Due Diligence for Mining License and Project Acquisitions
When acquiring or transferring a mining license or project, a thorough due diligence review is essential for understanding true asset value. Critical elements such as resource and reserve verification, operational feasibility, environmental impact assessment, and legal compliance must be carefully evaluated, as outlined below. Having these technical areas reviewed by independent mining consultants is one of the most reliable ways to minimize risk and protect your investment.
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1. General Information & Tenure Verification
This section focuses on verifying the legal status, boundaries, validity, and transferability of the mining license.
• License type, ownership, scope, and validity dates
• Verification of all exploration and operating permits and on-site confirmation
• Assessment of proximity to environmental protected zones or mining-restricted areas
• Inventory of workforce, equipment, and accounting records (if applicable)
• Identification of any conditions preventing license or company transfer
• Field verification of license boundaries using updated MTA/MIGEM coordinates
• Detection of overlapping licenses, pasture rights, surface ownership or other land claims
2. Geology & Mineral Resources/Reserves
This section outlines the evaluation of the project’s true potential, economic continuity, and the technical reliability of its reported resources and reserves.
• Review of all geological mapping, sampling, and geophysical raw data and reports
• On-site inspection of outcrops and rapid geological mapping
• Verification of drillhole data accuracy and QA/QC documentation
• Assessment of the need for confirmatory or infill drilling
• Verification of geological and structural 3D models
• Review of resource/reserve reports compliant with JORC, NI 43-101, UMREK, etc.
• Verification that mined volumes are properly surveyed and deducted from resources
• Evaluation of mineralization concept and grade distribution homogeneity
• Continuity assessment and economic viability under current metal prices
• Commodity price forecasting (short–mid–long term) and scenario modelling
• Evaluation of existing ROM or processed ore stockpiles
• Recalculation of cut-off grades and economic blocks based on metallurgical recovery
• Validation of survey accuracy, chain-of-custody protocols, and laboratory QA/QC
3. Geotechnical & Ground Conditions
This section reviews the geomechanical characteristics that influence the physical stability of both open-pit and underground mining operations.
• Major faults, fracture systems, and stability evaluation
• Rock strength, deformability, and mechanical behavior analysis
• Groundwater conditions and drainage requirements
• Slope design parameters, bench geometry, and factors of safety for open pit operations
• Underground excavation dimensions, roof/wall stability
• Rock mass classification (RMR, Q, GSI) and verification of support design
• Water-related hazards (piping, sudden inflows) and required pumping capacities
4. Metallurgy – Processing – Product Sales
This section highlights the assessment of ore processability, expected metallurgical recovery, and marketability of final or intermediate products.
• Laboratory and pilot-scale testwork results and recovery performance
• Evaluation of deleterious minerals and potential penalties
• Capacity and suitability of existing processing plants
• Distance and technical feasibility of selling ROM ore to third-party facilities
• Grindability testing (Bond Work Index) and compatibility with process circuits
• Final product quality, moisture, penalty structures, and sales constraints
5. Infrastructure & Operational Readiness
This section presents an evaluation of all operational and technical infrastructure required to support ongoing or planned mining activities.
• Collection and review of all survey/mapping data for existing pits or workings
• Assessment of backfill, reinforcement, or remediation requirements
• Technical and geotechnical review of existing pits and underground openings
• Condition of existing processing plants (crushing, grinding, flotation, leach, etc.) and remaining tailings capacity
• Power supply (grid or generators), water supply, and storage infrastructure
• Climate conditions, access roads, logistics, ports, and rail availability
• Waste management and tailings facility integrity
• Spare parts, maintenance tools, and consumables stock management
• Emergency access routes and analysis of seismic or landslide-prone areas
6. Mining Operations & Planning
This section examines the feasibility, practicality, and sustainability of the mine’s production strategy and operating plans.
• Review of short-, mid-, and long-term mine plans and life-of-mine schedule
• Commodity price and operating cost assumptions
• Annual production targets and achievable capacity
• Determination of operating cost per tonne and economic cut-off grade
• Review of safety systems (ventilation, gas monitoring, escape procedures)
• Capability for selective mining based on grade variability
• Alignment of mine plan with geotechnical constraints
7. Environmental & Social Technical Obligations
This section addresses the project’s environmental responsibilities, permit requirements, and long-term rehabilitation commitments.
• EIA/EIS reports and approval status
• Rehabilitation plans and associated obligations
• Wastewater, dust, noise, and chemical management plans
• Identification of legacy environmental risks from previous activities
8. Community Relations, Landowners & Social License
This section considers local community dynamics, socio-economic risks, and the potential impact of social pressure on future operations or closure.
• Current relations with villagers and landowners; local workforce availability
• Compensation records and expropriation requirements
• Potential risks of social pressure, protest, or operational disruption
• Presence of sensitive cultural zones, agricultural lands, or protected areas
• Relations with local authorities and overall social license risk assessment
9. Licenses Acquired Through Company Purchase
This section outlines the identification of financial obligations, liabilities, and legal risks associated with purchasing the operating company.
• Existing debts and liabilities: tax, social security, bank loans, government royalty payments
• Annual state royalties and license fees that continue post-acquisition
• Breakdown of operating costs: labor, depreciation, power, transport, maintenance
• Fines, disputes, and administrative findings from previous inspections
• Verification of pledges, mortgages, or enforcement actions on transferred licenses
10. Personnel
This section focuses on determining whether the operation has a competent, sufficient, and well-structured workforce.
• Experience and retention status of key personnel
• Dependence on subcontractors
• Staff turnover, unionization, and competency levels
• Training records, certifications, and HSE qualifications
• Backup (redundancy) planning for critical positions
11. Valuation & Acquisition Strategy
This section provides an overview of how the project’s financial value is determined and how the acquisition strategy is structured.
• Project development stage (greenfield – brownfield – operating)
• Cashflow-based valuation: NPV, IRR
• Risk premiums and pricing scenarios
• Scope of due diligence and need for independent technical review
• Economic limit optimization (Whittle, etc.) and validation of ultimate pit limits
• Sensitivity analysis on metal price, recovery, OPEX, and CAPEX
12. Health & Safety (HSE) Status
This section reviews safety risks, incident history, and the adequacy of mandatory HSE systems.
• Accident/incident history and serious event records
• Mandatory HSE documentation and emergency response plans
• Mining engineering inspection notes and non-compliance findings
• Ventilation capacity, gas/dust levels, and real-time monitoring systems
• PPE standards and issuance/record system
13. Economic, Financial & Market Analysis
This section examines the economic sustainability of the project, the accuracy of financial inputs, and exposure to market fluctuations.
• Metal price scenarios and sensitivity assessments
• Cashflow models and CAPEX/OPEX validation
• Pricing structure: grade, moisture, penalties, arbitration charges
• Contract analysis (offtake, sales, subcontracting, energy, leasing)
• Pending debt, leasing, guarantees, or financial commitments
• Logistics cost comparison and evaluation of final buyer markets
• Impact of pricing formulas and penalties in sales contracts
Should you have any questions regarding consulting services, please don’t hesitate to get in touch with us.
Subjects discussed in this article may overlap with your mineral exploration, modeling, mining operation and business development issues and may provide solutions for those. However, remember that various factors specific to your business may bring about different challenges. Therefore, seek support from expert consultants to evaluate all data together in order to convert potential into profit most efficiently.
Should you have any questions regarding the articles or consulting services, please don’t hesitate to get in touch with us.
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