Chapter 3 - The mining process
3.1 The current tax rules and the suggested new rules are best understood with reference to the mining process, as different rules relate to each stage of the mining process. This chapter describes that process.
The Crown Minerals Act
3.2 The Crown Minerals Act 1991 sets the broad legislative policy for prospecting, exploration and mining of Crown-owned minerals in New Zealand. These include all naturally occurring gold, silver, coal, other metallic and non-metallic minerals, and aggregates.
3.3 The allocation of rights (permits) to prospect, explore or mine minerals that are owned by the Crown is carried out by the issuing of permits under the Act. The allocation of permits broadly mirrors the complete process of mining, from discovery of an ore body through to the extraction of the minerals.
The mining process
3.4 The process of mining, from discovery of an ore body through to the extraction of minerals and finally returning the land to its natural, usable or safe state comprises several distinct steps as described below:
The mining process
The prospecting phase
3.5 The prospecting phase involves the preliminary search for and the identification of an ore deposit. The techniques vary, but they typically have a low impact upon the land. Prospecting broadly involves identifying land likely to contain exploitable mineral deposits or occurrences. It includes aerial, geological, geochemical and geophysical surveys, and the taking of samples by hand or hand-held devices.
The exploration phase
3.6 The exploration phase involves more intensive methods to define the extent, location and value of the ore present. This leads to a quantitative estimate of the size and grade of any deposits identified. This estimate is used to conduct a pre-feasibility study to determine the preliminary view on whether any ore deposits within the permit area are economic to recover. This determines whether further investment in delineating the resource and engineering studies is warranted. It also identifies key risks and areas for further work.
3.7 If further investment is justified, a feasibility study is undertaken to evaluate the financial viability, the technical and financial risks, and the robustness of the project. This study includes mine planning to evaluate the economically recoverable portion of the deposit, including understanding the mineral chemistry and ore recoverability, marketability and expected returns on the ore concentrates, engineering concerns, milling and infrastructure costs, finance and equity requirements, and an analysis of the proposed mine from the initial excavation all the way through to reclamation.
The development and mining phase
3.8 Once the analysis determines the ore deposit is worth recovering, development begins to create access to the ore body. Progress towards mining operations involves acquiring a mining permit and other consents, and the construction of production, processing, storage and transport facilities. The mine buildings and processing plants are constructed and any necessary equipment obtained. Operation of the mine to recover the ore begins and continues as long as the company operating the mine finds it economical to do so.
The rehabilitation phase
3.9 Once all the ore that the mine can produce profitably is recovered, rehabilitation begins to make the land suitable for future use by others. Typically, good mine management will involve a rehabilitation programme that ensures, where practical, land rehabilitation is gradually undertaken over the life of the mine.
General points
3.10 It is important to note that entities involved in mining will typically abandon a project once there is enough information about a deposit to suggest that minerals are not economically recoverable.
3.11 Further, mineral exploration and development does not cease with a decision to mine. Exploration is often conducted to find ore deposits close to the primary deposit. This activity often uses information generated as a result of mining the deposit and is typically called “brown-fields exploration”.