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68 www.resourceworld.com F E B R U A R Y / M A R C H 2 0 1 7 T he old adage "Mines are made not found" is a good start to "How to Build a Mine". There are thou- sands of mineral discoveries with very few that reach the positive feasibility stage and fewer yet where a profitable mine is actu- ally built. There are three key components to building a mine, starting with a compe- tent, experienced management team. The second component is the financing required to build the mine. The third component is the deposit, which needs to be technically sound and economically feasible. This arti - cle assumes that a positive feasibility study (FS) has been completed. In a normal mining market, financing will be available to proven management teams. An experienced management team can make the most out of a marginal deposit, while an inexperienced team can botch up the best deposit. This is not to say that good teams have not failed, as a number of very successful mine builders have started with, or had at least one fail - ure, in their careers. An FS produces a Life-of-Mine plan with development and production sched- ules based on the mining method and operating rate determined. The operating rate is based on what is practically and technically achievable for the deposit. Operating costs and capital costs are developed to within +/- 20% or better. A Life-of-Mine cash flow model is developed to include all revenue, operating costs and capital costs with the cash flow generating Net Present Values for the mine at several discount rates. An after-tax Internal Rate of Return of about 20% to 30% would be considered positive, combined with a quick payback of capital of two to three years and a mine life of five to ten years with a longer mine life preferred. Also, to allow some leeway for slower ramp up to full production, swings in metal prices and mistakes, it is very important to have sufficient cash flow, say double, to payback the initial capital. The strategy should be to develop the mine as quickly as possible with the least amount of capital and mining /processing the high - est grades first. Armed with a positive FS, senior man- agement and the board of directors of the company that owns the project must decide whether they want to sell the proj- ect or their company, find a joint venture partner, or to build the mine themselves. Management's first responsibility is to do what is best for the majority of the share- holders. Thus, if the price is right, a sale of the company may be the best route. A sale of the project and not the company is more complicated, as cash or shares remain in the company. The second option would be to find a How to build a mine by Fred Sveinson, PEng President International Mine Builders Inc. MININGWORLD A mining engineer takes us through the complex process of building a mine