Due Diligence

A thorough mining due diligence study or mining valuation must examine many critical factors directly affecting the final appraisal by the mining consultant.

BOYD appraisers' skills are based on our:

• Mining industry perspective and first-hand experience gained through continual assignments for producers, buyers and investors.
• Unique qualifications to realistically assess reserve mineability, competing mining operations, existing/potential liabilities, and market demand.
• Consulting experience in mining property transactions of varying nature.

Mining Due Diligence Definition: appropriate level of study by knowledgeable professionals to identify and assess significant factors affecting the future operation of the subject mining property.

BOYD performs mining due diligence studies at the international level. The decline in the number of mining companies continues as parent companies and operating entities announce divesture of their holdings. BOYD personnel have presented papers focusing on mining due diligence for both coal and minerals:

The mining due diligence review of a coal mining or mineral mining property provides reasonable assurance of the basis of investment related to purchase, financing, and internal assessment. A mining due diligence scope of work is presented below:

Regional or Areal Overview

Overview Analysis of Property

• Property - control, lease terms, surface, reliability of title
• Coal/mineral - reserve, quality
• Coal/mineral mineability - geology, overburden, previous mining, physical conditions, accessibility, other constraints
• Mine - operations, services, support
• Marketing - transportation, markets, realization

Related Studies

• Legal
• Environmental
• Employee Related Liabilities
• Accounting

Evaluate and Select Mining Plan

• Mining Equipment Selection
• Mine Layout
• Mine Support
• Coal Preparation/Mineral Processing

General Cost Analysis

• Annual Production Capacity
• Mining Requirements
• Capital Expenditures
• Mine Supply Cost
• Mine Production Cost
• Off-Site Transport
• Markets and Transportation

Final Valuation

• Discounted Cash Flow Analysis
• Risks and Sensitivity Analysis

Example Projects Include:

• Completed a due diligence study of a surface operation in Illinois and Indiana in regard to planned acquisition by our client. Performed an overall surface mine assessment including:
  
  
  • Review cost and mine projections.
  • Complete an evaluation and appraisal of equipment.
  • Evaluate long-range mine plans.
  • Develop cash flow projections.
  
  
  
• Completed a due diligence study of a major coal producer. During the course of our study, we interfaced with financial and legal representatives and developed a value for the company. Scope of work included:
  
  
  • Review of coal reserves and quality.
  • Evaluation of existing operations and mine plans.
  • Review of environmental liabilities.
  • Asset appraisal of plant and equipment.
  • Forecast of coal market conditions and price projections.
  
  
  
• Performed a due diligence review of underground mining operations in South Wales, United Kingdom. Scope of Work included:
  
  
  • Evaluate reserves, quality, and current operations.
  • Assess developed mine plans for reasonableness.
  • Review operating and cost assumptions.
  • Develop discounted cash flows for various production scenarios and sales realizations.
  
  
  
• Completed a due diligence review of a western Canadian surface mine producer for potential acquisition by our client. Work scope included:
  
  
  • Verify reserves and quality.
  • Assess equipment and facilities.
  • Analyze costs.
  • Determine value of operation based on a discounted cash flow.
  
  
  
• Completed a due diligence study of the coal operations of a major US company attempting to divest of its operations. Site visits were completed to all of the operating mines and related facilities. Areas of study completed included:
  
  
  • Geology and Reserves
  • Coal Quality
  • Mine Operations
  • Mine Plans
  • Environmental Issues
  • Sales and Marketing
  
  
  Prepared a valuation of the ongoing operations and developed cash flow projections.

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