Concept Sutudyrev3

8/2/2019 Concept Sutudyrev3

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CONCEPTUAL MININGSTUDY STANDARD

May 2008


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TABLE OF CONTENTS

1 DEFINITION ........................................................................................................................3

2 GENERAL ............................................................................................................................3

2.1 STUDY SCOPE .............................................................................................................3

2.2 STUDY ORGANISATION APPROACH ....................................................................3

2.3 STUDY REPORT ..........................................................................................................3

3 STRATEGY ..........................................................................................................................5

4 RISK MANAGEMENT ........................................................................................................6

5 MINERALS SPECIFIC ........................................................................................................7

5.1 GEOLOGY AND MINERAL RESOURCES ...............................................................7

5.2 MINING .......................................................................................................................11

5.3 METALLURGICAL PROCESSING ..........................................................................17

5.4 INFRASTRUCTURE ..................................................................................................21

5.5 ENGINEERING DEVELOPMENT ............................................................................22

6 HUMAN RESOURCES ......................................................................................................23

7 PROJECT EXECUTION ....................................................................................................24

8 OPERATIONS MANAGEMENT ......................................................................................25

9 CAPITAL COST ESTIMATE ............................................................................................26

10 OPERATING COST ESTIMATE ....................................................................................28


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1 DEFINITION

The primary objective of a Concept Study is to develop and assess an investment

opportunity in order to establish strategic fit and likely attractiveness of the businesscase. It identifies any possible options to be assessed during the next phase Pre-feasibility, should the investment opportunity warrant further investigation.

2 GENERAL

2.1 STUDY SCOPE

Before proceeding with the Concept Study, the Project Leader/Director should definethe scope of the Study. The Study should be structured to identify:

The potential of the new or expanded business opportunity;The general features of the opportunity including potential cases to be studied in thenext phase;

The key business drivers for the opportunity and any potential fatal flaws;The order of magnitude of cost estimates for the opportunity (both capital andoperating costs);

Technical issues needing further investigation, such as geological drilling or test workrequired;

The costs and time to undertake further development work for a Pre-feasibility Studyto be completed;

The resources and services required for undertaking further work on the opportunity.

2.2 STUDY ORGANISATION APPROACH

Prior to the actual commencement of the Study, the Project Leader/Director should:

Establish an integrated owners team to direct and manage the Study, ensuring thatthe appropriate skills are brought to bear;

Establish the contracting methodology, selection criteria and scope of work forexternal consultants and contractors;

Assign the scope to the owners lead personnel, consultants, contractors or externalgroups;

Establish mechanisms to control, monitor and report progress of the Study; Agree the format, frequency and circulation of a progress report with the CSG Board; Ensure that the principles of Front End Loading are applied to the development of theStudy.

2.3 STUDY REPORT

The owners team should prepare a Concept Study report that presents the findings ofthe Study and reports on the requirements highlighted in this standard.


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The report should include an Executive Summary that addresses the content in thefollowing table.

Ref Element Minimum Requirement2.3.1 Overview Provide an overview of the project, highlighting the main

economic benefits, the key business risks and the wayforward.

2.3.2 Recommendation

s

Recommend or not recommend that the identified

opportunity warrants further funding to investigate theeconomic benefits of its development. Therecommendation should demonstrate the businessopportunity and the potential risk for reward in pursuingthe opportunity further. Any recommendation maypresent a case for further Concept Studies, or a fullrecommendation for advancing the examination to Pre-feasibility Study status. The recommendation shouldpresent alternative geological, mining, metallurgical andmarketing approaches to be considered in the Pre-feasibility Study.

2.3.3 ProjectDescriptionand Scope

Include a statement of the scope of the opportunity, withany exclusion specifically nominated. Also include adescription of the primary features of the opportunity andwhere appropriate, a description of location, history,ownership, topography and climate.

2.3.4 Scope of Study Include a statement as to the scope of the studiesperformed to date, any exclusion or major assumptionsmade.

2.3.5 Key PerformanceIndicators andBenchmarking

Present the Key Performance Indicators (KPIs) for theopportunity, provided the accuracy of the indicators is notmisleading and can be quantified. Include order ofmagnitude benchmarking of unit capital cost, unitoperating cost, Execution Phase and the ramp-upschedule. Explain any major differences between theopportunity and the benchmarks, if data is available tosupport the basis of such an analysis.

2.3.6 Key Issues Address key issues as highlighted in Appendix 2 of theInvestment Process Manual with the focus on assessingthe probabilities of converting the proposed project into aviable investment, following commitment.


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3 STRATEGY

The Concept Study should include an analysis of the business opportunity and astatement as to whether (or not) the proposed project is relevant to and/or compliantwith the companies Strategic Plan and the Customer Sector Strategic Plan. Only thepotential economic benefits of the project to the company need be presented inconjunction with the Business Strategy Statement.

The Study report should provide an outline of the following issues.

Ref Element Minimum Requirement Note3.1 Industry

Attractiveness

Key supply and demand drivers. Revenue growth factors. Industry structures. Diversity of suppliers and customers. Industry cost curve. Forecast project position.

Price assumption. Historical and forecast margins.

