CD: Could you explain what makes the analysis in an international arbitration regarding a mining venture different from disputes regarding other types of operations?

Burrows: The main difference is that the economic analysis is typically prospective in nature as disputes often occur well before production starts. Mining projects often span decades from the initial geological work to initiation of production and ultimately a working mine. Mining can be divided into six phases: first, geoscience surveys; second, exploration;  third, discovery, which depends on field work, investment and quality geoscience to bring exploration to the development state; fourth, development, which includes pre-feasibility studies, metallurgical testing and evaluation, creation of a block resource model, a feasibility study, detailed engineering, raising capital and site preparation and construction; fifth, production; and, finally, reclamation after the end of commercial mining. A typical time line for the investment process would be three-plus years for exploration, six months for the preliminary economic assessment; 1-2 years for feasibility studies and detailed engineering; and 1-2 years for construction and site preparation. However, some projects can take decades to develop, particularly if there are significant environmental issues, a difficult operating environment or social concerns.

Jul-Sep 2014 issue

Charles River Associates (CRA)