Investment in new mines has declined in Nigeria but is still quite active in some areas. Feasibility studies are required throughout the pre-production stage of every mining project to justify continued investment in the subsequent phase. Usually a concept study or scoping study is followed by one or more pre-feasibility studies that reflect 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 develop a mine. 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 (second edition 2012) provides a set of standards that may become more widely used.
The level of engineering that has been attained in a feasibility study is usually well short of that required for construction, so a further period of detailed engineering design follows after the project has been approved. This usually continues during construction and only tapers off when production is imminent. The first evaluations of the property occur well before the scoping study, and form the basis of a decision to commence exploration. These may involve considering likely costs and revenues for conceptual targets, or sometimes examine the economics of discovering and developing a similar ore body to one that was mined in the past.
This procedure sets minimum targets for grade and tonnage against which the progress of exploration can be measured. If the initial drill intercepts give some indication of the potential tonnage and grade, a scoping study is carried out to justify further exploration. Exploration including preliminary metallurgical assessment, geotechnical investigations and so on will continue until sufficient data has been gathered to permit a pre-feasibility study to be carried out.
The pre-feasibility study usually considers a range of mining and processing alternatives and varying production rates, with the options narrowed down to one or two in each area. At this stage it is possible to detail the additional work including further definition drilling, sterilization drilling, metallurgical test work, pilot plant work and other site investigations that will be needed to support a feasibility study. The results of the pre-feasibility study are used to justify expenditure on gathering this additional information and the considerable expenditure needed to carry out the final feasibility study on a substantial project. The final feasibility study provides a basis for a commitment to proceed with project development, detailed design and construction. While it is convenient to refer to scoping studies, pre-feasibility studies, and final feasibility studies, in reality the study process is iterative and several increasingly detailed pre-feasibility studies may be undertaken before committing to the final feasibility study.
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 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. Estimation accuracy may be 30 to 35%. 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.
There are three common reasons for carrying out pre-feasibility studies as follows:
- As a basis for committing to a major exploration programme following a successful preliminary programme. It is possible for commitments of tens of millions of dollars or more to be made for ongoing exploration and development on the basis of a pre-feasibility 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 pre-feasibility 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 pre-feasibility study may be the first hard project information that is seen by corporate decision makers. There is a risk that the findings are committed to memory and announced publicly so that it becomes difficult to dislodge them with subsequent information. In such cases, the pre-feasibility study is the real decision point, with the subsequent feasibility study being seen by management as a necessary step along the path that has already been irrevocably committed.
For these reasons the pre-feasibility study must be prepared with great care by experienced people, and its conclusions 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. The main features of the pre-feasibility study are:
- Mine design based on a resource model.
- Best alternative selected from a range of alternatives.
- Preliminary studies completed on geotechnical, environmental, and infrastructure requirements.
- Bench scale metallurgical tests and preliminary process design completed.
- Cost estimates based on factored or comparative prices.
- Usually result in an Ore Reserve estimate
- Study accuracy 20% to 25%.
- Ready to proceed to final feasibility study.
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 three objectives:
- To provide a basis for detailed design and construction.
- To demonstrate within a reasonable confidence that the project can be constructed and operated in a technically sound and economically viable manner.
- 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.