Difference between revisions of "Pre-evaluation study"
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'''Author''': John Wright
== Introduction ==
== Introduction ==
Latest revision as of 10:05, 30 October 2014
Author: John Wright
The Venture analysis, also called the pre-evaluation study has the following characteristics:
- It involves 0% - 2% engineering.
- Cost estimate accuracy is "order of magnitude," with costs based on experience, allowances, and rules of thumb.
- Bottom line contingency is unspecified, as it would imply an accuracy that is not supported in the study.
- Normal time required for submission of draft report is ±2 months.
- Normal cost range (if no supporting studies are included) is ±$25,000.
Purpose of pre-evaluation study
The purpose of this study is typically to provide information for the Owner’s internal use only, as an aid to making ongoing internal decisions with respect to a potential project. The study may be used to determine if a deposit or facility has a reasonably robust economic benefit in order to justify carrying the work into the more formal scoping study stage. It will provide some preliminary guidance with respect to some basic early questions with respect to the proposed project, including:
- Is the final product readily marketable?
- Is the market stable?
- Is the location realistic? Consider site location, existing infrastructure, site access, environmental sensitivities, political sensitivities, etc.
- Are there sufficient ore tonnes and ore grade to justify further continuation of the exploration program?
- What will be the order of magnitude capital and operating costs of a “typical” mine to produce the desired product in this location? What other costs will be involved in shipping/selling the product?
- What combinations of ore tonnes and ore grade are required in order to justify moving the project forward into the more extensive study stages?
- What will be the main political, legal, environmental, social, and technical issues?
- What areas of the project require particular study and test work?
- What are the major project risks?
A venture analysis will typically consist of a few pages of text, some general schematics and figures, and order-of-magnitude cost estimates based on various assumptions, experience, benchmarks, and industry standards. It is more of a presentation of the project knowledge available to date, rather than a design document.
The project team
A venture analysis study will typically be completed by a single experienced engineer with access to the exploration group, process personnel, and design/estimating personnel who can provide some general guidance in specific areas.
Level of accuracy
The main purpose of this study is to determine if the property has sufficient potential to justify a decision to carry forward into more detailed study phases (typically a financial commitment less than $1 million plus any ongoing exploration costs) and to provide some idea as to the potential benefits, opportunities, and risks related to the project. If sufficient ore resources have not yet been identified, the study will provide some indications as to the ore resource quality (tonnes and grade) that will be required in order to justify moving forward into a scoping study.
This level of study is “order of magnitude” at best. Any scope of work, schedule, and cost information will be based on a number of high-level assumptions, industry standard performance figures and costs, vendor equipment productivity information, and general experience with similar projects.
No formal risk assessment is carried out at this level of study. The focus is to identify any major project risks that may become “fatal flaws” for the project. These risks may include:
- Market risks: Is the product market stable, predictable?
- Permitting risks: Is the permitting process clearly identified and understood by all parties?
- Political risks: Is the country stable, strongly nationalistic, strongly anti or pro-mining, etc?
- Site access risks: Is the site accessible under all conditions?
- Cultural: Is there some existing mining culture?
- Availability of capital required for permitting, design, construction, and operation.
A venture analysis can have three possible outcomes:
- Go Decision:
- Wait and Re-Visit:
- Suspend further work on the mineral discovery pending possible improvement in economics or conditions (increased metal prices, improved access to and infrastructure in the general area, change of government, etc.)
- No Go Decision:
- Abandon further work on the mineral discovery
Comments and suggestions
1. Define scope
Ensure the overall scope of the project is clearly identified, including items such as supply of services to the site, transport of personnel/materials to and from the site, shipping/refining/sale of products, corporate overhead costs, etc.
2. Identify costs
Ensure that other costs such as title and licenses, taxes and royalties, tariffs, permitting, legal, etc are identified as being included or excluded. Identify how these costs will be distributed back to the project and the ongoing operation.
3. Determine levels of accuracy
Clearly identify the level of confidence in the information that forms the basis of the study (mineral resource estimate, geotechnical/hydrogeology, metallurgy, etc.).
4. Work according to accuracy of available information
The level of accuracy of the basic information available (mineral resource tonnes and grade) sets the level of effort that should go into the venture analysis study. There is no point in trying to define production rates and costs to some specific level of accuracy if the resource information is not well defined.
5. Identify assumptions that have been based on information accuracy
Significant assumptions made in arriving at the scope of work, a mine plan, capital/operating costs, and a project schedule must be clearly identified in the report.