temporal, administrative and technical, as appropriate), define and show environmental assessment area (not the study area where you did baseline studies) specific for each VEC. Need good figures here • Methods used to describe the existing conditions (baseline data, literature review, Traditional knowledge etc.) • Existing conditions, give reader all the information relevant for the VEC so the reader doesn’t need to hunt and search back through the document, VECs intended to be a stand-alone treatment of the subject. These sections should be strong and confident, short and simple…don’t regurgitate information provided in supporting documents if it is not needed. • Likely future conditions Conditions of the VEC in the absence of the Project

15

Environmental Effects Analysis • Lucid and well supported/referenced section addressing the factors to be considered in an environmental assessment (e.g. magnitude, duration, frequency, reversibility, geographic extent, socioecological context etc.), use of a “score sheet” approach to be relegated to a supporting appendix. • Thorough, including treatment of all phases of the Project considered (C, O, C, PC, and accidental events) and the Project overall. • Cumulative environmental effects of the Project in combination with other projects and activities will be addressed separately but using the same VEC, environmental assessment areas for the VEC and the significance criteria for the VEC. Highlight the environmental design and mitigation aspects. Keep this succinct and remember monitoring is not mitigation. Residual Environmental Effects • Define significance criteria (or whatever) for the VEC, …real significance criteria not mumbo-jumbo or obfuscated criteria based on a formula. This must be done for each VEC and will be different for each VEC. • Predict residual adverse environmental effects for each phase of the Project, accidents etc. and the Project overall. • Predict residual adverse environmental effects of the Project in combination with other projects and activities. We will have separate section on Cumulative Environmental Effects. • Tables/matrixes and brief supporting text sections. Summary • Short section identifying the need for any monitoring or follow-up requirements. References Appendix: Each VEC chapter should contain an Appendix showing a score sheet or “calculation” matrix so the reader can quickly check that all the factors that should be considered in the environmental effects analysis (e.g. magnitude, duration, timing, frequency, geographic extent, and socio- ecological context) have in fact been fully considered. This adds substantially to the overall defensibility of the environmental assessment and helps the EIS manager make sure the author of the particular VEC has completed all the necessary steps and considerations. It also allows the main text to focus on the real or key potential environmental effects.

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Feasibility Study Guidelines 2006

APPENDIX D ENVIRONMENTAL ASPECTS HANDOUT #2 – EXAMPLES, PROJECT ENVIRONMENTAL INTERACTIVE MATRICES TO SUPPORT PROJECT DESCRIPTION

© AMEC May 2006 Page 1

Air Quality

Terrestrial Habitat

Wildlife Resources

Employment

SEG 2006 Conference DFS Example: Potential Project - Environment Interactions: Construction Phase

Community Services ENVIRONMENTAL COMPONENTS PROJECT ACTIVITY . . .

Marine Water Quality

Land Use and Culture

Biophysical Features

Community Infrastructure

Archaeological Resources

Socio-Economic Features

Marine Fish and Fish Habitat

Freshwater Fish & Fish Habitat

Freshwater Quality and Quality

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

• •

Vessel Movements Barge Landings Grubbing (erosion, noise, dust) Fuel and Hazardous Material Handling, Storage and Transfers Equipment Operation and Movement Concrete Protection/Wash Water Disposal Water Use (potable, construction) Human Presence Solid Waste Disposal Sewage Disposal Excavations and Grading Drilling, Blasting and Crushing (noise, dust) Access Roads/Stream Crossings/Airstrip Borrow Areas/Tailing Dams Aircraft Movements Power Supply & Distribution Marine/Jetty Construction Planned Activities

Fuel and Hazardous Material Spills Vehicle - Wildlife Collisions Discovery of Archaeological Reserves Nuisance Wildlife

Potential Accidental Events

Page 1 of 4

SEG 2006 Conference DFS Example: Potential Project - Environment Interactions: Operation Phase
Planned Activities Water Management (mine, tailings, storm water)

Page 2 of 4

Potential Accidental Events Fuel and Hazardous Material Spills

Vehicle and Equipment Operation

PROJECT ACTIVITY .

Fuel and Hazardous Material Handling, Transfer and Storage

Water Usage (potable, mill)

Progressive Reclamation

Vehicle Wildlife Collisions

Solid Waste Disposal

Power Generation

ENVIRONMENTAL COMPONENTS

. .

Biophysical Features Air Quality Freshwater Quality and Quality Freshwater Fish & Fish Habitat Marine Water Quality Marine Fish and Fish Habitat Terrestrial Habitat Wildlife Resources Archaeological Resources Socio-Economic Features Employment Land Use and Culture Community Infrastructure Community Services

• • • •

• • • • • • • • • • • • •

• • • • • • • • • • •

• • • •

• • • •

Nuisance Wildlife

Mill Operations

Tailings Dam Failure

Human Presence

Camp Operations

Sewage Disposal

Vessel Operations

Aircraft Movements

SEG 2006 Conference DFS Example: Potential Project - Environment Interactions: Closure Phase
Planned Activities Fuel and Other Hazardous Materials Handling, Transfer and

Page 3 of 4

Potential Accidental Events Fuel and Hazardous Material Spills

Vehicle/Equipment Operation

PROJECT ACTIVITY

.

Solid Waste Disposal

Rock Moving and Grading

Vehicle - Wildlife Collisions

Human Presence

Building Removal

Aircraft Movements

Vessel Movements

Sewage Disposal

Camp Operation

Culvert Removal

ENVIRONMENTAL COMPONENTS

. .

Biophysical Features Air Quality Freshwater Quality and Quality Freshwater Fish & Fish Habitat Marine Water Quality Marine Fish and Fish Habitat Terrestrial Habitat Wildlife Resources Archaeological Resources Socio-Economic Features Employment Land Use and Culture Community Infrastructure Community Services

• • • • • •

• • •

• • • • • • • • • • • • • • • • • • • •

Jetty Removal

• • • •

• •

• • • •

Nuisance Wildlife

Tailings Dam Failure

SEG 2006 Conference DFS Example: Potential Project - Environment Interactions: Post-Closure
Planned Activities

Page 4 of 4

Potential Accidental Events

PROJECT ACTIVITY

.

Aircraft Movement

ENVIRONMENTAL COMPONENTS

. .

Biophysical Features Air Quality Freshwater Quality and Quality Freshwater Fish & Fish Habitat Marine Water Quality Marine Fish and Fish Habitat Terrestrial Habitat Wildlife Resources Archaeological Resources Socio-Economic Features Employment Land Use and Culture Community Infrastructure Community Services

Human Presence

Vessel Movement

• •

Tailings Dam Failure

• •

Feasibility Study Guidelines 2006

APPENDIX E ENVIRONMENTAL ASPECTS HANDOUT #3 - EXAMPLES: KEY PROJECT DESCRIPTION INFORMATION FOR VEC AUTHORS, DE-LINKING THE PROJECT DESCRIPTION CHAPTER FROM VEC AUTHORS TO ALLOW FOR EIS PRODUCTION/PROGRESS

© AMEC May 2006 Page 1

Feasibility Study Guidelines 2006

APPENDIX F ENVIRONMENTAL ASPECTS HANDOUT #4 - EXAMPLE: ENVIRONMENT, HEALTH AND SAFETY MANAGEMENT SYSTEM (PARTIAL) VOISEY’S BAY MINE/MILL EIS

© AMEC May 2006 Page 1

Feasibility Study Guidelines 2006

APPENDIX G ENVIRONMENTAL ASPECTS HANDOUT #5 - EXAMPLE: ENVIRONMENT, HEALTH AND SAFETY MANAGEMENT SYSTEM (PARTIAL) SPECIFIC EH&S NEEDS FOR EACH VALUED ENVIRONMENTAL COMPONENT – WHY YOU DO AN EIS

© AMEC May 2006 Page 1

Feasibility Study Guidelines 2006

APPENDIX H ENVIRONMENTAL ASPECTS HANDOUT #6 - EXAMPLE: SELECTION OF VALUED ENVIRONMENTAL COMPONENTS

© AMEC May 2006 Page 1

8 SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) Tikkuaqtaunii Pinagiyauyut Avatiliginiqmun Ilagiyai
TABLE OF CONTENTS 8.0 8.1 8.2 8.3 Selection of valued environmental components (VECs) ................................................. 8-1 Summary of Project-Environment Interactions ........................................................... 8-2 Identification of Valued Environmental Components ................................................. 8-7 References.................................................................................................................. 8-18 LIST OF FIGURES Figure 8.1 Summary of Project – Environment Interactions ....................................................... 8-3 Figure 8.2 Selection of a Valued Environmental Component ..................................................... 8-7 Figure 8.3 Potential Project – VEC Interactions.......................................................................... 8-9

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8.0 SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECS) The selection of biophysical and socio-economic Valued Environmental Components (VECs) from both western scientific data and Inuit Qaujimajatuqangit is an important step in the completion of this environmental assessment. It is a process that reflects a balanced and knowledgeable synthesis of a wide range of information regarding the Project, the environmental setting where the Project is located and an understanding of concerns and issues associated with the responsible development of the Project (Chapter 4). The identification of VECs is important because the detailed environmental effects analysis, as laid out in the environmental assessment methodology (Chapter 9), is conducted only on those VECs. It has generally been recognized since the early 1980s (Beanlands and Duinker, 1983) that there is a need to somehow focus the environmental effects analysis and the statement of significance for residual adverse environmental effects on those components of the environment that have the most relevance to the decision-making process. This approach has been reinforced since the mid-1990s in guidance information from the Canadian Environmental Assessment Agency (CEAA, 1996). It simply isn’t practical or achievable to conduct a detailed environmental effects analysis on every aspect of an ecosystem. However, the exclusion of some environmental components from being elevated to the status of VECs isn’t intended to exclude their consideration in the environmental effects analysis. For example, caribou may simply be more important from a societal perspective than small mammals. However, Project changes to habitat and thus small mammals for example would be considered in the analysis of a representative predator VEC such as wolverine or raptors, as appropriate. MHBL has endeavoured to conduct as complete an environmental assessment as possible reflecting a holistic approach to ecosystem function. In addition to carefully selecting VECs, MHBL has also employed a wide range of environmental assessment tools in its methodology to ensure that important changes to the environment, although not necessarily considered VECs, are fully integrated into the analysis. An example includes the use of plant communities and wildlife habitat features analysis, or ecological land classification, to help support the environmental effects analysis for wildlife related VECs (e.g., caribou, grizzly bear) and any wildlife related issues under the Nunavut Land Claims Agreement. Another example is the use of Project related changes to water flow patterns and the water balance analysis to support the environmental effects analysis of increased flow areas or decreased flow areas for fisheries related VECs and negotiated mitigation measures, such as fisheries compensation and the IIBA. VECs are generally defined as environmental attributes or components of the environment that are valued by society as identified through an issues scoping process. MHBL used a wide variety of information in the determination of a functional range of VECs to reflect both
Doris North Project 8-1 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) the scope and scale of the Project, the potential Project-environment interactions, environmental baseline studies and consultation with Aboriginal groups, land-owners, communities, regulators and resource managers, and professional judgement by members of MHBL’s study team. The selection of a VEC requires placing a higher value on one particular environmental component over another. In general, this is a concept foreign to many ecosystem biologists and Inuit peoples alike. Indeed, some have argued that this reductionist approach devalues much of what is intrinsic to Inuit Qaujimajatuqangit, namely, that the spiritual, biophysical and human worlds are interconnected. Thus, although the concept of VECs was introduced at length during the Inuit Qaujimajatuqangit Workshop, participants felt that the approach was inappropriate and were challenged in selecting either VECs. To respect these sentiments, MHBL documented key environmental concerns and then systematically reviewed the workshop minutes to determine which components of the ecosystem were mentioned as being “important” or “critical”, even if they were not framed within the term “valued ecosystem components.”

8.1 Summary of Project-Environment Interactions
At this point in the VEC selection and justification chapter, it is important to remind the reader of the anticipated potential interactions between the proposed Project and various components of the environment. A similar analysis was provided in the Project Description (Chapter 4), in greater detail, as it was presented for each of the Project phases being assessed (i.e., construction, operations, closure and post-closure) as well as for accidents, malfunctions and unplanned events. Figure 8.1 provides an analysis of key anticipated Project-environment interactions.

