Evaluation of Small Scale Mining Operations

Abstract

This dissertation aims to evaluate the Abcourt-Barvue project, as a small scale mine. The company, Abcourt Mines Incorporated, claims in its Technical Feasibility Study (TFS) published in 2019 that it plans to set-up a mine-mill complex with a capacity of 1800 tonnes per day and a mine life of 13 years. The mineralization discovered on the property is a zinc- silver mineralization. The company estimates the CAPEX for development to be around $37.3M and the after-tax NPV to be around $41M and an IRR of 20.5% with a payback period of 5.3 years. The evaluation will cover various aspects of the project such as production plan, mineral processing and financial evaluation. The evaluation of the production plan will cover aspects such as whether the plan and costs associated are achievable. In the mineral processing evaluation, similar companies will be investigated to ensure that assumptions made by Abcourt Mines Inc. are reasonable and can be achieved by the company. The financial evaluation will involve three scenarios: base case with updated assumptions, base case plus inferred resources and base case plus a silver streaming agreement. Deterministic modelling will be done on all three scenarios and stochastic modelling on the first two scenarios. Evaluations concluded that this project is unfeasible for mining by Abcourt Mines Inc. due to inexperience in mining and processing zinc, production plan is stretched out to the limit and capital expenditure kept to the bare minimum. All three scenarios have generated NPVs and IRRs that are not encouraging for investment. The project shows a high level of sensitivity and most likely would face halting to operation if executed by Abcourt Mines Inc. Therefore, it is recommended that the deposit is developed by larger and experienced iii companies where operations can be shared with their other facilities. Glencore, which is an ore supplier giant, may find this deposit interesting since they own two properties in the Abitibi region (Matagami and Kidd Creek). Alternatively, Abcourt Mines Inc. may seek to partner with Agnico Mines Ltd., a similar sized company with zinc mining and processing experience, to make the project more attractive for execution.