In a mining project, there can be up to four study phases prior to project implementation. The feasibility study is where the accuracy and level of detail is most stringent.
The feasibility study should provide the technical and financial justification for continued investment; that is, an organisation and its financiers will often rely on the study when deciding whether to construct the mine.
Feasibility studies may fail to deliver the expected outcomes in several ways. For this reason, feasibility study preparation and ore reserve estimation should not be an academic exercise. It should be a practical one with the outcomes able to be realised given what is reasonably foreseeable.
Here are five ways studies can fail:
- The capital or operating cost of the project is higher than budgeted
- The recovered grade is lower than expected, affecting revenue
- Initial performance cannot be sustained, though it may take several years for the failure to become evident
- The project incurs unforeseen negative environmental, social or political impacts
- Force majeure such as industrial action, natural disasters, terrorism, wars
In his technical paper, Managing Technical Risk for Mine Feasibility Studies, P. McCarthy outlines eight problems that can arise from inadequacies in feasibility studies with the most common being mine design and scheduling (32 per cent), geology, resource and reserve estimation (17 per cent) and metallurgical test work, sampling and scale-up (15 per cent).
A common cause of “poor overall project outcomes”, cited by University of Western Australia adjunct research fellow Sam McLeod, is when too narrow a focus is taken on technical problem-solving, rather than exploring alternative ways of achieving the same objectives.
“It’s important that a feasibility study is completed to the required level of detail and the outcomes are placed in the correct context of technical risk and confidence,” AMC Consultants general manager and facilitator of AusIMM’s JORC Code Reporting professional certificate, Roderick Carlson, said.
“This helps the mining industry to preserve and improve its risk perception in the eyes of investors.”
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This piece is an extract from the AusIMM online professional certificate in JORC Code Reporting.
The JORC Code Reporting professional certificate equips students to identify good technical reporting practices, provides a holistic view of the JORC Code and teaches students to interpret the Code within their working environment.
The next intake commences June 26. Register here.
This article was developed in partnership with AusIMM.