Evaluation studies of the new mining projects

2.1 Scoping studies

Scoping or conceptual study is financial evaluations that are conducted initially in the early life of the project. According to the Australasian Joint Ore Reserves Committee (JORC) code definition (Clause 38), scoping study is an order of magnitude of economic and technical study for the potential viability of prospect mineral resources [13]. Meanwhile, scoping study is addressed as a preliminary economic assessment (PEA) according to Canadian National Instrument (NI) [14]. NI defined PEA as a study other than pre-feasibility or feasibility studies, which describes the potential viability of prospect mineral resources.

According to Australasian code for reporting (JORC) and European code for reporting (PERC), the main objective of scoping study is internal use for comparative purposes and planning by companies working in development and mineral exploration [15]. Scoping study may be initially conducted based on drilled holes and assumptions to generate a mine plan in elementary form. The conceptual study with ±30–50% estimation accuracy can be used for the project’s early evaluation. It can determine the subsequent steps and critical risks that are associated with the mining projects.

Depending on available limited data in this phase, scoping study demonstrates the project’s leading figures, such as net present value (NPV), cost estimation, and annual production. Furthermore, it outlines the prospect mining and processing plan, list of technical parameters needing test and more examination, proposed project key features, capital and operation cost estimation magnitude, and the required effort level for the project’s development [16]. In addition to determining the method of deposit mining (open pit or underground), requirements of equipment, infrastructure, and service facilities. The unique advantage of the scoping study is the ability to plan mining and processing production based on inferred resources [17].

Despite the scoping study built on broad assumptions, it is a valuable tool used by developers to assess the potentiality of a mineral resource for the mining project development. It aims to outline all available options and select the best one for further investigation. To increase the confidence of scoping study outcomes and then protect the investors, Australian Securities Exchange (ASX) was in conjunction (2016) with the Australian Securities and Investments Commission (ASIC) to release interim guidelines for scoping study results publication. As a result of released reporting requirements, between 2018 and 2019, 22 scoping study results were published on ASX. Only 64% were published in full after acceptance, while 36% were published as lite scoping studies, without any production target or financial results [18].

According to ASX, the scoping study results reporting guidelines include: writing all information required by listing rules, ensuring reasonable grounds such as NPV for any forward-looking statement, materials assumption disclosing, cautionary statements, balanced and fair summary, results not reported as headline statement, using a realistic range for figures, not reporting results as value (per share), and writing the correct terminology of JORC code [19].

Experienced people should be involved in scoping study phase due to the high risks of a new mining project, broad assumptions, and limited obtained data. Scoping study has no direct impact on the value of the new mining project. However, it is essential to develop this type of project. It indicates the potential economy of the mining project in a very early stage of measure and defines the further work conducted. Many checklists developed through published studies comply with the international standards recognized in this field to be used by companies working on mining projects evaluation as an audit tool for the minimum engineering items of the evaluation studies [11,16,20–23].

2.2 Pre-feasibility study

A pre-feasibility or preliminary feasibility study (PFS) is an intermediate stage between the scoping and feasibility studies (FSs) conducted to evaluate the viability of new potential mining projects economically and technically. The PFS was defined by the JORC code definition (Clause 39), as shown in Figure 3 [13]. Meanwhile, the CIM presented the PFS as a comprehensive study that introduces a range of economic and technical options for the viability of a new mineral project advanced to the preferred mining method stage [24]. Compared to the scoping study, the pre-feasibility is more detailed and can be used for due diligence work to determine the final feasibility proceeding and the project areas that require more investigation.

Figure 3

PFS definition according to JORC [13].

With an accuracy of ±25%, PFS can highlight the main challenges in the potential mining project, essential requirements, and the other significant information that help for proper decision-making before the investment of millions of dollars.

The pre-feasibility report should also provide information about the geological model, detailed mining operation descriptions and designs, cost estimation, safety concerns, and the project’s principal risks. From an engineering point of view, the PFS aims to analyze a range of options that come under project development to assess deposit mining and processing method, production and processing rates, dilution, extraction, and recovery estimation. As well as, containment of tailing and waste, hydrology and marketing studies, environmental impact assessment, legal and governmental requirements, capital and operating cost estimation, project economics, and financial analysis. In the PFS stage, quality control (QC) and quality assurance (QA) are conducted for the exploration of sample’s chemical test accuracy verification, and carry out the mining engineering for resource definition that may convert to mineral reserve as well as metallurgical testing work.