Developto outlinestandard

only.

3.2 StrategicRationale

Value adding sources, historically and forecast. Projects ability to exploit these opportunities. Companies capacity to achieve Value Adding.

3.3 Strategic Fit Strategy fit with companys framework and thecustomer sector strategic plan.

Review of project to business strategy.3.4 Strategic

Alternatives Strategic alternatives including exit / no gooption.

Basis of potential project being best option. Potential of staged development.

3.5 ScenarioAnalysis

Scenario development process used so far. Considerations of companys global scenario. Potential scenarios and impact on alternatives.

3.6 ExitStrategy

Basis of exit strategy. Defined triggers or milestones for exit decision.


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4 RISK MANAGEMENT

Risk Management is the culture, processes and actions that are directed towards theeffective management of potential opportunities and adverse effects. RiskManagement should be undertaken in accordance with the companies RiskManagement Policy and Procedures.

This section specifies the overarching requirements necessary for an integrated andholistic view of risks and their upsides to be formed. It is supplementary to sections inthis document that cover specific risks such as HSEC risks, Market risks, Country risks,etc.

It is important to establish effective risk management from the beginning of anInvestment life cycle and to continue it through to feasibility, implementation,operational and ultimately the exit phase of the Investment.


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5 MINERALS SPECIFIC

5.1 GEOLOGY AND MINERAL RESOURCES

The company should ensure that its Mineral Resources and Ore Reserves are reportedaccording to the appropriate codes.

All aspects material to the geology and resource evaluation should be investigated andreported. The investigation and report should include, but not be limited to the itemsand issues mentioned within these standards. Work must be performed by or under thedirection of competent geologist and/or resource practitioner or consultants based ondata and information derived from the investigation.

Any discussion of the issues must clearly distinguish which data and information isattained through direct observation, inference, or assumption.

Ref Element Minimum Requirement

5.1.1 Conventions Document the conventions used for the project and clearlydefine:

The units used for the project;

The Project Coordinate System and its relationship toWorld Coordinates;

The term Reduced Level; Project Grid system including grid North; and Key terms and nomenclature used.

5.1.2 Tenure State that:

The right to explore has been obtained; A clear process to obtain secure tenure and licence isidentified and understood;


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A plan for approval to the next phase is prepared; and A clear mechanism (purchase, lease, option orcompensation agreement) to obtain secure access to thenecessary surface rights for the mine, process plant, tailingsdisposal and infrastructure are in place.

5.1.3 Regional

Geology

Provide a summary of the regional geology, the

stratigraphic, structural and tectonic setting for the ore bodythat forms the basis of the geological concept to this Study.

5.1.4 ExplorationHistory

Outline in detail the exploration history, work completed bywhom, when and the techniques used. This should include adescription of the various interpretations and estimatesmade over time. Present ranges of outcomes derived fromprevious work.

5.1.5 DataAcquisition

Provide a description of the methods used to acquire data tofacilitate the preliminary evaluation of the deposit, includingan assessment of the accuracy and precision of the dataacquired.

Note:

The distribution of data will be such that it will allow for apreliminary or conceptual interpretation of the geologicalframework for the ore body. The continuity of themineralisation is assumed. Lithologies, alteration, structure,ore-types and metallurgical characteristics are assumed orestimated from available samples. Data collection must useappropriate techniques and should be qualified bythesources and method of collection, and be subject to QA andQC procedures such that the data collection trail is fullytrackable.

Geological and Topographic Mapping: Outline adescription of the geological and topographic mapping

undertaken with quality control and assurance methods.

Drilling and Other Sampling Methods: Describe thesample methods: including surface, grab or channelsampling if undertaken with QA and QC procedures used.

Drill data acquisition description should include:

Drilling methods, the basis of the drill contract andcomparison between drill methods applicable withdiscussion of any bias introduced by the drilling method/sapplied;

Drilling locations; Sampling methods, intervals and recovery;

Analysis methods; Quality control and assurance methods and results; In-situ density sampling and test work (wet and drydensity, moisture content, porosity etc.); and

Residual sample storage.

Data Management: Include a description of the datamanagement:

Survey control, hole position and set-up angle;


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Downhole position and survey method; Data organisation and storage; Audit trail; and Security.

Logging: Reference the drill logging system used:

Geological (including lithological, structural, mineralogicaletc.);

Hydrogeological; Geophysical; and Geo-technical.

Geochemical Analysis: Include the validation of thegeochemical analysis, description and summary results forquality control and assurance methods used and refer to themore detailed reporting in an Appendix.

5.1.6 DepositGeology

Provide a description of the local geology that hosts the orebody; clearly distinguish between the factual observationsand the interpreted geology, and indicate preferred andpossible alternate and likely ranges of interpretations. Thedescription should cover:

Lithology full description of the host and wall rocklithologies;

Structure; Mineralisation reference should be made to themetallurgicalcharacterisation outlined in Section 5.1.8 below; and

Alteration.Consider using summary cross sections, longitudinal

sections and plans to illustrate the geology data andinterpretation. Include reference to a complete set of plansand sections as an Appendix.

