The Anatomy of a Mine - Mining and the Environment: From Ore to Metal - page 194

that many known mineral deposits, some of large size and high grade, remain unmined to
this day.
In most jurisdictions, mineral deposits are national assets and remain in the ownership
of the government. Mining companies act more or less as contractors. This tempts govern-
ment to apply and increase taxes or royalties or to change permit requirements arbitrarily.
Changes in ground rules after an investment has been made may result in 'high grading',
reducing ore reserves or even entire ore bodies. Political risks, however, are not restricted
to developing countries. A change in government can change the investment climate in
any country, and there is no way of assuring absolute safety.
Environmental risks are almost always a reality in mine development, but proper plan-
ning and reasonable precautions can minimize them (see Chapter Thirteen for an over-
view of mining related environmental change processes). In the pre-feasibility stage the
environmental scoping study aims to identify key environmental constraints and possibili-
ties. The best safeguard against environmental and social risks, however, is a comprehen-
sive and unbiased environmental impact assessment study, backed up with the resources
and commitments to implement its recommendations. The EIA complements the BFS,
and provides documentation on whether or not the project is acceptable on environmen-
tal and social grounds. The EIA aims to demonstrate the environmental feasibility of the
mining project and covers all activities from mine construction up to mine closure and
post closure activities as detailed in Chapter Two of this topic. To some the EIA forms part
of the BFS; others understand the preparation of the EIA as a separate and stand alone
exercise, a difference that matters little in practice. However mining projects remain con-
troversial and social tensions have caused more than one mine to cease operation.
Eventually all risks contribute to economic risks. The cost/benei t analysis is based on
assumptions and forecasts. Metal prices are known to be highly volatile. Unlike most other
commercial products, metal prices are set internationally. Development of new mines else-
where in the world may depress market prices. On the other hand given the long lead time
of mine development, an increase in demand for a particular metal will be soon followed by a
price increase. In the feasibility evaluation, however, an assumption must be made about the
price at which the i nal product can be sold. The forecast must cover the time period of mine
operation until the initial investment is recouped with a typical market proi t. Economic
risks are also related to investment costs. Given the size of today's mines, investment costs
are huge and any percentage increase in actual costs compared to initial estimates will have
a notable impact on mine proi tability. Other examples of economic risks include l uctuation
in exchange rates or an increase in the costs of construction materials such as steel.
Today, most mines and virtually all downstream processing, smelting, and rei ning
plants make use of a feasibility study, usually prepared by one of the leading international
geological and technical consultants. It is almost inconceivable that a major mining project
could be i nanced today without a bankable feasibility study. What constitutes 'bankable'
depends on the circumstances, but as an overall dei nition, a document is considered bank-
able if it is in the standard form as seen in similar transactions, and as to matters of fact
and projection, analyses the required scope of data using accepted methodology, subject to
customary limitations (Berwin Leighton Paisner 2006).
Given the complexity of large-scale mining projects, a feasibility study is itself a com-
plex undertaking. It requires careful analysis of many variables to insure the economic
development of an ore body. It may take one to two years to complete, and cost up to sev-
eral million US dollars. And it is often the biggest item of capital expenditure during a
project's early stages, the period of highest risk. Unfortunately, considerations for i nanc-
ing are sometimes left to be completed in the last few weeks, and by those unfamiliar with
the implications of technical decisions already cast in stone. In light of their signii cance,

In most jurisdictions, mineral
deposits are national assets and
remain in the ownership of the
government.

The best safeguard against
environmental and social risks is
a comprehensive and unbiased
environmental impact assessment
study.

Given the complexity of
large-scale mining projects, a
feasibility study is itself a complex
undertaking.