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Due Diligence 

Authors: Jack Caldwell


This review describes due diligence in the mining and mineral exploration industry. It lists a series of activities involved in due diligence from well known consulting firms. It also gives an overview of publications, consultants, and lawyers with expertise in due diligence.


"Tell me all the environmental issues at these mines." This request from a friend with a mining company about to make an offer to buy another mining company. These are two low key companies. Thus was I thrust into the world of due diligence. "Well give me all the reports you have on the target mines." A perfectly reasonable reply, I thought. "We have none," was the reply, "see what you can get off InfoMine."

But first to Wikipedia:

"Due diligence may refer to the process of research and analysis that takes place in advance of an investment, takeover, or business partnership. The potential investor generally uses in-house resources or hires a consulting firm that specializes in due diligence and corporate investigations to investigate the background and principals of the target company. A due diligence assignment generally includes reviewing press and SEC filings, checking for regulatory and licensing problems, identifying liens and judgments, and uncovering civil and criminal litigation matters. Sophisticated investigators will also search for conflicts of interest, insider trading and press and public records that identify problems that may have occurred under the principal's watch."

"Press releases, that's easy," says I, clicking to the news tab on InfoMine. For one property alone over three hundred news items spilled at me. "And there are ten mines," I shudder.

Then to the InfoMine Properties Database: a random collection of cut & pastes from the press releases (albeit three hundred of them) and the fancy formatted Annual Reports, which are a wonder to behold, with color and graphics, and pages and pages of obfustication.

Yet somehow this process rapidly illuminated issues: the dam failure, the acid rock drainage, the environmental liability law suite, years of cost-cutting and neglect of environmental concern. A funny thing also soon appeared-in the last two years there have been no press releases, nothing in the Annual Reports-just grave silence. Almost as though a great nothing has taken over. Maybe they got control of an unruly press release-bleed after that last publicity disaster?

To the InfoMine Library, where the right keywords rapidly brought up papers on the acid rock drainage issue-those pesky researchers at the local university have documented the complete mess-infinite control and expensive water treatment. The EIS written when they bought the mine from the corrupt government tells all about the problems still to be dealt with. Funny how easy this due diligence thing is, thought I.

Now my friend is on a plane to the sites and the mines, armed with a list of questions, deep, insightful ones, based on a cheap review (discounting my time in the properties database) of generally public documents.


With the friend off to the sites, I breathed a sigh of relief and decided to see what the InfoMine library contains on due diligence. The best publication I found (although a little dated) is Due Diligence for Mineral Property Acquisition: A Technical Primer by J.T. Boyd. Tells you all you really need to know. See also the companion paper on Due Diligence Requirements for Coal Property Acquisition. I particularly liked the mining due diligence checklist prepared by Pincock Allen and Holt (see page 4 of the publication). Well I recall Kay Pincock bundling me into his luxury Chrysler New Yorker and taking us out into the Tucson desert for fine steaks. Tempus Fugit!


Thinking of those early days consulting from Arizona reminded me that other consultants maybe also had something of value to say. No decent publications on any websites, but lots of de profundis. Here follows three pages of information from three of the more informative sites.

From SRK I culled this list of due diligence activities:

SRK Consulting
  • title and conditions
  • geology/ resources and reserves
  • mine engineering and planning
  • metallurgical testwork and processing
  • waste disposal, environmental impact studies (EIS) and management plan (EMP)
  • surface and groundwater management
  • infrastructure and services
  • construction program
  • management and organization
  • capital and operating costs
  • technical and economic models
  • risk analysis and mitigation actions
  • From John T. Boyd I culled this list of due diligence activities:

    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
    John T. Boyd Company 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

    And from Astute Diligence I culled this list of due diligence activities:

    Strategy Practice. We assess the strategic fit of the transaction. Does it meet investment, merger or acquisition criteria? We also evaluate the go-forward strategy for your existing business units and portfolio companies.

    Technology Practice. We evaluate the underlying technology within a target company. We also assist you in evaluating various technology alternatives that are available to your existing business or portfolio company.

    Distribution and Logistics Practice. We assess the target company's operations and logistics capabilities and identify key issues that may need to be addressed. For existing companies, we analyze your operations and look for improvement opportunities.

    Merger Integration Planning Practice. We ensure that well-designed plans are in place for moving forward after a merger or acquisition.

    Finance and Accounting Practice. We scrutinize the financial statements and accounting infrastructure within the target company.


    Madeleine Donahue (Photo Credit: Macleod Dixon LLP) In Canada, Madeleine Donahue of Macleod Dixon is head of environmental practice in Macleod Dixon's Toronto office, where she practices primarily in the environmental, natural resources, and occupational health and safety and privacy law areas. Madeleine's environmental practice encompasses three broad categories: transactional due diligence, litigation and defense, and regulatory guidance.

    In South Africa there is Bowman Gilfillan Attorneys. A fair number of LLB and LLMs from Wits in the company - I confess I never did anything with my Wits LLB.

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