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Delivering Smarter Solutions Technical Bulletin No.


INTRODUCTION Only the final feasibility study is considered to have
sufficient detail to allow a definitive “go” decision for
Since its founding in 1968, Pincock, Allen & Holt (PAH) corporate and financial purposes.
has been closely involved in the development and review
of feasibility studies for mining projects. Over that Conceptual Study
period, reporting standards and requirements have
evolved to keep pace with the development of new A conceptual study is a preliminary evaluation of a
technologies and other project concerns. In 1968, for mining project. Although the level of drilling and
example, environmental considerations were rarely, if sampling must be sufficient to define a resource (by
ever, addressed as part of project feasibility. In addition, Internationally Accepted Standards–see page 3 ),
it has become apparent that there is continuing confusion flowsheet development, cost estimation and production
over the term “feasibility study”; i.e., what are the scheduling are often based on limited testwork and
differences among conceptual, prefeasibility and engineering design. This study is useful as a tool to define
feasibility studies? subsequent engineering input and evaluation. It is not
valid for economic decision making.
PAH has attempted to adapt its internal standards to the
changing needs of the mining and financial communities. Prefeasibility Study
Recent internal discussions coupled with review by
outside experts have led to the development of the The prefeasibility study represents an intermediate step
reporting guidelines presented in the enclosed table. PAH between conceptual study and final feasibility. It requires
will follow these as minimum standards for the a higher level of testwork and engineering design. Cost
completion of its feasibility studies. As part of a due estimates are of the order of ± 30 percent accuracy.
diligence review, PAH is frequently requested as a third- Economic evaluation is used for assessing various
party to review feasibility studies, and will insure that all development options and overall project viability. Cost
of the major elements are included before accepting estimates and engineering parameters are not considered
such reports. of sufficient accuracy for final decision making.

TYPES OF STUDIES Feasibility Study

The evaluation of a mining project from exploration The feasibility study is of sufficient detail and accuracy to
through development and production is a lengthy and be used for positive “go” decisions and financing
complicated process. It requires an increasing level of purposes. This, and only this, is considered the “bankable
engineering input to facilitate the decision-making document.” Cost estimates are equal to ± 20 percent
process. Essentially, PAH works with three types of accuracy or better. Mine plans show material movements
studies: conceptual, prefeasibility and feasibility. and ore grades on an annual basis. These plans would be
Depending on the context, each of these types of study based on measured and indicated geologic resource
is sometimes generally referenced as a “feasibility study.” which would become proven and probable reserves.

some geotech data Yes Hydrology/geotechnical parameters No Yes Yes Equipment list No Yes Yes Consumables list No Yes Yes Personnel list No Yes Yes Surface mining: Final pit and dump outlines Yes. manuals. simple outline Yes Yes Annual pit and dump outlines No Yes Yes Underground mining: General mine development Yes. topography. if any No Yes Yes GEOLOGY AND RESOURCES Geologic description Geologic map Yes Yes Yes Geologic cross-sections No Yes Yes Drilling. period and mine life Yes Yes Yes Metal recoveries Yes. and climate Site location map Yes Yes Yes Detailed topography map Yes Yes Yes Ownership and royalties Claims list No No Yes Claim map No Yes Yes Current status and history Historical chronology No Yes Yes Past production. grade No Yes Yes Variograms No Yes Yes Resource estimate Internationally Accepted Internationally Accepted Internationally Accepted Standards* Standards* Standards* MINING Ore reserve estimate Reserve calculation parameters Assumed values Test-based values Test-based values Cutoff grade equations No Yes Yes Reserve estimate Internationally Accepted Internationally Accepted Internationally Accepted Standards* Standards* Standards* Mining method and plans Mining parameters Yes. basis Yes. IRR and ROI No Yes Yes INTRODUCTION Location. simple outline Yes Yes Stoping system No Yes Yes Production schedule Annual ore and waste tonnage and grade Yes. from vendor quotes 30% and take-offs. ~+/. factored Yes. assumed Yes Yes Capital cost estimate Yes Yes Yes Operating cost estimate Yes Yes Yes NPV.Feasibility Studies Minimum Report Contents Conceptual Prefeasibility Feasibility Study Study Study SUMMARY AND RECOMMENDATIONS Principal parameters including: Mostly assumed and Some engineering basis Sound engineering basis factored Ore reserves Yes Yes Yes Mining and processing rates Yes Yes Yes Environmental Issues & Permitting Requirements Yes Yes Yes Dev. ~+/. of samples vs. from est.20% 2 . freq. and assaying Parameters Yes Yes Yes Drill hole location map Yes Yes Yes Sampling/Assaying flow diagram No Yes Yes Assay check graph No Yes Yes Mineral resource estimate Geologic model physical limits Yes Yes Yes Lithology/tonnage factors/code No Yes Yes Basic statistics No Yes Yes Cum. simple division of total Yes Yes Mining capital and operating cost estimates Capital and operating cost estimates Yes. minimal eng.Yes. sampling.

