Definition
Feasibility studies are required in the preproduction stages to justify continued investment. Usually, a Scoping Study is followed by one or more Pre-Feasibility Studies, which reflects the increasing level of technical and economic knowledge gained at the various earlier stages. These culminate in a final Feasibility Study that demonstrates the economic feasibility of the project with sufficient certainty to allow a decision to mine.
The level of engineering that has been attained in the Feasibility Study is usually well short of that required for construction, so a further period of detailed engineering follows. This usually continues during construction and only tapers off prior to commissioning when production is imminent. While the terms Scoping, Pre-Feasibility and Feasibility are most commonly used.
Accuracy of feasibility studies
There is no general agreement on the level of accuracy expected from Feasibility Studies. Bullock (2011) tabulated data for an unstated number of projects from 20 sources that gave the outcomes as shown in Table 2 for capital estimates.
Bullock separately tabulated data for 258 projects from eight authors, which gave an average capital cost overrun of 26 per cent. No improvement in estimation accuracy was apparent over the past 50 years. Level 3 or final Feasibility Studies generally aim for an estimate accuracy of ±10 – 15 per cent, though the data suggests that this is not often achieved. The accuracy of the components of Feasibility Study estimates is discussed in detail in Chapters 2 to 6 of the Cost Estimation Handbook (The AusIMM, 2013). It is not feasible to quantify the accuracy of Ore Reserve estimates other than to classify them under the JORC Code.
How feasibility studies fail
Feasibility studies may fail to deliver the expected outcomes in the following ways:
- the capital cost of the project is higher than expected
- the operating cost is higher than expected
- the recovered grade is lower than expected, affecting revenue
- product prices are lower than expected, affecting revenue
- the project takes longer to build and ramp up than expected, affecting costs and delaying cash flow
- 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.
Credits to Australasian Institute of Mining and Metallurgy (AusIMM)
