CHAPTER 6 CONTRACTING FOR A FEASIBILITY STUDY
| Jurisdiction | United States |
(Sep 2015)
CONTRACTING FOR A FEASIBILITY STUDY
Head of Legal - Mining & Metals
Bechtel Corporation, Fortitude Valley
Queensland, Australia
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SHAUN MESSER is Head of Legal - Mining & Metals, and a Principal Vice President, at Bechtel Corporation. Established in 1898, Bechtel is one of the world's leading engineering, construction, and project management companies. Shaun has global responsibility for legal support to the business development activities of Bechtel's Mining & Metals business unit as well as for its studies & projects under development. Bechtel has completed more than 380 major mining and metals projects and close to 1,500 studies across six continents, enabling its customers to produce everything from aluminium to zinc. Prior to joining Bechtel, Shaun's in-house career included roles at NRG Energy and BHP Billiton. He has a diverse range of tertiary qualifications, having graduated with degrees in law, land valuation, environmental management, and applied finance.
Table of Contents
1 Filtering Projects
2 Definitions for Feasibility Studies
3 Typical Feasibility Study Table of Contents
4 Typical Study Accuracy Definers
5 Example Orebody Definitions
6 Influence Curves
7 Expecting Absoluteness
This Reference Paper was prepared as an accompaniment to the 'Contracting for a Feasibility Study' session presented at the Rocky Mountain Mineral Law Foundation's Special Institute on 'Mining Agreements: Contracting for Goods & Services' held on September 23-25, 2015 in Vancouver, British Columbia, Canada. This Reference Paper is intended to be used in conjunction with that presentation.
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1 Filtering Projects
As an iterative process, studies tend to take competing project configurations through a filtering process, to distil down to those configurations with the highest likelihood of meeting the proponent organisation's objectives:
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2 Definitions for Feasibility Studies
The term "Feasibility study" does not have a single definitive meaning, as a result of the term being used for different purposes in different contexts. As one project-management based example:
"A Feasibility Study is an investigation into a proposed plan or project to determine whether and how it can be successfully and profitably carried out. Frequently used in project management, a feasibility study may examine alternative methods of reaching objectives or be used to define or redefine the proposed project. The information gathered must be sufficient to make a decision on whether to go ahead with the project, or to enable an investor to decide whether to commit finances to it. This will normally require analysis of technical, financial, and market issues, including an estimate of resources required in terms of materials, time, personnel, and finance, and the expected return on investment."
Source: 'feasibility study', 2007, Bloomsbury Business Library - Business & Management Dictionary, p. 3031.
In the mining sector, various industry organisations, regulatory bodies and mining houses have proffered their own definitions for use in their particular circumstances. For instance, for a public reporting context the following definition (or a variation of it) is often used:
"A Feasibility Study is a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production."
Source: Committee for Mineral Reserves International Reporting Standards ('CRIRSCO')
Meaning of a "Bankable" Feasibility Study
The notion of a "Bankable Feasibility Study" often arises in the process of bringing forward a project for investment decision and funding. However, the term is often mistakenly applied as if it represented a settled form of product or output.
"The term bankable is sometimes used in connection with final Feasibility Studies. This just means that the study achieves...
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