Note:The deposit geology, mineralogy and continuity of themineralisation must be understood on a general and globalscale.

5.1.7 ResourceEstimation

Provide a description of the methods and techniques used toestimate the insitu resource. This should include a summaryof the justification for the major decisions taken and themethods used and should indicate ranges of possible

outcomes.Resource models developed should (where possible) containinferred information on all aspects of the ore body that mayhave potential to significantly impact on mining, processing,the environment, or the saleability of the mineral contained.

The resource models developed should estimate the globalresource covering the gross spatial variability of key orebody parameters and characteristics suitable for aconceptual life of mine planning.Spatial variability should be assumed and the assumptions


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clearly stated. Alternate models and interpretations could beassessed to indicate ranges ofpossible outcomes.

Note:Tonnage and grade of the deposit will be estimated by a

"Competent Person" and is at least known at the Inferredclassification (as per appropriate code).

Geological Interpretation and Exploratory DataAnalysis: Include data analysis by geological and modellingdomains (where possible) with justification of domainschosen and discussion of the links to the geology, analysis:

Univariate classical statistical analysis; Bi-variate and multi-variate classical statistics; and Geo-statistics.

Block Modelling: If undertaken, include the following:

Choice of block size, orientation and origin;

Domain modelling; Grade modelling; Density modelling; and Model validation.

Resource Classification: Include a description of thecriteria used.

Mineral Resource Estimation Results: Include thefollowing resource estimation results:

Cut-off determination, including presentation of tonnesand grade v cut-off illustrations;

Comparison of the current resource with previousestimates and comment on the differences and the reasonfor those differences;

Resource classification; Mineral Resource tabulation, by classification and domain;and

Range of possible outcomes for Tonnes and Grade, basedon the current knowledge of the deposit and alternativegeological interpretations.

5.1.8 MetallurgicalCharacterisati

on

Data presented and discussion should include but not belimited to:

Reference and listing of the metallurgical samples taken(i.e. drill core samples etc.), either as an Appendix orseparate reference;

Ore mineralogy, mineral species, grainsize, texture, etc.; Gangue mineralogy, species, grainsize, texture, etc.; Chemistry of minerals present including a scan for minoror deleterious elements; and

Chemistry of the ore and waste rock types.


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Note:Initial characterisation of the ore and waste rock-types issought in order to relate them to potential metallurgical

processes (see Section 5.3.1). Typically this would besupported by initial field observations.

5.1.9 HydrogeologyDepositHydrology

Provide a description of the ground water regime likely tobe encountered within the deposit, including a generaldescription of possible aquifers, aquicludes, water levels,likely porosity and permeability, with initial speculation onthe impact on mining. This discussion should identify likelyrisks by identifying potential outcomes and the likelihood ofeach occurrence.

Project Water Supply: If the project requires a watersupply that could beprovided via a borefield or other means, then a descriptionof the proposedoptions and the test work needed to define these options is

required.5.1.10

GeotechnicalAppraisal

Provide a description of the known geo-technical domains,the rock mass character and the potential impact on mineplanning and operations. Identify potential risks and rangesof possible outcomes and translate them into likely impactson mining.

5.1.11

RiskAssessment

Provide a discussion of the technical risks associated withthe Study. In particular there must be clear definition of theranges of possible outcomes for key outputs (such as tonnesand grade) as well as a discussion of likely ranges to beexpected for items such as continuity, ore body geometry,boundaries, and contacts etc. Identify the methods used todetermine these ranges of outcomes.

5.1.12

Forward WorkProgram

Provide a description and cost estimate of the geological,drilling and resource work to be undertaken during the Pre-feasibility Phase of the project. Comment on whether suchwork is to improve the confidence in and/or to add to theexisting resource.

5.1.13

MineralResourceStatement

Produce the project Mineral Resource statement as perappropriate code.

Note:This must be a stand-alone statement that can be lifted outof the Study for public reporting purposes and must besigned by the Competent Person.

5.1.14

Appendices Provide the following documents (where possible) asappendices.

5.2 MINING


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The Study should investigate and report on the most likely mining scenario based onthe existing body of knowledge, which supports the contention that the opportunitypresented by the project may be viable. Generally, the depth of Study required doesnot extend beyond rule of thumb or industry standard assumptions, first passassessments, or application of proven methods to a similar deposit.

The professional judgment of a competent mining engineer or consultant, based oncursory or minimal information, will be sufficient in some areas.

Ref Element Minimum Requirement5.2.1 General

MinePlanningCriteria

Conventions: Document the conventions used for the miningStudy including full description of the survey co-ordinate systemused and its relationship to the Universal Coordinate System.Provide a glossary of terms as appropriate.

Site Description: Present a summary description, includingbut not limited to:

Local and regional setting, including: climatic, surface andseismic conditions;

Tenure conditions, including ownership, mineral titles, waterrights, operating licenses and surface access rights; Site access plus existing and proposed local and regionalinfrastructure facilities relevant to the project;

General site location map with coordinate system consistentwith that adopted for the project.

Resource Description: Summarise key issues, including:

Particular aspects of the geological block model on which themine plan places high reliance (e.g. ore types, high grade zonesetc.)

