Stage 5: Pre-developmentIllustrative example
Project Fjord-04
Trøndelag, Norway · VMS
- Copper
- Zinc
- Pre-feasibility study complete
- Reserve estimate supported by the study
- Permitting pathway defined
- Owner provided
- Verification pending
Stage 5: Pre-development
Pre-development
- From → to
- PFS → Build decision
- Chance of a mine
- 45% → 85%
- Money spent so far
- ~$40M → ~$120M
- Typical duration
- 2–5 years
Illustrative mid-range figures for a mid-size project. See the odds curve
What it is
The PFS declares the first reserves, and the odds reach about 1 in 2. This is the most expensive stage before construction: close-spaced drilling, a feasibility study (FS), environmental approval, permits and financing. The stage ends with a funded decision to build, when the odds reach about 85%.
For investors. An investor is now buying an engineered project. The questions shift from geology to execution: how accurate the cost estimates are, how much of the resource converted to reserves, which permits are still outstanding, and whether the construction capital can be raised.
Work done in this stage
- Close-spaced drilling to define Measured resources for the first years of the mine plan
- The feasibility study (FS), with detailed engineering and costs
- Pilot-plant metallurgical testing
- Environmental impact assessment and permit applications
- Community and Indigenous agreements
- Early engineering, long-lead equipment orders and arranging finance
Drilling
- Metres
- About 10,000–50,000 m more
- Spacing
- About 15–50 m, often only for the first 2–5 years of the mine plan
- Other holes
- Geotechnical holes for pit walls, condemnation holes under planned infrastructure
- Purpose
- Measured resources and Proven reserves
Cost and where the money goes
About $80M in this stage
- Early engineering and long-lead orders
- about $30M
- Feasibility study
- about $10–40M (large copper projects $50–100M or more)
- Measured drilling
- about $10M
- Permitting, environmental approval and community
- about $10M
- Financing and owner's costs
- about $10M
- Pilot-plant testwork
- about $5M
What moves it to the next stage
A funded build decision: FS published, main permits granted and construction finance arranged. The project moves to stage 6.
How the PEA, PFS and FS differ
What it takes:
- A feasibility study with accuracy of about ±10–15%
- Proven and Probable reserves
- Environmental approval and a mining licence
- Construction finance
Data you should expect to see
- Published PFS and, later, the FS
- Reserve table: Probable, then Proven
- Resource-to-reserve conversion (typically 60–90% of Indicated tonnes)
- Permitting checklist and status
- Capital and operating cost estimates
Key risks
- Capital cost estimates often rise from the PFS to the FS
- Reserves can shrink if costs rise or prices fall
- Permitting delay and community opposition
- Financing conditions
Typical financing
Who funds it: Mid-tier miners, major miners and strategic partners.
About $80M for this stage, while planning a build cost about ten times larger. This is where mid-tier and major miners most often step in, either as partners or by buying the project outright. For many juniors a sale here is the planned exit: few have the balance sheet to build a mine.
- Sale to a mid-tier or major minerMain route
From: Mid-tier and major miners
The buyer takes over the project or the whole company, usually at a premium to the share price, paying in cash or its own shares. It then funds the feasibility study, permits and construction itself.
- Joint venture with a larger partnerMain route
From: Mid-tier and major miners, sometimes smelters or state-backed investors
A partner funds the FS, or a share of construction, for a large stake, often with the right to operate and to buy the output.
- Share placementsMain route
From: Institutional investors, strategic shareholders
Larger raises to fund the feasibility study, permitting and early engineering.
- Royalty saleMain route
From: Royalty companies
Larger royalties, now valued off reserves rather than resources.
- StreamSometimes used
From: Streaming companies
Often agreed at or after the FS, with part paid upfront and the rest during construction. Usually on a by-product such as gold or silver.
- Offtake and prepaymentSometimes used
From: Smelters and traders
A buyer commits to buy future concentrate, sometimes with a prepayment, which gives lenders comfort.
- Bridge loans and convertible notesSometimes used
From: Specialist lenders, streaming and royalty companies
Short-term or convertible loans to fund early works and long-lead orders while the full package is arranged.
Questions an investor should ask
- What is the stated accuracy of the latest study, and who prepared it?
- What share of the resource converted to reserves?
- Which permits are in hand, and which are outstanding?
- Is the construction capital funded, and on what terms?
What a listing looks like at this stage
Usually filled
- All geology and resource sections
- PFS and FS study cards
- Reserve table
- Permitting checklist, mostly in progress
- Deal and use of funds
Usually not yet
- Usually none: missing items are a warning sign
Current listings at this stage
- Stage 1: GrassrootsMapping and surface sampling, up to the first drill holes.Prospectors, junior explorers
- Stage 2: Discovery drillingDrilling has intersected mineralization; no resource estimate yet.Junior explorersPlatform focus
- Stage 3: Maiden resourceFrom the first resource estimate up to a published PEA.Few natural funders (the gap)Platform focus
- Stage 4: Resource upgradeFrom the PEA to the PFS: infill drilling upgrades Inferred to Indicated.Few natural funders (the gap)Platform focus
- Stage 5: Pre-developmentFrom the PFS to the build decision: Measured drilling, the feasibility study, permits and financing.Mid-tier miners, strategic partners
- Stage 6: Development and productionFrom the build decision through construction and ramp-up to an operating mine.Majors, banks, streaming and royalty companies