Feasibility studies for mining projects 

Feasibility studies for mining projects 

Feasibility studies for mining projects 

There is no international agreement on the terminology for each stage of feasibility study and there is no agreed standard for quality or accuracy. The AusIMM’s Monograph 27, Cost Estimation Handbook provides a set of standards which may become more widely used. While it is convenient to refer to Scoping Studies, Prefeasibility Studies, and final Feasibility Studies, in reality the study process is iterative, and several increasingly detailed Prefeasibility Studies may be undertaken before committing to the final Feasibility Study.

Scoping Studies 

A Scoping Study may be carried out very early in the exploration phase, as a basis for acquiring exploration areas or making a commitment for exploration funding. At this stage the investment risk may be relatively small, but it is obviously undesirable to expend further funds on something that has no chance of being economic. 

The major risk at this stage is that a viable mining project is relinquished due to an inadequate assessment. As there is a very low probability of an exploration project proceeding to become a mine it is evident that this risk is quite a serious one at the Scoping Study stage. For this reason, it is essential that experienced people are involved in the Scoping Study. The intended estimation accuracy is usually 30 to 35 per cent, though some companies accept +/- 50 per cent. 

It is acceptable for Scoping Studies to be based on very limited information or speculative assumptions in the absence of hard data. The study is directed at the potential of the property rather than a conservative view based on limited information. 

A sensitivity analysis, however, should present the likely range of possible outcomes so that decision making, including investment decisions that may follow a public release of the study results, is not biased to the optimistic end of the range. 


Prefeasibility Studies 

There are common reasons for carrying out Prefeasibility Studies: 

  • As a basis for committing to a major exploration program following a successful preliminary program. It is possible for commitments of tens of millions of dollars or more to be made for ongoing exploration and development based on a Prefeasibility Study, prior to decision to mine. For example, where ore reserves cannot be proven by surface drilling underground development may be required for exploration at an early stage of the project. 
  • To attract a buyer to the project or to attract a joint venture partner or as a basis for a major underwriting to raise the required risk capital. A Prefeasibility Study may also be prepared in full or in part by potential purchasers as part of the due diligence process. 
  • To provide a justification for proceeding to a final Feasibility Study. 

The results of a Prefeasibility Study may be the first hard project information which is seen by corporate decision makers and investors. 

Usually the findings are announced publicly so that it becomes difficult to change perceptions with subsequent information. In such cases, the Prefeasibility Study has become the real decision point, with the subsequent Feasibility Study being seen by management and investors as a necessary step along a path which has already been irrevocably committed. While undesirable, this sequence of events may occur due to modern reporting requirements. 

For these reasons the Prefeasibility Study must be prepared with great care by experienced people, and its conclusions should be heavily qualified wherever necessary. Assumptions should be realistic rather than optimistic because it is very difficult to bring management and markets back to reality in the event that the final Feasibility Study is significantly less favourable. 


Final Feasibility Studies 

The final Feasibility Study is usually based on the most attractive alternative for the project as previously determined. The aim of the study is to remove all significant uncertainties and to present the relevant information with back up material in a concise and accessible way. The final Feasibility Study has a number of key objectives: 

  • to demonstrate within a reasonable confidence that the project can be constructed and operated in a technically sound and economically viable manner 
  • to provide a basis for detailed design and construction 
  • to enable the raising of finance for the project from banks or other sources. 

The term bankable is sometimes used in connection with final Feasibility Studies. This just means that the study achieves a quality and standard that would be acceptable for submission to bankers. Whether a particular bank will actually lend against the project is another question, depending on many matters that are outside the control of the feasibility study team. 

Whether the project design has been optimised in the feasibility study will depend on the time and budget allowed. Often a sub-optimal but acceptable design is used as the basis of the feasibility study with further optimisation undertaken (or not) once the project has been approved. 

The feasibility study is only a step along the design path. Much more work must be undertaken during the detailed engineering phase which follows project approval. The engineering work is usually ongoing through project completion, commissioning and early production. 


Reporting Ore Reserves 

While reporting requirements vary around the world, a Prefeasibility Study is the minimum level of study that should be completed before reporting an ore reserve.  


– Carlos Freile

Implicit Modeling Command

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Uncertainty and Mining 

Uncertainty and Mining 

Mining is an industry that combines many disciplines with a primary objective: the extraction of mineral resources in an economically profitable, environmentally and socially sustainable way. Many of the risks associated with a mining project include financial, technical, social, environmental risks, among others. One of the risks that has become more relevant in recent years are social risks. Many large, medium and small-scale projects have been discontinued, postponed or cancelled because they are not approved by communities. Some mining companies have increasingly been working hand-in-hand with communities to highlight the benefits that responsible mining brings to the economic development of a community, region, and country. However, many efforts are still required to change the negative perception of an activity so vital to our modern way of life. 


