9. Large Consulting Firms or Small Firms – Any Difference?
Date: May 7, 2015Author: Ken Kuchling
I have come across some junior mining companies that have based the selection of their engineering consultant on the assumption that they needed a “big name” firm on the cover page to give credibility to the study. This is an interesting dilemma that many smaller mining companies run into and also a dilemma for the smaller engineering firms trying to win jobs. Large consultants may ultimately be higher cost due to their overheads, however their name on the study may bring some intangible value.
Based on my experience I feel that larger consultants are best suited for managing large scope feasibility level studies. This isn’t because they will necessarily provide a better technical product, but rather they tend to have the management and costing systems in place to undertake the larger studies. The larger firms will be able to draw in more management resources; for example, project schedulers and document control personnel. Ultimately one will pay for all of these people, which may help in getting to the endpoint of the final study but it will come at a cost.
For certain aspects of a feasibility study, one may actually get better technical services from smaller specialized engineering firms. However the overall coordination of a large feasibility study can be an onerous task and the large firms may be well positioned to do this. In my view, likely the best result will come from a combination of a large firm managing the feasibility study but undertaking only the technical work where they can be deemed to be experts in. The large lead firm would be supported by smaller firms for the specialized aspects, as per a previous article “Multi-Company Engineering Studies Can Work Well..Or Not”.
For smaller studies, like scoping studies (i.e. PEA’s) which can be based on limited amounts of technical data, I personally don’t see the need for the large engineering firms. The credibility of such early studies will largely be based on the amount of data used to support the design assumptions; for example how much metallurgical testing has been completed; how much geotechnical investigation been completed; how much inferred resource is being used in the mine plan (see “PEA’s – Not All PEA’s Are Created Equal”). A large firm’s use of limited data may be no more defensible than a small firm’s use of the same data.
One of the purposes of an early stage study is to see if the project has economic merit and would therefore warrant further expenditures in the future. An early stage study is generally not used to defend a production decision. In addition, the objective of an early study is not necessarily to terminate the project outright unless it is obviously highly uneconomic. I have seen cases where larger firms, in order to protect themselves from limited data, were only willing to use the most conservative design assumptions. This may not be helpful to a small mining company trying to decide what to do with a developing project.
My bottom line is that for early stage studies like a PEA, smaller engineering firms can do as good a job as larger firms. However one must select the right firm, review some of their more recent 43-101 reports to gauge their quality of work, and don’t hesitate to check their client references. For the more advanced feasibility level studies, if the small firm indicate they can do the entire study too, one should be wary. Perhaps they can do parts of the feasibility study by sub-contracting to a larger firm but managing such large study may be beyond their internal capabilities. Whether considering a small or large engineering firm, one needs to be aware of their strengths and weaknesses as regards to the specific study.