Material characteristics and their variability that may affectmining or processing operations such as hardness, abrasion, in-

situ and loosedensity, moisture content, excavatability, swell factor, dustgeneration, contaminants, etc.

Geotechnical Parameters: Summarise key geotechnicalassumptions based on the available information, including:

Geotechnical data by material class or rock type, includingwhere appropriate in-situ stress regimes;

Stability (risk) analyses with consideration of seismic andhydrological action and the potential modes of failure;

Geotechnical recommendations for mine design, incorporatinggroundsupport requirements, equipment selection, and equipment

performance.

Hydrogeological Considerations: Summarise key issues,including:

Surface and groundwater regimes; Historical data such as water analysis, water table level andfluctuation, porosity, permeability, etc.;

Possible water control practices such as dewatering, grouting,etc.


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Gas Regimes: Summarise, where applicable, the availableinformation and data to establish the nature of in-situ gasregimes (to extent possible) and the likely impacts on mining.

Ventilation: Summarise, where applicable, the proposedventilation system,required to sustain the proposed mine development andoperation, including:

Regulatory requirements; Conceptual design, including design parameters, airflowregulation/control,infrastructure and equipment design.

Environment and Cultural Considerations: Summarise thekey issues and considerations that impact on, or influence themine plan and mine design.

Process and Market Considerations: Summarise the keyissues andconsiderations that impact on, or influence the mine plan andmine design, including:

How the design is influenced or constrained by the presentedMarketassessment of factors such as demand, supply and price of themineralcommodity being produced. Show that key businessassumptions havebeen challenged and verified.

Recovery or yield of the mineral commodity being produced

from oremined and processed;

Mineral processing parameters expected to affect mine designandoperation;

How potential marketing and process risks affect the mine.Show thatmarket and process driven constraints or requirements havebeenchallenged and verified.

Economic Criteria: Summarise the key issues andconsiderations that impact on or influence the mine plan and

mine design.Information and discussion presented, where applicable mayinclude but not be limited to:

Revenue Drivers: price, recovery, treatment terms, etc. Showhow net back to mine revenue is calculated.

Cost Drivers: mining cost assumptions, off-site costs,overheads,assumptions about sustaining mine capital, etc.


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5.2.2 MineDesign

General Approach: Provide a description of the methods usedto acquire data and to facilitate the preliminary or conceptualmine design, including an assessment of the accuracy andprecision of the data acquired and risks associated with themine design.

Note: Sufficient data will have been collected: From desktop investigations and preliminary site visits todescribe or infer in general, mine design criteria.

To carry out conceptual mine planning with global estimatesof time,quantities and costs.

Optimisation processes are not expected to be applied at thisstage.

The report as a minimum, should include a comprehensive

listing, description and explanation of the mine designparameters applied to the project, including the following mainheadings:

Mineable Resource Model: Provide a description of themineable resource model as developed from the geologicalresource model and other sources, including:

Development of the mineable resource model from thegeological resource model through application of such factors ascut off grade, ore dilution, ore recovery, grade control data,mineral processing response, etc.;

Resource classification which may or may not be per JORCCode,

depending on the existing level of definition; Mineral Resource tabulation with relevant discussion as to theconfidence level of the estimate.

Note:At the concept level, a good guideline is that the overall limitsof the deposit are known and that an overall resource tonnageand grade can be inferred from the available data.

Mine Production Rate: Provide a description of the range ofmine production rates suggested to be applied to the project.

Mining Method: Provide descriptions of the potential mining

methods to be applied to the project: A description of the considered mining methods based onavailable site information and regional or deposit typeknowledge. (Include operating examples as appropriate);

Methods previously applied to the ore deposit; Existing mine operations of similar magnitude and natureelsewhere on the same deposit.

Ore/Waste Determination: Provide a description of the


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proposed criteria for ore / waste determination that would beused in planning and design for the proposed mining operationsas presumed from similar operations or from historical data.

Mining Limits: Provide a description of the methodologyapplied to establish the final mining limits from the mineable

resource model. Illustrate schematically the final limits in mapsand sections.Information and discussion presented, where applicable shouldinclude but not be limited to the following:

Reference to physical and economic parameters to be appliedfrom other sections of the Study document;

Mineable resource model used; Method by which the results were verified or validated;Tabulation of mineable resource and reserve with discussionas to theconfidence of those estimates.

Note:

The limits presented here are not expected to be optimal. It isexpected that the final mining limits are the engineers best

judgment estimate as to the most likely outcome given theavailable body of knowledge.

Final Mine Layout: Include a schematic description to a levelof detailconsistent with the level of understanding of the project.Information and discussion presented, where applicable shouldinclude but not be limited to, the following:

A summary of design criteria applied and key assumptions;Tabulation of ore reserves and resources (including waste) byclassification, rock type, etc. within the design;

Sections and plans produced to show proposed positioning ofmineexcavations, waste dumps, ore stockpiles, ore processing plantand themine infrastructure, with cross reference made to a morecompleteAppendix.

Ore Reserves Statement: It is not generally expected that acode compliant statement can be made at the Concept stage.However, if a statement is made it must be compliant to theappropriate code.

