Silvercrest will present at PDAC on how they feel they have done it right.
It probably helps that they had a smaller project and could grip the detail.
The small contingent of stocks succeeding in this market are the growth producers who can deliver controlled, profitable growth moving good teams from one project to the next. Look for good levels of insider and management ownership to align interests.
SilverCrest Santa Elena mine construction: How to be “On time and under
N. Eric Fier, CPG, P.Eng, COO for SilverCrest Mines Inc., Vancouver, Canada
We live in a mining world of out-of-control schedule slippage and cost overruns.
Numerous recent examples litter the financial streets leaving potential investors
wondering what is going on!
In 2010, SilverCrest began construction of the Santa Elena Mine (open pit heap leach),
located in Sonora, Mexico. The proposed cost and schedule were publicly disclosed at
an estimated capital cost of US$20 million over a period of approximately 12 months.
Commercial production (>90% of design) was announced in July of 2011 at a capital
cost of approximately US$19 million. The mine was operational and SilverCrest
declared that construction was completed “On Time and Under Budget.”
Several factors contributed to being “On Time and Under Budget” including but not
1. Continuous on site supervision by SilverCrest executive level with systematic
planned reviews of schedule and budget.
2. A rigorous cost control program was set up early on at Santa Elena to provide
executive management with early warning “red flags” on slippage and cost
overruns requiring immediate action.
3. Executive level supervision at Santa Elena allowed for rapid and creative
decision-making which could be implemented without significant delay. Decisions
delays by executive management can cost millions in overruns.
4. Choosing the right construction manager for the specific site proved to be
invaluable for Santa Elena.
5. “Accurate and practical” engineering upfront paid off; pay now or pay later.
6. Under promise and over perform in the marketplace. Be conservatively optimistic
on your disclosed schedule and budget; don’t over promote.
7. Anticipate realistic changes in material costs over the construction period; the
longer the period the higher the risk.
8. Don’t underestimate the cost of location, access, topography and local logistics.
9. Estimate local labour costs equal to North American labour costs for most places
in the world. At Santa Elena it takes more people to construct and run the mine
than the same production level in Canada.
10. Don’t rely solely on schedules and costs from your PFS or FS independent
consultants. Do your own “realistic” numbers found from experience and industry.
Initial CAPEX discussions for Santa Elena was around $30 million plus plus.
11. The higher the estimated CAPEX is, the higher the risk of overruns. 10% overrun
on a billion dollar project is “visually” a lot worse than 10% on a $20 million
12. Significant ownership as a shareholder managing construction for the company
keeps you focused on achieving commitments “On time and Under Budget.
Several other items can be included. The most significant factor in the success or failure
of a mine construction project is having experienced executive management directly
involved, providing quick and accurate decision-making