FEASIBILITY STUDIES – FOUNDATION OR FANTASY?
Feasibility studies are a vital part of the sometimes tortuous path leading from
a resource discovery to an profitable operation. Yet they come in all shapes
and sizes - cheap or expensive, good or bad, well thought out or “off the cuff”,
valuable or valueless - and can be a firm project foundation or a fantasy. With
this in mind let’s take a look at some fundamental issues.
Feasibility studies are carried out at different stages of project
development.
A common approach is to carry out feasibility studies at three levels of
development. These come under various titles, but common designations
are:
• Scoping Study - carried out early in the project life, with relatively limited
information. It is frequently used to assess the potential of the project, and
as a basis for deciding whether to invest time and money in further
development.
• Pre-Feasibility Study (PFS) - undertaken at an intermediate level, when
data on every aspect of the project has been generated. The data should
be in sufficient depth to support realistic estimates of technical
performance, capital cost, staffing requirements, operating cost, product
value and marketability, project profitability, environmental and social
impact, and project risks. It provides a basis for whether or not to commit
to the large expenditure and effort involved in a subsequent FFS. The
PFS often lays the foundation for project success or failure, and should
perhaps be regarded as the key step in the whole development program,
rather than the FFS. Unfortunately, it is not uncommon to see “cut price”
pre-feasibility studies leading to costly disasters later on. The PFS is also
the time to evaluate and compare to provide a firm foundation for the FFS,
which can result in significant savings in time and cost.
• Final (or Bankable) Feasibility Study (FFS) – this is the final study prior to
pressing the green (or indeed red) light for the project. It involves the
finalization of every element of the project, including all the aspects listed
in the PFS. Whether there is any difference between a Final Feasibility
Study and a Bankable Feasibility Study is a debatable point. However,
one can say that a bankable study is generally subjected to a full
independent audit, while a FFS may or may not be if the project is to be
funded in-house. Preparing for a full independent audit may affect the
amount of detail presented in the study, and possibly the degree to which
various risks have been addressed.


Each level of feasibility study should address all aspects of the project,
identify potential risk, and include a risk analysis.
Any aspect of a project could represent a potential project winner or possible
fatal flaw, and needs to be identified as early as possible. A few nonetechnical
examples could include:
• The political situation could mean that a major economic incentive is
available, or that the project is desirable for national strategic reasons.
Conversely, there may be serious hurdles such as instability or adverse
government policy.
• Environmental regulations under consideration could reduce the
profitability, affect the selection of technology or location, or even rule out
the project altogether.
• Social conditions could lead to the availability of skilled personnel, or
perhaps favourable labour rates. On the other hand, there may be a
potentially powerful community opposition to the project.
• Possible future trends in market conditions could affect the marketability
and/or value of the product favourably or unfavourably.
• Climatic conditions could be favourable or unfavourable. For example, a
dry mild climate could be highly beneficial for a heap leaching project,
whereas a very wet or extremely cold climate may render such an
operation unworkable.
• The location could make or break the project. The proximity of cheap
power or a ready market could be decisive. On the other hand, the costs
and logistics dictated by a remote location could render the project
uneconomic.
All of these types of issues, as well as the more obvious technical factors such
as the potential size, grade and characteristics of the resource, need to be
subjected to a risk analysis to ensure nothing has been missed and to
highlight issues for more detailed study.
The cost estimates for each level of study should be carried out at an
appropriate level of detail.
Typical accuracies specified for the various study levels are:
• Scoping Study: +/- 25-30%.
• Pre-Feasibility Study: +/- 20-25%.
• Final Feasibility Study: +/- 10-15%.
The magnitude of the contingency is a more difficult figure to set. Typical
figures are around 25%, 15%, and 10%, for the above three study levels.
However, the use of a large contingency as well as a wide range of accuracy
at the scoping stage could lead to the project being unnecessarily ruled out.
An alternative approach is to study the potential economics over a range of
capital costs, in order to gain a feel for the affect of capital cost.

It is often possible to estimate potential operating costs with a greater degree
of accuracy. Again, it may be preferable to assess operating costs using
sensitivities rather than applying accuracy limits and a fixed contingency.
If metallurgical testwork is needed, the appropriate level should be
specified at each stage.
This is a very broad topic, as the type of testwork varies enormously.
However, a few key points are:
• Testwork should always include appropriate mineralogical analyses.
• Samples should very carefully selected to be as representative as the
phase of drilling or exposure of the resource allows. The selection should
be a team effort, involving the metallurgical, geological, and mining staff as
appropriate.
• Testwork should be systematic, increasing in detail as the project
develops.
• The PFS testwork should be in sufficient depth to develop project design
criteria, performance predictions and product analyses.
• The FFS testwork should be confirmatory in nature, and should be carried
out using samples representative of the final mine plan, with most
emphasis on the first few years of operation. The need for, and type of,
pilot scale testwork is a project by project decision. It will be affected by
factors such as the size of the project, the availability of sufficient suitable
sample material, process complexity and/or novelty, corporate policy, and
the requirements of the finance providers.