What an Independent Technical Review Catches That Financial Due Diligence Doesn't
Financial due diligence on a mining acquisition or investment is usually genuinely thorough — reserve figures as reported, offtake terms, capital structure, discount rate assumptions all get real scrutiny from people who are good at exactly that kind of scrutiny. What it isn't built to catch is whether the flowsheet actually works the way the technical report says it does. That's not a gap in effort. It's a gap in what the discipline is designed to assess. A lawyer or a banker has no structural basis for judging whether a piece of process technology is proven at the scale it's being proposed for, or whether an equipment sizing decision rests on a reasonable reading of the ore data or a convenient one. Two specific patterns illustrate why that gap matters more than it might seem from the outside.
“Financial due diligence on a mining acquisition thoroughly checks reserves, contracts and capital structure, but has no structural basis for interrogating technical judgement calls buried in the flowsheet. Two specific blind spots illustrate this: capital- constrained companies are structurally drawn toward unproven technology that looks routine on paper, and genuinely uncertain geological data can be read in whichever direction is cheapest without the resulting design looking wrong. Both produce a report that is internally consistent and passes every check a financial reviewer can run, while resting on a technical assumption that was never independently tested — which is exactly the gap an independent technical review, done alongside financial due diligence, is positioned to close.”
The pull toward the unproven
Smaller, capital-constrained companies have a structural reason to be drawn toward newer or less conventional technology and flowsheet choices — sometimes because a novel process genuinely offers better economics for their specific orebody, and sometimes because it's cheaper on paper, or differentiates the project's story to the market, or simply because someone on the team is convinced it's the future. None of those motives are dishonest. But a technology that hasn't been proven at commercial scale, or in ore of this type, carries a specific category of risk — scale-up risk, availability risk, unanticipated reagent or maintenance costs — that doesn't announce itself in a technical report the way a missing permit or an unfavourable contract term would in a legal review.
Financial due diligence sees a flowsheet with a named technology and a stated capex saving, and has no independent basis to interrogate whether that claim holds up. It looks like a normal line item. The only way to know whether "proven" actually means proven at this scale, on this ore, with a real operating track record — rather than a pilot plant result or a vendor's own projections — is for someone with the technical background to go and check.
The quiet arithmetic of capital pressure
The second pattern is subtler, and it's the one that's easiest to miss entirely because nothing about it looks like an error. Geological and geotechnical data almost always comes with genuine uncertainty attached — an orebody's competency, hardness, or grade can plausibly vary in more than one direction, and reasonable people can read the same variability data differently. Under capital pressure, that ambiguity creates a quiet incentive: a variable orebody could turn out harder in places, which argues for a larger, more conservatively sized mill — or it could turn out softer in places, which argues for a smaller, cheaper one. Both readings are technically defensible from limited early-stage data. Only one of them saves capital.
The design that results from choosing the convenient reading isn't obviously wrong. It's internally consistent, properly documented, and defensible in isolation — which is exactly why financial due diligence, working from the report as given, has no way to catch it. The report doesn't say "we picked the optimistic interpretation of an uncertain input." It just states an equipment size and moves on. Spotting the gap requires going back to the underlying variability data and asking whether the chosen design basis represents a genuinely balanced reading of it, or the reading that happened to be cheapest.
Why this sits specifically at the technical layer
Both patterns share the same structural feature: they produce a report that is complete, coherent, and passes every check a financial or legal reviewer is equipped to run, while resting on a technical judgement call that was never independently tested. That's precisely the layer an independent technical review is built to interrogate — not because the original study was produced in bad faith, but because someone with no role in choosing the technology or setting the design basis is the only person positioned to ask, plainly, why this reading of the data and not the other one, or why this technology and not the proven alternative.
For a board, a financier, or an M&A adviser working through a transaction, the practical implication is straightforward: a clean financial due diligence report is not the same thing as a clean technical one, and treating the first as a proxy for the second is exactly where this kind of risk gets through unnoticed until well after the deal closes.
This piece builds on the BFS accuracy and board-questions posts earlier in this series — the same underlying risks (factored-versus-engineered cost lines, flowsheet drift, orebody risk amplifiers) show up again here, in an M&A context rather than an internal project-approval one.