According to PERC, a complete FS is not required to achieve mineral reserves. PFS is carried out considering all the modifying factors, where a viable technical and economical mine plan can convert the mineral resource into a mineral reserve. Modifying factors include processing, mining, metallurgy, economic, infrastructures, legal, marketing, environmental, government, and social aspects. In addition, modifying factors are not restricted to previous considerations; they may include any factor related to mineral extraction and can impact the project’s feasibility [25]. PFS outlines the needed costs and how to utilize the costing data. The outputs may include the mining and processing methods, a preliminary equipment list, development cost, etc. (Figure 4) [26]. A PFS significantly influences the value of the new mining project.

Figure 4

Inputs and outputs of PFS (modified) [26].

2.3 Feasibility study

Feasibility study (FS) is the most detailed phase in the proposed mining project engineering evaluation. It is conducted to determine whether the project can proceed economically based on complete engineering work. FS has a high level of confidence compared to the scoping and PFS, and it is a vital basis for the potential mining project’s economic evaluation. As per the JORC code definition (Clause 40), the FS is equivalent to the bankable or definitive FS, and it is defined as shown in Figure 5 [13]. Meanwhile, the CIM introduced the FS as a comprehensive study that carries out technical and economical viability for the selected option of development in appropriate detailed assessment mineral project. Typically, cost estimation accuracy in the FS is ±15%, requiring more sufficient details to finance the potential mining project.

Figure 5

FS definition according to JORC [13].

The resource and reserve should be defined based on the FS’s detailed mine engineering and geological work. At the same time, the complete test work must be implemented to develop all parameters of the mining and processing [16]. The set parameters can be used for hydrology, material balance, equipment sizing and selection, general drawings, power consumption, production schedules, slope design of pit, capital and operating cost estimation, and development of flow sheet. The capital cost estimated by each study level is shown in Figure 6. The FS provides a wide range of advantages, such as improving investment, promoting the work team’s focus, and illustrating valuable information. Therefore, through FS, the mining companies can maximize the value of the proposed mining project.

Figure 6

Comparison between capital costs estimated by each engineering study [16].

Table 1 summarizes the significant differences between the three technical and economic studies used in evaluating mining projects, among the definitions, objectives, details required at each stage (inputs and outputs), and the accuracy of the estimation.

3.1 Geology

The unique geological characteristics of mineral deposits should be considered while preparing engineering studies. The amount of geological information required for resource determination mainly depends on engineering study level and deposit mineralogical complexity. Geological features significantly control the deposit economic mineralization. And with well-developed geological modeling, the decision of reliable grade will be estimated using geo-statistics and geological controls combination. Generally, the geological study may include drilling, samples collection, and assay data. Simultaneously, QC and QA must be conducted while sampling and assaying for verification and precision purposes. The mining industry also requests standard reference samples and send some samples to another laboratory for confirmation.

Geologically, the scoping study requires only reviewing the existing geological maps with a preliminary assessment, limited sampling from outcrops, and wide-spacing drill holes. Meanwhile, the requirements of pre-feasibility are detailed mineralogical and lithological maps supported by cross-sections, preliminary sampling, mineralogical study, initial infill drilling, and geotechnical and geophysical sampling. The FS should cover more geological details, such as 3D mapping for the defined deposit, detailed information for assessing the geological structure, alteration, mineralization, sampling, and conducting drilling with closed space.

3.2 Resource and reserve

The resource can be estimated based on the developed three-dimensional geology model of the deposit, continuity, and mineralization characteristics. The completed resource can introduce a basis for subsequent reserve determinations as well as planning and mine design. The resource and reserve estimations are classified according to standards that are internationally recognized. The existing rules required by many jurisdictions worldwide to declare the reserve is shown in Figure 7.

Figure 7

Listing rules required by many jurisdictions worldwide to declare the reserve [16].

The scoping study can preliminarily assess tonnage factors with no reserve estimated (only resource estimation). The PFS needs at least a probable reserve and known or estimated calculation parameters. Meanwhile, a proven reserve is required in a FS with calculation parameters that include a complete analysis for dilution and losses.

3.3 Mining

The mining method (surface or underground) can be selected based on the geometry and depth of the deposit upon the geologic interpretation of the deposit and resource estimation completed. While the details of mine design increase with the progress of the evaluation engineering studies. The optimization software is utilized for open-pit economic limits determination or stope shape definition in underground mining projects. The economic limits of mining are selected based on strategic analysis, which considers the impact of the changes in prices, recoveries, and cost. Resources can be converted to reserves with the increasing details of the engineering.

