The feasibility study process is critical in mineral exploration as it is the best opportunity the project owner will have to define what the project could, should and will be. In my previous post, we looked at the scoping phase of the feasibility process and how it is responsible for answering the question: “What could the project be?”. The next phase of the process is known as the pre-feasibility study and addresses the question: “What should the project be?” This is arguably the most important study in the feasibility process for any organisation. I will explain why I hold this opinion, but let’s first define the practicalities of the pre-feasibility study.
Though most exploration handbooks and textbooks will give you a robust enough definition, for the purpose of this post I will again, as previously rely on Mckenzie’s text. Importantly, the pre-feasibility process includes the delineation of the mineral resource in its formal sense and the final pre-feasibility study will rely primarily on this resource. Furthermore it is achieves the following:
- assess the likely technical and economic viability of the opportunity;
- consider different mining, process, location and project configuration cases;
- consider different capacities for the project;
- determine and recommend the preferred optimum case to be examined during the feasibility study;
- outline the features of the recommended project;
- determine key business drivers for the opportunity and examine any potential fatal flaws;
- determine the risk profile of the opportunity;
- determine the nature and extent of the further geological, mining, metallurgical, environmental, marketing or other work needed to be undertaken during the feasibility study;
- determine the costs and time to undertake this work and prepare a feasibility study, including an estimate of the costs and time to develop the project following completion of the feasibility study;
- identify the resources, personnel and services required to undertake further work on the opportunity;
- provide a comprehensive report with supporting appendices that includes a recommendation to proceed or otherwise.
Once all of the above has been ironed out and the fundamental question been answered, there is in fact little change that happens in terms of the project trajectory and in fact value creation. The fact that little value is added to a project after pre-feasibility may come to a surprise to some, but have a look at this graph from (again) Mckenzie’s study.
There is of course lots of juicy information presented on this graph, but notice the change in the gradient of the upper blue line after the boundary between the “Scoping” and “Pre-feasibility” phases. The gradient of this line defines the rate of value change (in this case, increasing). What you should notice is that during no other study phase is the gradient of the line this steep and therefore, is so much value added to the project. There is of course a very logical explanation for this! The predominant activity of the pre-feasibility process is the delineation of the in situ mineral resource of the project. What this graph really demonstrates and re-affirms is the fact that the resource (as in statistically defined with a cut-off grade applied) is the fundamental underlying asset of any project and minerals company for that matter. As soon as a resource delineation commences there is an unprecedented increase in project value.
For this reason, the pre-feasibility stage is the most important. It creates the most value, especially so from a relative cost perspective. It is common for the feasibility stage to be exponentially more costly than the pre-feasibility phase. Critically also, the different factors that define the answer to the question “What should the project be?”, including mining methods, general minerals processing methods and execution configuration are decided upon, remain relatively unchanged and so set the stage for the final feasibility study.
Finally, an important issue that this graph brings into perspective is study quality. The upper and lower solid blue lines also define study quality and its relation to project value. From the graph it is evident that at no other stage in the feasibility process is quality more critical than during the pre-feasibility phase, and therefore, the delineation of the resource and the associated modelling and estimation. The quality of a project’s resource model is the most definitive factor in determining the value trajectory of a project over its lifetime. As we can see from the graph, significant project value is destroyed with poor resource evaluation at the pre-feasibility stage.
As geologists, we need to get stuck in doing the best geology we can, constantly pushing the standards because, in so doing, we have a real (and possibly the only) opportunity to create fundamental value in a minerals exploration project.
If you enjoyed this post and are interested in the topics touched on in this post, you might enjoy “Geology and feasibility: 50/50 or 50% better“.
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