Environmental Engineering Reference
In-Depth Information
TABLE 1.3
Main Risks to Successful Implementation of a Mine
Key Obstacles to Successful
Implementation
Effect on Project Performance
Country Level Factors
Budget defi cit
Infl ation
Trade distortions
Foreign exchange control
Political/ social instability
Inadequate legal system
Inadequate local capital markets
Subsidies rate
Inadequate factor endowment
Inadequate human capital
Inadequate infrastructure
Infl ation, crowding out of private investment, cost overruns
Increase in cost of local inputs, shift to speculative instead of
productive investment, overvalued currency
Fluctuations in the real exchange rate; overvalued currency,
Limited international competitiveness of exports
Inability to make timely decisions on purchase of critical inputs,
debts repayment, and repatriation of profi ts
High cost of risk capital
Property rights not enforced
Diffi culty in obtaining long term fi nancing
Lack of fi nancial discipline and international competitiveness
High cost of doing business
Sector Level Factors
State ownership of enterprises
Barriers to entry
Barriers to exit
Uncompetitive/unstable tax regime
Incompetent bureaucracy
Shortage of skilled workers
Uncompetitive production costs
Lax safety procedure
Lax environmental control
Political interference, drain on gov. budget; State Owned
Enterprise's monopoly over resources; preferential treatment
State/favoured company monopoly of production
Inability to shut down ailing fi rms or reduce workforce
Inability to control costs
Cumbersome and wasteful 'red tape', corruption
Low productivity of local labour
Low market penetration potential
High frequency of accidents; low labour morale
Environmental degradation
Project/Enterprise
Level Factors
Poor technical design
Substandard emission control
Price instability of product
Poor quality of products
High input/output ratio
High initial outlay
Long gestation period
Errors in ore grade and reserves estimates
High debt to equity ratio
Low profi tability ration
Low assets turnover
Low economic internal rate of return
Low capital utilization and technical effi ciency
Environmental pollution
Earnings instability, high risk of failure
High rejection rate: low demand
High operating costs
Complex fi nancing, high risk and long payback period
Capital cost overrun, implementation delays, market risk
Potential solvency problems
Potential fi nancial problems
Ineffi cient operations
Marginal project
Wexler and Lovric (2006) adopt a different approach to risk characterization and broadly
categorize risks according to various aspects of exploration and mine operation.
Geological or Reserve Risks
Minerals may not have the quality, quantity or ease, efficiency or cost effectiveness of extrac-
tion as originally anticipated. There is no way of seeing directly what variations or discon-
tinuities occur in rock beneath the surface. Geologists depend upon projection of surface
formations, plus rock types and structures in combination with interpretation of geophysi-
cal responses (such as sonic waves generated by small explosions), and/or widely spaced drill
holes. There is no guarantee of continuity of mineralization between adjacent drill holes.
Expected continuity varies with the type of mineralized body. For example, there is a greater
probability of continuity in base metal ores than in precious metal ores. There is a better
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