Evaluation studies of the new mining projects

Ali Y. Al-Bakri; Hussin A. M. Ahmed; Haitham M. Ahmed; Mohammed A. Hefni

doi:10.1515/geo-2022-0466

Article Open Access

Evaluation studies of the new mining projects

Ali Y. Al-Bakri , Hussin A. M. Ahmed , Haitham M. Ahmed and Mohammed A. Hefni

Published/Copyright: March 23, 2023

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From the journal Open Geosciences Volume 15 Issue 1

Abstract

Mining still plays a vital role in providing various sectors with essential materials since many industries depend heavily on mined minerals. Moreover, the mining industry is the primary driver for many economies worldwide. On the other hand, new mining projects face many challenges, the most important of which are risks related to the economic aspects, e.g., the significant uncertainty about mineral resources compared to other engineering projects. Therefore, many jurisdictions worldwide depend on detailed engineering studies conducted according to internationally recognized standards to assess the new mining projects from an economic and technical perspective. In the same context and due to the significant lack of published research in this field, as the literature review revealed, this article reviewed and discussed the different main stages of engineering studies to evaluate new potential mining projects, including scoping, pre-feasibility, and feasibility studies, to ensure that the engineering study report complies with all the recognized main requirements. Results indicated the necessity of adhering to the needs of the engineering tasks while preparing reports of evaluation studies for new mining projects to reduce potential uncertainty risks and thus raise the level of confidence in these types of projects. Furthermore, they showed direct progress between the investigation details conducted in the evaluation studies and the value of the new mining project.

Keywords: new mining project; scoping study; pre-feasibility study; feasibility study; mining projects risk

1 Introduction

Mined minerals are directly or indirectly associated with our daily lives. They play a central role in the manufacturing of most essential tools. All of these demonstrate the great importance of the mining industry, especially with the tremendous acceleration of technologies and other related sectors [1]. Moreover, mining is considered a significant pillar of income in many countries worldwide [2,3]. For example, in Saudi Arabia, the government has set a plan for the mining industry to be the third source of overall income after oil and petrochemicals by 2030. On the other hand, the mining sector is fraught with many risks while developing new projects [4–6]. Therefore, these proposed projects are subject to many detailed studies conforming to international standards to evaluate and report their feasibility and thus reduce uncertain risks such as Australasian code for reporting (JORC), Canadian Institute of Mining (CIM), and European code for reporting (PERC).

Mining is most risky compared to other industries, due to high uncertainty [7]. Mining projects may fail to meet the expectation due to the exceeding project cost/time or operational reasons such as reserve size and grade recovery [8]. Ferguson et al. investigated the financial and non-financial factors that influence the failure of the new project development. The investigation study conducted on gold mining project, and the obtained results indicated that the mining method (surface or underground) with the disclosure status of production cash cost at completion of feasibility could drive the project’s failure [9].

Evaluation scoping, pre-feasibility, and full feasibility studies are mainly conducted under several phases to examine the viability of the new mining project technically and economically. At the same time, the development of mining projects faces many engineering challenges that require more investigation, such as geoscience, environmental, metallurgical, mechanical, electrical, safety, and chemical issues [10]. Therefore, evaluation processes vary based on the available information and go through long and complex procedures [11]. The importance of the examination stages lies in the fact that they contribute to reducing the uncertainty and then understanding the value of the project, thus helping decision-makers to take the most appropriate decision (Figure 1). Moreover, the progress of various examination phases will convert the resources into a proven reserve, significantly increasing the confidence and the project value, as shown in Figure 2.

Figure 1

Sequence of different stages of evaluation studies for new mining projects.

Figure 2

Impact of investigation under scoping, pre-feasibility, and feasibility engineering studies on the value of new mining projects (modified) [12].

In the context of the new potential mining project evaluations and due to the significant lack of published research in this field, as the literature review revealed, this review article will investigate the different main stages of studies conducted to evaluate new mining projects, including scoping, pre-feasibility, and feasibility studies. Moreover, discuss the associated modifying factors that are considered to convert mineral resources into reserves and the well-known international standards recognized in this field to ensure that the engineering study report complies with all main requirements.

2 Evaluation studies

The new mine project’s viability studies (scoping, pre-feasibility, and feasibility) build on professional judgment. Meanwhile, their reporting may deal with two mineral types: resources and reserves. The level of geological knowledge governs the mineral resources and contributes to upgrading them from inferred to indicated and then to measured, respectively. At the same time, converting the mineral resources into mineral reserves (probable or proved) is required considering that factors may affect the extraction (modifying factors), which vary in detail according to the type of the viability studies.

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.

Table 1

Significant differences between evaluation engineering studies

Study	Scoping study/PEA	PFS	FS
Concept	“What it could be”	“What it should be”	“What it will be”
Objective	Early-stage conceptual assessment of the potential economic viability of mineral resources	Realistic economic and engineering studies sufficient to demonstrate economic viability and establish mineral reserves	Detailed study of how the mine will be built, used as the basis for a production decision
Cost accuracy	(±50%)	(±25%)	(±15%)
Engineering	<1%	1–5%	5–25%
Estimate inputs	Inferred/indicated/measured resources	Indicated and measured resources
Estimate outputs	Inferred/indicated/measured resources	Probable and proven reserves

3 Major engineering study tasks

The required details in each engineering study directly increase with the advancement of the evaluation engineering study level. The major areas that incorporate into engineering scoping, PFS, and FS are shown in Table 2 and can be briefly described as in Table 2 [11,16].

