Do groundwork now, while there’s time – SRK
5 February 2016 – Johannesburg: The last years of the commodity boom were littered with mining projects doomed to failure by their champions’ headlong rush to fast-track them into production; but as the slump drags on, time and skills are available to do the job right first time, according to global consulting engineers and scientists SRK Consulting.
“Frankly, a great deal of money could have been much better spent by not rushing projects into existence quite late in the commodity cycle,” said SRK partner and principal consultant Andrew van Zyl. “We can look back and see mistakes made, which contributed to many projects failing to come on stream on time or on budget.”
He said there were several examples of miners over-paying for their projects and under-delivering to their shareholders – often due to taking short-cuts in key processes of due diligence, technical studies and strategic planning.
“When companies are in a hurry, they can make mistakes,” said Van Zyl. “If drilling and sampling is rushed, for example, it could result in lower confidence in the Resource and you don’t get optimal value from your investment.”
Bypassing a pre-feasibility study – and going straight to feasibility stage so that construction can be hastened – can preclude a full understanding of all possible options for a project, he said. The result could be a sub-optimal project size or design that falls short of generating the best possible return.
“Among the constraints during boom times is the skills shortage, making it difficult for developers to assemble the right people in the right place at the right time,” he said. “By contrast, in the current market mining companies can get good advice and good staff more readily. Now is the time that a mining company can go through a proper scoping study and pre-feasibility study, optimising their projects and weeding out those that don’t align with their strategic focus and are likely to deliver sub-optimal returns.”
Ideally, said Van Zyl, companies need projects they can “switch on” when there are signs of an improvement in commodity prices.
“At the switch-on stage, miners need to be comfortable that they’ve understood and optimised the project – and are technically confident to declare both a reserve and an associated level of return,” he said. “They need to be able to avoid those many and varied costs associated with overly rushed projects – both in terms of time and money.”
He also highlighted the growing complexity of mine planning in Africa and globally, as a result of growing competition for key resources like water, energy and land; this was forcing companies to navigate a space where they are not guaranteed the basic resources they usually need in order to operate.
“Mines and governments alike will often need assistance through this process – negotiating with stakeholders like local communities who see mines as a competitor for scarce resources,” said Van Zyl. “Processes like this also need time, as well as the input of experienced local experts who understand legal regulations, power relations and cultural nuances.”
With offices in various parts of Africa, SRK Consulting has offers a range of technical and strategic services to mines, provided by experienced and multi-disciplinary teams.
Visit www.srkready.co.za for further information.
About Andrew van Zyl – Partner and Principal Mining Consultant
Andrew has been involved in the fields of mining and engineering for over 16 years, and specialises in mine and project valuation, due diligence, mining convention negotiations and economics. Qualified in chemical and mineral processing, and in financial economics and econometrics, he has experience in a range of production and project roles including precious and base metals due diligence. Andrew has managed the cold and hot commissioning of process plants, as well as tenders – with the analysis of project financials and risk. He also lectures on exchange rates and valuation.
About SRK Consulting – www.srk.co.za
SRK Consulting is a leader in natural resource and development solutions, providing independent technical advice and services through over 45 offices in 20 countries, on six continents. With an African presence in Angola and Cameroon, and practices in the Democratic Republic of Congo, Ghana and South Africa, the global group employs more than 1,400 professionals internationally in a range of engineering, scientific, environmental and social disciplines.