What is a mining consultant?
Independent technical consultants play an increasingly important role in the cross-border mergers and acquisitions when the mining industry is actively capitalised. Generally speaking, independent technical consultants can be either companies or individuals. In other countries, technical services can be provided by individuals with the qualifications and competence relevant to the mining practice, while due to national and cultural differences of China, independent technical consultants still commonly exist in the form of consulting companies or advisory firms, instead of individuals. The main services include prospecting, exploration guidance, technical studies, independent technical due diligence, qualified person’s reporting, engineering design, and specific solutions.
Why is mining consulting vital?
Not every stakeholder involved in the mining industry has a technical background. Even for those who are mining professionals, their knowledge and experience are limited to a specific discipline and it is not possible to cover everything. For example, a geologist may not know much about mining, and vice versa. Mining consulting companies are a collection of multiple disciplines of mining professionals and able to conduct comprehensive or special evaluations of projects, including geology, resources, reserves, mining, geotechnical, metallurgical, environmental and social, cost and project valuation.
Who needs the consulting services?
The mine owner or operator usually needs the guidance from consulting companies to solve practical problems or design work plans during the exploration, development, and operating phases through to mine closure.
Potential investors or other stakeholders of the project may request the service. Since many investors are funds and banks, focused on making financial or strategic investments, there may be a request to commission a professional mining consulting company to carry out due diligence reviews to support investment decision-making or business negotiation. Even for the investor who is a mining company with certain technical capacity, and has already performed internal due diligence, a third party due diligence report is commonly required as a reference and mutual checking mechanism (which is now a common requirement for most state-owned enterprises of China to make investments). The statistics for all Australian gold projects in 1998 indicated that 57% of projects exceeded the planned financial investment, and 43% had higher operating costs than planning (feasibility study), while 68% had lower recovered grades than expected, and 66% were unable to achieve their expected production. Most of the issues and failures appear to be due to the lack of proper technical guidance.
The mandatory requirement of public disclosure usually requires the services of consulting companies. For projects that require public disclosure to the market (initial public offerings, mergers and acquisitions or annual reporting), an independent technical report (usually prepared by a consulting company) is a necessary part of the prospectus or circular. There are currently three main mining regulatory reporting standards accepted on most stock exchanges or public capital markets, which refer to the JORC Code, the NI 43-101 Standards and the SAMREC Code.
