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Lode Exchange
Stage 6: Development and production

Development and production

From → to
Build decision → Mine
Chance of a mine
85% → 100%
Money spent so far
~$120M → ~$1B
Typical duration
2–4 years of construction and ramp-up, then the mine life

Illustrative mid-range figures for a mid-size project. See the odds curve

What it is

With a funded build decision, the odds reach about 85%, but this is where most of the money is spent. Building the mine typically costs about seven times everything spent before it. Most of the remaining risk is execution: building on time and on budget, then ramping up to plan.

For investors. An investor is buying cash flow, or the promise of it. Value now follows output, costs, grade, recovery and the metal price. Track construction progress against budget, then actual production against the feasibility study.

Work done in this stage

  • Construction of the plant, mine, power, water and tailings facilities
  • Mine pre-stripping and fleet purchase
  • Commissioning and ramp-up to commercial production
  • Grade-control drilling and near-mine exploration

Drilling

Metres
Ongoing
Spacing
Grade-control drilling at about 5–15 m ahead of mining
Purpose
Guiding mining day to day, and replacing reserves as they are mined
Drill type
Mostly RC for grade control; diamond for exploration around the mine

Cost and where the money goes

About $880M in this stage for a mid-size mine

Processing plant
about $200M
Mine development and fleet
about $100M
Power, water and tailings
about $80M
Rest of construction
about $400M
Ramp-up and working capital
about $100M

Real build costs range from about $100M for a small mine to $5B or more for a large copper mine.

What moves it to the next stage

Commercial production: the mine is operating. From here, value follows cash flow.

What it takes:

  • Construction completed
  • Plant commissioned and ramped up
  • Steady production at or near design rates

Data you should expect to see

  • Construction progress against budget and schedule
  • Production reports: tonnes, grade, recovery, metal produced
  • Operating costs and all-in sustaining costs
  • Reserve and resource updates

Key risks

  • Construction delays and cost overruns
  • Ramp-up problems
  • Operating performance against the plan
  • Metal price and cost inflation

Typical financing

Who funds it: Major miners, banks, streaming and royalty companies.

Construction costs many times everything spent before it: about $880M in the mid-size example. It is funded by a package, not a single source, typically with project debt at 40–60% of the build cost. A major miner may fund it from its own cash instead. Operating mines are also bought and sold.

  • Project finance debtMain route

    From: Commercial banks

    Loans repaid from the mine's cash flow and secured on the project, usually 40–60% of the build cost over 5–8 years. Requires a bankable feasibility study and a completion test.

  • StreamMain route

    From: Streaming companies

    Large streams, often $50M or more upfront, fill the gap between debt and equity.

  • Share placementsMain route

    From: Institutional investors, strategic shareholders

    Typically 25–40% of the build cost: the money that takes the first loss if things go wrong.

  • Offtake and prepaymentSometimes used

    From: Smelters and traders

    Prepayments, often up to around 10% of the build cost, repaid in product.

  • Royalty saleSometimes used

    From: Royalty companies

    Royalties sold to fund cost overruns, expansions or exploration around the mine.

  • Export credit and development banksSometimes used

    From: Export credit agencies, development banks

    Loans or guarantees linked to equipment bought from the agency's country, or to development goals. Often important in higher-risk jurisdictions.

  • Owner's own cash and corporate debtSometimes used

    From: Major miners

    A major often builds from its own cash flow and corporate borrowing, without project debt.

  • Sale to a mid-tier or major minerSometimes used

    From: Major and mid-tier miners, private equity

    Operating mines change hands too: a buyer pays for proven cash flow and reserves, at a higher price per ounce or tonne than for an unbuilt project.

See the financing path across all six stages

Questions an investor should ask

  • Is the build on schedule and on budget?
  • How have actual output and costs compared with the plan?
  • How long is the reserve life, and what is the exploration upside?
  • What debt, streams or royalties already sit over the asset?

What a listing looks like at this stage

Usually filled

  • Every section, plus production data

Usually not yet

  • None

Current listings at this stage

  1. Stage 1: GrassrootsMapping and surface sampling, up to the first drill holes.Prospectors, junior explorers
  2. Stage 2: Discovery drillingDrilling has intersected mineralization; no resource estimate yet.Junior explorersPlatform focus
  3. Stage 3: Maiden resourceFrom the first resource estimate up to a published PEA.Few natural funders (the gap)Platform focus
  4. Stage 4: Resource upgradeFrom the PEA to the PFS: infill drilling upgrades Inferred to Indicated.Few natural funders (the gap)Platform focus
  5. Stage 5: Pre-developmentFrom the PFS to the build decision: Measured drilling, the feasibility study, permits and financing.Mid-tier miners, strategic partners
  6. Stage 6: Development and productionFrom the build decision through construction and ramp-up to an operating mine.Majors, banks, streaming and royalty companies