A due diligence checklist for mining projects

What matters most at each stage

Stages 1–2 are grassroots and discovery drilling; 3–4 are maiden resource and resource upgrade; 5–6 are pre-development and development and production.

1. Title and ownership

• Who holds the licence, until when, and is it in good standing?
• Are fees and work commitments up to date? Can it be converted to a mining licence as of right?
• Is the ownership chain clear: options, earn-ins, conditions still to meet?
• What royalties, streams, back-in rights and rights of first refusal already sit on the project?

Read: exploration and mining licences.

2. Geology and data quality

• What is the deposit type, and does the geological model make sense?
• How many holes, at what spacing? How do the weak holes compare with the strong ones?
• Are intercepts reported as true widths, and how was high grade cut?
• What quality control was used: standards, blanks, duplicates, an accredited lab?
• How much of the data is historical, and has it been checked?

Read: reading drill results, sampling and assaying, red flags in exploration reports.

3. Resources and studies

• Under which reporting code, signed by which qualified or competent person?
• What share is Inferred, Indicated and Measured? What cut-off grade and price sit behind it?
• What is the latest study, when was it done, and by whom?
• How much of the resource converts to reserves?

Read: resources versus reserves, mining studies.

4. Economics

• Grade, recovery and payability: what share of the metal is actually paid for?
• Operating cost and capex against comparable projects, and the contingency used.
• After-tax NPV and IRR, at what price and discount rate? How sensitive are they to price and capex?
• What does the government take, and what do private royalties take, on top?

Read: the Mining economics track and government take.

5. Jurisdiction and permits

• Which permits are in hand, which are pending, and how long have similar projects taken?
• Are fiscal terms stable? Is there a stability agreement?
• Are there limits on foreign ownership or on taking profits out of the country?

Read: the Mining jurisdictions track.

6. Environment, social and community

Environmental and social issues matter well before a mine is planned. Exploration needs access to land, and opposition can stop drilling as surely as poor results.

• Land and people: who lives on and uses the land? Are there Indigenous or customary rights, and is there an agreement or a process towards one?
• Water: how much does the project need, where does it come from, and who else depends on it?
• Tailings and waste: how will they be stored, and does the design follow recognised safety standards?
• Acid drainage and closure: does the rock chemistry raise long-term water-treatment risk? Is closure costed and bonded?
• Biodiversity and heritage: protected areas, endangered species, cultural sites.
• Artisanal miners: are there informal miners on the licence, and how will the company deal with them?
• Health, safety and human rights: the record of the company and its contractors.
• Lender standards: will the project meet the environmental and social standards that international lenders apply, such as the IFC Performance Standards and the Equator Principles? If not, the cheapest finance may not be available.

Read: Indigenous rights and community consent, permitting, closure and reclamation bonds.

7. Company and management

• Has the team taken projects through studies, a sale or a build before?
• What share of spending goes into the ground? Any related-party payments?
• What is the share structure, fully diluted? Who are the major and strategic shareholders?
• How much cash is there, and how long will it last?

Read: red flags in management and promotion, how juniors are listed and traded.

8. Funding and deal terms

• What exactly is being offered, and where does it rank against other claims?
• Does the money reach the next milestone, or stop short of it?
• What are the price, warrants, buybacks, information rights and participation rights?
• How will the following stage be funded?

Read: ways to invest, the typical financing path, the capital stack.

9. Valuation

• Which method fits the stage: EV per ounce, P/NAV, risked NAV, comparable transactions?
• How does the price compare with genuinely similar projects?
• Is any risk counted twice, or not at all?

Read: valuing a junior at each stage, jurisdiction risk.

10. Exit

• Who are the natural buyers, and at what stage do they usually buy?
• What could stop a sale: size, jurisdiction, burdens, partner rights?
• How liquid is the investment, and over what time horizon?

Read: how major miners acquire projects, diversifying across high-risk projects.

Using the checklist

Not every question needs a full answer at every stage. Concentrate on the topics marked Key for the project's stage, and treat any question nobody can answer as a finding in itself. A short list of serious unknowns is often more useful than a long list of reassurances.

This checklist is general and not exhaustive. It is educational material, not investment, legal or technical advice.