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PROJECT DEVELOPMENT

Project Development Learn More

THE PROBLEM

Historically, mining has been a difficult business to develop in. Much of the industry is focused on project generation as opposed to development. One key theme of this project generation narrative we want to dispel is that all of the major upside in the industry lies in exploration.  

We don’t believe this for two reasons: 

  1. Exploration is by definition, professional treasure hunting - 97% of exploration assets do not get developed into projects. 

  2. Effective project delivery is a far more reliable method to generate value that does not rely on luck.

 

The Lassonde curve provides a visual representation of the life cycle of a junior mining company. Below is a Lassonde curve against the share price of West African Resources. The development penalty is largely unsubstantiated with a massive value increase lying in development.

The recent rise of commodity prices, have led to increase valuations for juniors. This has interested private and public entities, as they pursue a limited number of assets in the resource sector, typically with one of two strategies: 

First Wave Surfers

  • Deemed as the Project Generators

  • Investment through exploration, exits before construction 

  • Relies on exploration success to drive value 

  • Typically overstates the resource, and uses optimistic assumptions to drive value on paper 

Goldilocks Hunters 

  • Deemed the Project Saviors 

  • Looks for the undervalued assets constrained to a specific profile 

  • Relies on realizing unidentified value - Increasingly difficult to do in current market 

  • Lack of undervalued projects in current market 

THE LIFECYCLE OF A MINERAL DISCOVERY

LASSONDE CURVE 

Development provides reliable upside for proven teams.

WHY NO ONE WANTS TO DEVELOP

If most juniors are fully valued and Goldilocks projects are thin on the ground, why are most juniors looking to divest prior to development? 

 

According to McKinsey: 

  • Over 80% of projects finish over budget, while 50% of projects finish more than ~50% over budget. 

  • 75% fail to reach name plate within a year of commencing production. 

  • The mining industry has a poor history of project development, and this is reflected in the reluctance to develop greenfield resources.

Source: McKinsey & Company survey of 41 major projects with capex greater than $500m and completed between 2008 and 2018.

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Only 20% of mining and metals projects achieve operating costs and outcomes within parameters predicted during feasibility study. 

A survey of 40+ mining projects completed in the last 10 years shows an average OPEX overrun of 60% vs. metrics announced at feasibility study. 

WHY DO PROJECTS FAIL?

The Many and the Few 

There are many junior miners and few proven development teams. Not all experience is equal in an environment where most projects finish late and over budget. 

Misaligned Incentives 

Feasibility studies produced by the Lassonde Curve Surfers are developed to showcase assets, which can create unachievable project metrics in pursuit of better exit valuations. This provides a very challenging hurdle for due diligence, asset valuation, and acquisition.

Management Teams Lack Recency 

Even with successful project personnel, most juniors have limited recent project development experience due to long project lifecycles from study into production. Our team at Orange Mining has delivered four greenfield mines and numerous brownfields upgrades in the last 10 years. 

Productivity 

Most junior mining companies are not structured to support the rigor or pace required to deliver projects on time and on budget.  

Success is Not Defined 

Projects must do more than be built. They must achieve feasibility costs, grade, and production volumes, and do so reliably for the life of the mine. 

"Parachuting in individual experts… seldom works effectively. These may be accomplished leaders, but too often, the sum of their experience adds up to less than their individual skills. At best, they struggle to integrate their thinking and identify priorities. At worst, they develop ineffectual plans by consensus after prolonged debate." McKinsey

Avoid typical development traps by using a proven development team. 

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A WORLD-CLASS PLATFORM FOR DEVELOPMENT

OUR BUSINESS

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Project Development 

At Orange Mining, we offer a turn-key solution for project studies and development. Rather than ad-hoc consulting, we provide a complete study and project delivery service utilizing a top shelf team that would otherwise be inaccessible to junior developers. We maximize your asset value by bringing together a team of proven technical, legal, and commercial experts for the development of mining projects globally.  

Our initial business strategy serviced the private equity space, however over half of our work is now for listed companies including ASX, TSX, and AIM juniors and producers. 

Our Model 

OM takes fees and equity, with skin in the game through an aligned incentive structure, you can be assured of our commitment in adding value to your business. Fees are billed as a fixed monthly cost, and equity is payable on achievement of key project metrics including study and/or project delivery, and key milestones including IRR, NPV, and funding hurdles.

Looking Forward 

OM has built a team to rapidly assess potential development opportunities and execute the work to turn these into sustainably profitable mines. Many of the global opportunities lie in being able to develop and operate mines, a proven skill for this team.

While 93% of mining project globally finishing late and over budget (McKinsey, 2018), our team has a track record of on-time and on-budget delivery. Having developed greenfield  mines with a combined value of our $1.5B in the last 10 years, along with continuous feasibility studies, Orange Mining offers unparalleled experience and credibility. With deep operational roots, Orange Mining provides a seamless transition from study, development, and into value driven production.

The major opportunity Orange Mining sees for wealth creation in the mining space is the acquisition and development of greenfield properties. Greenfields exploration is a gamble, while the upside through development with a proven team is a far more reliable route to value creation. This is driven by market metrics which price operating assets at a significant premium, and burden junior greenfields developers with significant risk discounts. We look to ease the burden junior developers face by reducing funding and development risk and maximizing value. 

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Project Development Services

Orange Mining principally provides Project Management and Development Services for Private Equity and Listed Companies looking to advance exploration assets into production.

Our core business is providing a turn-key service to move exploration projects into development and production on time and on budget. Our team comes with extensive and recent global development and operation experience to execute on:

Exploration Phase

Turnkey Exploration Management

Study Phase & FEED

NI43-101 and JORC Feasibility Studies & Front-end Engineering and Design

Finance

Financing/Transaction Support and Project Finance/Operational Modelling

Project Execution

Self-perform or traditional contractor management construction.

OUR
CURRENT
WORK

Leading Due Diligence for Private Equity

Exploration Targeting

Management of Exploration Programs

Compliance and functional management of:

  • ESG including GHG Emissions Strategies

  • Safety

  • Mineral/Mining Law

  • Employment/Labour Law

  • Tax

  • Commercial and procurement standard form agreements

  • Reporting framework

 

Permitting and Government Relations

Finance and cash flow modelling

Project Management

Design Management

Construction Management

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