Chapter I

.t - FEASIBILITY STUDY

By Edward S. F r o h l i n g and F. Milton Lewis

President
Mountain S t a t e s Mineral E n t e r p r i s e s , I n c .

M e t a l l u r g i c a l Consultant
Moufitain S t a t e s Mineral E n t e r p r i s e s , I n c .

'- , ABSTRACT . , -
. . ... , . - ,

The information which i s r e q u i r e d f o r ' a p r e l i m i n a r y f e a s i b i l i t y

s t u d y and t h e a d d i t i o n a l i n f o r m a t i o n which i s r e q u i r e d f o r t h e f i n a l
f e a s i b i l i t y s t u d y on a new m i n e r a l d e ~ o s i ta r e d i s c u s s e d . The pre-
l i m i n a r y f e a s i b i l i t y s t u d y i s made from v e r y l i t t l e ' i n f o r m a t i o n and
a t a minimum c o s t t o t h e owner. However, t h e o u t l i n e f o r t h e pre-
l i m i n a r y r e p o r t i s s i m i l a r t o t h e one used i n t h e f i n a l r e p o r t . I n
t h i s m a n u s c r i o t , it i s assumed t h a t t h e r e s u l t s from t h e p r e l i m i n a r y
s t u d y a r e f a v o r a b l e and t h e owner a u t h o r i z e s a f i n a l f e a s i b i l i t y
s t u d y by an o u t s i d e e n g i n e e r i n g company. The t y p e o f o r g a n i z a t i o n
f o r c o m ~ l e t i n gt h i s f i n a l f e a s i b i l i t y s t u d y i s d e s c r i b e d . The f i n a l
r e p o r t s i n c l u d e s a l l i n f o r m a t i o n and d a t a r e l a t i v e t o t h i s new m i n e r a l
d e p o s i t . This i n f o r m a t i o n i s p r e s e n t e d s o t h a t it may be understood
by f i n a n c i a l people a s w e l l a s by t e c h n i c a l people.

INTRODUCTION .

T h i s manuscript d e s c r i b e s procedures t h a t a r e commonly used f o r

developing a newly d i s c o v e r e d m i n e r a l d e p o s i t i n t o a promising v i a b l e
g r o j e c t t h r o u g h f e a s i b i l i t y s t u d i e s . These a r e Dlanned so t h a t t h e
owner w i l l spend minimum funds by p r o g r e s s i n g by s t e p s from an i n i t i a l
f i n a n c i a l a p p r a i s a l of t h e d e p o s i t t o t h e f i n a l f e a s i b i l i t y study.
The r e s u l t s from each s t e p w i l l ~ e r m i t h e owner t o d e c i d e whether
o r not t o c o n t i n u e t h e s t u d y . It i s assumed t h a t t h e r e s u l t s from
each s t e p a r e f a v o r a b l e and t h a t t h e owner Droceeds w i t h t h e s t u d y
u n t i l t h e f i n a l f e a s i b i l i t y r e ~ o r ti s completed.
4 MINERAL PROCESSING PLANT DESIGN

INITIAL FINANCIAL APPRAISAL

S h o r t l y a f t e r discoverin'g a mineral d e p o s i t and analyzing t h e r e -

s u l t s of i n i t i a l sampling, an economic e v a l u a t i o n s h o u l d . b e made t o
determine i f . t h i s d e p o s i t . h a s p o s s i b i l i t i e s f o r a v i a b l e p r o j e c t . As
p r a c t i c a l l y . n o information i s , a v a i l a b l e , t h i s e v a l u a t i o n must be made
e n t i r e l y on assumptions, which should be on t h e o p t i m i s t i c s i d e . I f ,
the' economics a r e u n s a t i s f a c t o r y a f t e r using t h e s e o p t i m i s t i c assump-
t i o n s , t h e n it i s p r u d e n t . n o t t o s ~ e n dany a d d i t i o n a l money on explo-
r a t i o n o n ,t h i s ' d e p o s i t .