Table 2

Summary of the major engineering study tasks considered in the new mining project studies as minimum requirements for evaluation

Sr.	Item	Description
1	Introduction	Site location/topography map and history
2	Geology and exploration	Geological description, drilling, and sampling
3	Resources and reserves	Resources and reserves analysis details
4	Mining	Mining method and capital/operation cost estimate
5	Processing	Engineering of process and design
6	Infrastructure	Power, facilities, and communications
7	Hydrology	Water resources and dewatering requirements
8	Development schedule	Project development plan and master schedule
9	Capital cost estimate	Basis, unit cost, and accuracy
10	Economic evaluation	Financial and marketing analysis
11	Risk evaluation	Project risk assessment

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.

4 Discussion

Although it comes at an early stage in the life of mining projects with a curacy of ±50%, scoping studies play a pivotal role in the potential economic viability of mineral resources. It is a valuable tool used by developers to assess the potentiality of a mineral resource for developing a mining project. Also, it can be internally used for comparative purposes and planning. And due to the significance of this study from an economic perspective, the ASX and ASIC released interim guidelines for scoping study’s result publication. However, only 64% of the scoping studies were published (from 2018 to 2019) in full after acceptance, which means 36% failed to meet complete publication requirements although the presence of guidelines. Therefore, providing extensive international standards governing the scoping study reports like PFS and FS may bridge the global discrepancy in dealing with its reporting, reducing associated risk levels, and increasing confidence.

The PFS is introduced with an accuracy of ±25% to highlight the main challenges in the potential mining project, essential requirements, and the other significant information that helps for proper decision-making before investing millions of dollars. However, it is still prepared with few details and varies from one reporting code to other. The FS is a vital basis for the economic evaluation of the potential mining project with an accuracy of ±15%, which significantly increases the project’s value. It is almost agreed on among all the internationally recognized reporting codes.

Regarding the engineering studies that come under each stage, generally, only a review and simple layout for the available data are required at the scoping study stage, while pre-feasibility requires preliminary assessment. At the same time, more details should be provided through the feasibility report. QC and QA protocols that verify samples and assay results should be defined at all stages, even the scoping study. The master schedule of the project is estimated in scoping study to show only the start and end, while it must be detailed in both pre-feasibility and feasibility. Risk assessment can be generally overviewed in scoping, analyzed by the fatal flaw in pre-feasibility and conducting risk workshops with advanced software at the FS level to explore the project-associated risks. That mainly reflects on the contingency percent, which is 25, 15, and 10% for scoping, PFS, and FS, respectively.

5 Conclusion

New mining projects face many economic challenges compared to other engineering projects. Therefore, a lot of requirements are put in place for studies in the field. The phases of the studies applied for this objective differ from one regulation to another. Still, the most popular is that there are three phases: scoping, PFS, and FS. The evaluation engineering studies significantly reduce uncertainty risks, raise stakeholders’ confidence levels, and increase the value of new projects. The scoping study, which is conducted initially in the early life of the project to demonstrate the project’s leading figures, can be used internally by companies working in development and mineral exploration for comparative purposes and planning. Experienced people should be involved in scoping studies due to the high risks of a new mining project, broad assumptions, and limited obtained data at this stage. Compared to the scoping study, the pre-feasibility is more detailed and can be used for due diligence work to determine whether to final the feasibility proceeding and determine project areas that require more investigation. Meanwhile, the feasibility is the most comprehensive study in the engineering evaluation stages and are conducted based on detailed engineering work with ±15% estimation accuracy.

In general, there is a lack of research investigating the requirements of engineering evaluation studies from a mining perspective. Moreover, it is possible to take advantage of the tremendous technical renaissance, such as artificial intelligence, to prepare such approaches for future development and time/effort reduction compared to the conventional methods.

Acknowledgments

The authors of this paper would like to thank the mining engineering department members at King Abdulaziz University (KAU) for facilitating this research journey. As well as acknowledge SAMIROCK Company LTD. for funding this work. Also, thank the peer reviewers for their valuable comments that improved the quality of the paper.

Funding information: This work was funded by SAMIROCK Co. Ltd., KSA (Project SR/093/23).
Author contributions: Writing the original draft of manuscript, A.Y.A.-B., H.A. M. A., H.M.A., and M.A.H; supervising the findings of this work, A.Y.A.-B. and H.A. M. A.; reviewing the manuscript, H.A. M. A., H.M.A., and M.A.H; approving the final version of manuscript, A.Y.A.-B., H.A. M. A., H.M.A., and M.A.H. All authors have read and agreed to the published version of the manuscript.
Conflict of interest: Authors state no conflict of interest.
Data availability statement: The data presented in this review are available within the manuscript.

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Received: 2021-11-29

Revised: 2022-12-23

Accepted: 2023-02-27

Published Online: 2023-03-23

This work is licensed under the Creative Commons Attribution 4.0 International License.

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https://doi.org/10.1515/geo-2022-0466

Keywords for this article

new mining project; scoping study; pre-feasibility study; feasibility study; mining projects risk

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