Mineral Resources and Mineral Reserves 3 3 . minimal detail Yes. simple. cap. manuals. factored Yes. ~+/. preliminary Yes.20% Closure costs & accounting method Yes. Securities & Exchange Commission Industry Guide 7 4. preliminary Yes Yes assessment Royalties and taxes No Yes Yes Cash flows Yes.30% Yes. Australasian Code for Reporting of Mineral Resources and Ore Reserves . cost estimates Capital and operating cost estimates Yes. op. Minimum Reporting Requirements Minimum Report Contents (Cont. with minimal detail Yes Yes Power and water parameters Yes. preliminary Yes Solid & hazardous materials handling No Yes. ~+/.30% Yes.20% (including working capital and owner's pre-production expenses) ENVIRONMENTAL/PERMITTING STATUS Environmental management system Permit/regulatory framework Yes. from est. from vendor quotes 30% and take-offs. factored Yes. U.20% DEVELOPMENT SCHEDULE Schedule chart No Yes Yes Schedule calendar No No Yes ECONOMICS Principal economic parameters Yes. block diagram Yes Yes Personnel list No Yes Yes Material balance No No Yes Site plan No Yes Yes General arrangement drawings No No Yes Processing capital and op. preliminary Yes Spill prevention & emergency response plan No No Yes Environmental cost estimates Capital and operating cost estimates Yes.Prepared by the Joint Ore Reserve Committee (JORC) 3. assumed values Yes. conceptual Yes. ~+/. SME Guide for Reporting Exploration Information. basis Yes Yes Equipment list No Yes Yes Consumables list No No Yes Flow diagram Yes.10-20% FSR costs Yes Yes Yes INFRASTRUCTURE AND ADMINISTRATION Infrastructure facilities Facilities list Yes. and admin. ~+/. detailed data Processing method and plans Processing parameters Yes.Yes. preliminary Yes Yes Full site plan No Yes Yes Infr. ~+/. well defined Impact mitigation plans Yes. Canadian National Instrument 43-101 and 43-101 CP 2. minimal eng. preliminary Yes Yes assessment Sensitivities No Yes Yes * Internationally Recognized Standards include: 1. preliminary Yes Yes Environmental Impact Analysis Yes. manuals. from vendor quotes 20-30% and take-offs. ~+/.S.Yes. ~+/. preliminary Yes Yes. ~+/. preliminary Yes Mine waste management plan No Yes. cost estimates Personnel list No Yes Yes Capital and operating cost estimates Yes.) Conceptual Prefeasibility Feasibility Study Study Study PROCESSING Ore sampling and testwork Testwork data No. preliminary data Yes. from est.

Pincock. definition of feasibility studies.pincock. is a consulting and engineering firm serving the international mineral resource industry. and longer post-closure monitoring of the project to withstand changes in the metal price. and the capital costs in the cash flow They are presented within the format of a typical PAH analysis.. Although they are excellent for feasibility assessment. Allen & Holt. the reporting requirements change only incorrect are: marginally. accuracy) are required to demonstrate project feasibility. these sensitivities are rarely tested report and are limited to the tables and illustrations against the model in order to determine their relative included in the 4 4 . experienced costs for closure which are three to five times the budgeted costs. Allen & Holt • 274 Union Blvd. This is compared to actual costs of construction and startup. Your comments and suggestions are always welcome.986. a natural response to constantly changing conditions. In The most common places where these estimates are contrast. however. Lakewood. operating costs. except in regard to the accuracy level of the study. project construction. companies RECENT OBSERVATIONS AND CHANGES assumed that the salvage value of the equipment and physical facilities would cover these costs. they With regard to the capital cost estimates associated with are part of the design and construction phase. These areas are the “robustness” reclamation costs.” this has been traditionally PAH engineers. and the costs associated with reclamation and PRESENTATION closure. actual capital costs associated with project construction and startup. it has been PAH’s experience that these are typically 15 to 25 percent too low when Any project will continue to evolve during its life.Feasibility Studies Minimum Reporting Requirements Flowsheet development is based on extensive testwork. the times. closure costs. however. Historically. it has been PAH’s experience that mines that Economic evaluation is based on annual cash-flow are in the process of closing and/or are closed have calculations for the life of the defined reserve. a division of Hart Crowser. grades. With the mining of lower grade deposits. by defining reporting requirements.8907 • www. this Since PAH’s first publication of this bulletin in 1994.. With regard to the determination of reclamation and material balances and general arrangement drawings. Inc. • Availability of local bulk suppliers such as steel or cement. Contact Pincock. leading industry experts. and the needs of handled by running sensitivities on the ore tons. • Underestimation of logistical support and transportation • Underestimation of construction time and startup requirements. assumption has proved incorrect principally as a result of additional emphasis has been placed on three specific more stringent mitigation requirements.6950 • FAX 303. higher areas of these studies. within a rational framework. Ste. impacts on the potentially mineable reserve. our clients in both the mining and financial communities.987. the construction engineers. The guidelines presented are based on the experience of With regard to “robustness. is hoping • Availability of local craftsman such as millwrights and to help standardize. PAH. PAH sees an increasing PAH does not believe basic engineering studies (± 15% need for this additional step of analysis. Colorado 80228 • TEL 303. 200.