The Bankable Feasibility Study (BFS) is often considered the gold standard in the evaluation of a mining exploration project. For investors, a well-executed BFS can serve as a robust foundation for investment decisions, offering a high level of confidence in the project's economic viability.
What is it?
A Bankable Feasibility Study is a comprehensive analysis that evaluates the technical and economic viability of a mining project.
Unlike earlier-stage assessments like the Preliminary Economic Assessment (PEA) or the Pre-Feasibility Study (PFS), a BFS is based on definitive data and is detailed enough to be used for securing project financing.
Key components
A typical BFS includes:
Resource and reserve estimates: A detailed assessment of the mineral resources and reserves, often confirmed by drilling programs.
Mining plan: A comprehensive plan outlining the mining methods, equipment, and manpower required.
Environmental & social impact: A thorough Environmental Impact Assessment (EIA) and social impact study.
Financial model: A detailed financial model including projections for revenue, costs, cash flow, and sensitivity analyses.
Investment implications
For investors, the BFS serves as a critical tool for:
Risk mitigation: A BFS significantly reduces uncertainties around a project, offering a reliable basis for investment.
Valuation and financing: The financial model within the BFS is often used for project valuation and is considered bankable for securing project financing.
Due diligence: The BFS provides all the data required for an in-depth due diligence process, aiding investors in making informed decisions.
Red flags
Investors should be cautious of:
Incomplete or outdated data: A BFS that lacks key components or relies on outdated data can be a significant red flag.
Regulatory and environmental risks: Ensure that the BFS includes a comprehensive EIA and adheres to all regulatory requirements.
Economic viability: A BFS that shows marginal economic viability may indicate higher risks, especially in volatile commodity markets.
Case studies
Positive: A mining company in Africa recently secured substantial project financing based on a robust BFS, which indicated a high-grade gold deposit with strong economic viability.
Negative: A mining project in Asia faced setbacks after its BFS revealed higher-than-expected environmental remediation costs, leading to a re-evaluation of the project's economic feasibility.
Conclusion
The Bankable Feasibility Study is a pivotal element in the mining exploration process, offering a detailed and bankable evaluation of a project's economic and technical viability.
For investors, a well-executed BFS can provide a high level of confidence in the project, serving as a critical tool for risk mitigation, project valuation, and due diligence.
As such, the BFS is an indispensable instrument for making informed investment decisions in the mining exploration sector.