A Preliminary Economic Assessment (“PEA”) is defined in NI 43-101 as “…a study, other than a pre-feasibility or feasibility study, that includes an economic analysis of the potential viability of mineral resources”. This is a fairly broad definition that provides for plenty of flexibility. While there are generally accepted industry norms for a pre-feasibility or feasibility study, the mining PEA can have a broad scope.
Some PEA’s might be based on a large database of test work and site information while others may rely on very preliminary data and require design projections based on that data.
Some PEA’s may have production schedules consisting largely on Inferred resources while other schedules may be based on higher proportion of Indicated resource.
Some PEA’s are able to incorporate information from advanced socio-environmental work while other PEA’s may not have access to advanced information.
Therefore one should not view all PEA’s are being created equal. Perhaps that is what investors are doing it seems, in many cases ignoring the results of newly issued PEA’s.
The PEA is normally developed at a fairly early stage in the project life. The initial PEA may then be superseded with a series of updated PEA’s as more data is acquired. Typically one would expect to see changes in project size or scope in these updates and hopefully improved economics. Shareholders appreciate being updated on positive growth trends.
The sequential PEA approach is a convenient way to continue advancement of the project without making the step to a Pre-Feasibility study or bigger step to a Feasibility study. Maybe the project is still growing in size and a feasibility study at this stage would not be presenting the true potential, hence the updated PEA.
On the downside of the sequential PEA approach is that investors may get tired of hearing about PEA after PEA. They may want to see a bigger advance towards a production decision. They ask “How long can they keep studying this project?”.
There is no right or wrong as to what constitutes a PEA.
The securities commissions consider that the cautionary language an important component of the PEA Technical Report and may red-flag it if it’s not in all the right places. However this cautionary language is generally focused on the resource.
For example the typical “The reader is cautioned that Inferred Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that value from such Resources will be realized either in whole or in part.” In that cautionary statement there is no mention of all the other speculative assumptions that may have been used in the study.
For example, the Inferred resource may not be that significant however the amount of metallurgical test work might be a more significant uncertainty. The previous cautionary language doesn’t address this issue. Therefore it is important to consider the chapters in the Report pertaining to risks and recommendations for a more complete picture of the entire report.