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We believe in ongoing learning and development

We believe in sharing knowledge as it makes us all better at what we do.

Below is a repository of materials in which readers may be interested.  As we find new articles or media clips that we believe will be beneficial we will add them to our list below.

We invite our readers to contribute so that we may update, replace or add to what we already have.

What is the Cost Curve?

We use the term Cost Curve a lot … a lot more than many of our peers.

An industry cost curve is a chart that maps a producer’s or product’s cost of production relative to its competitors.  In micro-economics it can be used to measure available capacity incrementally, allowing one to use the order of increasing costs as a tool to analyse pricing dynamics relative to demand.  In many industries simple factors such as energy and labour can be the key differentiating factors of competitiveness, hence the hollowing out of basic industries in developed countries to the advantage of developing countries based on energy and labour costs alone.

In mining there are many more factors affecting the competitiveness of one project over another, with geography, orebody parameters, and metallurgy all being important considerations in conjunction with labour and energy.  There are many examples of projects in all commodities with high grades or large mineral deposits being uneconomic and therefore un-bankable, while a much smaller and or lower grade project will be economic and bankable.  Many millions have been spent on feasibility studies when one could have reasonably determined that the project would fail at the outset due to simple factors such as geography, i.e distance from inputs and to end markets.  At Pan Asia we aim to secure opportunities which have the potential to be positioned in the first tercile (bottom third) of the cost curve.  We believe a project in the first tercile will be very robust, debt and equity finance should be more easily obtainable than it otherwise would be for a project situated in the top half or third of the cost curve.

Cost curves can be complex and often companies can approach them in an over simplistic fashion i.e. measuring direct cash operating costs only without considering other important factors, including capital costs and equipment depreciation.  In addition, until a mine is operating, we will never know exactly where it sits on the cost curve – nevertheless, one can make educated decisions based on precedents.

The cost curve to the left is one that Pan Asia has used to determine where a tin project in SE Asia may sit relative to its global peers.  Pan Asia uses the peer cost curve as one of several measures to help it determine whether it should proceed with a project.  Pan Asia uses the peer cost curve to help it determine whether an opportunity may still be well positioned on the cost curve.

The cost curve can be an informative tool but if its application is incorrectly used, i.e., the curve is measuring the wrong parameters, it can be highly misleading.  Often the cost curve is presented using C1 or cash operating costs as the measure, which is misleading as other costs other than mining and processing may result in a project moving up or down the cost curve relative to its peers.

What is JORC?

Pan Asia reports its exploration results in accordance with The JORC Code.

The JORC Code provides a mandatory system for the classification of minerals Exploration Results, Mineral Resources and Ore Reserves according to the levels of confidence in geological knowledge and technical and economic considerations in Public Reports.

Public Reports prepared in accordance with the JORC Code are reports prepared for the purpose of informing investors or potential investors and their advisors. They include, but are not limited to, annual and quarterly company reports, press releases, information memoranda, technical papers, website postings and public presentations of Exploration Results, Mineral Resources and Ore Reserves estimates.

The current edition of the JORC Code was published in 2012 and after a transition period the 2012 Edition came into mandatory operation from 1 December 2013.  The JORC Code, 2012 Edition can be found here: English, Chinese.  This link will take you to the JORC library page.

The JORC Code is produced by the Australasian Joint Ore Reserves Committee (‘the JORC Committee’). The Committee includes representatives of each of the three parent bodies: The Minerals Council of Australia (MCA), The Australasian Institute of Mining and Metallurgy (AusIMM), and the Australian Institute of Geoscientists (AIG).

The Committee also works closely with the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) to maintain international consistency in the development of reporting standards.  The CRIRSCO website provides a very interesting overview of the various codes under which exploration and mining companies report.  This link will take you to the CRIRSCO website.

JORC Backgrounder

The Poseidon bubble and scandals such as Bre-X have resulted in standards of disclosure such as the JORC code 

Current rules for resource disclosure in the mining industry owe their advent to the Poseidon bubble that was triggered by the discovery of a nickel deposit by exploration company Poseidon NL in Western Australia in September 1969.

At the time, Poseidon shares had been trading at A$0.80 each and peaked at A$280 each in February 1970.

As a result, the Australian government established the Rae Committee, which, in 1974, recommended changes to the regulation of stock markets that led to Australian securities legislation. Ironically, the deposit subsequently became a mine that operated for a number of years.

The Joint Ore Reserves Committee (JORC) was established in 1971 and sponsored by the Australian mining industry. JORC comprises representatives of the Mineral Council of Australia, Austral/Asia Institute of Mining and Metallurgy, Australian Institute of Geoscientists, Australian Stock Exchange, Financial Services Institute of Austral/Asia and the accounting profession. The JORC Code was imposed as a mandatory system for classification of minerals, exploration results, mineral resources and ore reserves according to the level of confidence in the geological knowledge, and technical and economical considerations for public reporting. The JORC Code was first published in 1989 and is incorporated in the listing rules of the Australian and New Zealand stock exchanges. The JORC Code was the first to set out in detail the requirements for disclosure on mining properties and was the genesis for a number of codes that have adopted its concepts in countries around the world.

The world of mining disclosure is gradually converging because of the efforts of organisations such as CRIRSCO, JORC, SAMREC, CIM and the application of regulators such as the Canadian Securities Administrators and stock and securities exchanges such as AIM, Toronto, Hong Kong, Australia and emerging exchanges in South America and Asia.

In time, one expects that disclosure will be common and yet still allow for local rules and regulations unique to each jurisdiction.

Brian E Abraham, partner at Dentons Canada LLP, provided the above commentary. For those interested we suggest reading the full report, titled ‘Global Mining Resource Disclosure‘, which was originally published by Lexology.

Ore Deposits Series for Non-Geologists

A series of videos to help the reader gain an understanding of ore deposits.

This series of videos was put together by Andrew Jackson of Sprott Global Resource Investments Ltd.  We thank Andrew for the contribution of his time and experience in compiling this series of videos.

Although the series is long it will provide the viewer with a very good understanding of ore deposits and what it takes for an exploration company, and specifically its geologists, to identify and verify an economic ore deposit.

We highly recommend Andrew Jackson’s videos No. 10 and 11, which cover the exploration process and the estimation of resources and reserves.

Part 1 – Introduction

Part 2 – Layered Complexes, Kimberlites

Part 3 – Porphyries, Skarns & IOCG

Part 4 – Mesothermal and Greenstone Gold

Part 5 – Epithermal Deposits

Part 6 – Carlin Gold Deposits

Part 7 – VMS and Sedex Deposits

Part 8 – Witwatersrand Gold Deposits

Part 9 – Uranium Deposits

Part 10 – The Exploration Process

Part 11 – Mineral Reserves, Resources and Estimation