Mining & Social Issues with Ignatius Kwamwanje: Elements of a Bankable Feasibility Study (BFS) as applied in Mining Projects

Mining & Social Issues with Ignatius Kwamwanje

Elements of a Bankable Feasibility Study (BFS) as applied in Mining Projects

A Bankable Feasibility Study is a phase of the mining cycle that compiles all the results of other feasibility studies as fully analyzed as possible when planning a mining project. Information added include Environmental and Social Impact Assessments, mine closure costs, land reclamation/rehabilitation, engineering costs, contract agreements/negotiations, mine closure strategies, permit   requirements etc. This full analysis is then presented to an investor or bankers for funding. However, presenting a BFS does not constitute or guarantee funding instantly because it is perceived to be more of a detailed business plan for a mining company and can be rejected.

Therefore, an investor or a banker is required to do due diligence on the information that is presented. It is said to be “bankable” because it is a funding proposal ready to be presented to the bankers/investors. In strict sense a feasibility study is bankable if it is prepared enough in a detailed manner objectively so that the company can attract bankers/ lenders. The goal of this study is to determine whether the project can progress with the resources available, generate cash flow that will sustain it, and can last long as anticipated based on the life of the mine as applied in mining.

Why Resource and Reserve Estimate in BFS?

The resource estimates of a mineral ore are classified using JORC (Joint Ore Reserves Committee) guidelines.

The JORC Code is currently used as a model for reporting codes of other countries with appropriate modifications to reflect local conditions and regulatory systems.

Examples of JORC reporting codes are:

~ SME (Society for Mining, Metallurgy and Exploration 2004) used in USA.

~ SAIMM (South African Institute of Mining and Metallurgy (2004) and the recent SAMREC.

~ IMM now IMMM as used in United Kingdom.

~ CIM (Canadian Institute of Mining and Metallurgy) Definition Standards complying with Canadian National Instrument 43-101, for the ‘Standards of Disclosure for Mineral Projects’ of February 2001 (the Instrument) and the resource and reserve classifications adopted by CIM Council in August 2000. This complies with disclosure and reporting requirements set forth in the Toronto Stock Exchange (TSX) Company Manual, National Instrument 43-101, Companion Policy 43-101CP, and Form 43-101F1.

~ ‘Australasian Code for Reporting of Mineral Resources and Ore Reserves’ of September 2004 (the Code) as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy.

~ Australian Institute of Geoscientists and Mineral Council of Australia (JORC).

* Our own Kayelekera Resource estimates used a combination of the last three captioned bullets.

The JORC code sets out a system for classifying tonnage and grade estimates as either ore reserves or mineral resources and subdividing these into categories that reflect different levels of confidence. The purpose of this is purely for public reporting. JORC does not regulate how estimates should be done, nor does it attempt to quantify the amount of data needed for each mineral resource category.

An anticipated miner requests the services of an independent consultant refered to as “Competent/ Qualified Person” to undertake the estimation of a Mineral Resource for the project. This work is done to enable the miner to make decisions on the project regarding progress towards a Bankable Feasibility Study (BFS). Initially the mining company undertakes diamond drilling program to provide samples for metallurgical test work and an RC drill program follows if needed. Cut off grades are also reported as the most likely range to be economically viable.

A Competent Person(s) makes these decisions based on direct knowledge of the deposit in question. The criteria used may be entirely subjective or they may involve some quantitative measures, or mixtures of both. It is very important that the selected methods of distinguishing resource classes should be geologically sensible in the context of the deposit being studied.

If the initial outcome of the pre-feasibility study commissioned demonstrates improved price of the product, local politics and infrastructure in the long run, the project could be viable and breed successful mining operations. These findings result in a formal evaluation through a Bankable Feasibility Study (BFS) to verify. The BFS covers all aspects of the Mining Project, including resources/reserves detailing, mining, production, tailings disposal and marketing of the processed ore. The BFS is supported by comprehensive environmental studies and management plans. The Project is designed to give an annual tonnage production and processing. Estimates of mineral reserves necessarily depend on a number of variable factors and assumptions all of which may vary considerably from the actual results such as;

  • Assumed effect of government regulations, taxes inflation, operating costs, price fluctuations,   development costs, severance taxes etc, rehabilitation costs, change in technology among others.
  • Historical production from the area as compared to  other producing regions of similar nature.
  • Geological continuity
  • Mining conditions due to available data from exploration activities that might differ with current operations.

The overall results from the BFS financial model, which provided the basis for the resource and reserve estimates are reported by independent consultants, and in summary contain the following:

  • The operating costs for the reserve averages of the ore over the life of the project.
  • The total capital costs for the development of the project.
  • Financial analysis in the BFS incorporating ore pricing schedule over the life of mine.
  • The Project’s ability is able to pay back initial capital and working capital for a calculated period after commencement of operations scheduled for ramp up.

The identified critical path activities during the feasibility study phase are the one that drive the project schedule. Environmental approvals and granting of a mining licence are critical to accessing site and even final implementation phase approval. Approval durations need to be managed to reasonable levels, as early award of key packages is required so as to facilitate timely receipt of vendor/ supplier data. This is critical to completion of detailed design allowing issuing of design drawings for fabrication packages and construction contracts to support the project schedule. Cost, recovery and revenue assumptions used in the optimization are also detailed in the BFS Report.

Framework for bankable feasibility study

The following summary provides an outline of the framework for the Bankable Feasibility Study (BFS)

The proposed Project comprises the type of mining of a Mineral Reserve i.e it can either be OP(Open Pit) or UG(Underground). Pit optimization and mine design are developed using both Measured and Indicated ore classes for the BFS. This also includes ore processing/crushability and the annual production.

Environmental assessment of the property also takes place. A number of social and environmental issues shall need to be addressed as part of the design of the project. It is assumed that a risk mitigation and management system may also be implemented. Additional feasibility studies on mining procedure, geology, infrastructure development, engineering, process plant construction, procurement (supplier and vendor estimates), water and waste management are also included. A mine closure plan or exit strategy and land reclamation are of paramount importance in full ESIA (Environmental and Social Impact Assessment) report.

In conclusion, a full scope of work for the completion of the BFS includes:

  • Overall project management
  • Securing a Mining Agreement with government for the Project
  • All other required liaison and negotiation with the Government
  • Provision of infrastructure for work in the fieldwork including metallurgical sampling, pit optimization and sterilization drilling
  • Auditing and verifying the geological model
  • Auditing and verifying the ore resource and reserve estimates
  • Mine plan and production schedule
  • Metallurgical testwork
  • Flowsheet development
  • General Arrangement Drawings
  • Mass and material balances
  • Infrastructure and services
  • Waste disposal
  • Environmental study and EMP audit
  • Operating costs estimate
  • Capital cost estimate
  • Financial model
  • Marketing
  • Project funding

In a Malawian context, when the BFS (Bankable Feasibility Study) is finalised, it incorporates the Development Agreement fiscal regime. Then the final signed BFS, together with the ESIA (Environmental and Social Impact Assessment) is now submitted to the Commissioner for Mines for the granting of a Mining Licence paving the way for the miner to commence development and construction of the Project with a planned commissioning ramp up.


This piece was initially published in Malawi’s Mining & Trade Review Issue Number 62 (June 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

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