5.2.3 MineOperations

Production Sequence and Schedule: Provide an idealisedsequence and schedule.

Mine Equipment Requirements: Provide a listing anddescription of the size and type of mine equipment assumed,including:

The mining equipment (with assumed sizes of primaryequipment);

Operating cost estimate for primary and secondary mining


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equipment;

Capital cost estimate or lease option costs.

Overburden and Waste Disposal: Provide a generaldescription of thewaste/overburden material disposal sites and methods:

Waste disposal site selection and design criteria; Environmental and cultural considerations to disposal sites; Condemnation activities and results; Mining activities for waste disposal (site preparation, topsoilstorage, dump construction, rehabilitation anddecommissioning, etc.)

Operations Summary: Provide a summary of the schedulesdeveloped for the mining operations. Schedules will bepreliminary and presented as summarised annual statistics toinclude:

Ore production and feed to process; Ore and waste excavation;

Waste disposal movements; Equipment required for mining operations; Manning levels for all mining activity related personnel; Infrastructure required to support the mining operations; Mine capital expenditure; Mine operating costs.

Note: Provide clearly organised tabulated results of the miningsection.

Operations Management: Provide a cursory description of themine

operations proposed for the project, including: Mine equipment operation and maintenance; A schedule of mine operation activities.

5.2.4 CapitalCostEstimates

Present summary tabulations to illustrate the mine capitalexpenditure.

Note:Sufficient data would have been collected to provide globalestimates based on scaled or industry history for the size andtype of potential operations contemplated. Reference to inhouse data on operations of similar magnitude and scope will be

adequate for a Concept Study.

5.2.5 OperatingCostEstimates

Present summary tabulations to illustrate the mine operatingcosts.

Note:Sufficient data would have been collected to provide globalestimates based on scaled or industry history for the size andtype of potential operations contemplated. Reference to in


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house data on operations of similar magnitude and scope will beadequate for a Concept Study.

5.2.6 Risk Management

Provide a discussion of the potential technical risks associatedwith the mining aspects of the project and if possible, themethod of mitigation to be adopted following this Study. In

particular there must be a discussion of the potential valueoutcomes and likely impacts to mining from items such asreserves, production risk, mining method, schedules, operatingcosts and capital expenditure.

5.2.7 FutureWorkProgram

Provide a Work Plan with detailed costing and implementationprogram for a Pre-feasibility Study on the opportunity of theproposed project.

5.3 METALLURGICAL PROCESSINGThe Study should investigate and report on the most likely processing option thatsupports the contention that the opportunity presented by the project may be viableand identify all options to be considered in the next phase. The Study report shouldaddress the following.


5.3.1 Conventions Document the conventions used for the project and clearly


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define:

Measurement units the SI system is the standard, withconversionsquoted if other units are employed;

Key terms, symbols and abbreviations.

Note:The use of the word ore is deemed to apply to bothmined ore and to plant feedstocks in the case ofdownstream processing (e.g. smelters and refineries.

5.3.2 OreCharacteristics

Detail the method and results of the initial ore and wasteMetallurgical Characterisation work (including anyassumptions), which as a minimum, should address, inaccordance with Section 5, the following metallurgicalprocessing issues:

Details of ore and waste mineralogy, mineral species,grainsize and texture;

Mineral chemistry and relevant physical properties (e.g.SG distribution), in particular, minor deleterious elements

or minerals, that typically present commercial or technicalissues in processing and marketing;

Details of any evidence that indicates ore variability andthe presence of significantly metallurgically different oretypes.Detail how any metallurgical samples were obtained andwhat considerations (and assumptions) were made toensure that test work was carried out on relevant samplesthat are representative of future processing plant feed orblends.

5.3.3 Laboratory,Pilot andDemonstrati

on PlantTest Work

Basic metallurgical test work must be conducted to verifyeach key unit operation that makes up one or more of thepotential metallurgical processing options identified during

process selection. Detail the basic metallurgical test workas follows:

Identification of the samples tested and the scale of thetest work conducted;

Metallurgical test method adopted for each unitoperation;

Where a simulation or model has been used, details ofsuch simulation software and how it was applied;

Test work or simulation results obtained; Interpretation of these test results including thederivation of metallurgical design basis from the results;

Degree of metallurgical behaviour variability indicated.

5.3.4 ProcessSelectionandBasis

Detail the following in relation to potential mineral ormetallurgical processing options:

Potential metallurgical processing options identified forsubsequent test work based on ore characterisation data;

Any historical metallurgical test programs that havebeen carried out on the ore body, including whocompleted the work, when it was completed, the


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metallurgical techniques used and the interpretation ofresults. Where appropriate, any differences should behighlighted and discussed.

