Feasibility study

Author: John Wright

Contents
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 1 Introduction

 2 Purpose of Study

 3 Study content

 4 Project team

 5 Risk assessment

 6 Study results

 7 Comments and suggestions

 8 See also

Introduction
Characteristics of the feasibility study stage include:

 25% - 50% of the engineering tasks are complete

 Cost estimate accuracy is in the order of ±10% to ±20%

 Bottom line contingency is in the order of ±15%

 Normal time required for submission of draft report is ±18 months. Report reviews and final
approval – variable, can add several months to project schedule.

 Normal cost range (includes supporting studies and test work – geotechnical, mineralogical,
metallurgical, environmental, socio-economic, EIS submission, etc but not exploration
geology) will be in the order of 4.0% to 8.0% of the total project value ($8.0 - $16 million for a
$200 million project) depending on the level of detail desired.

Purpose of Study

A feasibility study refines the preferred Base Case option as presented in a successful pre-feasibility study.
The study provides the required level of detail to support a decision for the commitment of resources
(funds, manpower) required to design, construct, and operate the facility.

Study content

A feasibility study includes:

 Completed and approved associated studies (geology and ore resource definition, updated orebody
model, geotechnical and hydrogeological studies, metallurgical studies and testwork, environmental
 impacts fully identified, socio-economic issues fully identified, major project risks identified, permit
applications submitted and the review process underway.

 Development of the Base Case option (as presented in the Pre-feasibility study) is to a much higher
level of detail (conceptual layouts finalized, with some level of detailed engineering). Key items will
include adequate information supporting a high level of confidence that:

 The "box" around the project is clearly defined (what is and what is not included in the project).

 The orebody resource tonnes/grade, orebody configuration, mining recovery, mining dilution,
mining rates, mining method, and overall mine production plan are realistic.

 The overall mine geological, geotechnical, and hydrogeological issues are understood and have
been accounted for.

 The orebody metallurgy and mineralogy are understood and the process plant design,
performance estimates, and recovery of metals are realistic.

 Adequate infrastructure has been provided to support the mine operation, and the required level
of services (electrical power, potable and process water, site access, etc.) to the site are
available.

 Equipment needs (fixed and mobile) are known in detail (including delivery, installation,
commissioning, spare parts, special operating and maintenance requirements, etc.).

 Productivities and manpower estimates (staff, operating, maintenance, support) for both
construction and operation are realistic.

 The schedule is complete and achievable (but not "padded"). Adequate allowances have been
made for reviews, risks, commissioning, and production build-up. Where possible, portions of the
work are scheduled to be carried out in parallel. The split between capital and operating is clearly
defined.

 The capital cost estimate is detailed, complete, and accurate; and the contingency allowance is
justified in detail.

 The operating cost estimate is detailed, complete, and accurate; and the contingency allowance is
suitable.

 Details to demonstrate that environmental impact issues have been fully identified and adequately
addressed

 Safety, training, and socio-economic issues have been fully identified and adequately addressed.

 An economic assessment showing a suitable return on investment.

 A formal assessment of any remaining significant project risks and opportunities.

 A plan for detailed design and construction of the project.

Project team

The project team may involve as many as 50 to 100 engineers and other specialists. This will typically
consist of:
  A dedicated Owner’s project team (project manager and project engineers, with input as
required from other staff personnel such as the operations, health and safety, electrical, and
maintenance departments at other existing properties).

 An engineering consulting group team (project manager, project engineers, project estimators,
procurement personnel) tasked to assemble the feasibility study. At times, a much larger team
of discipline engineers, design specialists, and draftsmen will be working on the actual mine,
plant, and facilities design drawings.

 Specialist personnel (normally consultants) providing basic information to be used in the study
(parallel studies and testwork for geotechnical, hydrogeological, mineralogical, metallurgical).

 Specialists involved in other parallel study areas including environmental impacts, permitting,
environmental monitoring and site closure, community consultation, legal, safety, training,
project management and construction, marketing, etc.

Risk assessment

At the feasibility study level, a formal project risk assessment and risk registry (described in the Pre-
feasibility study section) is completed as part of the study. If a project risk registry was set up during the
pre-feasibility study, this risk registry is reviewed in detail and the mitigation strategies developed during the
feasibility study stage are included. All risks are then given an updated risk/severity rating based on the
feasibility study design. If any risks remain high (above an acceptable company standard) they must be
identified in the feasibility study report and will be an important consideration in any decision to proceed
further with the project execution.

Project financial and schedule risks are also assessed in detail, often using specialty resources (Monte
Carlo simulations) in an effort to provide a recognized basis for the magnitude of schedule and estimate
contingencies. These simulations will be run for all major cost items in the estimate, and for the critical path
(and minimal float items) in the project schedule.

Study results
At the feasibility study level, there are three possible outcomes:

 Go decision…

 Proceed to detailed design and project construction.

 Obtain final construction and operating permits.

 Wait or re-visit…

 Project put into a queue of ‘possible projects to be funded’. The location in the queue will
depend upon the relative results of the project economic analysis.
  Collect additional data in an effort to improve economics (expand ore tonnes, improve ore
grade, improve recoveries, re-visit long-term metal price estimates, lower capital and
operating costs).

 No-go decision…

 Abandon the project as being un-economic, sell the property, or put the project on hold
pending improved market conditions.

Comments and suggestions

1. Ensure report is accurate

The reader of a feasibility report is being asked to commit tens or hundreds of millions of dollars based on
the report contents. The report must be comprehensive and accurate, and be based on the best available
information.

2. Identify potential problems

At each stage of a project, the cost of fixing an error, omission, or other issue increases dramatically.
Identifying and resolving a problem at the pre-feasibility or feasibility study stage is much less expensive
than identifying and correcting it during project construction, which in turn is less expensive than identifying
and correcting (or living with) the problem during mine operations.

3. Cost estimates must be comprehensive

The feasibility study must include a clear description of the path forward (detailed design, project
construction, and facilities operation). The project cost estimates need to include appropriate resources for
the complete scope of the work and the control (planning, policies, procedures, program development,
management, administration) of these activities.