Another major risk that has been extensively identified and studied from a technical perspective corresponds to the geological risk. The geological model for a mineral deposit is developed from the limited information obtained from techniques such as exploration drilling, channel samples or from outcrops, amongst others. It’s well known that the estimates in a geological model, such as those commonly used in the estimation of resources and reserves, are an approximate representation of  the mineral grade distribution. This leads to high incertitude regarding the distribution and variability of mineral grades within the deposit, commonly referred to as geological uncertainty.  Several studies have shown that a large percentage of projects do not meet production targets due to the differences between the mineral grade they had in the model with respect to the grade obtained in reality,  this being a result of the geological uncertainty previously mentioned. 


Another risk factor affecting all mining operations is the risk of over and under excavation of blocks, which results in dilution, operational losses of material, and possible geomechanical instability. In most cases, a mining operation assumes a dilution rate based on historical values, previous experiences or similar operations. However, this dilution rate can differ greatly in reality, compromising the profitability of the operation. 


From a financial point of view there are large risks related to the uncertainty in the price of metals and raw materials, operating costs, as well as taxes and regulations.  In a similar way we could list many more risks that arise from all the uncertainties that are  present in a mining operation.  


The question we have to ask ourselves is how to face this uncertainty. We can identify three working methodologies to deal with this uncertainty. The first option is to ignore the uncertainty, which is the traditional methodology along with the ensuing risks associated with that. The second option is to reduce uncertainty, which can be done up to some extent and can come at a great cost. This option can be considered for certain types of uncertainties, but in certain cases, such as geological uncertainties, the deposit is only fully known once it is extracted. The third option is to live with uncertainty and consider it in decision-making using stochastic methods. In this case, uncertainty is accounted for in the model and strong decisions have to be made, understanding that uncertainty will be present at the moment of making decisions. 

Stochastic solutions perform better than their deterministic counterparts in the presence of uncertainty. The challenge is to correctly model uncertainty and develop efficient stochastic methods. It’s in this direction that we must all work in the industry, academia and technology companies to be able to provide us with the tools that will allow us to reduce the risks associated with mining activities. 


Luis Montiel Petro, PhD. 

Is Mining Evil?

Is Mining Evil?

Is mining evil?
A non-mining point of view

I’m not a mining engineer, nor a geologist. For the past four years, I have worked at a mining software company, although my background is primarily in business.  At the beginning of my professional life, I worked in accounting and finance. My journey through my career has tilted me more towards financial management and business strategy than towards the study of the land and its minerals. Therefore, you can say very surely that my point of view is non-mining.  My sympathy for animal causes have led me to give up meat consumption. I recycle and always try to reduce my carbon footprint. I drive a very efficient car and I don’t have a house full of state-of-the-art electronics. And having said that, I believe that legal, responsible and controlled mining is not evil. 

As is the case behind all other human economic activity, mining has an effect on the environment.  But, as is the case with agriculture and manufacturing, without mining there is no civilization. This is not to say that we should mine the land without any consideration or control, but to ask that there be no mining is to ask that we return to Neolithic times. And perhaps even further back, because already in the Neolithic era, our ancestors made use of stone tools and rudimentary mineral extractions from the earth.  In other words, mining is closely linked to the progress and development of humanity. 

Without mining there is no concrete to build. Without mining there are no minerals for agro-industrial production. Without mining, we can’t build machinery for labor and transportation. From where does the copper for electrical circuits come? How to produce lithium batteries without mining? Are we willing to abandon our full-of-minerals computers, to go back living in caves or straw huts, or never to see our loved ones on other continents again? Mining provides us with the raw material to be able to do all those great things that human ingenuity creates to facilitate our lives. 

 Mining also generates work. I’ve been told that mine sites only generate work for the operation’s employees. But this is far from reality. I will counterargue it in a very simple way: Let’s take the example of a copper mine. Large trucks are needed to extract copper. This already creates employment in the truck factory, in the truck distributor, also in the tire factory, and in the oil company that provides the raw material for the tires. Then, with the extracted copper, cables are produced that will be used, among many other things, for cell phones. Cell phones that create jobs in the telecommunications service sector, create work in the software application sector, and enable and facilitate the operations of many businesses around the world. Those same cell phones that are filled with copper, brass, aluminum, manganese, gold, silver, palladium, indium, antimony, phosphor, etc. Which are all extracted through mining processes. Ultimately, those cell phones will also need satellites for the operation of a wireless network. And yes, satellites are made with a myriad of minerals, which are also extracted from the earth. 

 In conclusion, many of the organizations and individuals who defend environmental and social causes, although necessary and just, should moderate their speeches and make it more realistic. Measures should be put in place for the creation and implementation of reasonable controls to reduce or eliminate contamination. Laws should be implemented to protect the environment without stopping the development of the people. Investment in new extraction techniques and better technologies should be funded to increase the efficiency of mining operations. Corrupt authorities preventing the proper distribution of mining-generated wealth should be persecuted and punished.  And finally, we must ask to end illegal mining, which is actually the biggest polluter and main reason for the demonization of the mining industry. We must, then, accept that responsible and sustainable mining is not evil but vital for present-day civilization. 

Romián Tuesta-Vilca