Page 282 - Introduction to Mineral Exploration

11: PROJECT EVALUATION 265

plant, will have demonstrated that a product the major factors that may have an impact
can be extracted using a viable process. The upon the reserve estimate. This will help quan-
mine infrastructure and labor requirements, tify the risk associated with the reserves,
and the impact of the potential mine on the en- which at this stage will fall within the compa-
vironment will have been evaluated. Detailed ny’s acceptable risk category. If the company is
evaluation of capital and operating costs can approaching a financial institute to borrow the
be established to ±25%. These figures will be capital that will be required to bring the mine
used, along with a preliminary mine schedule, on stream, these risk factors will be assessed
in a financial and commercial evaluation. A in detail. Often, financial institutes use inde-
number of sensitivities will have been assessed, pendent consultants to audit the resource and
including alternative methods of mining and reserve estimates. The reserves will be based
processing the mineralisation, and the effects upon a final mine design. This design will
of various levels of output. The integration of provide the information to enable the company
social and environmental aspects is most im- to request bids for detailed engineering studies.
portant in the consideration of options for major Similarly, a final process flow sheet will have
project decisions. Findings from the social and been developed. Costs will have been devel-
environmental baseline studies are used as the oped to ±15%.
basis to predict and evaluate the likely effects
or impacts, whether negative or positive. The
option that demonstrates the highest value 11.4.5 Detailed engineering
with acceptable (lowest) risk will be selected Once the decision is taken to proceed to
as demonstrably viable. Such a study can cost detailed engineering, costs will be developed to
several hundred thousand dollars. ±10%. The project is almost certain to progress
to a mine. This is the final stage before major
capital expenditure is incurred and involves
11.4.4 Feasibility study
producing detailed plans and work schedules
The aim of the feasibility study is to confirm so that orders can be placed for equipment
and maximize the value of the preferred tech- and the mine development can begin. These
nical and business options identified in the investigations are thorough, penetrating, and
pre-feasibility study stage. usually completed by outside consultant com-
During the feasibility study the environ- panies who specialize in this type of work.
mental and other statutory approvals processes, Such a study usually takes several months
commenced during the pre-feasibility study, or years, depending upon the initial database,
will continue but at an accelerated pace. Con- and can cost several million dollars for a large
sultations and negotiations with local commu- project.
nity groups, landowners, and other interested
parties will proceed to the point of basic agree-
ment. Social and environmental impact assess- 11.5 MINERAL PROJECT VALUATION AND
ments will be required that meet statutory and SELECTION CRITERIA
company requirements. The timing of formal
submissions for permitting and other statutory Previous sections have considered the value of
processes needs careful consideration. Sub- mineralisation in absolute terms (i.e. a sum of
mission too early may prematurely commit the money expressed as a cash flow) and this is the
project to conditions which may constrain basis of mineral project evaluation. Another
scope and compromise value. aspect of value is its use in a relative sense,
Sufficient sample collection and test work that is the ranking of a group of similar pro-
has taken place during a feasibility study for jects, or options within one project (King 2000).
more of the resource estimate to be reported in This relative value is based upon ranking
the measured category. On large projects sev- each project’s absolute value and is particularly
eral million dollars may have been spent to useful when a company has several projects
bring the project to feasibility study level. Sen- competing for funds. Any company has finite
sitivity analyses will have been run to assess managerial and financial resources and a