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We are available to perform "Third Party
Reviews" of any 43-101 technical studies, scoping studies or related mine
planning documents. We seek to critique or perhaps change several key
parameters to reinterpret conclusions.
We do not represent ourselves as "Qualified
Persons" under Ontario regulations to perform 43-101 studies, nor are we
mine engineers or metallurgists or geologists. We do not seek to become
scientists per se.
However, as substantial readers and users of
such studies we find two common issues permeate all. First, the principal
authors of such studies often are scientists in one of the three disciplines
important to the exercises, and lack expertise in the others. If a very
large organization publishes the studies, sometimes bureaucratic weaknesses
are evident in the time, money and quality of the work involved.
Second and more important, mine scientists that
are truly competent as businessmen usually choose to run companies rather
than write 250 to 500 page studies. Rarely are we comfortable with the
economic or business assumptions implicit in such studies.
Disingenuous
economic assumptions often cause such studies to be "mine destroyers" rather
than mine planning documents. The "phasing" of capital outlays rather than
one huge bullet expenditure, contract mining, sidestepping 100% vertical
integration such as farming out an oxygen plant or nickel refinery,
"simultaneity" of selling price and input cost assumptions (e.g. low prices
and high costs = over-conservatism while peak prices and $30 oil = fraud),
appropriate discount rates to reflect local risks and related economic or
business planning issues. Further, we believe that such studies should
budget to include capitalized interest and at least some consideration of
financing practicalities.
All of our personnel are mathematicians, and we
take great interest in the mathematics of reserve determination. The
standard deviation of ore grades and coefficients of variation are key
measures of uncertainty. We often second guess assay cutting, economic
cutoffs, areas of influence, drill hole spacing, the inclusion or exclusion
of observations and related issues. Often we may choose to present
resource data under many different scenarios rather than representing a
single simplistic calculation.
We may go out and "invite bids" from actual
contractors to reassess capital cost estimates if they appear out of line.
Under no circumstances will we accept finders fees, referral fees or
commissions from mine equipment, contractors or other suppliers. Because
our clients in our primary businesses are equity investors, we have no
interest in "over-estimating capital" to "provide an umbrella" to next phase
engineers or contractors to over-bid.
We do not seek to develop "Mine Services" as an
independent consulting revenue center to be "billed by the hour." We do not
want to take time away from our investment research reports. Creativity and
insight in our primary businesses should be much more lucrative to us. We
envision this potential line of business as a sort of "service" to our
friends in the mining community owing to the capacity shortfalls among
traditional technical advisors.
Instead, perhaps once a year we may undertake
such a study. If necessary, we will engage a Qualified Person appropriate
to the task or specific technical issues involved. We will seek to
price such studies "reasonably" to recover something for our time, and we
will require the proviso of our being a minimum of a co-advisor on all
financings or transactions of the client over the next five years.
After all, the underlying studies are a key input to any such financing.
We may perform such services for large financial
institutions, banks or investment firms, as part of their due diligence
processes. We will seek a base fee and a fraction of their financing fees
as engaged.
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Copyright © 2008 John Tumazos Very Independent Opinions, LLC
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