How to Conduct a Preliminary Assessment of a Mineral Deposit: Six Questions Before Making an Investment Decision

On a map, two mineral deposits may appear equally promising: they may have a similar area, comparable reserve volumes, and contain the same type of mineral commodity. Yet the cost of developing them and the amount of marketable product that can ultimately be produced may differ substantially.

A preliminary assessment helps determine whether a project warrants more detailed investigation. It does not provide a definitive answer regarding the value of a mineral deposit. Instead, its purpose is to identify confirmed advantages, material constraints, and the information still required to make an informed decision. This approach is consistent with the CRIRSCO International Reporting Template: the assessment of mineral reserves involves not only geological information but also mining, metallurgical, economic, legal, and environmental factors. At the same time, categories reported in the documentation of a particular Ukrainian deposit should be interpreted according to the classification system applied in those documents.

1. How Reliable Is the Geological Data?

Start with the source of the information. Determine when the site was investigated, what exploration work was carried out, and what data formed the basis for estimating the quantity of the mineral resource. It is important to review not only the final figure but also the underlying materials: geological reports, plans, cross-sections, drilling results, and laboratory analyses. Pay attention to the distribution of observation points. If most boreholes are concentrated in one part of the site, information about the remaining area may be less certain. In deposits with variable geological characteristics, average values may also conceal areas with significantly different productive-layer thicknesses or raw-material quality. Another important question is what exactly is being reported: resources, reserves, or an exploration estimate. The name of the parameter, its category, and the date of the estimate all matter. It is equally important to determine whether the reported figures refer to the entire deposit, a specific area, or only a particular type of raw material.

What to request: geological reports, reserve estimation materials, borehole location maps, cross-sections, and tables containing analytical and test results. How to interpret a data gap: if only a short presentation containing a single reserve figure is available, the geological potential may be considered, but the reliability of that figure still needs to be verified.

2. How Much Marketable Product Can Be Produced?

The amount of valuable material in the ground and the amount of product leaving the processing plant are not the same. Between them are mining, preparation, and processing stages. Losses may occur at every stage, while the characteristics of the final product depend on both the properties of the feed material and the selected processing technology. For example, in a placer deposit, knowing the total heavy-mineral content is not enough. It is necessary to understand which minerals make up the heavy-mineral assemblage, how they are distributed across the deposit, and whether products of the required quality can be produced from them. If associated components are mentioned, the recoverability, product quality, and cost of producing each of them should be assessed separately. The best basis for such an assessment is metallurgical or mineral-processing testwork. The results should answer three questions:

What products were successfully produced?
What was the quality of those products?
What proportion of the valuable components was recovered?

Testing a single sample does not necessarily characterize the entire deposit. Check where the material was collected and whether it is representative of the areas planned for the initial stages of mining.

What to request: testwork protocols and reports, sample descriptions, and product yield, quality, and recovery data for each product. How to interpret a data gap: if technological data are unavailable, potential products may be treated as a hypothesis, but including revenue from their sale in the base-case scenario would be premature.

3. Which Mining Conditions Will Affect Costs?

Even high-quality mineralisation can be expensive to mine. After reviewing the geology and processing characteristics, the physical conditions of mining should therefore be assessed. For an initial evaluation, determine the depth of the mineralisation, the thickness of the productive layer, the volume of material that must be removed or relocated, and groundwater conditions. Examine how these parameters vary across the deposit. An average value for the entire area may not be sufficient when selecting the first area for development. What happens to materials after mining is equally important. Space may be required for overburden, processing waste, and, depending on the technology, water-management facilities. Road access, the distance to processing facilities, and the availability of infrastructure connections can also significantly affect the project. At this stage, a detailed cost estimate is not essential. The objective is to identify factors that could make mining substantially more difficult or expensive than the reserve figures alone might suggest.

What to request: geological cross-sections, information on overburden and groundwater conditions, a preliminary mining concept, and infrastructure information.

4. What Is the Status of Mineral Rights and Project Documentation?

The geological potential of a site does not mean that operations can begin immediately. The documents and rights associated with the specific asset and the proposed activity must be reviewed separately. First, compare the boundaries of the mineral deposit, the licensed subsoil area, and the relevant land plots. These boundaries may not coincide. Then verify the status of the special permit for subsoil use, its conditions, and the available documentation relating to subsoil use. If the project involves mining, determine which additional documents and approvals are required for that particular stage of development. It is important to verify original documents and their current status. A map, sale listing, or brief asset description can help identify issues that require investigation, but none of these substitutes for proper verification.

What to request: documents confirming subsoil-use rights, materials containing coordinates and boundaries, information on relevant land plots, and the documents referenced by the asset owner or project developer. How to interpret a data gap: if the status of the documentation is unclear, this should be identified as a separate risk and clarified before estimating the project development timeline.

5. Which Constraints Can Be Identified on a Map, and Which Require Further Verification?

A GIS map can quickly show the location of a mineral deposit relative to protected areas, water bodies, settlements, roads, and other relevant features. This makes it a useful tool for preliminary site screening. However, every map layer has its own source, date, and level of accuracy. Boundaries digitised from a regional-scale map may not be sufficiently precise for conclusions concerning a specific land plot. An apparent overlap or close proximity should therefore be treated as a reason for further investigation, rather than as definitive confirmation that an activity is permitted or prohibited. The practical implications of the site's location should also be considered. Where could access roads be constructed? What areas would be required for production facilities? Would the selected processing technology require significant quantities of water? What work may be necessary after mining is completed? The answers can affect both project costs and the feasibility of the development schedule.

What to verify: the source and date of each relevant map layer, boundary accuracy, current documentation relating to the affected areas, and a preliminary layout of project facilities.

6. Does the Project Pass a Basic Economic Test?

After the preliminary review, an initial economic model can be developed. It should not create a false impression of precision: if the input data are approximate, the results will also be approximate. The model should include the expected mining volume and production rate, the anticipated yield of each marketable product, capital expenditure, mining and processing costs, logistics costs, and assumptions regarding product prices. The source of each parameter should be identified — for example, a geological report, testwork results, a commercial quotation, or a preliminary assumption. A single “most likely” scenario provides limited information about the robustness of a project. Several scenarios should therefore be tested:

What happens if recovery of the valuable component is lower?
How would higher overburden-removal or water-management costs affect the project?
Would the project remain viable at a lower product price?
What happens if an associated product cannot be sold?

This type of analysis often reveals which uncertainty should be addressed first. If the result is most sensitive to recovery, additional processing testwork becomes a priority. If it is most sensitive to overburden-removal costs, the geological model and mining concept require further refinement.

What Should Be the Outcome of a Preliminary Assessment?

A useful result is a concise asset assessment in which the following are clearly separated:

Confirmed information: what is supported by the available reports and documents.
Preliminary assumptions: what has been used in the assessment but has not yet been verified.
Critical unknowns: which missing information could materially affect the project decision.
Next steps: which documents should be requested, which investigations should be carried out, and which questions should be addressed first.

A mineral deposit should not be evaluated solely on the basis of a single reserve figure, its area on a map, or a list of potentially valuable components. An investment decision depends on the relationship between the reliability of geological information, the ability to produce marketable products, mining conditions, the legal ability to develop the project, and its economics.