It i s assumed t h a t t h e r e s u l t s from t h e i n i t i a l f i n a n c i a l a p p r a i s a l
a r e f a v o r a b l e , and t h e owner w i l l r e q u e s t a p r e l i m i n a r y f e a s i b i l i t y
study. This phase w i l l again be based on very l i t t l e information and
a t a minimum c o s t t o t h e owner, by e i t h e r h i s s t a f f o r by an o u t s i d e
engineering firm. I n e i t h e r c a s e , t h e following w i l l be included i n
t h e preliminary report:

Location
D e s c r i p t i o n of t h e P r o j e c t
Summary and Conclusions
Geologic Informat i o n
P o s s i b l e Ore Reserves
M e t a l l u r g i c a l R e s u l t s from Preliminary Laboratory Test Work
Proposed Mining Plan
Production Schedule
S a l e s Value of Products
Map of Mine Area and P l o t Plan o f Surface P l a n t and A n c i l l a r y
Facilities
Flowsheet o f Processing P l a n t s w i t h M a t e r i a l Balances
Process Equipment L i s t s and Budget Q u o t a t i o n s
C a p i t a l Cost Estimate
Operating Cost Estimate
Environmental Considerations
Economic Evaluation of t h e Proposed P r o j e c t

FINAL FEASIBILITY STUDY

Although more s u b s t a n t i a l information has been developed, it i s t o

be understood t h a t t h i s p r e l i m i n a r y study i s s t i l l a rough one a n d .
w i l l not be wholly a c c u r a t e . It i s assumed t h a t t h e r e s u l t s from
t h i s s t u d y a r e f a v o r a b l e and t h a t t h e owner will1 want t o c o n t i n u e t h e
s t u d y and w i l l provide funds f o r p r e p a r i n g a f i n a l f e a s i b i l i t y r e p o r t .
It w i l l r e q u i r e s e v e r a l months t o complete t h i s s t u d y and t h e c o s t
w i l l be i n a range from a h a l f t o one and a h a l f o e r c e n t of t h e t o t a l
 F E A S I B I L I T Y STUDY

estimated capital cost. Generally, an engineering company will be

employed to make this final feasibility study, as the engineering
department in most mining companies is oriented toward production
rather than designing and evaluating new mining projects. ,.

The owner should be rather careful in selecting the engineering

company for this,final feasibility study. The engineering company's
records and performances on similar studies, and the qualifications
and experiences of the key personnel, who will be responsible for the
study, should be investigated thoroughly. From the conclusions of
this investigation, the owner should have confidence in the engineer-
ing company and the key ~ersonnelwho will be reponsible for making
this feas,ibility study. When this confidence prevails and the owner
assigns at least one liaison representative on a full-time basis, the
study should Drogress smoothly and efficiently.

The size and skills of the engineering company's organization which

is to be responsible for the study depends on the work that will be
involved in ,completing the study and preparing the final report. How-
ever, in all typical mining feasibility studies for major projects,
the engineering company's organization will contain the following key
personnel, with varying numbers of subordinates: ,

Project Manager - Responsible for the complete feasibility study.

Project Engineer - Responsible for all plant design engineering.

Senior Mining Engineer - Responsible for the complete mining study

and mine design.

Chief Geologist - Available for consultation and ap~rovalof de-

tailed geological study.

Senior Metallurgical Engineer - Responsible for the metallurgical

processes.

Process-Engineer - Responsible for the flowsheet, material balance,

equipment selection and operating cost estimate.

Design Engineers - Responsible for the design criteria of all sur-

face plants and ancillary facilities in all of the engineering
disciplines.

Cost Estimating Engineer - Responsible for all capital cost esti-

mates for the project.

Financial Analyst - Responsible for the financial evaluation of the

project .
6 MINERAL PROCESSING PLANT DESIGN

A s m a l l e r s t a f f may be adequate f o r minor p r o j e c t s where one person

may a c t i n more t h a n one of t h e foregoing p o s i t i o n s .

