Part 1 Part 2
“There are a lot of capable people doing very good work,” he said. “And experience shows that in periods when markets are quieter, such as now, project results improve.”An RPA review of failed or troubled projects since 1985 identified 75 projects that failed to meet expectations, and of them: ........
- 35 were related to grade;
- 10 to mining methods;
- 16 were associated with processing problems;
- 8 had to do with capital costs;
- 7 with operating costs;
- 6 were traced to social, permitting or government issues; and
- 5 to metal prices and timing
Clow’s list of potential red flags includes:
- Not enough skilled workers to go around- Studies show that cost overruns are higher when markets and metal demand are overheated. This results in a shortage of skilled workers
- Management team too small
- Owner-operator at the construction stage
- Not enough engineering
- Lack of benchmarking — On the operating cost side
- The term “optimization” — A project rarely gets cheaper with further study
- Insufficient metallurgical test work
- Too much mining dilution — Dilution is the number-one thing RPA looks at when it audits reserves and production forecasts
- Productivity problems — Make sure the right mining method is chosen for the type of deposit and that there are enough workplaces to ensure flexibility
- Mismatched mill size
- Unrealistically low ramp-up times
- Cut-off grade too low or too high — Reserve estimates are generally completed at a break-even grade, but most operators mine to incremental grades. Problems can also arise if the cut-off grade is too high - “to drive your overall resource grade up, continuity is compromised.
- Errors in resource grade estimation “You have to confine grades to where they belong rather than smearing them around the deposit
- Mining low-grade deposits — If you’re mining a 1 gram per tonne gold deposit and your calculations are off by 0.2 gram gold, that’s the equivalent of losing 20% of your deposit.
- Inappropriate bulk-density measurements and not recognizing the difference between specific gravity and bulk density, which takes ore porosity into account
- Lack of capping — Capping is used to handle nuggety deposits, and RPA swears by the practice.
- Lack of qualifications and experience of the QPs — QPs are required to have a minimum of five years of experience, but that’s not much. “There’s a hole there and there’s no policing of these studies
- PEAs often receive “an undeserved level of credibility,” as their overall accuracy can range by plus or minus 30%, or more
- Prefeasibility studies can range in accuracy from plus or minus 20–25%, while the range for feasibility studies can vary from minus 15% to plus 15%. “And it’s pretty much always a plus, never minus,” Clow said.