Source : AUSIMM MONOGRAPH23

CORPORATE CONSIDERATIONS
FEASIBILITY STUDY
Purpose
The most critical step of any project is the feasibility study.
Unfortunately the concept of the term feasibility study has
expanded to include a whole range of activities varying from
scoping studies, through economic evaluations and preliminary
feasibility studies to the final feasibility study.
It is critical that the purpose of the study be defined prior to
its initiation, particularly when other partnerships or joint
venture relationships are involved. Ideally a final feasibility
study is prepared when, by virtue of preliminary evaluations, a
project is known to be feasible and concepts are fairly well
established. The feasibility study has one primary goal: to
demonstrate that the project is economically viable if, and only
if, it is designed, constructed and operated in accordance with
the concepts set forth in the study.
It should demonstrate that Ore Reserves are sufficient to
support the development of the project, that mining and metallurgical
processes are adequate to produce the required
quantity of marketable product, that construction schedules and
budget have been prepared with a reasonable degree of confidence
and that the project will produce a cash flow profile that
will be acceptable to lenders.
If the feasibility study has shortcomings, these will have an
amplified impact on the success of the project. The study must
contain a reasonable balance between detailed estimates and
broad assumptions and must provide sufficient evidence that
all project risks and upside potential have been adequately
addressed.
Defines Ore Reserves
Of course, the successful demonstration of economic viability
will result in a percentage of the Mineral Resource being
reclassified as Ore Reserves which, under the classical definition,
is material that can be mined and processed at a profit.
Therefore, one of the most important outcomes of the feasibility
study is that it defines the Ore Reserve of the project.
Scale of project
The magnitude of the Ore Reserve will also affect the scale of
the project. Generally the larger the reserve, the larger the
project although this is not always the case. Market considerations
may determine the scale of production, financing
constraints may limit the size of the facility and government
policies may influence the way the project should be developed
and expanded. Net present value calculations will usually
indicate that reserves should be processed as rapidly as possible
while, normally, socio-economic considerations would dictate
a longer period of production.