Immediately a f t e r t h e p r o j e c t manager and h i s s t a f f a r e designated

and approved, t h e r e should be a meet in^; between them and r e p r e s e n t a -
t i v e s of t h e c l i e n t t o d e f i n e i n d e t a i l t h e scope of t h e f e a s i b i l i t y
study. A t t h i s meeting, t h e Project-Manager should p r e s e n t f o r approv-
a l an o u t l i n e of c o n t e n t s t h a t w i l l be included i n t h e f i n a l f e a s i b i l i -
t y r e p o r t , a l s o t h e procedures t h a t w i l l be d i s c u s s e d . It should be
mutually agreed t h a t t h e P r o j e c t Manager and a d e s i g n a t e d r e p r e s e n t a -
t i v e of t h e c l i e n t w i l l apDrove and f i n a l i z e promptly a l l c r i t e r i a
connected w i t h t h e study. A schedule f o r completing t h e f e a s i b i l i t y
study should be prepared by t h e P r o j e c t Manager. An understanding
should be e s t a b l i s h e d on i n t e r i m r e p o r t s which w i l l be r e q u i r e d t o
keep t h e c l i e n t informed on t h e p r o g r e s s of t h e study. The P r o j e c t
Manager should summarize t h e d e c i s i o n s t h a t were made i n t h i s i n i t i a l
meeting i n a r e p o r t t o t h e c l i e n t f o r h i s a p p r o v a l .

S h o r t l y a f t e r w a r d s , t h e P r o j e c t Manager w i t h c e r t a i n members of h i s
s t a f f and r e p r e s e n t a t i v e s of t h e c l i e n t .should v i s i t t h e s i t e f o r <.>
v i s u a l o b s e r v a t i o n o f t h e topography of t h e a r e a , t h e approximate
boundaries of t h e mine, p o s s i b l e l o c a t i o n s f o r t h e s u r f a c e p l a n t s ,
t a i l i n g s d i s p o s a l a r e a , miscellaneous b u i l d i n g s and a c c e s s r o a d s .
While a t t h e s i t e , t h e source of w a t e r , power, f a c i l i t i e s r e q u i r e d
t o r e c e i v e f r e i g h t a t t h e s i t e , t y p e and a v a i l a b i l i t y of l o c a l l a b o r ,
t a x e s and o t h e r miscellaneous items should be checked.

A f t e r t h e P r o j e c t Manager and h i s s t a f f have r e t u r n e d t o t h e home

o f f i c e , work should be s t a r t e d c o n c u r r e n t l y on s e v e r a l p a r t s of t h e
study and t h i s work can be expanded a s t h e s t u d y p r o g r e s s e s . When
t h e f i n a l f e a s i b i l i t y r e p o r t i s f i n i s h e d , t h e following work w i l l
have been completed and w i l l be included i n t h e r e p o r t :

Exhaustive s u r f a c e g e o l o g i c a l s t u d y and mapping of immediate a r e a .

Extensive d r i l l i n g t o e s t a b l i s h grade and geometry of d e p o s i t ,

r e t a i n i n g a l l c o r e r e j e c t s f o r m e t a l l u r g i c a l process development.

Development of t h e economic p i t l i m i t and mining sequence and

establishment of a p r e l i m i n a r y cut-off grade.

C a l c u l a t i o n of o r e r e s e r v e s .

Establishment of most l i k e l y e x t r a c t i o n r a t e .

~ e l e c k i o nof mine equipment.

E v a l u a t i o n of t h e economics of o u t s i d e c o n t r a c t i n g f o r t h e removal
of overburden v e r s u s removal by t h e owner.
 FEASIBILITY STUDY 7

Determination o f m e t a l l u r g i c a l , chemical, and p h y s i c a l p r o p e r t i e s

of t h e ore.

T e s t i n g of o r e hardness t o s i z e comminution equipment

Test work t o e s t a b l i s h c o n c e n t r a t o r f l o w s h e e t , r e c o v e r y , . and grade

of concentrate.

