Estimating mining project costs is an iterative process, vital for viability assessment and financing (AusIMM, 2012). It evolves from conceptual to detailed feasibility stages, increasing project confidence (Resource Capital Funds, 2024). Core costs include Capital Expenditures (CAPEX) like exploration, site development, and equipment; Operating Expenditures (OPEX) for extraction, processing, and maintenance; and essential Closure/Reclamation costs (MSHASafetyServices, 2024).
Estimation progresses through phases: Conceptual/Scoping (e.g., PEA, ±35% to ±100% accuracy), Pre-Feasibility (PFS, ±25% to ±35%), to Feasibility Studies (FS, ±10% to ±25%), with accuracy improving as engineering detail increases (Resource Capital Funds). Methodologies range from early-stage analogy and parametric models to detailed bottom-up estimates in later phases, often supported by cost databases (SRK Consulting).
Numerous factors drive costs: geological characteristics (ore grade, rock strength), mining method, project scale, location, infrastructure, equipment, ESG regulations, and market conditions (MSHASafetyServices, 2024).
Cost contingency, an allowance for “known unknowns,” is crucial, calculated via methods like percentages or Monte Carlo simulation, and is distinct from specific risk allowances (Taylor & Francis, 2019).
Robust estimation, integrated with risk management and continuously updated, underpins strategic decisions and project success (Cleopatra Enterprise, n.d.).
At which stage of a mining project do you think cost estimates become reliable enough for investment decisions?
References:
AusIMM. (2012). Cost Estimation Handbook (Monograph 27, 2nd ed.). The Australasian Institute of Mining and Metallurgy. https://www.ausimm.com/publications/monograph/monograph-27—cost-estimation-handbook-hc/
Cleopatra Enterprise. (n.d.). Mining Industry: Reduce Cost Overrun Risks. https://cleopatraenterprise.com/blog/mining-industry-reduce-cost-overrun-risks/
MSHASafetyServices. (2024, December 18). Understanding the Cost of Underground Mining. https://mshasafetyservices.com/understanding-the-cost-of-underground-mining/
Resource Capital Funds. (2024, January 9). Phases of Mining. Retrieved from https://resourcecapitalfunds.com/insights/mining-and-minerals-101/phases-mining/
SRK Consulting. (n.d.). Operating cost for miners – How much will it cost us to mine? https://www.srk.com/en/publications/operating-cost-for-miners
Taylor & Francis. (2019). Cost contingency. https://taylorandfrancis.com/knowledge/Engineering_and_technology/Industrial_engineering_%26_manufacturing/Cost_contingency/
