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M E White
ABSTRACT
Feasibility is a value improvement process for projects.
At any stage in project development, a feasibility study
can be undertaken, but although the scope generally
remains unchanged the extent of detail and level of
accuracy usually increases with time. The main scope
elements are a business definition, project description
and an execution plan. The studies are designed to
assess the potential of the project and to secure funding
for
on-going
examination.
Invariably,
the
investigations loop back to earlier stages to establish
more appropriate development criteria but a critical
stage is reached when a project construction decision is
requested. This feasibility study requires very detailed
presentation and analysis to a higher accuracy for the
owner(s) and their potentiallender(s).
INTRODUCTION
The first assignment of a project manager is often to
define the scope of a feasibility study. The information
presented in a feasibility study and its associated accuracy
should be commensurate with the stage of project
development, the level of definition available and the
desired outcomes.
The significance of such scope
definition and the overall relevance of a feasibility study in
the development of a project are the basis for this paper.
Matters di cussed include:
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PROJECT CYCLE
A normal project cycle consists of four major functional
activity stages, namely:
I. opportunity development,
2. project development,
3. operations, and
4. asset disposal and final restoration.
Figure I relates each of the above functions through the
progress of a typical minerals development to the major
activities and review points.
Opportunity Development in a minerals industry project
refers either to an exploration stage, which is more typical
of a mining project, or the business opportunity
development appropriate to a manufacturing or processing
project such as a refinery. By illustration, the exploration
for and the discovery of the Scuddles base metals orebody
was the major opportunity development activity behind the
subsequent development of the Golden Grove base metal
project. However, it has been the licensing of Alcan
technology,
the
development
and
subsequent
commercialisation of AM (Australian Magnesium)
Process and the establishment of market opportunities
through the off-take arrangements with Ford which will be
the major opportunity development activities behind the
Australian Magnesium Research Development Project
(AMRDP) - Magnesium Metal Project.
From an activity viewpoint, project development is
normally
subdivided
into
pre-development
and
development stages. The pre-development stage refers to
those collective activities which take a project from
opportunity development (eg
exploration discovery)
through to a decision to proceed with detailed design and
construction. It is in this pre-development stage that,
under conventional circumstances for a greenfields project,
one carries out a feasibility study. Development refers to
the subsequent stage of design, construction and
commissioning to a point where operations have been
commenced and can be maintained on a sustainable basis.
The
At this point, operations have commenced.
operations stage may continue unabated until either the
reserves are no longer available for a viable project to
continue and asset disposal commences or, as is more
often the case, additional stages of project development
occur. Such additional stages of pre-development may
result from supplemental opportunity development (eg
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MEWHITE
FUNcnONS
OPPORTUNITY
DEVELOPMfNI'
SCOPING '"
ACTMTIFS
PRW~
EXPLORATION
RFSEARCH&
DEVELOPMfNI'
OPERATlO S
PROJECr DEVELOPMfNI'
1-FEASmll.JTY ....
DEflI\TI1VE
FEASmU.JTY
:~~~~
J-D_I:T_A1_u:D_EN__G....L
....__.....
ASSET
DISPOSAL
-L_C_O_M_M_IS_S_IO_N--lI
PR_OCIJRE
_ _~_IE/(f
- - - I PRODUcnON
.....
SHUTDOWN
FINAL
STAR11JP
INIllAL DEVELOPMENT
REHAB
DEVEWPMINT
PREDEVELOPMENT
MILFSTONFS
ESTIMATE
ORDER OF
MAGNmJDE
TYPES
PROJECT EVALUATION
OPPORTUNITY
DEVELOPMENT
DEVELOPMENT
CONCEPTS
EXPLORATION
DETAILED
EVALUATION
ECONOMIC
ASSESSMENT
m:RA11VE
DEFINITION
PROJECT BASIS
m:RA11VE
I~;
FINANCIAL ANALYSIS
~
~
PRELIMINARY
DESIGN
DISCOVERY
CONCEPTUAL
ENGINEERING
APPROVAL
CRITERIA ANALYSlS
RESEARCH &
DEVELOPMENT
COST
ESTIMATION
DETAILED PLANNING
AND COSTINGS
CONSTRUCTION
PLANS
PROJECT DEVELOPMENT
FIG 2 - Project evaluation.
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LEVEL OF ACCURACY
Table I summarises the major study phases discussed
above including where such tudies are applied and the
level of accuracy generally sought or which can be
anticipated (based upon the information available).
BASIC E GINEERING
The employment of basic engineering within a feasibility
study context, as a pre-development activity, has become
more popular in recent years, particularly with large
projects, where owners require greater levels of certainty
ahead of a decision to proceed. Such elections illustrate
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TABLE 1
Feasibility sllldy level categories.
Estimate Type
Level of Accuracy
When applied
30%
Developing long-term
corporate strategies. Deciding
on level of on-going
exploration. Assessing project
advancement from exploration
to pre-development.
20%-25%
Definitive
15%
Basic Engineering
10%
As above
Scoping
Preliminary
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Matters Inclusive
Business Definition
Owner Parameters
Project Goals
Market Considerations
Project Description
Execution Plan
Implementation Plan
Operating Plan
Rehabilitation/Disposal Plan
Capital/Operating Costs
Risk Evaluation
In
TABLE 2
Systems Definition
At Scoping Study
At Preliminary Study
At Definitive Study
PROJECT PHASES
FIG
30
--+
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'-'
Z
40%
iX
'"'"z
G
Z
30%
'"
-l
g
...
ESTIMATE ACCURACY
ID"
loo
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'0"
SCOPING
~TUDY
PRELlAUNARY
fEASlBlUTY
DEnNlnvE
FEAS18LUTY
B'ASIC
ENCINUJtlIC
DEVELOPMENT PHASE
D<TAIL
DSl""
SUMMARY
Feasibility studies are an essential pre-requlslte for the
development of any given venture. Such studies form a
structure through which a project can progress until a final
decision to proceed to commercial operation is
undertaken. Although there is a common methodology in
the evaluation and optimisation of projects, the path
followed for any given project will vary depending upon
the nature of that project and the required business
outcome.
Invariably that path involves iterative
assessment until the required outcome is achieved.
At each progressive stage in a project's assessment, the
scope of any given feasibility evaluation should not vary,
only the degree of effort expended to achieve the required
level of accuracy should change. This in turn will be
dependent upon the significance of the decision to be
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M EWHITE
APPENDIX 1
ESTIMATED ACCURACY
RANGE
COST
SCOPING
'RILlMINARY
STUDY
I'LUIIILlTY
DEnNrTIV&
IASIC
FlASI.ILITY ENCINIU,INC
DETAIL
DUICN
COMPu:n:D
PROJECT STAGE
PROJECT
COST
t--------===========----j
Market Opportunity
LEVEL or CONllNCtNCV
COST
DETAIL
DUIGN
C(IPlETED
PROJECT STAGE
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Project Economics
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PROJECT DESCRIPTION
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EXECUTION PLAN
Process Plant
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