FEATURE
Investors , beware the preliminary assessment
PEAs also tend to underestimate the costs and complexities of a project
Preliminary economic assessments
( PEAs ) are no foundation for production decisions in mining projects , and serve little basis for detailed value-creation forecasts . “ The dire state of the global economy may be prompting the considerable number of PEAs being published ,” said Roger Dixon , corporate consultant at SRK Consulting . “ Investors should be reminded that there is not much value in the detailed value projections that often accompany these assessments .”
Dixon noted that many PEAs include calculations on envisaged production levels , capital costs , operational costs and even net present values ( NPVs ) and internal rates of return ( IRRs ).
Roger Dixon , corporate consultant at SRK Consulting
“ Setting out these indicators in exact dollars and cents tends to belie the many assumptions that must be made at this stage in a project ,” he said .
“ At best , it is a somewhat fruitless exercise to attach such exact numbers to a PEA – while at worst it could be highly misleading . There are just so many assumptions that are being made at this stage in a development , which have yet to be tested scientifically by technical studies .”
He acknowledged that stock exchange regulators do make special provision for PEAs , and that they do have a role in the project planning pipeline . Canada ’ s National Instrument 43-101 , developed
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