Tim Oliver's Death List
Issue 144, November 2015
Meet Tim Oliver, a minerals engineer in Arizona, who maintains a death-list of new projects showing signs of a potentially fatal engineering defect.
Oliver advises companies, ironing-out difficulties before they multiply, but he is also used as an on-call engineer to some of the largest mining investors in the US, to ferret out flaws in a project's engineering. Talking in gallons per minute and tonnes per day, he says investors take “a leap of faith” when it comes to engineering.
“I see so many supposedly crack investors that do the stupidest things,” he says. “They all hire geologists, but nobody looks at the engineering.” Investors “just figure that if an engineer stamped it and I don't understand it, it must be okay.”
All too often that is not the case. In June, Rubicon Minerals poured its first gold bar from its Phoenix underground gold mine in Canada's Red Lake district, but on Tuesday, its shares tanked 55 per cent after the company suspended Phoenix, saying it “requires additional analysis.”
The “much ballyhooed June gold pour was just a show,” Oliver believes. “Rubicon managed to choke enough ore through the grinding mill to collect sufficient gravity concentrates to stage a gold pour.” Rubicon maintains that its mill commissioning is complete, but Oliver's analysis of its public filings suggests the mill has only run for around 20 days in the last 5 months.
The company was high on Oliver's watch list; he was calling Phoenix “toast” in early October. So where else is he looking?
Valued at C$55m ($42m), Largo Resources reported record daily production in August at its Maracas vanadium mine in Brazil, but the mine is burning cash and is chronically behind schedule.
Construction began in 2012, but Maracas has failed to sustain nameplate capacity and ramp-up remains incomplete. Last month, its CEO Mark Smith admitted the operation is facing a catalogue of engineering failures, forcing it to replace key parts, including tanks and conveyers.
Like Rubicon Minerals, to avoid the cost of a detailed engineering assessment, Largo built the mine off a preliminary economic assessment, or PEA, which Oliver describes as little more than a “guess” at a cost estimate. The “single biggest sin in mine development”, he says, is “building a project without adequate engineering... The construction itself doesn't lie.”
Cut corners, bullish assumptions and rose-tinted reports designed to push projects passed boards are just some of the problems behind mine construction that barely get reported to the stock exchange, yet have the power to sink a company.
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