Pre-evaluation study

Author: John Wright

Contents
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 1 Introduction

 2 Purpose of pre-evaluation study

 3 Study contents

 4 The project team

 5 Level of accuracy

 6 Risk assessment

 7 Study results

 8 Comments and suggestions

 9 See also

Introduction

The Venture analysis, also called the pre-evaluation study has the following characteristics:

 It involves 0% - 2% engineering.

 Cost estimate accuracy is "order of magnitude," with costs based on experience, allowances,
and rules of thumb.

 Bottom line contingency is unspecified, as it would imply an accuracy that is not supported in
the study.

 Normal time required for submission of draft report is ±2 months.

 Normal cost range (if no supporting studies are included) is ±$25,000.

Purpose of pre-evaluation study

The purpose of this study is typically to provide information for the Owner’s internal use only, as an aid to
making ongoing internal decisions with respect to a potential project. The study may be used to determine
if a deposit or facility has a reasonably robust economic benefit in order to justify carrying the work into the
more formal scoping study stage. It will provide some preliminary guidance with respect to some basic
early questions with respect to the proposed project, including:

 Is the final product readily marketable?

 Is the market stable?

  Is the location realistic? Consider site location, existing infrastructure, site access,
environmental sensitivities, political sensitivities, etc.

 Are there sufficient ore tonnes and ore grade to justify further continuation of the exploration
program?

 What will be the order of magnitude capital and operating costs of a “typical” mine to produce
the desired product in this location? What other costs will be involved in shipping/selling the
product?

 What combinations of ore tonnes and ore grade are required in order to justify moving the
project forward into the more extensive study stages?

 What will be the main political, legal, environmental, social, and technical issues?

 What areas of the project require particular study and test work?

 What are the major project risks?

Study contents

A venture analysis will typically consist of a few pages of text, some general schematics and figures, and
order-of-magnitude cost estimates based on various assumptions, experience, benchmarks, and industry
standards. It is more of a presentation of the project knowledge available to date, rather than a design
document.

The project team

A venture analysis study will typically be completed by a single experienced engineer with access to the
exploration group, process personnel, and design/estimating personnel who can provide some general
guidance in specific areas.

Level of accuracy

The main purpose of this study is to determine if the property has sufficient potential to justify a decision to
carry forward into more detailed study phases (typically a financial commitment less than $1 million plus
any ongoing exploration costs) and to provide some idea as to the potential benefits, opportunities, and
risks related to the project. If sufficient ore resources have not yet been identified, the study will provide
some indications as to the ore resource quality (tonnes and grade) that will be required in order to justify
moving forward into a scoping study.

This level of study is “order of magnitude” at best. Any scope of work, schedule, and cost information will
be based on a number of high-level assumptions, industry standard performance figures and costs, vendor
equipment productivity information, and general experience with similar projects.

Risk assessment
No formal risk assessment is carried out at this level of study. The focus is to identify any major project
risks that may become “fatal flaws” for the project. These risks may include:

 Market risks: Is the product market stable, predictable?

 Permitting risks: Is the permitting process clearly identified and understood by all parties?

 Political risks: Is the country stable, strongly nationalistic, strongly anti or pro-mining, etc?

 Site access risks: Is the site accessible under all conditions?

 Cultural: Is there some existing mining culture?

 Availability of capital required for permitting, design, construction, and operation.

Study results

A venture analysis can have three possible outcomes:

 Go Decision:

 Continue exploration work on the mineral discovery in order to upgrade the resource to
the target levels identified in the scoping study.

 Undertake a pre-feasibility level study if the mineral resource targets have already been
(or are likely to be) achieved.

 Wait and Re-Visit:

 Suspend further work on the mineral discovery pending possible improvement in

economics or conditions (increased metal prices, improved access to and infrastructure in
the general area, change of government, etc.)

 No Go Decision:

 Abandon further work on the mineral discovery

Comments and suggestions

1. Define scope
Ensure the overall scope of the project is clearly identified, including items such as supply of services to the
site, transport of personnel/materials to and from the site, shipping/refining/sale of products, corporate
overhead costs, etc.

2. Identify costs
Ensure that other costs such as title and licenses, taxes and royalties, tariffs, permitting, legal, etc are
identified as being included or excluded. Identify how these costs will be distributed back to the project and
the ongoing operation.

3. Determine levels of accuracy

Clearly identify the level of confidence in the information that forms the basis of the study (mineral resource
estimate, geotechnical/hydrogeology, metallurgy, etc.).
4. Work according to accuracy of available information
The level of accuracy of the basic information available (mineral resource tonnes and grade) sets the level
of effort that should go into the venture analysis study. There is no point in trying to define production rates
and costs to some specific level of accuracy if the resource information is not well defined.

5. Identify assumptions that have been based on information accuracy

Significant assumptions made in arriving at the scope of work, a mine plan, capital/operating costs, and a
project schedule must be clearly identified in the report.