I think it was Stephen Covey that coined the phrase “to begin with the end in mind”. For the exploration geologists, the end in mind in many respects is the completion of a Feasibility Study, otherwise known as a Bankable Feasibility Study (BFS). A BFS is typically a comprehensive forward analysis of a project’s economics to be used by financial institutions to assess the credit-worthiness for project financing. It is important as geologists that we produce sound technical data and interpretation for use in these key documents. What is just as important though is that we understand both economic criteria and factors as well as other broader technical factors that will eventually have an effect on the feasibility of a deposit.
The idea of starting with the end in mind speaks of clear goals, understanding direction and strategy, all which result in a well defined set of priorities. In the context of mineral projects and BFS this will eventually dictate what information, on both technical and business grounds cannot be compromised on and what should be discarded. So before we go any further, start to familiarize yourself with the “end”. Download a handful of Feasibility Studies, get comfortable with the terminology and study the different technical and economic factors which come into play.
Through the next couple of post I hope to explore and unpack some of the aspects of the BFS, from the simple but fundamentally important tasks of core logging all the way to Discounted Cash Flow assessments. What I will try and focus on is the bridge between the technical factors and economic factors.
Something to keep in mind:
In the 1970s, a study for the World Bank showed that in the first year of operation after
commissioning, 60% of the mines and 70% of the treatment plants surveyed achieved a production rate of less than 70% of design capacity.
In the 1980s, a study of 35 Australian gold mines found that 68% failed to deliver the planned head grade.
A similar review of nearly 50 North American projects showed that only 10% achieved their commercial aims with 38% failing within about one year.
So apart from highlighting the effect of bad execution, these studies demonstrate that many (up to 2/3) of BFS are a load of nonsense. Bare this in mind as you read through those Feasibility Studies and see if you can identify some thumb sucking. This will also challenge you to think of the practicalities of mining and how feasible plans are in the context of the understanding of a deposit.
So, let the games begin…