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Figure 8.1 Summary of Project – Environment Interactions
PROJECT ACTIVITIES
Physical Disturbance Vessel Traffic Water Management Tailing/Waste Rock Management Employment & Purchase of Goods Fuel/Oil, Hazardous Material Air Emissions/ Sewage & Noise Solid Waste Traffic

ENVIRONMENTAL COMPONENTS

Atmospheric Environment Water Quality Wildlife Fish & Fish Habitat Near Shore Marine Processes Historic Resources Communities Country Foods Human/Social

Legend:

Interaction Key Interaction

MHBL has conducted an evaluation of its Project in the environmental setting and developed an informed perspective on the potential Project-environment interactions. Based on systematic and scientific technical analysis as well as input from Inuit Qaujimajatuqangit and community meetings, MHBL has also developed an understanding of the concerns and issues (chapter 7) associated with its Project and mineral resources development in general in the West Kitikmeot Region of Nunavut. This environmental assessment, and the methodology used to complete it, reflects contemporary practice in Canada for environmental assessment and a responsiveness to the Guidelines, as much as possible. VECs are an important feature in conducting an environmental assessment and the concept of VECs needs some context for the reader. In this way, MHBL can be as transparent as possible in its approach to VEC selection and in setting up the detailed environmental effects analysis. Northern environments are complex and include a wide range of species/populations that contribute to ecosystem function as well as support socio-economic and cultural values and needs. Thus, it is unavoidable to exclude some aspects of the environment from being elevated to the level of a VEC that provides the focus of the detailed environmental effects analysis in any environmental assessment. By doing so, MHBL is not intending to be
Doris North Project 8-3 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) dismissive or disrespectful to concerns associated with some elements of the environment, but acknowledges that in a value-based approach to conducting an assessment, it is inevitable that not everything can be assessed to the same level of detail. MHBL is confident that the selection of VECs is sufficiently comprehensive that the environmental effects presented in the VEC chapters can be appropriate for other species with similarities in their life history or roles in ecosystem function. The selection of VECs, followed up by a balanced analysis of potential adverse environmental effects, is intended to bring forward to decision-makers what MHBL considers the key potential adverse environmental effects, appropriate design and mitigation measures to reduce adverse effects, as well as what potential benefits from the Project will occur. Based on both scientific analysis and integration of Inuit Qaujimajatuqangit and other local concerns, MHBL believes the freshwater ecosystem is the key aspect of the biophysical environment where potential adverse environmental effects will occur. This is largely as a result of tailings placement in Tail Lake and issues immediately downstream of the tailings management area associated with water management, water quality and freshwater aquatic resources such as fish species. Further, water as the conduit for fish movement and water quality as the key determinant in fish habitat, were both identified as key concerns based on Inuit Qaujimajatuqangit. MHBL has added emphasis in its analysis of potential environmental effects on the freshwater ecosystem by elevating several fish species, including a principally forage fish species (i.e., ninespine stickleback) to the level of a VEC. Another aspect of the biophysical environment is associated with direct and nearby indirect adverse environmental effects connected with the Project “footprint”. In the terrestrial environment, MHBL has elevated issues associated with heritage resources as a VEC due to the cultural importance of such resources, the long history of traditional use and the need for continued and long-term responsible stewardship. In the terrestrial environment, MHBL has implemented the use of current knowledge and wildlife management practices around habitat and habitat suitability for a variety of representative wildlife species. While it is not practical to conduct a detailed environmental effects analysis on all wildlife species, MHBL has selected caribou as the key species to be the representative of species such as caribou and musk ox. This selection, in part, is due to the importance of caribou to the Inuit of the Kitikmeot region for subsistence, cultural and ceremonial purposes. MHBL’s baseline data and consultation process as resulted in the decision that caribou is the most representative wildlife species of this type on which to focus the effects analysis. Similarly, MHBL has identified two key wide ranging predators/scavengers, wolverine and grizzly bear, as representative species on which to focus the effects analysis. The principal issues around developments like the Project relate to direct habitat loss or alteration and potential changes in the levels of metals in the environment as these changes can persist for a long time in northern regions. Other wildlife related effects are more subtle as they relate to habitat
Doris North Project 8-4 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) avoidance due to activities and human presence over a shorter period of time. The use of habitat baseline data and knowledge about habitat needs of key wildlife species, particularly with respect to Inuit Qaujimajatuqangit, allow better information about the Project to be brought forward to decision-makers. MHBL understands that decision-makers have wider regional interests beyond the Project. This Technical Report helps them fully understand the implications of the scope and scale of this Project in association with the pace and scale of other projects and activities in the region. Also, in the terrestrial ecosystem, MHBL has included as VECs, several groups of related bird species that occur in the Project area, largely on a seasonal basis. The selection of these species as VECs reflects concerns expressed by the public as well as resource managers and regulators. The marine environment is another aspect of the biophysical environment where potential Project related effects can occur. MHBL has considered the potential interactions based on the scope and scale of the Project and focused its analysis on issues around the nearshore marine environment in Roberts Bay and the construction and presence of the jetty. MHBL has moved the bulk storage of fuels, for example, from the jetty area to the mill area in the Project design to reduce the potential for spills, should they occur, from reaching the marine environment. MHBL has also developed environmental protection and contingency plans that address vessel operations and fuel transfers that will reduce potential adverse environmental effects, some of which were expressed by community members and others that were identified through the technical studies/reports. MHBL will require no more than two shipping transits into Roberts Bay on an annual basis and thus the shipping activities are similar to those that occur annually during the open water shipping and community supply season along the Nunavut coastlines. There will not be any shipping through ice. Thus the VECs selected are those associated with the jetty and include aspects of marine transport mechanisms such as current patterns as well as local marine biological processes such as fish passage around the jetty. Although the intent of this Technical Report is to provide a values-based assessment, there is nevertheless the need to employ other environment evaluation tools to help address and be as responsive as possible to particular concerns. One such area is the use of concepts around potential increased or changed levels of metals or other contaminants in the environment and the possible concerns associated with human consumption of country foods. Elders and community members identified general pollution of the environment as a key concern, and, thus, MHBL has developed a VEC called environmental health to explore concerns around the potential implications of elevated levels of contaminants in the environment. The intent with this VEC is to offer some information on aspects of environmental health issues to decision-makers and community members alike, and to demonstrate that MHBL has been responsive to community concerns about contaminants.

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SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) Environmental health is considered a transition VEC between the biophysical and the socioeconomic environments. Environmental health is largely a risk-based evaluation of potential contaminant pathways that may relate to human health issues from the use of country foods. The issue around contaminants in country foods is a widely held concern yet it is an extremely complex issue to evaluate due to some of the principles around exposure, uptake and accumulation. It necessarily has to be addressed at the appropriate level for the purposes of Project planning due to the nature of some of the species (e.g., fish and large game animals are long-lived, wide ranging and mobile thus perhaps only spending a limited time in the Project area over the life of the Project), available information and experience. Further, Inuit Qaujimajatuqangit documented across Nunavut has shown that environmental health has changed, particularly in the last fifty years and with respect to climate change effects. This state of flux makes it difficult to isolate and characterize current environmental health. Despite these complexities, MHBL has endeavoured to address such issues at a level that is appropriate for an environmental assessment and in consultation with Health Canada. The use of risk assessment methods in this environmental assessment is simply to help conceptualize concerns associated with issues around certain contaminants in the environment and the human consumption of country foods. MHBL has developed two key socio-economic environment based VECs to bring forward a meaningful analysis of the potential adverse environmental effects as well as a description of potential benefits on northern communities and the residents that may result from the Project. The information should provide the basis for communications and community planning with respect to the Project, both to avoid or reduce potential adverse effects and to capture and enhance potential benefits, where possible.

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8.2 Identification of Valued Environmental Components
The VECs identification process and the VECs selected for this Technical Report are shown in Figure 8.2. Figure 8.2 Selection of a Valued Environmental Component
Use of Predictive Models: Noise/Emissions Habitat (ELC) Water Quality Hydrology

Consultation with Regulators, Resource Managers and Other Stakeholders

Consultation with KIA, Inuit Communities and the Public

Inuit Qaujimajatuqangit

NIRB Direction and EIS Guidelines

Baseline Studies

Literature Review and Technical Experts

FOCUSED LIST OF VALUED ENVIRONMENTAL COMPONENTS (VECs)

Project Description and Alternatives Analysis

Project-Environmental Interactions

Pervious EISs and EA Review

Pathways:
*Atmospheric Environment *Water Quality

Biophysical:
*Arctic Char *Lake Trout *Lake Whitefish *Ninespine Stickleback *Caribou *Grizzly Bear *Wolverine *Upland Breeding Birds *Waterfowl *Raptors *Nearshore Marine Processes *Heritage Resources *Environmental Health

Socio-economic:
*Community Services and Infrastructure *Employment and Economy

VECs have been selected to achieve both a high level of focus and integration in the environmental effects analysis of the Project overall and to conduct a more complete
Doris North Project 8-7 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) environmental assessment. The identification and rationalization of some VECs is more straightforward than others. Caribou, for example, is a rather obvious candidate species or population as a VEC owing to its importance to communities and resource managers. Other components of the environment are truly pathways where there may not be any intrinsic value to the component, but changes in such components are critical to understand as the changes potentially cause adverse effects on other VECs. The two key biophysical pathway VECs selected are water quality and atmospheric environment. For illustrative purposes, it is really the changes in water quality that need to be assessed on lake trout, for example, rather than just water quality in itself. MHBL has completed an environmental effects analysis and identified residual adverse environmental effects for such pathways, as a true VEC. Where appropriate throughout this document, MHBL has identified where residual adverse environmental effects may be overly conservative, such as where potential adverse effects are “double counted” (e.g., potential residual adverse environmental effects on water quality and on lake trout). Figure 8.2 groups the VECs into pathway VECs, biophysical VECs and socio-economic VECs. Other pathways or the use of models to help complete the environmental effects analysis are identified in Chapter 9 (Section 9.5). The following text is a brief justification and rationale for the VECs selected in this environmental assessment. VECs are presented in the order of discussion and are not ranked in terms of importance. Key pathways VECs are presented before related VECs so that changes to a key pathway VEC are described to the reader and the potential environmental effects of the changes to key pathway VECs can be tracked more easily through subsequent biophysical or socio-economic VECs. Figure 8.3 shows the potential Project-VEC interactions.

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SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) Figure 8.3 Potential Project – VEC Interactions
CLOSURE AND TEMPORARY CLOSURE

PROJECT ACTIVITY

.
Emissions and Dust (stacks, vehicles) Site Preparation and Infrastructure

Diversions and Impoundments

Sewage Effluent Discharge

Hiring and Procurement

Hiring and Procurement

Dismantling of Facilities

Mining and Quarrying

Emissions and Dust

CONSTRUCTION

Marine Jetty

Atmospheric Environment Water Quality Arctic Char Lake Trout Lake Whitefish Ninespine Stickleback Caribou Grizzly Bear Wolverine Upland Breeding Birds Waterfowl Raptors Nearshore Marine Processes Heritage Resources Environmental Health Community Services and Infrastructure Employment and Economy
Legend: interaction; + benefit + + + + +

Noise

Noise

.

OPERATIONS

Quarrying

VALUED ENVIRONMENTAL COMPONENTS (VECs)

. .

