understanding risks & identifying opportunities reflection ... · • a multi-skilled project...
TRANSCRIPT
Technical Due Diligence
Understanding Risks &
Identifying Opportunities
Reflection on International Practices
Jeff Elliott
Managing Director
GKZ Convention , Moscow, 30th May 2017 www.csaglobal.com
CSA Global is a leading mining, geological, technology &
management consulting company
We provide high quality solutions to our clients across the
global minerals industry
Our team consists of geologists, mining engineers, project
managers, data scientists, information technology professionals
and technical personnel.
About CSA Global
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
EXPLORATION RESOURCES MINING TECHNOLOGY CORPORATE
CSA Global is a leading mining, geological, technology &
management consulting company
We provide high quality solutions to our clients across the global
minerals industry
We have a multi-discipline team consisting of geologists, mining
engineers, project managers, data scientists, information
technology professionals and support personnel.
It is an objective
investigation of an asset
being considered for
potential purchase or
investment
It involves a rapid and
high-level assessment of
a large quantity of data,
information and opinions
What is Due Diligence?
GKZ Convention , Moscow, 30th May 2017 www.csaglobal.com
“Due diligence (‘DD’) is both an art and a science”
Why do we do it?
• To validate key components that support the value of the asset
• To define risks and evaluate the potential impact on project value
• To assess upside potential
• To highlight key value drivers (↑ & ↓) prior to deal completion
Due Diligence – why?
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
Top-down focus on key value drivers
After validation, the main
objective is to assess:
• risks
• opportunities
• value
Must focus on key value drivers……will not have time for detailed review of every aspect of a project……need to work quickly to identify fatal flaws or project weaknesses
Technical Due Diligence
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
How do we do it?
• Rapidly and efficiently
• Select the right team
• Use tools where available
• Get the full data set
• Visit site
• Ask questions
Due Diligence Process
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
Can use SWOT analysis
➢ Strengths
➢Weaknesses
➢Opportunities
➢ Threats
Avoid:
• Trying to read
everything
• Too much detail
• Aspects that won’t affect economicsGeology Resources Reserves
Due Diligence Planning
www.csaglobal.com
Focus on:
• Top-down approach
• A structured framework
• Concentrate on critical elements
• Looking for fatal flaws and gaps
Time is of the essence…• Days to weeks to assess information compiled over many years…
so be efficient…
Conclusions must be transparent, defensible and justified
Due Diligence Scheduling
www.csaglobal.com
How much time and money are you willing to invest?
• Time pressure can come from both sides of the deal
• Take a top-down approach
• Focus on materiality
• Use 80:20 rule
• Work rapidly and efficiently
• Communicate frequently
• Allow sufficient time
• Desk-top study: a few days to
a few weeks
• Site visit: 2-3 days per site plus travel time
• Follow up questions: days to weeks
• Reporting: typically 1-2 weeks
Assemble an experienced team with relevant skills…• A multi-skilled project manager should lead the DD team
• Mining operations have the most risks and highest value
• Generally a team is required e.g. a geologist, mining engineer and a
metallurgist with input from other specialists
• Pre-development assets - from scoping study to BFS
• Skills of DD team should align to assess key project risks
• Exploration assets – focus is geological potential and data quality
• Evaluated by an exploration geologist
with consideration of development issues
• Site visit is typically restricted to key
person (leader) or core of team
Due Diligence Team
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
Key risk elements of mining projects change over time:
• Some risks accumulate, others decrease with project maturity
• Risk assessment focus must change as the project develops
Risk in Mining Projects
www.csaglobal.com
Source: John Wheadon, 2011
GKZ Convention , Moscow, 30th May 2017
Discovery PFS BFS Approval Design
Construct Operations Upgrades Operations Closure
Resource Financial
Delivery
DesignProject
Business Design Business Closure
HSE HSEBuild
Key risk
Environmental and social risks
Project Value (NPV)
Annual Revenue
Metal/Product produced
Tonnes
Volume Density
Recovered Grade
In-situ gradeRecovery
factors
Price
Annual Costs (capex, opex)
Other deductions
Identify Value Drivers
www.csaglobal.com
Source: Peter Ravenscroft, 2013
What underpins a mining project?
• What factors can have a material
impact on project value?
• Geological understanding
has downstream impacts
• Mineral Resource est.
are core to valueA simplistic view
that highlights
areas of focus
Geology-driven with mining and metallurgical factors
Use tools to manage & evaluate project information
• Reporting standards provide a great
framework for due diligence
• The JORC Code, Table 1: Checklist of
Assessment & Reporting Criteria
• NI 43-101 reporting standard & guidelines
• Customised due diligence checklists and
auditing tools
• Industry databases e.g. SNL Metals & Mining
• Virtual data rooms e.g. www.SpringTech.io
Tools for Due Diligence
www.csaglobal.comGKZ Convention , Moscow, 30th May 2017
Due Diligence
GKZ Convention , Moscow, 30th May 2017 www.csaglobal.com
Due diligence is part of the investment – be diligent
• Remain independent - don’t become excited by the opportunity• The larger the investment, the more at risk, invest time to assess
risks, opportunities and value
• Try to understand the objectives of the parties in the transaction
• Be prepared and organised
• Focus on key value drivers
• Is all the info presented?
• Visit site, meet the key people
• Ask questions and don’t accept the first answer as the final
• Trust your gut instinct
Cheap
Willing seller
Quality
There is need for
compromise in all
transactions
For more information
please contact:
Follow Us On:
www.csaglobal.com
Igor Svintitskiy
General Manager
Thank you for your attention
For more
information please
contact: