CHAPTER 1 AN OVERVIEW OF IDLE MINES PROPERTY MANAGEMENT

• Jurisdiction: United States

Idle Mining Properties
(Sep 1998)
CHAPTER 1
AN OVERVIEW OF IDLE MINES PROPERTY MANAGEMENT
Robert C. Armstrong
Armstrong Associates International LLC
Denver, Colorado

IDLE MINES WORKSHOP

DEFINITION

• Mining is a risky business

— the resource is hidden from view

— the resource is finite, non-renewable

— all mines will eventually close

• Mine closure can be temporary or permanent

— idle mines are "temporarily closed" mines

• All idle mines are a liability

— if it is not producing, it is costing money

— sometimes becomes impossible to sell or close in future

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IDLE MINES WORKSHOP

REASONS FOR TEMPORARY CLOSURE

• REVENUES DOWN

— External

• market change — demand, substitution

• market management — metal and concentrate supply

• metal price change — lower forward prices, dumping (Central Banks)

• major new production

— Internal

• grade too low

• reserves not there

• product quality too low — impurities, penalties

• mining problems — increased water, safety concerns

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• COSTS UP

— External

• compliance with new regulations

— environmental, land-use, health, safety, employment

• financing

— Internal

• wages and benefits

• mining and processing costs as mine matures

• labor relations — strikes

• POLITICAL PRESSURES

• CHANGE IN STRATEGY

• size, location, product, cost structure, mine life, potential

• usually occurs on takeover, and probably should have happened earlier

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REASONS FOR RE-OPENING MINES

• ECONOMICS

• better metal prices

• reduced costs, smarter management

• new markets

• NEW TECHNOLOGY

• mining — longhole stoping, bigger, better equipment

• processing — heap leaching, bioleach, hydrometallurgy

• OWNERSHIP CHANGE

• new methods with reduced costs

• combination with another operation

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BUSINESS PLAN

• Imperative to have a plan for each idled property

— to not have a plan is to court financial and political loss

— wastes shareholders'...