Just posed the question to an accountant contact with a large engineering firm who do process/mining plant construction.... what is a normal acceptable construction cost estimate error?
They said 5% when things are tight, 10% when bouyant.
Back in 2007, the cost estimate of the Newcastle plant given to sh's was $6M. I've lost track of the CR's since then, but CR's + Kronos $$$ + WIM150 is well over $6M.
Every time they allow more over-run, the ROI ratchets down from the guidance that was given before the project began.
I have no idea whether this is due to unrealistic original estimates (whether through optimism or lack of planning), excessively flexible design parameters or unforeseen circumstances.
I'd be OK about it if revenue went up in proportion to the capex escalation, but I don't think revenue is going to triple.
I know 2007 figures are wrong. I'd like to know what the 2014 capex/revenue figures are to give some sort of rational underpinning to my investment.
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