Production schedule f o r proposed f a c i l i t i e s which may i n c l u d e

c o n c e n t r a t o r , l e a c h i n g p l a n t , s m e l t e r and waste g a s t r e a t m e n t .

Equipment l i s t s f o r ~ r o ~ o s ef ad c i l i t i e s .

General d e s c r i p t i o n o f s i t e and f a c i l i t i e s .

Subsoil investigation.

Location and dimension o f s i t e f a c i l i t i e s .

Plot plan.

p r e l i m i n a r y g e n e r a l arrangement drawings.

Preliminary s t r u c t u r e design.

Foundation s k e t c h e s .

Architectural c r i t e r i a .

Utilities - steam, w a t e r , and power requirements.

P r e l i m i n a r y motor l i s t s .

S u b s t a t i o n d e s i g n s and s p e c i f i c a t i o n s .

C a p i t a l c o s t e s t i m a t e s f o r mines and s u r f a c e ~ l a n t swhich a r e

a c c u r a t e w i t h i n 20 p e r c e n t .

Operating c o s t s f o r mining, c o n c e n t r a t i n g ; l e a c h i n g , s m e l t i n g
and g e n e r a l expenses.

F i n a n c i a l a n a l y s i s of t h e . p r o j e c t .

The r e p o r t w i l l be l e n g t h y . It should be a d e q u a t e l y indexed, e a s y

t o r e a d , and p r e s e n t e d i n a c l e a r and l o g i c a l manner s o t h a t it w i l l
be r e a d a b l e by f i n a n c i a l people a s w e l l a s t e c h n i c a l people. The
r e p o r t w i l l be d i v i d e d i n t o s e c t i o n s and i n c l u d e t h e f o l l o w i n g :

I n t r o d u c t i o n - S t a t e s b r i e f l y a l l of t h e i n f o r m a t i o n t h a t has been
gathered r e l a t i v e t o t h e p r o j e c t .
8 MINERAL PROCESSING PLANT DESIGN

Scope o f t h e Study - D e s c r i b e s t h e a c t i v i t i e s o f t h e p e r s o n n e l who

c o n t r i b u t e d t o t h e s t u d y and what i s i n c l u d e d i n t h e s t u d y .

Summary - P r e s e n t s t h e r e s u l t s and o b s e r v a t i o n s from a l l o f t h e

succeeding s e c t i o n s . P r e f e r a b l y , t h e s e a r e shown i n t a b u l a r forms
and a r e complete s o t h a t a r e a d e r may be informed a b o u t ' t h e pro-
p e r t y , t h e ~ r o p o s e df a c i l i t i e s , t h e p r o d u c t i o n s c h e d u l e , c a p i t a l
and o p e r a t i n g c o s t s and p r o f i t a b i l i t y of t h e p r o j e c t without read-
i n g t h e remaining s e c t i o n s o f t h e r e p o r t .

Ore Reserves - I n c l u d e s t h e s i z e and g e o m e t r i c a l shape o f t h e

deoosit, a geological a n a l y s i s , mineralization, types of o r e s ,
sampling by d r i l l i n g o r by t u n n e l l i n g . C a l c u l a t i o n s a r e i n c l u d e d
f o r e s t a b l i s h i n g t h e cut-off g r a d e , based on t h e f o r e c a s t m e t a l
p r i c e s an4 o p e r a t i n g expenses, t h e tonnage and t h e g r a d e of t h e s e
reserves.

Mine Preproduction Schedules -

Describes i n d e t a i l . a l l work. which
i s r e q u i r e d f o r developing t h e mine, a p r a c t i c a l t i m i n g s c h e d u l e
f o r completing t h i s work, manpower r e q u i r e m e n t s , equipment. l i s t ,
and t h e e s t i m a t e d annual o r semi-annual c a s h requirements f o r a l l
mine p r e p r o d u c t i o n work. I .