+ + + + + +

+

+

The Atmospheric Environment is widely recognized as being important for the health and safety of people working and living at the Project site and conducting land use activities near the Project site. The Atmospheric Environment is also important to local wildlife and vegetation as well. Further, people from nearby communities who use this area for fishing, hunting and other traditional uses, need to know that the integrity of the atmospheric environment will be maintained and that noise related effects will be minimized, particularly with respect to their possible effects on wildlife. In addition, Inuit Qaujimajatuqangit of environmental change, including effects from climate change, arctic haze and global fall-out, have community members thinking about cumulative effects. The Project will produce air emissions from engine and ventilation exhaust, dust from blasting, crushing, excavations, milling and road use, all of which will have very localized effects. Noise will occur from a variety of sources and will be attenuated through the atmosphere. The Atmospheric Environment is a pathway for the potential transport of contaminants to the food chain and for issues associated with noise and habitat avoidance for wildlife populations. Air quality and local climate conditions are important to ecosystem

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Fuel and Hazardous Materials Spills

Site Rehabilitation/Reclamation

Increased Human Presence

Monitoring and Maintenance

Increased Human Presence

Waste Management

ACCIDENTAL EVENTS

Plant Commissioning

Waste Management

Water Management

Tailings Pond Release

POST-CLOSURE

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) health in general. Atmospheric Environment analytical results and Inuit Qaujimajatuqangit will be factored into considerations on Environmental Health. • • Key Issues: pathway VEC, decreased air quality and contaminant transport Integration: other VECs dependant on air quality, environmental health, EH&S Management System (engineering design, monitoring and follow-up plan), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: Dust and emissions are known to contribute to respiratory problems, especially for elders, noise levels are a general concern

Water Quality is important to community members, territorial and federal regulators and resource managers as well as others throughout Canada. The quality of water is an important aspect of local and regional sustainability concerns as it is a pathway for contaminant transport to other components of the environment as well as to the food chain. Water Quality is also an important component of fish habitat and is a key component of the Nunavut Land Claims Agreement. Inuit have a long history of monitoring and evaluating water quality and Inuit Qaujimajatuqangit can contribute much to an understanding of water quality. For generations, Nunavummiut have had to monitor water quality to ensure survival and have often looked to fish, birds and wildlife to provide clues as to the state of the water. For example, careful observation of variations in suspended sediment or the absence of birds feeding at water bodies to determine if water is fit for drinking. • • Key Issues: pathway VEC, decreased water quality and contaminant transport Integration: other VECs dependant on water quality, environmental health, EH&S Management System (environmental protection plans, reclamation plan, monitoring and follow-up plan), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: water quality is a key determinant in the health of fish and fish habitat and, ultimately, all living things; maintaining water quality is critical to respecting water bodies

Arctic Char is likely the most important fish species in the Project area as it is critical to local subsistence, culture and identity as well as provides a key food source for wildlife. Arctic char are also considered both a marine fish species and a freshwater fish species as they spend a portion of their life cycle in both environments. The Project has the potential to alter aquatic habitat, including changes in water quality, and restrict movement or access by Arctic char in some areas. Fish and fish habitat are important aspects of federal legislation. Arctic char are a potential pathway for contaminants and are also considered in the risk analysis for environmental heath as part of this environmental assessment. As an indicator of the importance of Arctic char to local Inuit, there are numerous traditional place names
Doris North Project 8-10 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) proximate to the Project site that is named for their relevance to Arctic char (e.g., a lake called Iqaluqpilik meaning ‘it has char’). • • • Key Issues: loss of habitat, loss of access, contaminants in the environment Integration: EH&S Management System (follow-up program for fisheries compensation), Environmental Health, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: recreation, culture and identity Arctic char are key to Inuit subsistence,

Lake Trout is a predatory freshwater fish species that occurs in lakes in the area potentially affected by the Project. Lake trout are a good species to indicate the potential for bioaccumulation of contaminants in the environment as they live for a long time and feed on other fish species including Ninespine Stickleback. Local Inuit rank them as the second most valuable fish for subsistence. Like the Arctic char, lake trout is also important to Inuit culture and identity. Lake Trout also represent another potential food source for present and future generations of local harvesters and land users. Fish and fish habitat is an important aspect of federal legislation. They are a potential pathway for contaminants and are also considered in the risk analysis (fish section) for environmental heath as part of this environmental assessment. • • Key Issues: loss of habitat, contaminants in the environment Integration: predator-prey relationships, EH&S Management System (follow-up program for fisheries compensation), environmental health, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: lake trout are key to Inuit subsistence, culture and identity

Lake Whitefish have been selected as a non-predatory freshwater fish species that occur in lakes in the area potentially affected by the Project. Lake whitefish have potential as a food source for local harvesters and land users as well as other wildlife, now and in the future. Local Inuit have ranked lake whitefish as the second most valuable fish for subsistence (along with lake trout) and they are also important for Inuit culture and identity. The Project has the potential to alter lake whitefish populations and/or habitat in the area. Fish and fish habitat is an important aspect of federal legislation. They are a potential pathway for contaminants and are also considered in the risk analysis for environmental health as part of this environmental assessment.

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SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) • • • Key Issues: loss of habitat, contaminants in the environment Integration: EH&S Management System (follow-up program for fisheries compensation), environmental health, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: lake whitefish are key to Inuit subsistence, culture and identity

Ninespine Stickleback are considered to be representative of the forage fish communities that other predatory fish, such as Lake Trout, are dependent on in the food chain. They are a potential pathway for contaminants and are also considered in the risk analysis for Environmental Heath as part of this environmental assessment. Although this species is not central to Inuit subsistence, Inuit Qaujimajatuqangit supports giving respect to all species. • • Key Issues: loss of habitat, contaminants in the environment Integration: predator-prey relationships, lake trout, Arctic char, EH&S Management System (follow-up program for fisheries compensation), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: respect for all species

Caribou occur in several herds in the region including the Bathurst, Ahiak and UnionDolphin herds. For Inuit in the Kitikmeot Region, the presence or absence of caribou historically determined not only whether people would survive, but also if predators such as wolves and grizzly bears or scavengers such as wolverine would flourish. Today, caribou and the act of caribou hunting are central to Inuit identity, culture and subsistence. Throughout the north, caribou continue to be important as a prey species and for subsistence and sport hunting. Project activities and human presence may alter habitat, and decreases in water quality and attributes of the atmospheric environment could introduce contaminants that affect environmental health. Caribou that interact with this Project may also interact with other projects and activities in the region due to their large range. Wildlife resources are an important component of the Nunavut Land Claims Agreement. The Union-Dolphin herd also has special conservation and management status. According to Inuit Qaujimajatuqangit, the Bathurst herd is known to calve in and around the Project area. Caribou are reported to be extremely sensitive to noise. Further, they have been observed to relocate their calving grounds or migration routes as a result of human activity. • • Key Issues: habitat loss, disturbance, increased hunting, environmental contaminants Integration: EH&S Management System (engineering design, environmental policies, environmental protection plan, emergency response and contingency plan, monitoring
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Doris North Project

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) and follow-up plan), predator-prey relationships, environmental health, cumulative environmental effects • Relevance to Inuit Qaujimajatuqangit: Caribou are critical to Inuit subsistence, culture and identity; caribou are sensitive to noise and human activity and may alter their calving ground location or migration patterns as a result; reported observations of changes in caribou health, body condition, behaviour, migration patterns and location of calving grounds, likely due to broader phenomenon of environmental change; showing respect for caribou is important

Grizzly Bear is a large, long-lived and wide-ranging species predator that is important both ecologically and culturally in the region and also is a species of general conservation concern and awareness throughout North America. Grizzly bears are omnivores but Caribou are a key prey species. Grizzly bear that interact with this Project may also interact with other projects and activities in the region due to their large range. Wildlife resources are an important component of the Nunavut Land Claims Agreement. According to Inuit Qaujimajatuqangit, grizzly bears are highly respected and typically follow the caribou migrations, supplementing their diet with berries and ground squirrels. Maintaining habitat for berries, grounds squirrels and caribou is thus important. Grizzly bears are known to frequent areas near the community of Bathurst Inlet and settlement at Brown Sound. As with all wildlife, they are sensitive to noise and human activity. People reported that grizzly bears close to settlements are very unpredictable. Changes in the range of the grizzly bear have recently been observed, for example, crossings from the mainland to Victoria Island. • • Key Issues: habitat loss, disturbance, increased hunting, nuisance wildlife, environmental contaminants Integration: EH&S Management System (engineering design, environmental policies, environmental protection plan, emergency response and contingency plan, monitoring and follow-up plan), predator-prey relationships, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: Grizzly bears are known to follow caribou herds; showing respect for grizzly bears is important

Wolverine has been selected as a valued fur bearing wildlife species and a wide-ranging predator that can prey on caribou, waterfowl, upland breeding birds and likely various fish species. Wolverine may be affected by changes to its habitat and increased contaminants in the area. There is also the possibility that certain wildlife, such as wolverine, may be attracted to areas of new human activity and be put at risk by becoming a nuisance. Wolverine interacting with this Project may also interact with other projects and activities in the region due to their large range. Wildlife resources are an important component of the Nunavut Land Claims Agreement. According to Inuit Qaujimajatuqangit, the Project area, particularly near Doris Lake, is well known as an important wolverine hunting area.
Doris North Project 8-13 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) Wolverines are said to be abundant due to the presence of caribou and wolves and due to the abundance of eskers and other desirable denning habitat. In nearby Umingmaqtuuq, the annual spring festival is named after the wolverine, the Kalvik Frolics, suggesting that this animal have been and continues to be important in the region. Wolverines often travel closely with wolves to scavenge their kill sites. • • Key Issues: habitat loss, disturbance, increased trapping pressure, environmental contaminants, nuisance wildlife Integration: predator-prey relationships, EH&S Management System (engineering design, environmental policies, environmental protection plan, emergency response and contingency plan, monitoring and follow-up plan), environmental health, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: The Project area is well known as traditional hunting grounds for wolverine, in part because of the abundance of caribou and consequently wolves which hunt caribou and provide scavenging opportunities for wolverine; the Project area includes eskers and other desirable habitat for denning; showing respect for wolverines is important

Upland Breeding Birds are a potentially widespread group of wildlife species and populations that are a potential food source for people and other wildlife. These birds, mainly ptarmigan, are year round residents and their populations exhibit fluctuations periodically. Habitat changes related to direct physical disturbances and activities as well as potential effects from increased levels of contaminants in the environment may affect Upland Breeding Birds. According to Inuit Qaujimajatuqangit, it is important to show respect to birds. Wildlife resources are an important component of the Nunavut Land Claims Agreement. • • • Key Issues: habitat loss, disturbance, increased hunting pressure, environmental contaminants Integration: Environmental Health, EH&S Management System, predator-prey relationships with other associated wildlife VECs, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: respect for all species

Waterfowl are a group of birds that are important locally as food, particularly for Inuit subsistence, and others uses (e.g., down) in the communities as well as for resource managers and outdoor enthusiasts throughout region and the central flyway. Waterfowl resources and harvesting are typically managed under a variety of interests including the Nunavut Land Claims Agreement, territorial and federal legislation and international agreements such as the North American Waterfowl Management Plan. Waterfowl habitat may be altered or lost as a
Doris North Project 8-14 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) result of direct disturbances from the Project or decreased water quality. Wildlife resources are an important component of the Nunavut Land Claims Agreement. • • Key Issues: habitat loss, disturbance, increased hunting pressure, environmental contaminants Integration: environmental health, EH&S Management System (environmental policies, environmental protection plan), predator-prey relationships with other associated wildlife VECs, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: waterfowl are important to Inuit subsistence; respect for all species

Raptors represent a group of birds that can occur and breed near the Project site. According to Inuit Qaujimajatuqangit, raptors are plentiful in the region because of the numerous cliffs and mesas that are suitable for nesting. They can be affected by noise related disturbances, habitat loss or alteration and uptake contaminants in the environment through their prey. Raptors typically occur in relatively low numbers and their local populations may be responsive to changes in prey availability. Raptors typically are protected under territorial legislation and in the case of the Peregrine Falcon, been the focus of much effort from a special conservation status perspective regionally and internationally. Raptors are also an aspect of the Nunavut Land Claims Agreement. • • Key Issues: habitat loss, disturbance, environmental contaminants Integration: EH&S Management System (engineering design, environmental policies, environmental protection plan, monitoring and follow-up plan), predator-prey relationships, cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: respect for all species

Nearshore Marine Processes includes localized nearshore processes such as tide and/or wind generated wave patterns and currents associated with the presence of the jetty in Robert’s Bay and how the jetty may alter existing patterns of sediment transport, accretion and erosion. Quantifying and monitoring these processes may be challenging due to the confounding effects of environmental change, as reported through Inuit Qaujimajatuqangit. Navigability is an issue under federal legislation and the Nunavut Land Claims Agreement. This chapter also includes a brief discussion associated with the nearshore movement of marine fish in the area of the jetty. • Key Issues: alteration and loss of marine fisheries habitat, nearshore and shoreline conditions, fish passage

