Mergers & Acquisitions Case: Specialty Mining Company
Pre-Acquisition Due Diligence, Asset Retirement Planning, Insurance Reviews

GaiaTech was retained by a major private equity firm that specializes in the commodities and mining industries to conduct an environmental review of a specialized U.S.-based mining company in advance of a planned acquisition. The target company had a more than 100-year history of mining for certain minerals in the Western U.S.

Mining and ore-processing practices have changed significantly in past decades – as have applicable environmental regulations and approved practices. The mineral being mined by the target company, the mining practices of the company, and the use of solvents and compounds used in the mineral's refining and subsequent processing into various products all had potential environmental impacts.

GaiaTech's engagement scope included a review of the target company's current and historical operations, which included numerous current and former mine sites; current and former processing facilities; a current company-owned town and public water supply system; a landfill; and former rail lines, refinery and slurry pipelines. We also evaluated compliance with applicable local, state, federal and tribal environmental laws, in addition to reviewing land leases and reclamation bonds held by the company.

Based on this review, GaiaTech estimated costs for our client to address known and potential impact and compliance concerns, including asset retirement obligations and possible historical liabilities. We then presented our client with best-case, likely-case and worst-case scenarios. To model financial outcomes under these three scenarios, GaiaTech used a probability-weighted "expected-cost" projection to prepare a cash-flow table extending throughout the expected life of the mine.

GaiaTech's reviews and estimates were used to obtain insurance coverage as well as to satisfy lenders' requirements. We also were available as an advisor to the equity investor to respond to technical questions from their deal specialists, from the company's insurance companies, and from lenders and lenders' advisors.