PEA's and associated risks....Here is an opinion on PEA's in general from a mining engineer who has worked on every uranium mine in the Athabasca Basin except Cigar Lake:
PEA's are not feasibility studies. It is a shame that I could not find a free link to McCarthy's paper "Objectives of Feasibility Studies" which clearly spells out the differences. PEA's are based on a set of assumptions, feasibility studies are based on actual site layouts, general arrangement drawings, piping and instrumentation diagrams, clearly defined quantities etc. When a PEA is upgraded to pre-feasibility level- the capital cost estimate typically rises about 30% when some of the optimistic assumptions (no need to grout the dyke/rock interface for instance) are proven false. A 30% hit usually also occurs when a pre-feas is upgraded to feasibility level. And then construction costs are usually 20% greater than what the feasibility study stated. So that's the typical evolution of a project. PEA's therefore prey upon retail investors who do not know the difference in study types. I have been thinking about taking this up with the Canadian Institute of Mining since PEA's are being abused. They are being written by honourable people but on shoestring budgets.
https://www.stockhouse.com/companies/bullboard/v.nxe.wt/nexgen-energy-ltd?postid=24223509
How might FCU's PEA be impacted by a pre-feasibility study and subsequent feasibility study? Below are some additional comments:
Finally wrapping up that project some of you know I have been working on lately, so I will PM my thoughts on FCU's PEA finally. (The horse has well and truly left the barn mind you and the smart money is well aware of below). But in a nutshell-
Mill capex- about $400M loo low.
Dyke- about $250 M too low.
Tailings facility- as illustrated, this will not get CNSC approval. Add $150 M for subsurface tailings management facility.
Water treatment plant- about $50M too low.
Unit rates for developing a meter of tunnel (drifts or crosscuts as we call them) is around $5,000/m by contractor, not the $2,500/m used. Add about $100 M for this.
The mill production rate is impractical and needs to be smoothed out from a sales perspective. You can't push that quantity of U on the market all at once then shut the taps off if you want to utilize long term contracting to get a premium. The production schedule is shown as is in order to front end the revenue to make the financial model look good. No other reason.
So I think a feasibility study will show capex about $950M higher than the PEA. But anyone who follows PEA's/Pre-feasibility studies and feasibility studies would be well aware of this trend anyways.
https://www.ausimm.com.au/content/docs/branch/2013/melbourne_2013_02_presentation.pdf
https://www.stockhouse.com/companies/bullboard/v.nxe.wt/nexgen-energy-ltd?postid=24222416
So, there are some comments for FCU shareholders to think about, including the impact on the IRR by adding $950 million or more to the capital cost of PLS, and the risks inherent in the PEA......