The mining method in scoping study can be assumed as well as pit slopes and mining system. Also, at this stage, the simple outline is enough for the pit design and waste dumps. The production schedule can be basic according to assumed mine life. At the same time, the capital and operating costs are factored in from similar projects. The PFS should identify the mining method with a preliminary 3D model for pit slope, design, and waste dump. Also, preliminarily define the mining system with an annual production schedule, including ore and waste tonnage, grade, and recovery. Equipment list with prices and estimated operating costs also can be preliminarily covered in the PFS. The mining section in the FS should provide finalized mining method with a plan, a 3D model for pit slope, and an optimized design for the pit with equipment access and dump sites. Moreover, it identifies the mining system, monthly production schedule, and detailed capital and operating costs.

3.4 Process engineering

In the FS, process development requirements include representative samples test work for flowsheet development, flow sheet pilot testing, and variability testing for all ore types. The main components of process engineering are metallurgical test work, conditions of project site consideration, mineralogical study, best location and form of the tailing containment, design basis and processing flowsheet, criteria of processing design and description, facilities layout of the processing plant, equipment sizing and description, and services of the plant.

In scoping study, test work and ore sampling are conducted on bench-scale data, estimated products and production rate, outline for construction design criteria, possible sites for tailings containment, and assumed flow sheet in addition to rough maps for topographic and no details regarding soil conditions, equipment, electrical distribution, piping, instrumentation, and motors. The PFS depends on bench-scale data verified with the work of the pilot scale. It also requires preliminary processing and mining rates, established construction design criteria and flow sheet, identifying the best location for tailings containment, rough maps for topographic with a report of soil condition, a list of major equipment, and a general description and diagram for piping, motors, instrumentation, and electrical distribution. Meanwhile, the FS should conduct pilot scale testing and define design specifications, fixed processing, and mining rates. Moreover, it includes a finalized tailings containment site, detailed topographic maps with soil conditions, a complete equipment list, and a detailed list and design for piping, motors, instrumentation, and electrical distribution.

3.5 Infrastructure

The required infrastructures in the mining project are related site-specific. Capital costs associated with infrastructure usually vary from site to site, depending on its location rather than the method of mining or processing. Therefore, while estimating capital costs in engineering studies of mining projects, infrastructure requirements must be defined and assessed correctly. Infrastructure facilities include utilities, access roads, communication, service roads, transportation, water supply, fuels, townsite, administration and industrial facilities, disposal system, and port/marine.

The scoping study shows only a general overview of support facilities with communication requirements and power availability. The PFS identifies all support facilities, communications systems, and power sources with unit cost. The FS indicates the size and prices of all support facilities, licensing and communications standards, and engineering study for power requirements, including unit cost.

3.6 Marketing study

The marketing study should necessarily define the nature of the market for mining projects, incorporating production rate, potential competitors, new mines coming, specification of the product, future price of the product, likely buyers, and sale terms. Marketing studies help understand the market, minimize investment risks, highlight threats and opportunities, provide the strength and weaknesses of competitors, and facilitate strategic planning.

Marketing study in scoping study is always conducted based on industry knowledge and usual prices. Meanwhile, a preliminary analysis of the market should be conducted in a PFS. As well, the feasibility requires a detailed analysis for the marketing.

3.7 Environmental management

Environmental aspects study addresses the impacts of mining activities that can affect the environment and the required processes and procedures to mitigate them. The environmental management study may include mine permitting, assessment of noise and air quality, management design of mine waste, surface and underground water management, habitat assessment, mitigation of wetland, assessment of leachable elements, and closure planning.

A scoping study can describe the mining activities and the associated significant negative impacts on the surrounding environment. Meanwhile, pre-feasibility introduces a preliminary environmental assessment and management plan. At the same time, a FS requires more detailed assessment and control measures that may mitigate the related environmental impacts.

3.8 Social management

Social aspects study allows analyzing and controlling the social impact of mining activities and providing the required processes and procedures to mitigate them. It may include stakeholder engagement, grievance mechanism, social license acquisition, and closure planning. Scoping study can identify the direct social impacts related to the proposed mining project. And in the PFS study, a preliminary analysis for direct and indirect social impact is considered with control measures and required processes and procedures. Meanwhile, a feasibility report is used to address, assess, predict, mitigate, and measure all mining-associated social impacts.

3.9 Economic analysis

As a final step in the engineering study, economic analysis provides the project’s financial viability. The pro forma cash flow can be used conventionally to conduct an economic analysis of the mining potential project incorporating the constant/current dollars, leveraged/unleveraged finance, basis of the project (combined or stand-alone), basis of pre/after-tax, and annual cash flow of the project discounting period. The economic analysis can determine the financial measures, which include NPV of the selected discount rate, investment discounted cash flow return, payback period.

The parameters of principal economics are preliminarily assessed in scoping study while assessed with little details in pre-feasibility, and fully assessed in the FS. The cash flow analysis can be in simple form in scoping study, preliminary in pre-feasibility, and formally detailed in the FS.