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SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) • Integration: EH&S Management System (emergency response and contingency plans, monitoring and follow-up as it relates to fish habitat, engineering and design), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: effects of environmental change including increase in sedimentation may make quantifying and monitoring effects from the Project difficult; nearshore species and their habitat should be respected

Heritage Resources are important because of the information they reveal about past and present land use, cultural identity, and relationships with other cultures and the social and biophysical environments. Historic resources represent archival information from the past and the Project may result in the alteration or loss of such archival information. Historic resources are protected under territorial legislation as well as the Nunavut Land Claims Agreement. The importance of heritage resources is recognized by both MHBL, and in Inuit Qaujimajatuqangit. Respect for the ancestors and the evidence they have left behind are recurring themes spoken by community members and workshop participants. Inuit Qaujimajatuqangit supports the belief that the cultural identity of contemporary Inuit is still intrinsically linked with the land, the resources, and their ancestors. Both hunting and fishing are important activities that continue today and have been passed on from generation to generation. Children are often taken out on the land itself to learn the traditional ways and witness the remains left by generations before them, such as stone tools, camp remains, and burials. Even more important, is the need to continue to pass on the information, even if a more modern way of life is practiced today. Without the opportunity to continue to practice a hunting, fishing and subsistence way of life, the cultural identity of Inuit could be greatly altered. • • • Key Issues: loss or alteration of resources Integration: community wellness, EH&S Management System (contingency plans for historic resources, engineering and design), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: heritage resources and what they represent in terms of both the past and current ties between local Inuit and the land, must be protected and respected; historic resources must be protected

Environmental Health as a VEC allows a slight deviation from the principally values based approach to the environmental assessment. In this chapter, risk assessment methods and a modelling exercise are used to forecast what might happen based on assumptions used with respect to the possibility of contaminants bioaccumulating or biomagnifying in the environment as a result of the Project. Such modelling is typically conservative and often assumptions must be used due to the lack of empirical data for input. However, risk
Doris North Project 8-16 Technical Report October 2005

SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) assessment is simply a tool to be used to help identify the potential for concerns and guide possible additional data gathering. Environmental health contains a treatment of fish, wildlife and human health contaminant pathways analysis. • • Key Issues: contaminants in the food chain, human consumption of country foods, human health and safety Integration: fisheries and wildlife related VECs, EH&S Management System (communications, engineering design, monitoring and follow-up), cumulative environmental effects Relevance to Inuit Qaujimajatuqangit: community members have observed environmental change as manifest in changes to body condition of mammals such as caribou; important to maintain environmental health as a way of respecting the environment

Community Services and Infrastructure includes a variety of social, health and security services and infrastructure in the key communities in the environmental assessment area of the Project. The Project will yield real benefits in terms of employment and increased incomes. Project related incomes and revenues result in a higher personal standard of living as well as providing opportunities for communities to enhance their health and social support infrastructure. However, individual health and consequently the health of the community as a whole can be adversely affected if individuals, as a result of increased income, respond in a manner that could endanger themselves or others thus causing increased demands on community services and infrastructure • • Key Issues: services and facilities provided, rate and usage of services and facilities, types of illnesses and demands placed on services and health personnel Integration: health services on camp site, EH&S Management System (community relations, impacts and benefits, Inuit involvement, human resources, monitoring and follow-up), cumulative environmental effects, environmental health

Employment and Economy is of primary interest to residents of the West Kitikmeot communities. Given the significant rate of unemployment in the communities and the limited type and number of employment opportunities combined with the desire of many to work, the Project is seen as a way to help address this situation. Measuring the number of jobs created and identifying and assessing the skills acquired by local people will indicate the influence the project could have in changing this situation. The Project will also make contributions to the economy of Nunavut and Canada in terms of real benefits.

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SELECTION OF VALUED ENVIRONMENTAL COMPONENTS (VECs) • • Key Issues: Number and types of jobs available, sources of qualified labour, local and regional barriers to employment, extent of economic benefits Integration: EH&S Management System (human relations, Inuit involvement, community relations), community well-being

8.3 References
Beanlands, G.E. and P.N Duinker. 1983. An Ecological Framework for Environmental Impact Assessment in Canada. Published by: Institute for Resource and Environmental Studies, Dalhousie University and Federal Environmental Assessment Review Office, Hull, P.Q. CEAA (Canadian Environmental Assessment Agency). 1996. Guide to the Preparation of a Comprehensive Study under the Canadian Environmental Assessment Act for Proponents and Responsible Authorities.

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Feasibility Study Guidelines 2006

APPENDIX I ENVIRONMENTAL ASPECTS HANDOUT #7 - EXAMPLE: VEC SELECTION AND TREATMENT ILLUSTRATION – CONCEPTUAL

© AMEC May 2006 Page 1

Feasibility Study Guidelines 2006

APPENDIX J ENVIRONMENTAL ASPECTS HANDOUT #8 - EXAMPLE: ENVIRONMENTAL ASSESSMENT METHODOLOGY DORIS NORTH PROJECT EIS, MIRAMAR HOPE BAY LIMITED

© AMEC May 2006 Page 1

9 ENVIRONMENTAL ASSESSMENT METHODOLOGY Avatiliginiqmun Naunaiyaqniinut Pityuhiit

TABLE OF CONTENTS 9.0 9.1 9.2 9.3 9.3.1 9.4 9.5 9.5.1 9.6 9.7 9.8 9.8.1 9.8.2 9.8.3 9.8.4 9.8.5 9.9 9.10 ENVIRONMENTAL ASSESSMENT METHODOLOGY ............................................ 9-1 The Preferred Alternative ............................................................................................ 9-3 Inuit Qaujimajatuqangit ............................................................................................... 9-4 Experience in the North ............................................................................................... 9-4 Other Projects and Activities ............................................................................... 9-4 EISs to Date ................................................................................................................. 9-5 Environmental Baseline Studies .................................................................................. 9-5 Local and Regional Study Areas.......................................................................... 9-6 Strategic Use of Models............................................................................................... 9-6 Approach to Evaluating Cumulative Environmental Effects....................................... 9-7 Environmental Effects Methods .................................................................................. 9-7 Geographic Extent ............................................................................................... 9-8 Frequency and Duration....................................................................................... 9-9 Ecological and Socio/cultural Context................................................................. 9-9 Environmental Effects Analysis Worksheet ........................................................ 9-9 Incorporation of Standard Mitigation Measures ................................................ 9-12 Residual Effects Methods – Determination of Significance...................................... 9-12 Use of the EIS for Future Development in the Hope Bay Belt.................................. 9-14

LIST OF TABLES Table 9.1 General Outline of VEC Chapters ............................................................................... 9-2 Table 9.2 Definitions for Magnitude and Reversibility of Effects .............................................. 9-8 Table 9.3 Environmental Effects Analysis: Name of VEC (e.g., Caribou) ............................... 9-11 Table 9.4 Summary of Residual Adverse Environmental Effects: VEC Name ....................... 9-13 Table 9.5 Definitions for Probability of Occurrence, Effect on Ecosystem Function and Integrity and Sustainable Use of Renewable Resources as Applied to Residual Environmental Effects Ratings ............................................................................................................................... 9-14

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9.0 ENVIRONMENTAL ASSESSMENT METHODOLOGY The environmental assessment of the Project has been conducted in a holistic manner using a detailed description of the Project and associated activities. MHBL has an extensive understanding of the existing environment within the Project area and has conducted a consultation process to identify issues and concerns from a broad range of interested parties and stakeholders. However, the detailed analysis of potential adverse environmental effects resulting from the Project is nonetheless focused on Valued Environmental Components (VECs), and is based on the preferred alternative configuration of the Project as described in Chapter 4. VECs were determined by the Project team after full consideration of potential Project-environment interactions and a good understanding of the nature of the Project and the local area. VECs have been identified and justified (Chapter 8) to allow for a focused environmental assessment on particular issues, as reflected by the scope of the Project to be assessed, the potential for expansion within the Hope Bay Belt and in consideration of Inuit, public and regulatory consultation. Each VEC chapter consists of three major sections. The general outline of each VEC chapter is shown in Table 9.1. The first section of each chapter (Existing Environment), presents information on the existing conditions relating to the VEC. It begins with an introduction to the regional ecological and socio-cultural context of the VEC. Specific "boundaries" or "limits" on the environmental assessment studies are addressed. These boundaries are tailored to each particular VEC. A range of terms occur in this Technical Report and supporting documents, depending on the context and are used to help describe aspects of the boundaries of the assessment. MHBL acknowledges that there is the potential for confusion amongst the use of terms such as Project Area, Study Area (Local and Regional) etc., that have been used in previous EISs for the Project to describe, for example, areas where baseline studies occurred and can lead to confusion as to where the potential adverse environmental effects on each VEC will occur (see further discussion in Section 9.5.1). Therefore, to try and make this environmental assessment more understandable, the environmental assessment area for each VEC will be described. The environmental assessment area can be unique to each VEC and describes where the environmental effects are predicted to occur and the area where they are assessed. The environmental assessment are may extend beyond baseline study areas, as appropriate, for each VEC. The purpose of specifically providing an existing environment section for each VEC to allow, to the extent possible, for all the information pertinent to the VEC to be contained within each VEC to provide for a more integrated assessment and allow the reader to more easily follow the analysis and conclusions within one chapter. Study methods are briefly summarized and where appropriate the reader is referred to more detailed explanations in supporting documents. Existing conditions are discussed through a review of relevant literature and the results of field studies, which may be further described
Doris North Project 9-1 Technical Report October 2005

ENVIRONMENTAL ASSESSMENT METHODOLOGY in supporting documents. Likely future conditions of the VEC without the Project, including climate change, during the anticipated lifespan of the Project, are discussed. Table 9.1 General Outline of VEC Chapters
Section (VEC Title) Existing Environment Environmental Assessment Boundaries Contents Introduction/context as appropriate. Description of environmental assessment boundaries reflecting Project, ecological and/or socio-economic boundaries where relevant. The treatment of the boundaries issue for the environmental assessment is to establish the environmental assessment area for each VEC. A variety of potential boundaries issues may be considered including: spatial, temporal, administrative and technical boundaries. Description of data collection methods, use of models, research, consultation, baseline studies etc. Explanation of sources of information and/or overall statement of general conditions Presentation of key potential environmental effects based on available literature, field study results, professional judgement, etc. Discussion of likely condition of environment within expected lifespan of Project if the Project is not approved

Methods Existing Conditions (subsections, as appropriate for each VEC) Likely Future Conditions Environmental Effects Analysis (subsections, as appropriate for each VEC)

Environmental Design, Mitigation and Optimization

Presentation of potential adverse environmental effects by Project phase supported by research and available literature, IQ, professional judgement, consultations and any environmental effects experienced already due to MHBL exploration. Summary of environmental design features integrated into the Project, mitigation and environmental management initiatives. In keeping with contemporary practice in EA, residual adverse environmental effects are predicted based on the assumption that standard, technically proven mitigation measures are designed into the Project VEC specific significance criteria provided Residual environmental effects significance by Project phase. Residual cumulative environmental effects of the planned Project in combination with other projects and activities. Where relevant, key predicted residual adverse environmental effects that are reduced to not significant due to mitigation yet to be proven are identified Cross reference to Chapter 6. Key elements identified in each of the VEC chapters for both monitoring and, as appropriate, follow-up Discussion of the planned Project overall in combination with other projects and activities (Section 4.12)

Residual Environmental Effects (subsections, as appropriate for each VEC, but typically for the following: construction, operation, closure, postclosure, accidents/malfunctions and unplanned events, the planned Project overall, and cumulative environmental effects) Monitoring and Follow-up Program Cumulative Environmental Effects References

The second section of each VEC chapter (Environmental Effects Analysis) provides information relevant to the evaluation of potential environmental effects related to Project development. The potential adverse environmental effects will be described for each major
Doris North Project 9-2 Technical Report October 2005

ENVIRONMENTAL ASSESSMENT METHODOLOGY phase of the Project (construction, operation, closure and post-closure, as well as for accidents, malfunctions and unplanned events). Exploration activities by MHBL at Doris North are completed. Exploration activities to support further development in the Hope Bay Belt are assessed under cumulative effects. Where appropriate, specific potential adverse environmental effects associated with temporary closure will be described. The environmental effects analysis will include the typical factors to be considered in describing potential adverse environmental effects (e.g., magnitude, geographic extent, duration, frequency, reversibility and ecological and socio/cultural context). Other modifiers for predicted residual adverse environmental effects, which are those effects remaining after the incorporation of mitigation and design features, such as the probability of occurrence, effects on ecosystem function and integrity, capacity of resources to meet present and future needs will also be described (Section 9.9). The importance of VECs, as they relate to each other, is described in Chapter 8. MHBL’s approaches to considering cumulative environmental effects are also described in this Chapter (Section 9.7). Key mitigation and environmental design features specific for each VEC are highlighted in this section as well as being brought forward into the Environment, Health and Safety Management System (Chapter 6, Section 6.17 - Specific EH&S Needs for each VEC) to show how all the key anticipated EH&S concerns associated with the Project are captured in the environmental management system for the Project by MBHL. The final section of each VEC chapter (Residual Environmental Effects), is a summary of the predicted residual adverse environmental effects remaining after mitigation and Project environmental design considerations. This section presents the results of the environmental effects analysis in terms of significance. This section also provides an evaluation of the planned Project in combination with other projects and activities in the region.

