Implications of mining project cost overruns for QP liability

Cost overruns are not new to engineering projects. It is a problem when the scale and frequency is high. Unfortunately, the mining industry has a reputation for cost overruns during project construction. Different people have estimated mining cost overruns to nearly 40%. This is significant because all the CRIRSCO standards require capital and operating cost accuracy of ±25% and ±15% for prefeasibility and final feasibility studies, respectively. The US Securities and Exchange Commission’s (SEC’s) Regulation S-K 1300, in addition to this, asks qualified persons (QPs) to state the accuracy of their cost estimates in technical report summaries filed with the Commission. In this post, I am going to share my thoughts on the causes of these cost overruns and the implications for QP liability in public reports.

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Assessing uncertainty: What is the most important variable?


Many mine engineering analyses involve uncertainty due to variability in input variables. Examples include mine production planning analyses with uncertainty surrounding production rates and other production parameters and geomechanics analyses with uncertainty around rock properties. Simple methods can be effective in some cases but can be limiting in others. Regardless of what approach one takes it is important to focus such analyses on the most important variable(s) (i.e. those that cause the most uncertainty). In this post, I will attempt to show the relationship between input variables and uncertainty, which might help you to focus on the key variables the next time you have to do such analyses.

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