Mining P l a n - D e s c r i b e s t h e mine l a y o u t and method f o r e x t r a c t i n g

t h e o r e , r a t i o o f waste r o c k t o o r e , p e r c e n t of t h e t o t a l o r e
which w i l l be r e c o v e r e d , mine p r o d u c t i o n s c h e d u l e , t r a n s p o r t a t i o n
o f waste r o c k t o dumps and o r e t o t h e c r u s h i n g p l a n t , equipment
l i s t and s u p p l i e s , work s c h e d u l e and manpower requirements. - .

M e t a l l u r g i c a l T e s t i n g - Review o f l a b o r a t o r y and p i l o t p l a n t t e s t -
i n g , proposed f u r t h e r t e s t program.

Production Schedule - T a b u l a t e s t h e o p e r a t i n g schedule and pro-

d u c t i o n r a t e s f o r mining and o r e p r o c e s s i n g u n i t s , t h e r e c o v e r i e s ,
t h e product g r a d e s and product weights.
-.
Process D e s c r i p t i o n and Design C r i t e r i a - I n c l u d e s t h e o r e Drocess-
i n g f l o w s h e e t s , t h e primary c r u s h i n g , secondary c r u s h i n g and m i l l -
ing. r a t e , m a t e r i a l b a l a n c e s throughout t h e o r e p r o c e s s i n g f a c i l i t i e s ,
and t h e d e s i g n c r i t e r i a f o r :
- Primary c r u s h i n g p l a n t
- Coarse o r e s t o r a g e
- Secondary and t e r t i a r y c r u s h i n g giant (or f i n e crushing p l a n t )
- Fine ore storage
- Concentrator
- F i l t e r p l a n t and load-out f a c i l i t i e s
- Reagent f a c i l i t i e s
- Tailing disposal
- I n d u s t r i a l and p o t a b l e w a t e r f a c i l i t i e s
- Reclaim w a t e r f a c i l i t i e s
- C o n s i d e r a t i o n s f o r f u t u r e l e a c h i n g of dumps
 C i v i l Work.and U t i l i t i e s - I n c l u d e s a- p r o j e c t a r e a map showing:
-. - E l e c t . r i c a l system .
- Water.supply-- . . . . .. . . .. <.
-. General s h o p s : . - . .
- Changehouse
-,O f f i c e s
Warehouses ::..
--. . - . .. . .
. -
- Compressed. a i r . '. .. .
- Roads and p a r k i n g
- Fences and l i g h t i n g
.'- S a n i t a r y sewers C-.. , . . . .
. . - ., .. . .
L i s t o f Major Equipment - S p e c i f i c a t i o n s and c o s t . q u o t a t i o n s f o r '-

a l l major equipment::are t a b u l a t e d w i t h i n , t h e f o l l o w i n g a r e a s :
-Mine .,::.. .. . .. . ..
- Primary c r u s h i n g p l a n t
- Coarse o r e s t o r a g e and secondary c r u s h i n g p l a n t .
- . F i n e o r e b i n and c o n c e n t r a t o r ' ,,.
- Thickening,. f i l t e r i n g a n d c o n c e n t r a t e l o a d l o u t f a c i l i t i e s
. . '- T a i l i n g d i s ~ o s a land reclaiin. w a t e r system
- Reagent- f a c i l i t i e s .
. .
..
- C f v i l works and u t i l i t i e s
..
e , .
. .
I

.. C a p i t a l Cost Estimate - I n c l u d e s t a b u l a t i o n - of.'a.2> d i r e c t and i n - .

d i r e c t c a p i t a l c o s t i t e m s for. mine and a l L . s u r f a c e f a c i l i t i e s .
Normally, approximately 1 5 percent: o f t h e t o t a l e n g i n e e r i n g w i l l
be completed p r i o r t o making t h e s e e s t i i n a t e s and a l l . n e c e s s a r y
drawings w i l l be a v a i l a b l e f o r e s t i m a t i n g t h e c a p i t a 1 c o s t . With
t h i s much e n g i n e e r i n g i n f o r m a t i o n , t h e c a p i t a l c o s t . e s t i m a t e should
have an a c c u r a c y o f p l u s 20 p e r c e n t .