Details of metallurgically similar ore bodies that havebeen identified that could be used as a benchmark for orecharacterisation, process route selection and processing

risks.Identify the potential processing options that are likely tocapture the maximum value of the ore body at anacceptable level of risk.Provide the details of all selected processing flow sheetsand, as a minimum, indicate:

All potential flow-sheets considered and/or the mostlikely flow-sheet to be adopted and the reasons for itsselection;

Any alternative processing options to be considered inthe future;

Possible product specifications indicated by the testwork results;

Scale-up factors required; Potential consumption rates; Process design criteria.Address any key technology issues relating to theprocessing of the ore and the handling and storage ofplant residues including:

Potential source, costs and terms for technology neededto be acquired;

Whether the technology has been used before, whereused and the success or otherwise of its use;

Whether patented or proprietary; Extent of further test work required to validate its use onthis project;

Areas where, if the technology were developed, BHPBilliton would achievesignificant competitive advantage. Estimate the potentialbenefits to allow focussed research and developmentactivities to be proposed.

5.3.5 FacilityDescription

Include, as a minimum, the following:

Facility Description:

Conceptual block process diagram; Process flow diagrams outlined with the major streamscharacterised;

Preliminary mass, energy and water balances; Possible plant, infrastructure and disposal sites for plantresidues, and location footprint plan.

Design Criteria:

Product quality specifications; Annual ore and product capabilities; Outline mass, energy and water balances; Predicted plant availability;


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Preliminary consumption rates for major operating andmaintenance consumables;

Preliminary utility usage; Design life; Product handling and transportation strategy (pipeline /rail / shipping).

Facility Operations Basis: Possible operating strategy;Typical availability of metallurgical processing plant; Ramp-up rate from commissioning to full production.

Capital and Operating Costs: Develop this inaccordance with the estimating guidelines.

5.3.6 Future Work Program

Provide a description of the metallurgical investigationsand test programs proposed to be undertaken during thePre-feasibility Phase of the project and include:

Direction of the future investigation, including theobjectives and reasons;

Scope of the investigative work; Engineering development;

5.3.7 Risk Assessment

Provide a preliminary risk assessment of those processingroutes consideredfor selection in accordance with Section 4 of this minimumstandard to identifyspecific metallurgical processing risks such as:

Technical risks associated with the processing routeselected andalternatives considered;

Key process performance parameters including thosewhich are the

processing economic drivers;The likely range of outcomes for the key drivers and themethods used toestimate these ranges;

Process scale up if likely to present significant processrisk or whether thescale up behaviour is well known and proven.Where significant processing risks are identified, provide aclear mitigationstrategy that would include pilot testing of the process atan appropriatedemonstration plant scale in the Pre-feasibility orFeasibility Phase of the

project.


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5.4 INFRASTRUCTURE

For the purpose of this standard, infrastructure is defined as all facilities of a non-production nature required to support the operation and typically includes items tabled

below.Major aspects of both on and off-site infrastructure should be outlined in the ConceptStudy to identify the proposed development of infrastructure needed to support theproject. On-site infrastructure comprises facilities of a non production nature, which areproposed to be located on lands controlled or owned by the operation.

Off-site infrastructure comprises facilities of a supporting services nature, proposed tobe located away from the lease on lands controlled by the company or leased fromothers. The Concept Study should identify which items of infrastructure are located onor off site. The extent to which existing infrastructure may be available to support aproject, should be stated in the Concept Study. Concept studies should identify optionsand optimisation cases and develop basic evaluations to justify further review at thenext stage.

The battery limits between on-site infrastructure and mining and processing facilitiesmust be clearly stated. Similarly the battery limits between off-site infrastructure to bedeveloped and existing infrastructure needs to be stated. The Concept Study shouldaddress these issues.


5.4.1 InfrastructuralRequirements

Define the requirements for the following, in accordance thestatements above:Utilities: Power, fuel, water and other utilities compressedair, steam etc.

Disposal and Drainage: Sewage, waste disposal, tailings

and stormwater drainage.

Buildings and Facilities: Administration and servicebuildings,accommodation, warehouses and community related facilities housing, schools, clinics, etc.

Transport Infrastructure: Roads, rail, port and airstrips.

Communications: Landlines, satellite - including IT/ISinterfaces.

Temporary Facilities:Temporary facilities required during

construction power, water, accommodation, lay-down areas,etc.

Other: Security, fire protection, etc.

5.4.2 LocationStudy

Identify potential locations proposed for the infrastructure.

Note:Ground-level geotechnical survey (by surface observation and


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local pits), and topographical investigations via existing datashould be completed, to provide a reasonable level of supportfor the viability of the locations selected.

5.4.3 EngineeringDesignBasis and

Deliverables

Include significant parameters and factors influencing theengineering design basis of the Study:

Site conditions general data;

Environmental potential limitations.

5.5 ENGINEERING DEVELOPMENT

During the course of the Concept Study, the project team will identify the productionfacilities and infrastructure required. For the purposes of indicating the potential valueof the project, it is necessary for the engineering thereof to be developed to the extentthat the owners can define the scope of work of the project, in order to;

Establish an order of magnitude estimate of the capital cost appropriate for a

concept study. Establish an indication of the schedule

As engineering development (including a preliminary site selection) is critical todefining the right business opportunity, it is a key component for the early phase ofFront end loading.

The minimum requirements for a Concept Study are as follows.

Ref Element Minimum Requirement5.5.1 Basis of

DesignPreliminary Design Basis document covering:

Site conditions topographical, seismological, climatic data. Environmental potential issues and limitations.

