A critical investigation into value adding principles for conducting an open pit conceptual study

Abstract

A conceptual study is regarded as the first phase in the development of a new open pit mine. The phased approach (conceptual, prefeasibility, feasibility) is described as a “stepwise risk reduction” process, whereby each phase progressively reduces risk prior to project implementation. As the first step in the process, the conceptual study could potentially have the largest effect on mine development since investment decisions are based on its content. Carelessly conducted, a conceptual study has the potential to underestimate a viable project or produce an overoptimistic valuation. In a tough economic climate, mine project developments are scrutinised, prioritising capital to develop assets with the most potential. To prioritise, conceptual studies need to be comparable and therefore based on a similar, structured approach. Comparability is hindered by low confidence geological information and assumptions on which conceptual studies are based. The time it takes to conduct a conceptual study and the associated accuracy are largely dependent on the information available since information is often borrowed from similar projects or developed from first principles. To prevent casual educated guesswork, conceptual studies need to be subject to a scientific, standardised approach with experienced professionals involved. At the core, a conceptual study can be broken down into a set of activities as is found in a work breakdown structure. Major mining companies have comprehensive internal standards (sets of activities) where the activity determines what needs to be included in a conceptual study and the deliverables that need to be achieved. This dissertation drew activities from industry standards and eight different case studies for consideration. Essentially, activities add value to a conceptual study by reducing technical and financial risk. For this reason, activities culminated from case studies and industry standards were evaluated by a focus group to determine the risk reduction potential of each activity. From the focus group evaluation, activities were ranked according to value adding potential, and a list of twenty activities was identified as critical to the success of a conceptual study. The top twenty activities were evaluated against the required conceptual study deliverables identified in the literature, and six additional activities were added, ensuring that all critical deliverables are met. In total, twenty‐six activities were identified that, if included in a conceptual study, would ensure that a standardised, scientific approach is followed and that a conceptual study would add value by reducing risk. In addition to the critical activities identified, this dissertation drew from the literature survey, case study results and focus group assistance such value adding principles critical for the success of an open pit conceptual study.