Over my career I have been involved in various types of front end mine studies, ranging from desktop conceptual to definitive feasibility.    Each type of study has a different purpose and therefore requires a different level of input, effort, and cost.  I have sat in on a few junior mining management discussions regarding whether they should be doing a PEA or a Pre-Feasibility Study, or Feasibility instead of a Pre-Feasibility Study.    Everyone at the meeting had their opinion on how to proceed based on their own reasoning.   Ultimately there is no absolute correct answer but there likely is one path that is better than the others.  It depends on the short term and long term objectives of the company, the quality and quantity of data on hand, and the funding available.
In my opinion there are four basic levels of study, which are listed below.  My intention is not to provide a detailed comparison between the different studies although such matrix tables are readily available (contact me for an a copy of the table excerpt shown below).

Four Studies Table

  1. Desktop or Conceptual Study
This would likely be an in-house study, non-43-101 compliant, simply used to test the project and let management know where the project may go (see a previous article at the link “Early Stage “What-if” Economic Analysis – How Useful Is It?”.    I always recommend doing one of these studies.  It doesn’t take much time and is not made public so the inputs can be high level or simply guesses.  This type of study helps to frame the project for management.
  1. Preliminary Economic Assessment (“PEA”)
The PEA is 43-101 compliant and would present the first snap shot of the project scope, size, and potential economics to investors.  Generally the resource may still be uncertain (inferred classification), capital and operating costs are approximate and may be on the low side since not all the operational or environmental issues are known at this time.   Please do not treat the PEA as a feasibility study.
I also recommend not announcing or undertaking a PEA until you are confident in what the outcome of the PEA will be.   A reasonably thorough desktop study done beforehand will let one know if the economics for the PEA will be good or bad.  I have seen situations where companies have announced the timing for completing a PEA and then during the study, things were not working out as well as planned.  The economics were looking poorer than hoped and so a lot of re-scoping of the project was required.  The PEA was delayed and shareholders and financial analysts were not impressed with the delay.
The PEA can be used to evaluate different development options for the project (i.e. open pit, underground, small capacity, large capacity, heap leach, CIL, etc.) .  However the accuracy of the PEA is limited and therefore I suggest that the PEA option analysis only be used to discard obviously sub-optimal scenarios.  Options that are within a +/-30% range of each other many be too close to discard at this stage.
  1. Pre-Feasibility Study (“PFS”)
The PFS will be developed using only measured and indicated resources (not inferred) and the costing accuracy will be better than a PEA.  Therefore the PFS is a good time to definitively evaluate the remaining development options and then make the decision on the single path forward.     More data will be required for the PFS, possibly including a comprehensive infill drilling program to upgrade the resource classification.  Many companies, especially those with smaller projects could skip the PFS stage entirely and move directly to Feasibility.  I cannot disagree with this approach if the project is fairly simple and had a well defined scope at the PEA stage.
  1. Feasibility Study (“FS”)
The Feasibility Study is the final stage study prior to making a production decision.  The feasibility study should preferably be done on a single project scope.  Try to avoid more option analysis at this stage.
Small companies must be careful entering the FS stage since once the FS is complete, shareholders will be waiting to hear about the production decision.  If the company had only intended to sell the project with no intention of going into production, they have now hit a wall.  What do they do next?   Sometimes management feels that a FS may be needed to better sell the  project, however I am not sure that is concern is real.  Many potential buyers would do their own in-house due diligence and possible design studies and likely information from a PFS would be sufficient to tell them what they need to know.  A well advanced Environmental-Socio Impact Assessment program may give as much or more comfort to them than a Feasibility Study would.
My bottom line recommendation is that there is no right answer as to what study is required at what point in time.  Different paths can be followed but remember that consideration must be given to the future and what is in store for the company after the study is completed.   Also what is the best use of shareholder money?  Company management may see pressure applied from retail shareholders, majority shareholders, financial analysts, and the board of directors, and management must decide what path is in the best interests of the company.
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