Logistical Limitations. Criteria for operability, reliability and maintainability

5.5.2 LocationStudy

Potential locations for the production facilities, infrastructure andwastedisposal sites.

Note:Ground-level geotechnical survey (by surface observation andlocal pits), and topographical investigations via existing datashould be completed, to provide a reasonable level of supportfor the viability of the locations selected.

5.5.3 Engineering

Deliverables

For all production facilities and infrastructural requirements,provide the

following (where applicable) on a preliminary basis: Heat and Mass balance Plant Block Flow Diagram Process Flow diagrams for major facilities. Utility Flow Diagrams Mechanical Equipment list Electrical Single Line Diagrams Plant Layout Drawing Process Control System Configuration


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5.5.4 Front EndLoading

Demonstrate that basic principles of FEL have been applied andsupport thevalidation of the business opportunity and the selection ofalternatives to beanalysed in the next phase.

5.5.5 ValueImprovingPractices

Although not applicable to a concept study, practicesappropriate fordeveloping alternatives should be identified. Review and outlinenew and/or competing technologies.

6 HUMAN RESOURCES

Based on the outline of the potential Operations Management Plan (see Section 8), abrief review of human resources must be conducted to report on the following issuesaccording to the standard stated:

An assessment of the skills required and available to execute and operate theplanned facilities;

The sources of human resources available;The potential human resource impacts if the potential project was to be developed.

The issues which should be addressed, include:

Organisation model to be potentially adopted; Cultural fit; Recruitment and training strategy; Employee relations strategy; Performance management and compensation strategy;

Statutory obligations and requirement pertaining to the employment of local andexpatriate staff.

At the Concept Phase, the extent of definition and evaluation of these issues need onlyto be outlined, with an emphasis on identifying high-impact issues.


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7 PROJECT EXECUTION

At the Concept Phase, the owners team should develop an outline of the potentialapproach to Project Execution that forms the proposed basis for implementing theproject. This outline should address the following.


7.1 Scope State the physical scope of the project along with any majorassumptions.

7.2 Work BreakdownStructure(WBS)

Prepare a preliminary WBS that represents the majorelements of the project in line with the intentions for projectexecution, as they are envisioned at this stage.

7.3 ExecutionMethodology

Broadly outline the proposed approach to executing theproject and the various contracting strategies that could beuse to deliver the project and the approach / strategyselected / nominated to support the basis of factorisedestimates for indirect costs.

7.4 ProjectOrganisation

Broadly address the Project Organisation for implementationof the project including the general type of structure etc. thatmay be employed.

7.5 ProjectHealth,Safety,EnvironmentandSecurity

Identify key or special health, safety, environment andsecurity issues thatwill require management during theExecution Phase of the project.

7.6 Planning andScheduling

Prepare a schedule showing all the major activities duringsubsequent studies and phases, execution and start-up of theproject. Structure the schedule generally in accordance withthe WBS.

7.7 Engineering Explain the approach to engineering delivery, including the


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requirements for specialist input, the application of newtechnologies, use of computer aided engineering, reviews(constructibility, operability, and maintainability) and theengineering resources required for the Execution Phases.

7.8 Procurementand

Contracts

Identify key items of equipment with long lead times orcritical technology issues including potential manufacturers

and suppliers.Outline major contracts.

7.9 Construction Outline the broad approach to construction, industrialrelations, labour resourcing, logistics and specificconstruction issues.

7.10 Pre-commissioningandCommissioning

Outline the broad approach to pre-commissioning andcommissioning including the involvement of operations staffand any specific requirements due to new technology,shutdowns, tie-ins etc.

7.11 Risk any recognised Execution Phase major risks or potential

projectkillers and propose potential mitigation concepts.

8 OPERATIONS MANAGEMENT

The Concept Study should include a general appraisal and commentary of the possiblemethods of establishing (or increasing) the companies capability to establish,commission, start-up and operate the proposed facility and associated infrastructure.

The Concept Study report should address the following issues with supportable

statements meeting the followingstandards.


8.1 Organisation Include the broad structure of the Operations group neededto support the development and operation of the potentialproject and a statement to this effect.

8.2 ResourcesandSources ofPersonnel

Present an assessment of the resourcing and sourcing of theproposed operating workforce, to an acceptable level ofaccuracy.

8.3 OperatingCycles

No assessment is required.

8.4 Conditions of Employment


8.5 Accommodation

Briefly investigate the basis of accommodation and state theresults and any assumptions made.

8.6 Operations Report on the operability of the proposed facilities and theplant options considered, taking into account lessons learnt.

8.7 Maintenance Report on the maintainability of proposed facilities by meansofbenchmarking and/or experienced judgement.


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8.8 Transport Include an assessment of logistic transport requirements tosupport thepotential project.

8.9 Administration


8.10 Other Issues No assessment is required, unless addressed elsewhere inthis standard, i.e. marketing, HSE, information management.

9 CAPITAL COST ESTIMATE

This section sets out the minimum standards applicable to preparing a Capital CostEstimate for the Concept Phase. Changes to, or deviations from this standard should besubject to approval prior to commencement of the Concept Study.


