Resource investors that are new to the market might see quite a few unfamiliar terms in press releases, and prefeasibility and feasibility studies are definitely two that are key to know. Let us start with the prefeasibility study.
As the two are inherently connected to one another, it helps to understand their differences to gain a better idea of what they mean and how they’re used. They main thing to know, however, is that prefeasibility and feasibility studies represent milestones for mining and exploration companies.
What is a prefeasibility study?
Before a resource project moves into the feasibility study stage, companies will undertake what’s known as a prefeasibility study. Such studies are intended to help determine whether it’s even worth it to move to the feasibility phase.
More specifically, according to the Centre for Excellence in Mining Innovation, prefeasibility studies are designed to select the base case for developing a project.
This may include factors such as potential mine access points and process methods, and will be used to determine whether or not the project is “feasible” and whether it may be developed further.
Since more development can cost millions of dollars, prefeasibility studies are an essential part of determining whether it makes sense to continue with a project.
When and why do companies undertake them?
A mining project can be expensive, to say the least. Before an organization commits to putting up several million dollars to collect information and obtain the required permits, it wants to be sure its investment will pay off.
Prefeasibility studies act as one of the first explorations of a potential investment, following a preliminary resource/reserve report and the creation of an orebody model.
Based on the data procured by various assessments, a prefeasibility study may occur.
What information do they include?
In addition to information relating to geological models and mine design, prefeasibility studies also take into account factors that may impact or interfere with the final project. This can involve community issues, geographic obstacles, permit challenges and more.
While prefeasibility studies are conceptual in nature, there are some key factors investors will want to be aware of. A comprehensive prefeasibility study should include detailed designs and descriptions for mine operation, as well as cost estimates, project risks, safety issues and other important information.
There should also be multiple options included in the study for tackling different issues, as this will provide organizations with more ways to overcome potential challenges.
What happens if results of the prefeasibility study are positive? Negative?
Put simply, if a prefeasibility study results in a positive base case, the company will likely move on to the next stage: a feasibility study. If the study is negative, organizations may head back to the drawing board or abandon their potential project altogether.(source: Resource Investing News)