9.1 The Preferred Alternative
MHBL conducted an assessment of alternatives to the Project as part of its decision-making process on what elements would comprise the Project, that would undergo a detailed environmental assessment on a VEC by VEC basis as presented in Chapters 10 – 31 in this Technical Report. The assessment of alternatives is provided in Chapter 4 (Section 4.3.2 and Appendix 4.A). The preferred alternative, or the Project that provides the basis of the detailed environmental assessment in this Technical Report, is described in Chapter 4 (Sections 4.7 through 4.12). As a reminder, the Project comprises the following key elements: • • • Underground mining methods (nominal mining rate of 668 tonnes per day); Two year mine life; Sub-aqueous tailings placement in Tail Lake;
9-3 Technical Report October 2005

Doris North Project

ENVIRONMENTAL ASSESSMENT METHODOLOGY • • • • • • • Fly-in/fly-out camp operations; Marine jetty in Roberts Bay; Permanent roads and airstrip; Power generation on-site using generators; Modularized construction and fabrication; Peak construction workforce of approximately 120 persons; and Operations workforce of approximately 165 persons.

9.2 Inuit Qaujimajatuqangit
MBHL conducted an Inuit Qaujimajatuqangit workshop in September of 2003 with Inuit Elders and other knowledge holders from the communities of Cambridge Bay, Kugluktuk, Gjoa Haven and Taloyoak. Men and women participated in the workshop. The purpose of the workshop was to gather information about the land, its resources, the use of the land and perspectives on values as well as the identification of any key sensitive areas or periods of the year around which mitigation measures can be considered. A summary of the workshop is provided as a supporting document (SD E1). This environmental assessment integrates such knowledge and provides a balance between western scientific knowledge and Inuit Qaujimajatuqangit in the formulation of conclusions.

9.3 Experience in the North
MBHL has considerable experience in conducting mineral exploration and mining operations in northern regions including Nunavut (exploration activities in the Hope Bay Belt since January 2000) and the Northwest Territories (mining operations in Yellowknife from 1993 to the present). As a result, MBHL is well aware of operational issues, regulatory expectations, environment, health and safety concerns and the aspirations and expectations of local communities and people.

9.3.1 Other Projects and Activities
The North and its residents and communities are also extremely familiar with construction and development projects and activities, although the Project may be one of the early mining developments in the West Kitikmeot Region (others include Roberts Bay and Ida Bay mines). However, other mineral development projects in northern environments include projects such as diamond mines in the Northwest Territories and Nunavut, as well as other base metal mines in Nunavut such as Polaris and Nanisivik and other mines in similar operating environments such as Raglan in the Ungava region of Quebec and Voisey’s Bay in Labrador. There is a high level of practical knowledge with respect to bringing forward environmentally acceptable and successful projects in northern climates in the mineral
Doris North Project 9-4 Technical Report October 2005

ENVIRONMENTAL ASSESSMENT METHODOLOGY resources development industry and a high level of regulatory and monitoring experience. This knowledge base contributes to continuous improvement throughout all aspects of project planning, assessment and execution. Although all projects are different in many ways there is yet a high degree of sameness in construction and operational considerations and practices in the North that allows for the integration of standard mitigation measures into the Project design before residual adverse environmental effects are described. The creation of permanent settlements throughout the north also means that the residents are also very familiar with construction methods and considerations, supply and storage of fuels and other products, the effects of the environmental and structures and such activities as permanent and temporary airstrips including winter aircraft operations on ice landing strips. Many aspects of the Project occur or have occurred throughout the North over many decades and allow for a high level of confidence in anticipating the potential environmental effects, their significance and the effectiveness of mitigation. This knowledge base allows MHBL to bring forward a Project for detailed environmental assessment that has most mitigation measures designed into the Project prior to the determination of residual adverse environmental effects.

9.4 EISs to Date
MHBL is committed to the responsible development of mineral resources in the Hope Bay Belt area of the West Kitikmeot Region of Nunavut and has endeavoured to bring forward a focused and defensible environmental assessment. MHBL acknowledges that its past attempts at providing a complete and fully integrated approach to Project planning through previous EISs has been insufficient. However, MHBL is confident that the NIRB and other decision-makers consider the information presented in this environmental assessment in a positive way. MHBL appreciates the time and energy invested in the process to date by all involved, including the NIRB, potentially affected communities and stakeholders such as regulatory and resource management agencies. The benefits of the environmental assessment and review process to date allows MHBL to have a good understanding of the range of issues and concerns with respect to environment, health and safety which has benefited the conceptualization and production of this Technical Report.

9.5 Environmental Baseline Studies
Environmental baseline studies were conducted to determine both recent and existing environmental conditions in the vicinity of the Project and potentially affected communities. Inuit Qaujimajatuqangit and scientific fieldwork provided most of the site-specific information used in this environmental assessment. Existing information from the scientific literature (both published and unpublished), engineering studies and test work results, technical reports, and community socio-economic studies were used wherever available. Regional studies were used, where appropriate to validate baseline information. Engineering
Doris North Project 9-5 Technical Report October 2005

ENVIRONMENTAL ASSESSMENT METHODOLOGY studies, biological and economic modelling were undertaken to help provide context to the analysis of potential environmental effects. The information available from the Inuit Qaujimajatuqangit workshop, the environmental baseline studies, supporting research and consultation as well as previous working experience in the region has provided MHBL with a high level of understanding about its Project, the potential adverse environmental effects and the appropriateness of mitigation to avoid, reduce and/or compensate for anticipated adverse environmental effects.

9.5.1 Local and Regional Study Areas
A variety of terms are used in the Technical Report and supporting documents that need to be discussed. The terms local and regional study areas are terms used to describe aspects of some environmental baseline studies and are not to be confused with the consideration of boundaries used to describe the environmental assessment area for VECs. Environmental baseline, or field, studies in the field are used in part to gather data as an issues scoping exercise well in advance of decisions on what will be considered VECs on which to focus the detailed environmental assessment. Information from baseline studies help contribute to the VEC selection process (see Figure 8.2). While it is possible that the study area boundaries or limits may coincide with the environmental assessment area for a particular VEC it is not necessarily so. An example where the environmental assessment area exceeds a regional study area limit is for caribou (Chapter 16, Figure 16.4).

9.6 Strategic Use of Models
MBHL has used a range of effects analysis and scoping tools to help describe the potential adverse environmental effects in this Technical Report. A variety of models was used to support the environmental effects analysis and included the following: • • Air quality dispersion modelling: to help describe the potential effects of emissions; Water quality and quantity modelling: water quality modelling was used to help predict future changes in water quality to support water quality as a VEC and water quantity and changes to flows patterns to support the analysis of VECs dependent on water quantity such as various fish species and/or populations; Economic modelling: to help determine direct, indirect and induced benefits; Bioaccumulation: ecological and human health risk modelling to help describe contaminants in the environment and support environmental health as a VEC; Oceanographic modelling: to look at the transport processes in the marine environment related to the presence of the jetty;

• • •

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ENVIRONMENTAL ASSESSMENT METHODOLOGY • Ecological Land Classification: to help quantify local and regional wildlife habitat types that may be affected and supports the environmental effects analysis in related VECs; Engineering test work such as acid base accounting, humidity cell tests; and Habitat suitability modelling for various wildlife species.

• •

9.7 Approach to Evaluating Cumulative Environmental Effects
MHBL has conducted a comprehensive evaluation of the concept of cumulative environmental effects. The consideration of the Project in combination with past, present and likely future projects and activities contributes to helping bring forward a complete environmental assessment if in a regional planning and decision-making process. Issues with respect to cumulative environmental effects have been considered at various levels within this Technical Report by MHBL. First, MHBL considers that having an adequate environmental baseline is important for the identification of issues and concerns and the selection of VECs. An adequate environmental baseline also contributes a substantial portion to the concept of cumulative environmental effects. A good knowledge of baseline conditions in the area contributes to the description of the effects of past and present projects and activities on each VEC. Current baseline conditions reflect the environmental effects of past and present activities. Second, the potential adverse environmental effects of each Project phase are rated in the residual adverse environmental effects section of each VEC chapter. Therefore, it is the cumulative potential adverse environmental effects of, for example, noise, habitat loss, human presence etc., that occur during construction on caribou that are rated as significant or not significant, thus achieving an additional level of cumulative effects assessment. Third, in addition to rating the residual adverse environmental effects of each phase of the Project, the residual adverse environmental effects of the planned Project overall are rated for each VEC, thus achieving another level of cumulative effects analysis in this environmental assessment. Lastly, a separate rating of the significance of the planned Project, in combination with other projects and activities defined in Chapter 4 (Section 4.12), to address the issue of potential cumulative environmental effects from a regional land planning perspective, is conducted on each VEC.

9.8 Environmental Effects Methods
In each VEC chapter, potential environmental effects are identified at the beginning of each environmental effects section (Environmental Effects Analysis). The potential adverse environmental effects of the Project are described, as appropriate, using the following factors: magnitude; geographic extent; duration and/or frequency; reversibility; ecological and socio/cultural context. These factors are the factors considered in the environmental effects analysis for each Project phase on the VEC, for example. Once the key potential environmental effects are described, then mitigation measures or environmental design
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ENVIRONMENTAL ASSESSMENT METHODOLOGY features designed into the Project can be considered to avoid or reduce the potential adverse environmental effects. This is a separate step from the determination of the significance of residual adverse environmental effects (Section 9.9) where the determination of criteria/thresholds and/or triggers are described that allow for the determination of whether a residual adverse environmental effect is considered significant or not significant. The significance criteria used are specific for each VEC and do not necessarily have to be directly related to the factors considered in describing environmental effects. The definitions established for the ratings applied to "magnitude" and "reversibility" is outlined in Table 9.2. Table 9.2 Definitions for Magnitude and Reversibility of Effects
Rating high Magnitude* an environmental effect affecting a whole stock, population or definable group of people, or where a specific parameter is outside the range of natural variability determined from local knowledge over many seasons an environmental effect affecting a portion of a population, or one or two generations, or the environmental effect may be where there are rapid and unpredictable changes in a specific parameter so that it is temporarily outside the range of natural variability determined from local knowledge over many seasons an environmental effect affecting a specific group of individuals in a population in a localized area, one generation or less, or where there are distinguishable changes in a specific parameter; however, the parameter is within the range of natural variability determined from local knowledge over many seasons No environmental effect Reversibility previous research/experience indicates the environmental effect is reversible previous research/experience indicates the environmental effect may be reversible

medium

low

previous research/ experience indicates that there is a small likelihood that the environmental effect is reversible previous research/ experience indicates that the environmental effect is non-reversible there is insufficient research/experience to indicate whether the environmental effect is reversible

nil

unknown

.

an environmental effect affecting an unknown portion of a population or group or where the changes in a specific parameter are unknown

*Note: definitions of magnitude for atmospheric environment and water quality are specific and defined in the respective VEC chapters; definitions for magnitude and reversibility for heritage resources and defined in that chapter.

