Critical Thinking for Critical Minerals: Why Due Diligence Matters More Than Ever in Mining Investments and M&A

By Michael Stine, Manager, Mining Economics and Risk at Stantec

Years ago, I was interviewing for a position at a gold mining company. I was talking with the CEO after visiting one of their newly started open pit mines, and I brought up how the recovery numbers in the feasibility study were fantastic. He replied, “Oh yeah, we’ll get around 5 to 10 per cent lower recovery than that. The study was more of a marketing document.”

I left the meeting not only saddened by the integrity of the company but shocked by the blatant disconnect the executive had on the importance of being forthcoming with investors.

Sadly, things like this are not that unusual, even if not quite so unashamed. As capital floods into critical minerals, I see more and more projects being promoted that will never be built. Mining has entered a new era of excitement, and with it comes a renewed need for discipline, skepticism, and due diligence.

The critical minerals rush

The push to decarbonize, as well as geopolitical events, have turned once-overlooked niche metals markets into essentials. Lithium, nickel, cobalt, copper, and rare earth elements sit at the centre of everything from electric vehicles (EVs) to wind turbines and seem to regularly be the focus of senior diplomatic missions and government announcements. According to the International Energy Agency (IEA), demand for these minerals could double or even quadruple by 2040, depending on the pace of the energy transition. Even gold prices, for completely other economic reasons, has drastically changed the landscape for projects.

This market activity is driving investment. Many private equity companies that once ignored mining have mandates to get exposure to critical minerals projects. In 2024, global mining M&A activity hit $121 billion, with critical minerals making up a growing share.

Governments are adding fuel, too. Canada, the United States (US), and the European Union (EU) have all launched critical mineral strategies with funding, fast-tracked permitting, and partnerships. For Canada, the stakes are high. The country has 31 of the 50 minerals deemed ‘critical’ by Ottawa, and the TSX/TSXV remains the world’s largest mining finance hub. In 2023 alone, miners raised over $10 billion on Canadian exchanges. With a federal Critical Minerals Strategy and provincial governments eager to attract projects, the rush is real.

But with all that capital comes new players – and many don’t understand the difference between a resource and reserve, much less how to critically assess a project.

The risk of inexperience

Mining isn’t tech or real estate. It’s slow, capital-intensive, and tied up in geology, politics, and social licenses. But new entrants – from venture capital to sovereign wealth funds – often treat mining like a plug-and-play business. The result? More deals are getting done on incomplete data, rosy assumptions, and underestimated risks. For a taste, I had to repeatedly push back on a request to use commodity prices that were double the current spot price in an economic evaluation of a project, because the owner’s felt: “surely prices will need to increase in the next few years.”

A 2024 McKinsey study found:

• 83 per cent of major mining projects ran over budget by more than 40 per cent.
• Schedule delays averaged 20 to 30 per cent.
• Megaprojects (over $1 billion) saw average overruns of 79 per cent.

There’s no beating around the bush here – these numbers are terrible. What is the point of having confidence ranges in technical reports if we are not even close?

A Canadian case: Lithium in Quebec

Quebec has become a magnet for lithium explorers, especially in the James Bay region. The geology is excellent, and governments at both levels are backing battery supply chains. But good rocks don’t guarantee smooth sailing. In 2023–24, several juniors ran into delays over Indigenous consultation, water use, and wildlife concerns. A few projects were shelved despite millions already sunk. The takeaway: even in Canada, social license and environmental diligence can make or break mining developments. Projects that skip the hard work of building trust or assume permits will sail through usually get stuck.

What due diligence should really mean

Too often, due diligence is a box-ticking exercise. In mining, it has to be deeper and cross-disciplinary. At minimum, it should cover:

1. Geology and technical: Is the resource real, and can it actually be mined? Drill data, models, and metallurgy all need independent verification.
2. Permitting and regulatory risk: How long will permits really take? Are there land claims or environmental liabilities lurking? Timelines have doubled in some regions.
3. Community and ESG: Is there a social license to operate? ESG isn’t window dressing—it’s a core project risk.
4. Operational readiness: Does the team know how to deliver? Are power, water, and logistics in place? Is the schedule a best-case scenario or realistic? What is the ramp-up time?
5. Cost estimates: How does this estimate compare to other projects in similar locations and of similar scale?
6. Market and price assumptions: Are the economics stress-tested? Lots of projects look good at $5/lb copper – far fewer at $3.50. How big is the market? Can this niche market handle this kind of new volume? What are the commercial terms? Is there a processing facility that can take the product? Where are they, how does the product get there, and what do the payables look like?

A call for disciplined capital

The world needs over $1 trillion in new mining investment by 2040 to meet critical mineral demand. That money should be deployed wisely.

For investors, that means asking hard questions. Don’t be afraid to look like the idiot in the room to make sure you understand the asset. It also means bringing in independent experts. Make sure they are critical and skeptical of data that doesn’t make sense. Stress-testing every assumption is important. So is valuing experience over hype.

For companies, it means being transparent about risks. Don’t bury or hide them – investors will reward you.

It also means investing early in proper project definition, building trust with communities and regulators, and using real numbers and accounting for risk in your economic models. In short, don’t model best-case scenarios.

Final thoughts: The value of skepticism

Mining is full of opportunity right now. But it’s also full of significant risk. The best way forward is with a clear head, tough questions, and a healthy dose of skepticism. Due diligence isn’t just about protecting capital. It’s about building projects that last—technically, socially, and financially.

Due diligence isn’t a box-checking exercise to clear the way and close a deal. It’s the line between building value and burning capital. And in mining, as in life, if something looks too good to be true, it probably is.