The Role of Due Diligence in Mining Finance

No sector places greater weight on due diligence than mining. A commercial real estate deal rests on comparable transactions and a building survey. A SaaS acquisition rests on customer contracts and code quality. A mining transaction requires independent verification of geology, metallurgy, environmental baseline, water rights, mining title, infrastructure, cost estimates, and market assumptions — each conducted by specialists, simultaneously, against a defined timeline.

For mining companies raising capital — whether equity, debt, streaming, or royalty finance — the due diligence process is the critical path. Understanding what it covers, who conducts it, and how to prepare it is the difference between a smooth close and a transaction that grinds to a halt over solvable issues.

Technical Due Diligence: The Geological and Engineering Review

Technical due diligence (TDD) is the foundation of any mining transaction. An independent technical advisor — typically a specialist firm such as SRK Consulting, AMC Consultants, or Wardell Armstrong — reviews:

Geological model and resource estimate — independent verification of the JORC/NI 43-101 resource estimate, review of the geological model, assessment of the Competent Person's methodology and assumptions
Drilling database — all drill hole collar surveys, down-hole surveys, assay data, QA/QC procedures, twin hole comparisons, and chain of custody documentation
Metallurgical testwork — review of recovery data, process design assumptions, and the robustness of the processing route; refractory or complex metallurgy is examined in detail
Mining method and schedule — assessment of mine design, stope sizes, dilution assumptions, mining recovery factors, and production schedule against the geological model
Capital and operating cost estimates — benchmarking of capex and opex against comparable operations; assessment of contingency adequacy; review of contractor quotes and vendor quotations supporting the estimate
Infrastructure — access roads, power supply, water availability, tailings storage facility design, and proximity to processing facilities

Environmental and Social Due Diligence

Environmental due diligence (ESDD) has grown substantially in scope over the past decade, driven by ESG requirements from institutional investors and lenders. A specialist environmental consultant reviews:

Environmental baseline studies — biodiversity, hydrology, air quality, cultural heritage
Environmental impact assessments (EIA) — completeness, regulatory compliance, and adequacy of mitigation measures
Tailings storage facility design — dam safety, liner design, closure plan, and liability quantification
Water management — source, usage, treatment, and discharge compliance
Rehabilitation obligations — cost estimation, bonding adequacy, and regulatory compliance
Community and indigenous relations — consultation records, FPIC compliance, social licence assessment

"Environmental diligence findings don't usually kill transactions — but they consistently delay them. Disclose early and have the answers ready."

Legal Due Diligence: Title and Agreements

Legal DD is conducted by specialist mining lawyers in the relevant jurisdiction. It covers:

Mining title — chain of title, current registration, expiry dates, maintenance obligations
Corporate structure — ownership chain from the listed entity to the project company, any intermediate shareholding issues
Underlying agreements — option agreements, joint venture terms, royalty deeds, earn-in agreements, back-in rights
Existing encumbrances — charges, caveats, existing royalties, security interests registered against the tenements
Material contracts — offtake agreements, processing agreements, key supplier contracts, employment agreements for senior personnel
Regulatory compliance — mining permits, water permits, environmental approvals, construction permits

Financial Due Diligence: The Numbers Behind the Model

Financial DD reviews the financial model, historical accounts, and existing financing arrangements. For early-stage mining companies with limited operational history, the focus is on the financial model: the assumptions behind revenue, operating cost, capital cost, and funding. For producing or near-production companies, historical financial performance and existing financing covenants are reviewed in detail. For project finance transactions, a financial model audit by an independent accountant (financial model review, or FMR) is typically required.

The Due Diligence Timeline

DD Component	Typical Duration	Primary Deliverable
Technical DD	4–8 weeks	Independent Technical Report (ITR)
Environmental DD	4–6 weeks	Environmental & Social Due Diligence Report
Legal DD	3–5 weeks	Legal DD Report / Title Opinion
Financial DD	2–4 weeks	Financial Model Review
Total (parallel)	6–10 weeks typical	Combined DD Reports → Transaction Documents

How to Prepare for Mining Due Diligence

The companies that pass due diligence quickly share a common characteristic: they had the answers before the questions were asked. The practical preparation list:

Organise all drill data into a current, complete database — holes, assays, surveys, QA/QC
Confirm all tenements are current, registered, and maintenance obligations met
Document all underlying agreements — options, JVs, royalties — and confirm they are executed
Have the geological model reviewed internally before external diligence
Prepare a financial model with clearly labelled assumptions and sensitivity analyses
Compile environmental baselines, permits, and community engagement records in a single organised folder
Disclose all known issues — historical environmental incidents, title disputes, existing royalties — in your information memorandum

OAKRG works with mining companies throughout the due diligence process — from pre-diligence preparation through to transaction close, connecting management with investors and lenders including streaming companies, royalty providers, project finance banks, and IPO advisors.

Frequently Asked Questions

Technical due diligence (TDD) in mining covers: independent verification of the geological model and resource estimate, review of drilling databases and QA/QC procedures, metallurgical testwork assessment, mining method and schedule review, capital and operating cost benchmarking, and infrastructure assessment. It is typically conducted by an independent mining consultancy.

In parallel, a full mining due diligence process (technical, environmental, legal, and financial) typically takes 6–10 weeks. Technical DD is usually the critical path. Transactions where the company's data room is complete and organised at the start of diligence close significantly faster than those where documents are produced reactively.

An Independent Technical Report is the deliverable from a third-party technical advisor (such as SRK, AMC, or Wardell Armstrong) summarising the findings of technical due diligence. It is typically required by banks, streaming companies, and PE investors as a condition of transaction close. For public market transactions, it is often published as part of disclosure documentation.

A Financial Model Review is an independent audit of the project's financial model by a specialist accounting firm or financial advisor. It verifies model integrity (formulae, linkages, no hard-coding), confirms assumption documentation, and assesses the model's fitness for purpose in a transaction context. Required for most project debt financings.

Common findings: incomplete or inconsistent drilling databases; resources estimated on outdated software or non-compliant methodology; title issues (missed renewals, unregistered transfers, undisclosed royalties); cost estimate inadequacy (missing contingency, optimistic analogues); environmental compliance gaps; and financial model errors or unsupportable assumptions.

A title opinion is a legal professional's written assessment of the validity, completeness, and encumbrances of a mining company's title to its tenements. It confirms that the company holds what it claims to hold, identifies any issues with chain of title, and lists all registered encumbrances. Required by most institutional investors and all project lenders.

ESG requirements have significantly expanded environmental and social diligence scope. Institutional investors and lenders now systematically review: tailings dam safety (following high-profile failures), FPIC compliance with indigenous communities, biodiversity baseline adequacy, water management, and rehabilitation liability quantification. Deficiencies in these areas can delay or prevent transactions.

Free Prior and Informed Consent (FPIC) is the principle that indigenous communities have the right to give or withhold consent for projects affecting their lands, resources, and rights — prior to the project proceeding, based on full information, and without coercion. It is required by IFC Performance Standards and the ICMM Position Statement, and increasingly required by institutional investors regardless of whether local law mandates it.

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OAKRG arranges capital for mining companies at every stage — from early exploration through to production finance. Bridge loans, convertible notes, royalty financing, project debt, and IPO advisory across gold, silver, copper, lithium, and critical minerals.

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