9.8.1 Geographic Extent
The geographic extent factor is simply presented as a range or scale of approximate geographic areas that are used to help describe the areas over which any particular potential interaction is anticipated to occur. A level of conservativeness is used with the geographical extent factor to include a range of issues. For example, areas of direct physical disturbance due to vegetative clearing may be relatively small but other effects such as the avoidance of habitat by wildlife may encompass a larger area than the areas directly altered or lost.
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ENVIRONMENTAL ASSESSMENT METHODOLOGY

The geographic extent factor for potential environmental effects is described and/or rated in the environmental effects analysis synthesis that is provided as a supporting appendix for each pathway VEC chapter, biophysical VEC chapter and socio-economic VEC chapter. Definitions for geographic extent for heritage resources are provided in Chapter 24.

9.8.2 Frequency and Duration
The frequency factor is used to help describe the nature of the interaction being analyzed and comprises a range of event/year from a few to continuous activities. For example, noise from blasting may occur relatively infrequently, whereas noise associated with vehicle movements would be more frequent and noise from generators may be continuous. The duration factor is used to help describe how long any potential interaction causing adverse effects may occur within the phase of the Project being assessed. For example, environmental effects associated with vehicle operations will have a shorter duration during construction, compared to operation/maintenance based on the anticipated construction schedule and life of mine. The frequency and duration factors for potential environmental effects is described and/or rated in the environmental effects analysis synthesis that is provided as a supporting appendix for each pathway VEC chapter, biophysical VEC chapter and socio-economic VEC chapter. Definitions for frequency and duration for heritage resources are provided in Chapter 24.

9.8.3 Ecological and Socio/cultural Context
The factor is used to help provide reviewers and decision-makers with an indication of the potential effect on the VEC. This factor provides an indication of any key local or regional ecological or socio/cultural features. This factor is described for the Project over the assessment areas for the VEC and provides an indication of any special features that need to be considered in this analysis (e.g., pristine or unique ecological features, rare and endangered species habitat, parks or special areas). The ecological and socio/cultural context factor for potential environmental effects is described and/or rated in the environmental effects analysis synthesis that is provided as a supporting appendix for each pathway VEC chapter, biophysical VEC chapter and socioeconomic VEC chapter. Definitions for ecological and socio/cultural context for heritage resources are provided in Chapter 24.

9.8.4 Environmental Effects Analysis Worksheet
As described above, the analysis of potential environmental effects is summarized in an appendix to the VEC chapters to allow the reader/reviewer to see how each of the factors to
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ENVIRONMENTAL ASSESSMENT METHODOLOGY be considered were indeed considered in the analysis of environmental effects. This allows for a high degree of transparency in the methodological approach to conducting the analysis and allows the text in the main portion of the VECs to focus on key interactions and effects, as appropriate. Table 9.3 provides an environmental effects analysis matrix used to support each VEC chapter.

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ENVIRONMENTAL ASSESSMENT METHODOLOGY Table 9.3 Environmental Effects Analysis: Name of VEC (e.g., Caribou)
Environmental Effects Criteria Project Activity
Blasting

Project Phase Construction

Environmental Effect
Habitat Avoidance

Magnitude
Description:

Geographic Extent
Description: Noise effects in local area near blasting Rating (see footer) 1-2 Description:

Frequency Duration

and

Reversibility
Description:

Ecological and Socio/cultural Context
Description:

Rating (see footer) 3 Description:

Description: Periodic noise in an area Rating (see footer) 2, 1 Description:

Rating (see footer) 1 Description:

Rating (see footer) 2 Description:

Rating (see footer)

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Operations

Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer)

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Closure

Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer)

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Post-Closure

Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer)

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Accidental Effects

Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer)

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Planned Project Overall

Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer) Description:

Rating (see footer)

Rating (see footer)

Rating (see footer)

Rating (see footer)

Rating (see footer)

Key: Magnitude: * 1 = High 2 = Medium 3 = Low 4 = nil 5 = unknown *Definitions are provided in Table 9.2

Geographic Extent: 1 = < 1 km2 2 = 1-10 km2 3 = 11-100 km2 4 = 101-1,000 km2 5 = 1,001-10,000 km2 6 = >10,000 km2

Frequency: 1 = <11 events/year 2 = 11-50 events/year 3 = 51-100 events/year 4 = 101-200 events/year 5 = >200 events/year 6 = Continuous

Duration: 1 = < 1 month 2 = 1-12 months 3 = 13-36 months 4 = 37-72 months 5 = > 72 months

Reversibility: * 1 = High 2 = Medium 3 = Low 4 = nil 5 = unknown *Definitions are provided in Table9.2

Ecological and Socio/cultural Context: 1 = Relatively pristine area not adversely affected by human activity 2 = Evidence of existing adverse effects 3 = High level of existing adverse effects n/a = Not Applicable

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ENVIRONMENTAL ASSESSMENT METHODOLOGY

9.8.5 Incorporation of Standard Mitigation Measures
MHBL has conducted a complete and fully integrated environmental assessment of the Project in a manner that, to the extent possible and practical, addresses the Guidelines, the scoping of issues and contemporary practice in environmental assessment in Canada. Residual adverse environmental effects, only, are rated (predicted) in this environmental assessment. It is not practical to describe the potential effects of the Project both before and after mitigation. A key element of the MHBL’s Project is the design of the Project that includes standard environmental protection and mitigation measures as well as contemporary expectations for environmental awareness and stewardship for such projects in Canada. It is not practical to assess the potential effects of noise for example for heavy equipment without mufflers (e.g., mitigation) then assess the residual effects again with mufflers. Similarly, there are well established expectations that other routine mitigation measures such as silt fences, erosion protection, fuel spill prevention and containment are all integrated into an acceptable project. Thus the residual adverse environmental effects are predicted assuming technologically proven and standard mitigation measures are part of the Project being assessed. However, where mitigation has yet to be proven, such as in areas where the mitigation anticipated to reduce a potential significant adverse environmental effect (e.g., loss of Tail Lake for tailings) to not significant through habitat compensation associated with fish and fish habitat issues, these residual adverse effects are identified in the summary tables in each VEC. Such compensation is usually proven successful through a follow-up program.

9.9 Residual Effects Methods – Determination of Significance
Residual environmental effects are those environmental effects predicted to remain after the application of mitigation or engineering design adjustments. Residual environmental effects and their significance are presented in the "Residual Environmental Effects" section of each VEC chapter. Following the conclusions reached in the "Environmental Effects Analysis" section of each chapter, the significance of residual (i.e., after including mitigation into the Project) adverse environmental effects, for a particular VEC, is determined for each Project phase (construction, operation, closure, and post-closure). MHBL has endeavoured to develop specific criteria, thresholds and/or triggers, as appropriate, that will described the residual adverse environmental effects as being predicted as either significant or not significant. As previously mentioned, the residual adverse environmental effects resulting from temporary closure will be described if such anticipated effects are different than those anticipated at closure. The residual adverse environmental effects of accidents malfunctions and unplanned events are also predicted to the best of MHBL’s ability. To provide emphasis, a separate
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ENVIRONMENTAL ASSESSMENT METHODOLOGY section rating the predicted residual adverse environmental effects of the planned Project overall as well as the planned Project in combination with other projects and activities is provided for a more regional planning perspective for decision-makers. The residual adverse environmental effects predicted for the Project on each VEC are provided in a summary table in each VEC chapter (Table 9.4). Table 9.4 Summary of Residual Adverse Environmental Effects: VEC Name
Probability of Occurrence (Likelihood)* Effect on Ecosystem Function & Integrity* Capacity of Resources to Meet Present & Future Needs*

Project Phase

Residual Adverse Environmental Effect

Significance

1

Construction Operation Closure Post-Closure Accidental Events The Project Overall
1 Significance ratings are made after mitigation has been applied, significance criteria are provided for each VEC

*Note: see definitions in Table 9.5

Definitions of residual environmental effects significance, that are relevant for each VEC, are included in the "Residual Environmental Effects" section of each VEC chapter. Residual environmental effects that are moderate or major are considered to be significant. Residual environmental effects that are negligible or minor are considered to be not significant. For each VEC where residual adverse environmental effects are predicted, the likelihood of occurrence is discussed in terms of: probability of occurrence; effect on ecosystem function and integrity; and the sustainable use (capacity) of renewable resources to meet present and future needs. Definitions for these likelihood ratings are shown in Table 9.5. This approach is consistent with the three steps outlined for determining whether environmental effects are adverse, significant and likely.

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ENVIRONMENTAL ASSESSMENT METHODOLOGY Table 9.5 Definitions for Probability of Occurrence, Effect on Ecosystem Function and Integrity and Sustainable Use of Renewable Resources as Applied to Residual Environmental Effects Ratings
Rating Probability of Occurrence Effect on Ecosystem Function and Integrity residual adverse environmental effects may result in severe ecosystem changes that result in large scale changes in resource management practices/planning and land use residual adverse environmental effects may result in temporary changes resource management practices and land use residual adverse environmental effects will not result in noticeable change to ecosystem components. Changes may be similar to natural variability. anticipated adverse environmental effects area small and may not be detectable Sustainable Use (Capacity) of Renewable Resources to Meet Present and Future Needs previous research/experience indicates that the environmental effect on the VEC would not reduce biodiversity or the capacity of resources to meet present and future needs previous research/experience indicates that the environmental effect on the VEC may, to a certain extent, reduce biodiversity or the capacity of resources to meet present and future needs previous research/experience indicates that the environmental effect on the VEC would reduce biodiversity or the capacity of resources to meet present and future needs previous research/ experience indicates that the environmental effect on the VEC would eliminate biodiversity or the capacity of resources to meet present and future needs

high

an environmental effect is probable and there is no uncertainty based on previous scientific research/experience

moderate

an environmental effect may occur but there is some uncertainty based on previous scientific research/experience an environmental effect has a small probability of occurring and there is little uncertainty based on previous scientific research/experience An environmental effect has no probability of occurring and there is no uncertainty based on previous scientific research/experience

low

nil

unknown

there is insufficient research, There is insufficient knowledge there is insufficient research/experience to experience, Traditional to predict ecosystem effect indicate whether the environmental effect knowledge to predict the on the VEC would reduce biodiversity or likelihood of an environmental the capacity of resources to meet present effect occurring and future needs Note: these definitions as they relate to heritage resources are provided in Chapter 24.

9.10 Use of the EIS for Future Development in the Hope Bay Belt
This environmental assessment focuses primarily on the definition of the Project presented in Chapter 4 as well as this Project in combination with other projects and activities, also defined in Chapter 4. However, this environmental assessment also forms the basis of identifying key environment, health and safety issues that MHBL will need to fully consider should opportunities arise that would result in the potential for expanded activities and projects in the region. MHBL is fully committed to the future environmental assessment and review of any future expansion within the Hope Bay Belt and has developed a plan called Planning for Future Expansion (Chapter 6, Section 6.14) supporting its EH&S Management System to help consider the environmental effects of such possibilities.

