Feasibility Study vs Bankable Feasibility StudyCanadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition of Feasibility Study A Feasibility Study
is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable).
The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.
National Instrument 43-101 (NI 43-101) Standards of Disclosure for Mineral Projects
PART 1 - DEFINITIONS AND INTERPRETATION
Mining Studies 1.4 In this Instrument, the terms “preliminary feasibility study”, “pre-feasibility study” and “feasibility study” have the meanings ascribed to those terms by the
Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resourcesand Mineral Reserves adopted by CIM Council, as amended.
Ontario Securities Commision (OSC) / British Columbia Securities Commission (BCSC) S.2.3 Restricted Disclosure (4) An issuer must not use the term preliminary feasibility study, pre-feasibility study, or feasibility study when referring to a study unless the study satisfies the criteria set out in the definition of the applicable term in section 1.4.
There should be no difference between a “bankable feasibility study” and a “feasibility study”. The concept of bankable is already built into the definition of feasibility study. The Bankability Concept The term “bankable” feasibility study initially seems to have an added ring of veracity over the more mundane phrase “feasibility study”. Adding “bankability”, after all, seems to imply that the study is like money a party can take to the bank. Unfortunately, the term is misleading. As will be shown below, a lender would rarely accept a study prepared by a borrower or the borrower’s consultants as the basis for financing a project. At the very least, the knowledgeable lender, experienced in lending to mineral projects, will require that its own consultants and internal research departments review the study. The lender often then requires the parties to augment the study as support for the lending request. One can argue in good faith, then, that
there really is no such thing as a “bankable feasibility study” except after the selected financing lender prepares or approves one. In short,
it would be far less misleading if the term were “Bank-Approved” Feasibility Study.
The feasibility study is of sufficient detail and accuracy to be used for positive 'go' decisions and financing purposes.
This and only this, is considered the 'bankable document.' Cost estimates are equal to [plus or minus] 20 percent accuracy or better.
Mine Life Cycle - How Accurate are the Resources Reported in Each Project Phase In the exploration phase, the results of a drill program are reported under supervision of a qualified person who will publish the first (and future) mineral resource estimate(s).
If the preliminary economic assessment indicates that the project could be economically viable, management will hire a consulting firm who will start with the preliminary feasibility study. Well-known consulting firms are: SRK Consulting, Tetra Tech, and Behre Dolbear.
When management concludes - based on the outcome of the preliminary feasibility study - that the resource has the potential to be extracted from the ore in a profitable manner,
a consulting firm will be hired to complete the (bankable) feasibility study. This final feasibility study will include the engineering design. After receiving the bankable feasibility study, management has to arrange the best possible project financing: this is one of the hardest tasks for management to complete. Therefore, I always prefer to see a financial specialist in the management team, who already has raised significant amounts of money in the past (although this is not a guarantee that the financing will be completed without any problems).
Finally, when management has secured the project financing, the company can start with the construction phase.
The Accuracy Level of the Resources Reported in Each Project Phase of the Mine Life Cycle
| Project Phase | Accuracy of Reported Resources |
| Exploration | - |
Preliminary Economic Assessment (PEA)
(also referred to as Economic Analysis) | 30-40% |
Preliminary Feasibility Study (PFS)
(also referred to as Pre-Feasibility Study) | 20-30% |
Bankable Feasibility Study (BFS)
(also referred to as Final Feasibility Study or Feasibility Study) | 10-20% |
| Construction Phase | 5-10% |
| Operations | - |
| Closure | - |
‘Bankable Feasibility Study’ is perhaps one of the most abused and misleading phrases used in the industry.
I hope that I have helped clear up the confusion with the references and definitions cited above.
Cheers,
VB