Operating Cost Estimate - T a b u l a t e s a l l o p e r a t i n g c o s t items by

departments and c a l c u l a t e s t h e t o t a l e s t i m a t e d d i r e c t and i n d i r e c t
o p e r a t i n g expenses f o r t h e e n t i r e o p e r a t i o n .

Environmental C o n s i d e r a t i o n s - I n c l u d e s f e d e r a l and s t a t e environ-

mental r e g u l a t i o n s f o r o p e r a t i o n s of t h i s t y p e , and t h e need f o r
o p e r a t i n g p e r m i t s . The a u x i l i a r y equipment which i s r e q u i r e d t o
meet t h e s e r e g u l a t i o n s i s i n c l u d e d i n - t h e p l a n t d e s i g n and c a p i t a l
cost' e s t i m a t e .

F i n a n c i a l A n a l y s i s of t h e P r o j e c t- I n c l u d e s t h e ~ a n n u a lg r o s s
v a l u e o f a l l s a l a b l e p r o d u c t s , t h e annual s a l e s expense, annual
n e t revenue a t t h e p r o p e r t y , a l p di'rect and i n d i r e c t annual opera-
t i n g expenses, d e p l e t i o n , d e p r e c i a t i o n , income b e f o r e and a f t e r
income t a x e s , annual c a p i t a l out1ays;cash flows by y e a r s f o r t h e
l i f e o f t h e p r o p e r t y and c a l c u l a t i o n s f o r determining t h e r a t e o f
r e t u r n , p r e s e n t worth, and paybackytime. S e n s i t i v i t y a n a l y s e s a r e
made t o a s c e r t a i n t h e e f f e c t t h a t ,changes i n t h e revenue from s a l e s
w i l l have on t h e r a t e of r e t u r n . Also, s e n s i t i v i t y a n a l y s e s a r e
made t o determine t l i e e f f e c t t h a t , changes i n t h e c a p i t a l investment
 MINERAL PROCESSING PLANT DESIGN

.
w i l l have on t h e r a t e of r e t u r n . These t y p e s o f . a n a l y s e s w i l l be
u s e f u l t o t h e owner i n deciding whether o r not t o proceed with t h e
p r o j e c t . Normally, u n l e s s t h e c l i e n t r e q u e s t s otherwise, it i s
assumed t h a t t h e p r o j e c t w i l l be financed e n t i r e l y by t h e owner. - .

Drawing L i s t - Includes t h e l i s t of a l l a p p r o p r i a t e drawings which .'

i l l u s t r a t e a l l items i n t h e f e a s i b i l i t y study. These drawings,
which a r e reduced i n s i z e , a r e included i n t h e Appendix.

The f i n a l f e a s i b i l i t y r e p o r t i s submitted t o t h e owner. The r e -

s u l t s may i n d i c a t e t h a t t h i s new mining venture w i l l be very a t t r a c -
t i v e . It i s assumed t h a t t h e owner, a f t e r studying t h e r e p o r t ,' w i l l
conclude t h a t t h e engineering on t h e p r o j e c t should continue and t h a t
t h i s work w i l l be c a r r i e d on by t h e same engineering company.

When t h e f i n a l f e a s i b i l i t y . s t u d y i s f i n i s h e d , only about 1 5 percent

of t h e t o t a l engineering work w i l l have been completed. The next s t e p
on t h i s p r o j e c t w i l l be t h e d e t a i l e d engineering. The engineering
crews w i l l be increased f o r t h i s work and w i l l progress uninterruptedly
u n t i l approximately 50 percent of t h e engineering work i s completed.
A t t h a t time; a d e f i n i t i v e c a ~ i t a lc o s t e s t i m a t e w i l l be prepared
which w i l l have an accuracy w i t h i n p l u s 1 0 p e r c e n t . This w i l l g i v e
t h e owner another opportunity t o e v a l u a t e t h e p r o j e c t before beginning
construction.