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2019 Mineral Systems of the Pacific Rim Congress

Enthalpy’s CEO, Paul harper, presented at the 2019 Mineral Systems of the Pacific Rim Congress in Auckland earlier this week. The presentation covered Improved Reporting of Mining Feasibility Study Results.

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Purpose of our proposal

The share market and mining companies have recognised that greater transparency disclosure is required in the promotion of mining projects to attract a larger proportion of investment funds available in the equity market.

“We propose an improved process for greater transparency around
disclosure and use of Feasibility Studies (FS) to enhance and attract
investment confidence in the resources industry”

Improved reporting of mining “Feasibility Study” results

So why are so many projects failing?

• Fail to establish core technical aspects of geology, mining, metallurgy at study phases
• Ignoring the sustainability and licence to operate aspects
• Prefeasibility studies failing to rigorously find the best investment case
• Thinking bigger will be better – chasing economics by only upsizing the project
• Assuming optimistic commodity prices for the life of mine
• Producing flawed feasibility studies in the rush to get into production
• Not integrating studies at technical, project and business levels
• Inadequate project implementation planning
• Assuming project management should not be difficult
• Not conducting good quality reviews during the study and implementation phases
• Failure in project controls leading to surprises for company directors
• Believing that things go smoothly with a project.

We are not only letting down investors but our industry as well.

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Making the Right Investment Decisions


Making the Right Investment Decisions to develop or acquire new capital assets should be made on complete information evaluated via a feasibility process. By necessity the information is never final, hence due to this uncertainty, no investment decision is without risk.

What is at issue is that the systematic evaluation processes used, and the definition standards to be  achieved, should ensure the evaluations are complete and to a known quality.

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During the 90’s and even more recently, the media have reported on a number of large projects and acquisitions that could only be described as technical and economic disasters. These well publicised investments destroyed shareholder value and resulted in challenges to Boards and Management of many resource companies.

Capital Investment Systems incorporating defined processes and standards have now evolved to meet
these challenges.

This paper sets out the experiences of Neil Cusworth, Managing Director of Enthalpy, relating to the Best Practices now being used or developed to make Capital Investment decisions.

The costs and efforts needed to define any new capital asset development or acquisition utilise the
resources available from shareholders’ investments. If the intended development or acquisition
proceeds, then the investigation costs add to the costs of the new development or acquisition.
Alternatively, if the intended development or acquisition does not proceed, then the shareholders’ funds
are lost or reduced in value.

Yet to grow or sustain a business, investments must be made. The challenge then is to decide how
much of shareholders’ funds should be put at risk, prior to the investment decision, in seeking to define
the investment. The alternative is to take higher risks during the delivery of the development project or
purchase of the existing business or asset.

Over the past fifteen years too many examples of investment decisions which did not deliver the
promised values have been witnessed in the resource and industrial sectors.

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The Use and Abuse of Feasibility Studies

It is generally accepted that the preparation of a feasibility study is an important element early in the life cycle of a resource development project (eg Laird, 2001; Amos, 2001). It is also widely accepted that the feasibility study process is multi-phased and iterative (eg West, 2006).


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Typically, initial assessments of the development potential of a resource project are aimed at assessing the project’s key technical and economic characteristics, with subsequent assessments designed to confirm assumptions and reduce the uncertainty associated with the development to an acceptable level. References to feasibility studies are often prefaced with ‘order of magnitude’, ‘preliminary’, ‘indicative’, ‘pre’, ‘final’, ‘bankable’, ‘definitive’, ‘detailed’ or other terms to indicate the level of detail investigated in a study. Resolution of technical issues is often seen as the primary focus of a feasibility study, whereas in reality, these technical issues are the basis upon which a business plan is built. This is not to say that technical issues are unimportant – they are a prerequisite to the demonstration of a project’s viability.

Please get in contact with us if you would like to inquire about our feasibility study managers.