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Feasibility Study Guidelines 2006

APPENDIX K ENVIRONMENTAL ASPECTS HANDOUT #9 - EIS TABLE OF CONTENTS SIDE-BY-SIDE

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Conceptual Layout of a Mine Development EIS: SECTION 1 – PROJECT DESCRIPTION AND PLANNING EXECUTIVE SUMMARY
Chapter 1- Introduction The Project and its History The Proponent Environmental Policy Mining: Lessons Learned Sustainable Development, Biodiversity and The Precautionary Principle Scope of the Environmental Assessment Study Strategy and Report Organization Study Team Chapter 2 – Regional Ecological Context The Landscape Region Ecological Land Classification Ecological Processes and Relationships Chapter 3 – Project Description Rationale and Purpose Need for the Project Alternatives to the Project Planning for Project Development Construction Operation Decommissioning Post – Decommissioning Human Resources Occupational Health and Safety Accidental Events Other Projects and Activities Chapter 4 – Environment, Health, Safety and Community Management Systems Purpose Corporate Commitment and EHS &CS Policy Roles and Responsibilities Environmental Assessment and Design Environmental Protection Plans Emergency Response and Contingency Plans Chapter 4 – Environment, Health, Safety and Community Management Systems – (continued) Occupational Health and Safety Plans Human Resources Plan Education and Orientation Plan Aboriginal Involvement Plan Community Involvement Plan Monitoring and Follow – up Plan Auditing and Continuous Improvement Plan Specific Environmental Management Needs Chapter 5 – Communication and Public Consultation Open Houses Baseline Studies Information Programs Workshops Government Meetings Meetings with First Nations Communities Community Involvement Chapter 6 – Issues Scoping and Valued Environmental Components Issues Scoping Selection of Valued Environmental Components Chapter 7 – Environmental Assessment Methods Traditional Knowledge Environmental Baseline Studies Mapping Landscape Perspective Environmental Effects Methods Approach to Assessing Cumulative Environmental Effects Residual Effects Methods – Determination of Significance

SECTION 2 – ENVIRONMENTAL EFFECTS ASSESSMENT
Chapter 8 – Atmospheric Environment Existing Environment Environmental Effects Assessment Residual Environment Effects References Chapter 9 – Water Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 10 – Fish and Fish Habitat Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 11 – Plant Communities Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 12 – Aquatic Furbearers Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 13 – Avian Communities Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 14 – Wetlands Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 15 – Historic Resources Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 16 – Land Use and Culture Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 17 – Employment and Economy Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 18 – Communities and Infrastructure Existing Environment Environmental Effects Assessment Residual Environmental Effects References Chapter 19 – Summary Residual Environmental Effects References

Feasibility Study Guidelines 2006

APPENDIX L CHECK LIST FOR PROJECT EXECUTION PLAN

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CONTENT OF A PROJECT EXECUTION PLAN Scope and Approach
The Scope and Approach will incorporate the following components: • Project Description: This is a description of project characteristics, business case and description of ownership and stakeholder interests. Scope: Physical scope of facilities and services of the project. Performance Criteria: Results of analyses of key performance indicators. Communication: Process for communication of project status to all stakeholders. Responsibility Matrix: Project team organization and details of responsibilities. Includes a table of authorities for budget, scope and schedule changes. Project Stages: Decision points and hand-off points are described and scheduled.

• • • •

Project Organization
A project organizational chart and organizational plan is developed to provide a framework for staffing, managing and executing the project. This will include: • Organization: Develop an organizational chart, incorporating definition of the various teams and their involvement in engineering, construction, project management, commissioning, ramp up, and environment, health and safety. Develop responsibility matrix. Staffing: Establish compensation, benefits and policies. Responsibilities: Define responsibilities in the form of position descriptions. Performance Management: programs. Contractors: contractors. Establish performance guidelines and recognition

• • •

Designate responsibilities for contacts and negotiations with

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Work Breakdown Structure (WBS)
The Work Breakdown Structure is used to define each task of the project and control allocation of resources, scheduling and costs to each component. The WBS will include: • Components: Arranged into engineering, pre-purchased equipment, services and construction packages for detailed design, procurement and construction. Deliverables are also arranged on an individual contract basis and set out the way the work will be performed, how progress will be monitored and the basis on which the contractor will be paid. Cost Breakdown Structure: Costs are arranged by components for reporting purposes. Asset Breakdown Structure: Project deliverables are arranged by physical assets in a manner appropriate for tax benefits. Organizational Breakdown Structure: work packages. Project team organization is paired to

Cost Management
Cost management systems will be employed and are a critical part of cost containment. This component includes: • Project Procedures Manual: Defines the protocols for making changes to project scope, cost, schedules or quantities. Scope Management: Detailed information on each scope item, authorized budget and schedule. Integrated Costs and Schedule Control: Map entire WBS into budgets to allow tracking of costs by each work component. Cost Control: Normally this is a specialized computer cost tracking and reporting system that provides the planned and actual budget (time and cost) and forecasts changes in the schedule and cost based on actuals.

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Change Control: Changes to scope, quantities and materials must have a formal approval mechanism. Financial Management: A defined system of accounts payable and reconciliation of costs with budgets is provided. Contingency Management: Formal approvals for drawdowns of contingency funds are required. Opportunity Analysis: Formal process to routinely evaluate opportunities to improve project based on work executed to date.

Planning and Scheduling
Schedules for each component of the project are provided and included as parts of the master project schedule. The schedules will include: • Project Master Schedule: This schedule includes resource requirements for equipment, personnel as well as camp and support requirements. The schedule clearly identifies the milestone dates and the critical paths. The baseline schedule is used to monitor and report progress. It is usually based upon an early start and late finish to reach each critical milestone and include float time for problems. Critical Path: Gantt chart outline of all work components as designed. Target Schedule: A separate schedule is provided which targets early completion of components to take advantage of possible schedule improvements. Engineering Schedule: Detailed engineering deliverables and timetable for each. Permits and Approvals Schedule: Schedule for completion of all baseline studies and submission of permit applications and anticipated permit receipts. Identification of critical permit points affecting other work and project components. Procurement Schedule: Key milestone dates for equipment and construction components. This includes inspection and commissioning requirements. Construction Schedule: Integrated into baseline schedule and detailed enough to guide scheduling of inspections and execution of contracts.
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Commissioning Schedule: Integrated with construction schedule and includes inspection and approval requirements. Production, Start Up and Ramp-Up Schedule: This is integrated with the commissioning schedule and includes a schedule for start of process feed, confirmation of product quality and ramp up to full production. Manpower and Equipment Schedules: Requirements for specific manpower and equipment are established for each component of the baseline schedule. Progress Tracking: Comparison of planned, actual and forecasted schedules. Operations Interface: Requirements for interfacing with existing operations if new project is an add-on to an existing operation.

• •

Engineering
The engineering phase produces detailed engineering drawings, specifications, bills of materials and bid documents as required for the fabrication and construction of buildings and structures, and the installation of equipment, material, and services. The detailed engineering phase will include the following: • Design Calculations: All designs will be signed, peer reviewed, approved and filed. Design Criteria: Discipline design criteria will have been developed in the Feasibility Study and will be maintained throughout the design engineering phase. Criteria may be improved as additional information is acquired. Specifications: Engineered components will be provided with specifications for manufacture and assembly. Design Drawings: All drawings will be completed, peer reviewed, signed and filed. Construction drawings will include all relevant vendor data. Drawing lists will be maintained and updated. Vendors may supply drawings that will be included. Equipment and Materials: All equipment and materials will be procured in accordance with the specifications and datasheets provided. All equipment to be

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purchased and installed as part of the project will be included on the equipment list. The equipment list developed during the Feasibility Study will be used during the execution phase and updated as the design progresses. Separate motor and instrumentation lists will be compiled if required by the project. All equipment and materials must be quantified and registered. • Equipment and Material Specifications and Data Sheets: Specifications will be supplied for equipment pieces and materials to include process conditions, Performance and duty requirements, scope of supply and exclusions, specific technical requirements, special materials of construction required, quality assurance requirements, and performance test requirements. Vendor and Construction Contracts: These are designed at the engineering stage and will include standards specifications for the work, drawings and contracts to be used. Engineering Control: The following are defined for each work package: Efforthour budget, schedule, progress measurement, performance requirements, scope control and design change, cost, quantity, quality, function and schedule conformance, definitive estimates and opportunity analysis. Vendor Data: This contains all vendor data that have been received and accepted in accordance with designs and specifications. Technical Document Control: A prescriptive document control system is developed to file all documents, reports, communications, designs, specifications, etc. Vendor Operating and Maintenance Manuals: All manuals for equipment are received, reviewed, approved and filed for use in operations.

Procurement and Contracts
Procurement and contracts control ensure that all equipment and materials are purchased and received on time and within budget as originally designed. This will include: • Procurement and Contracting Plans: Plan is developed in the Feasibility Study, reviewed and adjusted as appropriate. A procurement process is defined and used for all procurement activities.
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Commercial and Legal Terms: Contract language will be developed for all procurements. Legal reviews will be required for other contracts. Contracts will include appropriate insurance requirements. Equipment, Materials, Land, Goods and Services: All required equipment contracts are identified, bid invitations are made and awards made. Vendor and Contractor Qualifications: Prepare a qualified bidders list for each work package. Develop a pre-qualification procedure for selection of qualified bidders. Tender Documents: All tender documents are prepared and made ready. Bid Evaluation and Recommendations: Develop a bid evaluation template and guidelines for negotiations. Contract Administration: Develop standard contracts for different services and equipment. Develop payment strategy for all major contracts. International Matters: Address handling of currency fluctuations, customs, duties, shipping, logistics and receiving. Bulk Materials: Develop program to select and obtain bulk materials. Consider possibilities for delays or lack of availability. Procurement Schedule: Monitoring plan for tracking procurement relative to designed schedule. Procurement Reporting: Develop a protocol for communicating procurement information. Vendors: Standards for drawings to be developed by vendors. Develop database of vendors to be involved in construction, mechanical completions, commissioning and ramp ups. Installation Contracts: Develop contracts for installation of equipment and instrumentation.

• •

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Equipment and Contract Completion: Conditions are established for completion requirements of each major contract including schedule, performance testing, support services, and training. Warrantees: Established by contract. Develop database of warrantees to be consulted after equipment failures. Spares: Catalog spares required for first year of operation. Claims: Each contract should have a claims and dispute resolution procedure.

• •

Construction
Construction planning and monitoring must be sufficiently detailed to adequately control construction activities and costs. Construction information must ensure that The purpose of construction planning and monitoring during the execution phase is to ensure that: equipment, materials and systems are installed on schedule and on budget, and that these conform to the project scope, quality, and the requirements of the engineering and procurement documentation. In addition they must ensure that the equipment and materials are installed mechanically complete and handed over to the commissioning team based on the milestone schedule date, ready for operation as per the scope criteria. The construction management components are: • Planning: Establish the construction schedule as established in the Feasibility Study. Construction Schedule: Update the construction schedule and schedule activities, verify construction methods and establish procedures for authorization of work. Site offices and facilities: Establish temporary facilities and services required for construction phase. Site Management: team. Establish responsibilities and procedures for construction

Construction Environment: Develop guidelines for project environmental, health and safety practices.

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Quality Control: Establish quality control procedures for inspection of work. Documentation and Reporting: Establish and maintain daily and weekly reports, minutes of meetings, field reports, schedule changes and acceptance of work and materials. Progress Payments: progress payments. Establish procedures for approval and processing of

Equipment and Materials: materials.

Establish procedures for inspecting and accepting

Field Inspections: Establish procedures for field inspections and approvals or rejections of construction and equipment installations. Vendor Assistance: Establish procedures for inspection of vendor materials. Mark-up Drawings: As built drawings are prepared for piping and instrumentation, buried services, general arrangement layouts, electrical schematics, and pipe and cable routes for power, control and data. Site Schedule: Establish working hours and work day schedules. Site Closure: Prepare plans for site closures or closures of temporary facilities. General Contractor Relationships: with third parties. Establish legal and financial relationships

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• • •

Commissioning
Commissioning activities have the ultimate objective of establishing the first feed to the processing facilities. Aspects of the commissioning phase include: • Safety, Health and Environment: Develop plans to address hazards and maintenance of suitable standards. This will include locking and tagging of equipment, disposal of wastes, and testing of equipment. Mechanical Completion: handover to operations. Document completion of mechanical installation and

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Vendors: Develop plan for vendor assistance in start up and ramp up. Deficiency Lists: Develop process to identify deficiencies and remedies. Spares and Consumables: Identify spares and consumables necessary in commissioning and warehousing required. Operations and Maintenance Procedures: maintenance functions. Develop training necessary for

Management Information Systems: Develop systems for payroll, materials management, purchasing, warehousing, accounting, human resources, and engineering and production planning. Test Procedures: Develop procedures to inspect installation, testing, operation and first feed. First Feed Criteria: facilities. Develop criteria for first feed of materials to processing

Ramp-up and Handover to the Operator
After first feed is introduced to the processing facilities, ramp up in production is carried out to measure process performance under more normal operating conditions. Procedures to be developed in this phase include: • • Deficiencies: Plans to correct deficiencies are developed. Equipment Performance: Performance tests and measures of acceptance are developed. Product Specifications: Specifications of final process products are developed. Environmental Management: Waste management programs previously defined are enacted. Project Documentation: Project documents are filed, organized and provided to operator.

