Feasibility Study

A feasibility study, in mining, is a comprehensive technical and economic study of the selected development option for a mineral project. Under the SEC's mining disclosure rules it includes detailed assessments of all applicable modifying factors, together with the detailed financial analysis needed to demonstrate, at the time of reporting, that extraction is economically viable (17 CFR 229.1300). Its results may serve as the basis for a final decision to proceed with, or to finance, the development of the project.

The three levels of study

The SEC rules define three technical studies. Each is more comprehensive than the one before and carries a higher level of confidence.

• Initial assessment: a preliminary technical and economic study of the economic potential of all or parts of mineralization. It is required for the disclosure of mineral resources, and it cannot be used as the basis for disclosure of mineral reserves.
• Preliminary feasibility study, also called a pre-feasibility study: a comprehensive study of a range of options for the technical and economic viability of a mineral project. The project must have advanced to the stage where a qualified person has determined a preferred mining method or pit configuration, an effective method of mineral processing, and an effective plan to sell the product.
• Feasibility study: the study of the selected development option. It must contain mining, infrastructure, and process designs completed with sufficient rigor to serve as the basis for an investment decision or to support project financing.

Required accuracy of cost estimates

The rules set a minimum accuracy and a maximum contingency for capital and operating cost estimates (17 CFR 229.1302).

• Initial assessment: accuracy of approximately ±50 percent, with contingency no greater than 25 percent. Cost estimates are optional at this level.
• Pre-feasibility study: accuracy of approximately ±25 percent, with contingency not exceeding 15 percent.
• Feasibility study: accuracy of approximately ±15 percent, with contingency not exceeding 10 percent.

The qualified person must state the accuracy level and the contingency range in the study.

What each study can support

• An initial assessment supports a statement of mineral resources.
• A pre-feasibility study must be sufficient for a qualified person to determine whether all or part of the indicated and measured mineral resources may be converted to mineral reserves.
• An inferred mineral resource may not be considered when assessing the economic viability of a mining project, and may not be converted to a mineral reserve.

Modifying factors

Modifying factors are what a qualified person applies to indicated and measured mineral resources to establish the economic viability of mineral reserves. The rule lists them as mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental compliance, plans or agreements with local individuals or groups, and governmental factors.

Names that mean the same thing

The rule states that terms such as full, final, comprehensive, bankable, or definitive feasibility study are equivalent to a feasibility study.

Who prepares it

A qualified person is a mineral industry professional with at least five years of relevant experience in the type of mineralization and deposit under consideration, who is an eligible member or licensee in good standing of a recognized professional organization.

Where mineral title fits

Legal factors are one of the listed modifying factors. A mine plan assumes the project holds the ground it intends to mine, and that assumption rests on the status of the mining claims, leases, and surface rights beneath it.

Other standards

These definitions come from SEC Regulation S-K subpart 1300, adopted at 83 FR 66448 on 12/26/2018. Canada uses its own instrument, NI 43-101, which incorporates by reference the CIM Definition Standards adopted on 5/10/2014. The two frameworks use similar terms and are separate rules.