Every few weeks we see another feasibility study completed. Normally the numbers will look fantastic. The feasibility study shows that a project could work, but will it really work?
A positive feasibility study is the moment a mining project is supposed to come alive. It’s the point where geology, engineering, and economics merge into a real (i.e. bankable) business case. However, it is also the starting point of an entirely different and more difficult path.
The roadblocks between a feasibility study and a producing mine can be numerous, varied, and often have nothing to do with the geology itself. A government can change the tax regime, or a community can withdraw support. The commodity prices can turn, or environmental permits can be challenged in court. A company’s own board can lose conviction. Understanding this development gauntlet is the difference between allocating capital to projects with returns and those that will consume capital for a decade.
Stalled projects will experience several of the roadblocks simultaneously. A single roadblock might be surmountable, but multiple roadblocks may not be.
Many of these roadblocks will be identified during confidential third-party due diligence by potential partners, acquirers, or financiers. Hence investors may never learn the actual truth as to why the project is stalled and are left guessing why.
I have been part of due diligences on behalf of lenders and have seen the negative reasons never make it to the public eye. Sometimes the company may itself not know why a project was declined, although they can make an educated guess.
The following is a checklist of the various pitfalls leading to the study graveyard. Check off all those that you think apply to your favorite stalled project. Be honest. Typically, more than one will apply and they will tend to compound.
Geotechnical & Geological Risk
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Review of the block modelling reveals concerns with grade, continuity, or metallurgical recovery.
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Review of the expected geotechnical conditions reveals mining concerns associated with faulting, weak ground, karst, high water inflows.
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Metallurgical complexity understated in feasibility (refractory ore, penalty elements).
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Resource classification is suspect and a lot more infill drilling is required, at a high cost.
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Hydrology issues, e.g. acid rock drainage severe and difficult to manage long term and becomes a corporate liability.
Technical & Engineering
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Feasibility study found to be technically flawed upon review.
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Project is very complex and will be difficult to build on budget and on time, as well as difficult to staff with qualified operating personnel.
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Processing technology unproven at scale, ore sorting risk ,etc.
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Infrastructure assumptions (power, water, road) prove more costly or difficult.
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Mine plan optimistic on strip ratios, mining rates, or equipment productivity.
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Tailings storage facility design issues, high risk, or siting problems.
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Water rights access insufficient or contested.
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Offsite infrastructure (road, rail, or port) inadequate and too costly to build.
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Remoteness – labor costs and retention problems underestimated.
Permitting, Regulatory, and Social License
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Environmental impact assessments likely to be rejected or endlessly delayed.
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Perceived difficulties to get operating licenses, water licenses, or discharge permits.
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Regulatory framework uncertain and changes mid-process (new environmental laws, mining codes).
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Federal/state/provincial jurisdictions overlap creating jurisdictional gridlock.
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Permits granted but successfully challenged in court by third parties.
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Indigenous or First Nations consultation failures, failure to negotiate community benefit agreements acceptable to all parties.
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Local community opposition leading to blockades or political pressure.
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NGO campaigns attracting negative media attention that spooks investors or lenders.
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Religious, cultural, or heritage site conflicts with site plan.
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Mineral title disputes persist with overlapping claims or historical issues.
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Land access agreements with surface rights owners difficult to acquire.
Political & Country Risks
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Government instability, coup, or change of administration hostile to mining.
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Retroactive tax increases, windfall profit taxes, or royalty rate changes.
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Nationalization or forced renegotiation of mining agreements.
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Corruption demands that the company is unwilling to meet.
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Sanctions, war, or civil unrest making the region inaccessible.
Financing & Capital
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Inability to secure project financing (debt or equity) due to financier risk appetite, commodity price outlook, or lender requirements.
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Cost overruns discovered during reviews that make the economics unviable.
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Declining commodity prices between feasibility and financing.
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Owner balance sheet too weak to fund large construction; inability to attract a joint venture partner.
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Royalty or streaming deals entered into that are too dilutive, making equity unattractive.
Corporate & Strategic
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Management change leading to strategy pivot away from the project. The internal champion is gone.
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Company acquired by a buyer with a different portfolio strategy — project shelved.
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Board loses conviction or knows they cannot manage this; project deprioritized in favor of capital returns or other assets.
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Key technical personnel depart, taking institutional knowledge with them.
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High market cap of owner makes the acquisition cost high, when considering the capital cost to build must also be incurred by the acquiror. This will lower the return.
Market & Macro
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Commodity price collapse, or forecasting an oversupply, makes the project sub-economic even with a positive study.
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Input cost inflation (energy, steel, labor, reagents) erodes profit margins.
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ESG-driven investor exclusions make it impossible to raise equity capital.
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Offtake agreements cannot be secured on acceptable terms. This can be important in industrial and battery mineral projects. This may require focusing on downstream processing into upgraded specialty products, increasing risks and costs.
Conclusion
The list of potential production roadblocks is extensive. Moving from the study stage to production is very difficult and very few can do it successfully. A positive feasibility study is a necessary but far from sufficient condition for production.
When projects stall, it is likely due to multiple factors listed above. A ranking analysis may conclude the compounding effects of the perceived risks makes the project a no-go for financiers.
Some people will say be thankful that more projects don’t advance to production, because we would likely see more failures as the risks come to bear Ideally only the best projects are moving forward, but even there we can see mixed results.
Due to the upcoming shortages of < insert critical mineral > we need more exploration and more discoveries. Given the number of idle feasibility stage projects now, who is to say that these new discoveries won’t see the same roadblocks that the current projects are seeing. Real mining is a tough business – doing studies isn’t.