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Cost Control and Contracts: Contracts are let to correct deficiencies identified in ramp up. Modification Protocols: Protocols are established for changes in operating practices to achieve desired specifications of products. Performance Criteria: communicated Performance criteria for ramp up is established and

Information Transfer: Formal transfer of all reference documents, manuals and specifications is made. Permits: All information on operating permits are transferred. Contracts: All completed and active contracts are provided to operation team. Management Systems: Management systems are transferred to operation team, and training provided where necessary. Warrantees: All warrantees are registered and recorded in a database for operations team use. Human Resources: Commissioning team is wound down progressively in handover to operations.

• • •

Project Closure
Project closure occurs when all aspects of the project are handed off to the operations team. This phase will include: Document Handover: Documents are archived. Contracts: Contracts are closed or identified as still active. Claims: Claims are addressed as they occur. Product Verification: Products are measured to ensure that they meet the required specifications.

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Management Information Systems: operations team.

Fully functional systems are handed off to

Acceptance Documents: Handover to operations team is formalized and accepted. Closure Report: A closure report is prepared outlining any remaining issues to be addressed by operations team. Human Resources: Remaining commissioning team is released from the project.

Project Occupational Health, Hygiene, Safety, Security and Public
These plans implement appropriate health, hygiene,safety and security programs for the entire project from detail design, construction, commissioning to operator handover. Plans will include: • Safety Management: procedures. Establish management responsibilities, tools and

Safety Risk Identification: mitigation plans or training.

Establish a program to identify risks and develop

Hazard Identification: Establish a program to routinely identify hazards and eliminate hazards through modifications in facilities or training. Community Issues: Identify issues that may occur during EPCM activities. Industrial Hygiene and Health: environments. Establish program to maintain clean

• •

Disability Management: Develop program to accommodate disabilities in procurement and contracting phases. Safety Inspections and Audits: Establish programs for routine safety inspections and audits and protocols for mitigation of deficiencies. Security: Develop security and access program with staffing and responsibilities. Work Environment: Develop program to maintain quality work environment with management responsibilities.
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Safety Training: retraining.

Develop program of routine safety training, certification and

Safety Program and Standards: Develop procedures and responsibilities for safety program development and maintenance. Emergency Preparedness: Develop a response plan for emergencies, including training, management and communication with local authorities. Contract Safety Conformance: Establish standards for contractor safety performance and mitigation plans for departures from conformance.

Environmental
Environmental compliance procedures are implemented through establishment of policies and procedures, and management protocols. This is maintained throughout the engineering, construction, commissioning and handoff periods. Environmental policies will include: • Policies: policies. Tabulation of all local, regional, national, international and company

• •

Requirements: All legal requirements for permits are tabulated. Environmental Management Plan: A plan is developed to include identification of stakeholders, roles and responsibilities, environmental department organization, budget, systems to minimize impacts, identified risks, control technologies, required training programs, environmental audit and communications plan. Environmental Data: Establish ongoing data acquisition requirements and environmental document controls. Risks: Procedures for identifying risks and responses to risks. Ethics: Establish environmental ethics code.

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Stakeholders: Develop plan for communicating with stakeholders including local community, government, funding agencies, venture partners, NGOs and construction team. Environmental Compliance: Develop plan for dam safety, protection of air, water, flora, aquatics, heritage, wetlands, potable water, land and soil. Energy Management: Develop plan to manage energy consumption. Crisis Management: Develop management plan and coordinate with emergency response plan. Closure and Reclamation: Plan for closure of project construction phase and handoff of environmental responsibilities to operational environmental plan.

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Risk Management
The Risk Management process has the objectives of identifying risks in all phases of the project and development of mitigation plans to address these risks. The process is continuous and monitored by the project manager. Risks in the following areas should be considered:

Project Organization and Execution
• • • • • • • • • • • • • • • Project definition/scope Joint Venture or Consortium partners, experience and ability Personnel defined Provisional experience with subcontractors Clients or suppliers approval of personnel Interface with third parties Nominated subcontractors or suppliers Previous experience with sub contractors or suppliers Clients level of involvement in design, procurement, construction and commissioning Clients procurement procedures Procurement procedures Shipping Communications and culture Transport Logistics
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Organization (maturity, commitment, competence, experience and leadership)

Technical Design
• • • • • • • • • • • • • • • • • • Design and construction Previous experience with designers Design adequacy Reliability Recognized codes and standards defined Certification/verification requirements New technology Unfamiliar codes and standards Design responsibilities defined Specifications and responsibility for errors or deficiencies, etc. Design risks arising from surveys and investigations etc. Geotechnical Likelihood of change (design development) Design approvals Interaction between design and construction IT strategy for project Quality assurance requirements Ability to build design

Construction
• • • • • • • • • • • • • • • Performance requirements Quality Control Planning and program Critical path activities Complexity New construction methods Construction methods feasibility Sequence of activities Labour and resources, experience and availability Workmanship Records Long deliveries M&E services, plant and equipment Construction plan, cranes and equipment Defects and errors
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• • • • • • • • • • • • •

Labour relations Brownfield or Greenfield site Safety Permits and licenses Restrictions on access, working hours Storage, marshalling and assembly areas Completion, commissioning and handover Liabilities for program overrun Accuracy of tender program Weather downtime responsibilities Programs from major suppliers/subcontractors Defined shutdown periods, holidays Third party relationships

Environmental
• • • • • • • • • • • • • • • • • • • • • • • • Site investigations Unforeseen ground conditions Services, contamination, mine workings Archaeological discovery Weather Earthquake Flooding Fire and Explosion Settlement and landslides Contaminated land Pollution Nuisance (eg. Noise) Permissions Public Opinion Environment law or regulations Environmental impact assessment Required/Completed Other restrictions Local issues Public Enquiry Waste disposal and treatment Archaeological and heritage issues Working environment for personnel Accessibility Spills
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Fire EIA Commitments

Community
• • • • • Community relations Stakeholders response Public relations Community impacts Social impacts

Safety
• • • • • • • • • • • • Regulations and legislation Hazardous substances Collisions Flooding Fire and explosion Collapse Confined spaces Access Health requirements Site location and local labour Lifting, dropping and falling Healthcare/evacuation

Political
• • • • • • • • • Political Regime Government Policy Public Opinion Disorder (war, terrorism, riots) Legislation Socio-economic impacts Previous experience in country Language/custom differences Legal system reliability

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Economic
• • • • • Taxation Cost inflation Interest Rates Exchange Rates Exchange controls

Markets
• • • • Demand (forecasts) Competition Customer satisfaction Obsolescence

Financial
• • • • • Bankruptcy Margins Insurance Risk Share Project funding

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Commercial and Legal
• • • • • • • • • • • • • • • • • • • • • Defined liabilities Performance bonds Liquidated damages Responsibilities defined Definition of handover, completion or acceptance Applicable law (English or other) Contract language Payment and invoicing procedure Supplier and subcontractor default Currency of payment Insurances – standard or project specific Estimate accuracy and agency fees etc. Escalation Force Majeure definition Previous experience with client Cancellation or postponement of project Variations procedures Contract/subcontract issues Patents and royalties Warranties Confidentiality

Quality Controls
Quality controls must be established that will include the following components: • Plan: Establish specific procedures for acceptance and approval of each component of engineering, procurement, construction, commissioning and production. Design Reviews: standards. Review detailed designs to ensure compliance with design

Project Schedule: Confirmation of activities being carried out on schedule by appropriate staff. Vendor Information: Review of specifications of equipment received to ensure compliance with original designs.
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Equipment Tests: suitability.

Confirmation of tests performed to determine equipment

• •

Contractor Review: Review of contractor guarantees of performance. Site Inspections: Site inspections of contractor work.

Technology and Intellectual Property
The following issues will need to be addressed: • • Intellectual Property: Confirm agreements in place to use IP. Technical Expertise: Confirm acquisition and scheduling of specialized expertise required to execute the project. Technology Transfer: Confirm documents necessary for training and conveyance of information to operations team. Licenses: Confirm process or technology licenses necessary for operation. Patents and Copyrights: applications. Confirm requirement for patent and copyright

• •

Confidentiality Agreements: Confirm signing of confidentiality agreements where necessary.

Communications and Reports
A detailed communication and reporting plan is developed to include: Communication: Defined and scheduled project communication documents and responsibilities for reports. Reports: Establish reports that will be required and persons responsible. Forecasts: Establish forecast reports required. Project Reviews: Establish and schedule project reviews at key decision points.
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Stakeholder Reports: Establish reports to be provided to joint venture partners, banks, communities and other stakeholders. Public Relations: Develop public relations plan.

Financial Management and Administration
A financial management system is developed which will include: • • • • • Accounting Controls: Accounting policies and procedures. Audits: Develop plan for internal and external audits. Insurance: Obtain necessary project insurance. Foreign Exchange: Manage risks imposed by exchange changes. Performance Management: Track project financial performance relative to as developed in the Feasibility Study.

Project Responsibilities
Project work and management responsibilities need to be clearly defined. following is a typical arrangement of responsibilities: Project Management Team • • • • • • • • • • • • • • Project execution and coordination Project safety, health, hygiene, environmental and security Meeting cost, schedule, operational requirements Acquiring project staff, contracts and purchase orders, contractual payments Regular reporting Change Management including areas such as Cost, Schedule and Risk Client Interaction Risk Management Analyzing, Forecasting, Managing and Communicating Variances Ensure an appropriate level of auditing, quality control and quality assurance Project closure Scope Management Stakeholder management Owners team interaction
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Joint Venture or Partners management

Owner’s Team • • • • • • • • • • • • • • • • • • • Permits and Approvals EPCM team interface Operability and Maintenance Interface EPCM team and Stakeholders Interface with Operator Scope management Reporting Systems acceptance Opportunity analysis Delivery of Financial outcomes Project payment Peer reviews Government Community and Public Senior management interface Work authorization and release Decision analysis and acceptance EPCM effectiveness resources, process and delivery Co-owner or Partner relations and communications

Engineering Team • • • • • • • • • • • • • • Engineering planning and scheduling Engineering specifications and quality aspects All engineering disciplines Engineering workflow Engineering methodologies Design Basis, Specifications and Standards Technical document control including revision control Integration with procurement, construction, commissioning Engineering deliverables Materials and warehousing takeoffs Interdisciplinary coordination of engineering, technical and vendor information Field engineering inquiries Engineering deliverables for procurement and construction Engineering technology tools
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Engineering close out and archiving

Project Controls Team • • • • • • • • • • • • • Planning/scheduling Definitive cost estimate Document control content policies and procedures Change management Project procedures Cost control Schedule control Estimate updates Cash flow reporting and updating Forecasting of total installed cost and completion dates. Accounting and payments Reporting Close out documentation and requirements including archiving

Procurement Team • • • • • • • • • • • • • •

Purchasing Logistics Contract administration Payment reconciliation Contract formation Contract strategy Contract closure Expediting Payment forecast and cashflow Customs and Duties Transportation and Freight Warranty and Guarantee Insurance Storage and Warehousing Materials management

Construction Management Team • • Construction Safety, Health and Hygiene Construction Environment
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• • • • • • • • • •

Constructability Construction Strategy execution approval Construction drawings and documents Field Engineering including field reports and logs Site cost and schedule control Industrial relations Construction quality Construction turnover package and punch lists System cleaning and preparation for commissioning Contract execution Site security

Commissioning Team • • • • • • • • • • • Acceptance from Construction to handover to Operations, including agreed to ramp-up to production Energizing of components and systems Mechanical completion acceptance Commissioning, planning and scheduling Training manuals and programs Maintenance manuals Scope verification Vendor input Management systems such as Payroll, Warehousing, Maintenance Management Spares Ramp up plan

Environmental, Health Hygiene and Safety Team • • • • • • • • • • Safety programs Hygiene Environmental control, monitoring and reporting Emergency plan and preparedness Health program. Public impacts and assessment Security Community awareness and Response Contractors E, H and S plans Contractor Pre-qualification and selection Safety standards, rules and regulations

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Quality Assurance Team • • • • • • • Quality planning and standards Quality control program Quality assurance program Inspections, Testing and Verification Storage and Shipping standards Quality audits Quality document control

Human Resources Team • • • • • • • • • • • Policies and Programs for Human resources Recruitment and Staffing Employee Relations Individual Development and Career planning Personal Performance management Labour and Industrial relations Transition planning Competency and Skills assessment Total Compensation (including base pay, benefits, pension, variable compensation) Expatriate considerations Job Descriptions Immigration and Work permits

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