DFS = Definitive Feasibility Study
BFS = Bankable Feasibility Study - see note below re the use of "Bankable"
The feasibility study process
Noort and Adams (2006) describe three phases of a study process as:
A scoping (concept) study should be used to define the potential of a project, eliminate those options that are unlikely to become optimal, and determine if there is sufficient opportunity to justify the investment required for further studies.
Scoping studies are typically undertaken during project generation or exploration and structured to:
• assess the potential of the new or expanded business opportunity;
• describe the general features of the opportunity including potential cases to be studied in the next phase; • determine key business drivers for the opportunity and any potential fatal flaws;
• develop order of magnitude costs of the opportunity (both capital and operating);
• identify technical issues needing further investigation, such as geological drilling or test work required;
• determine the costs and time to undertake further development work to complete a prefeasibility study;
• identify the resources, personnel and services required to undertake further work on the opportunity; and
• provide a comprehensive report with supporting appendices that includes a recommendation to proceed or otherwise
Prefeasibility studies should be used to select the preferred operating options from the shortlisted options defined by the scoping study and to provide a case for whether or not to commit to the large expenditure and effort involved in a subsequent definitive feasibility study.
Prefeasibility studies are typically undertaken after the delineation of a mineral resource and structured to:
• assess the likely technical and economic viability of the opportunity;
• consider different mining, process, location and project configuration cases;
• consider different capacities for the project;
• determine and recommend the preferred optimum case to be examined during the feasibility study;
• outline the features of the recommended project;
• determine key business drivers for the opportunity and examine any potential fatal flaws;
• determine the risk profile of the opportunity;
• determine the nature and extent of the further geological, mining, metallurgical, environmental, marketing or other work needed to be undertaken during the feasibility study;
• determine the costs and time to undertake this work and prepare a feasibility study, including an estimate of the costs and time to develop the project following completion of the feasibility study;
• identify the resources, personnel and services required to undertake further work on the opportunity; and
• provide a comprehensive report with supporting appendices that includes a recommendation to proceed or otherwise.
Definitive (full) feasibility studies should be used to refine the optimal operating scenario defined by the prefeasibility study. They are often used to assist with outside financing requirements. The definitive feasibility study provides the basis for the decision on whether in fact further study is required, whether the project is worth pursuing or whether to advance the project to design and construction.
Feasibility studies are typically undertaken after detailed data gathering of all material information relevant to the project development structured to:
• demonstrate the technical and economic viability of a business opportunity based on the proposed project;
• develop only one project configuration and investment case and define the scope, quality, cost and time of the proposed project;
• demonstrate that the project scope has been fully optimised to ensure the most efficient and productive use of the mineral resource, capital and human resources applied to the project;
• establish the risk profile and the uncertainties associated with this risk profile and develop mitigation strategies to reduce the likelihood of significant changes in the project assessment as set out in the feasibility study;
• plan the implementation phase of the proposed project to provide a baseline for management, control, monitoring and reporting of the project implementation and establish a management plan for the operations phase;
• facilitate the procurement of sufficient funds to develop the project in a timely manner; and
• provide a comprehensive report with supporting appendices that includes a clear recommendation to proceed with the investment or otherwise.
Bankability
The framework deliberately avoids the use of the term ‘bankable feasibility study’.
Guanera (1997) notes:
The definition of a bankable document is theoretically:
A document which outlines the technical risks inherent in a mining project, delineates methods of eliminating those risks, and quantifies the potential economic returns that can be attained at various commodity prices.
The bank itself will ultimately define what is required in a document that it will utilise to justify financing a mining project, so realistically, one could say that there is no such thing as a bankable document.
Johnson and McCarthy (2001) continue this line and argue for the use of the term ‘Bank-Approved’ as opposed to ‘Bankable’:
The term ‘bankable’ feasibility study initially seems to have an added ring of veracity over the more mundane phrase ‘feasibility study’. Adding ‘bankability’, after all, seems to imply that the study is like money a party can take to the bank. Unfortunately, the term is misleading … At the very least the knowledgeable lender, experienced in lending to mineral projects, will require that its own consultants and internal research departments review the study. The lender often then requires the parties to augment the study as support for the lending request. One can argue in good faith, then, that there really is no such thing as a ‘bankable feasibility study’ except after the selected financing lender prepares or approves one. In short, it would be far less misleading if the term were ‘Bank-Approved’ Feasibility Study.
Guarnera (1997) notes:
Whether it is a financial institution that is considering financing a mining project or a mining company going to a financial institution for capital to finance their project, there are four general areas of risks involved in the analysis of a mining project:
• bank risk,
• country risk,
• company risk, and
• project risk.
Given that the first three risk areas are difficult for a project owner to address, the focus of the minimum standards is on addressing project risk. Rather than attempt to define ‘bankability’, the authors have developed a set of criteria in Table 2 that a feasibility study should achieve to facilitate the procurement of bank debt. The minimum standards for the feasibility phase incorporate these characteristics.
(20min delay)