9.1 Accuracyof

Estimate

Develop capital cost estimates for Project Concept Studies to betargetedwithin an accuracy of 50%.

Note:On completion of the Study the accuracy of the estimate shallbeassessed.

9.2 Basis of Estimate

Basis : Include a description of the estimating basis used and inparticular any deviations from the Cost Estimating guideline.

The estimate must be referenced to the scope of work.

Definition of Costs: Sufficiently define operating costs inaccordancewith the BHP Billiton standard General Ledger and CostElements, toallow an accurately defined financial evaluation to beundertaken.

Base Date and Exchange Rates: State the base date of thecapital costestimate. The estimate will be expressed in the functional


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currency of theproject. State the exchange rate conversion factors used.

Estimate Strategy:The basis of the estimate should state thestrategyfollowed and should demonstrate a methodology that is

appropriate insupport of the stated accuracy of the Study.

Consultants Estimates: Instruct those sub-consultants who,as part oftheir scope of work, are required to prepare elements of thecapital costestimate, to prepare their estimates in accordance with theagreedEstimate Strategy.

9.3 Work Breakdow

nStructure

Prepare a preliminary WBS to produce a structure for the capitalcosts as

detailed in Section 7.2.

9.4 StructureofEstimate

Structure capital cost items according to the Work BreakdownStructure.

9.5 Presentation of theEstimate

Present capital costs as:

Capital Direct; Indirect Costs; and Owners Costs including Pre-production, Commissioning; Provisions including Foreign Exchange, Escalation andContingency.A summary of the capital cost estimate should be included inthe body of the Study report, with any detailed estimates to be

presented inAppendices to the Study report.

9.6 OwnersCosts

Specifically identify owners and pre-production costs; theseneed only be factorised values.

9.7 EscalationandForeignExchange

Highlight any escalation provisions and show them separately:the basisof calculation should be shown. Foreign exchange componentsof the costs need not be identified, unless the information isreadily available and deemed as reasonablyrepresentative.

9.8 Working

andSustainingCapital

Respectively identify working and sustaining capital as

percentages ofannual revenue and of capital cost.

9.9 Contingency

Include a contingency allowance in accordance with the CostEstimatingguideline. Clearly state the methodology for calculating orarriving at theallowance.

9.10 Cash Flow Include an assessment on an annual basis for:


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Forecasting

Pre-feasibility Study; Final Feasibility Study; Execution Phase.

Note:A detailed cash flow is not required.

9.11 Sources of Data

Identify sources of cost data i.e.: Previous Concept Studies for similar projects; Benchmarked estimate data; EPC/EPCM contractors; Equipment vendors; Bulk material suppliers; Specialist project estimating consultants.

10 OPERATING COST ESTIMATE

This section sets out the minimum standard for an Operating Cost Estimate for theConcept Phase. Changes to, or deviations from this standard should be subject toapproval prior to commencement of the Concept Study.


10.1 Accuracyof

Estimate

Develop operating cost estimates with a targeted accuracy of 50 percent.

10.2 Basis of Basis: Include a description of the basis of estimate, and in


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estimate particular anydeviation from the Cost Estimate guideline.

Base Date and Exchange Rates: State the base date of theoperating cost estimate. This should be the same base date asstated for the Capital Cost estimate. The estimate will be

expressed in the functional currency of the project. Theexchange rate conversions used should be stated.

Definition of Costs: Provide a definition of costs betweencapital andoperating costs, sufficient to allow a preliminary financialevaluation to beundertaken.

10.3 StructureofEstimate

Present Operating Costs in the form per the following:

Fixed Operating Costs(i) Labour Costs: Present a broad assessment of staffingrequirements

and of the unit labour costs based on the operating philosophyof thefacilities.(ii) Fixed overheads: Factorise fixed overheads from similarprojects.

Variable Operating Costs(i) Chemicals, Reagents and Fuel: Base significant chemical,reagentand fuel quantities and costs on likely rates derived from testwork orindustry norms.(ii) Operating Consumables: Base rates of consumption foroperatingconsumables on factorised costs.(iii) Product Transport and Insurance: Derive the rates fortransportation and insurance costs associated with thetransportation of product from factorised costs. Derivequantities of product to be transported and insured fromestimates and unit costs applied.(iv) Maintenance, Consumables and Spares: FactoriseMaintenance,Consumables and Spares costs from similar projects wherepossible.

Note:The operating cost estimate should include only a contingency

provision for undefined areas and a commentary and reasoningfor the provision

10.4 ContingencyAllowance

Develop the Operating Cost Estimate using spreadsheets in aformat that can input directly into the Financial Model.

10.5 Presentation of theEstimate

Ensure fixed operating costs are outputs that can inputdirectly into theFinancial Model.


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Express the Variable Operating Costs in costs per tonne of oremilled in a format to be agreed that shows units per tonne of oremilled and unit rates used. The output will be used input directlyinto the Financial Model.

10.6 Start-upCosts

Ensure the Capital Cost estimate includes owners costs andpre-production costs up to the date of introduction of ore forcommissioning purposes.

Note:Thereafter, annual operating costs shall take effect, including allspecial startup costs. These need not be assessed in detail forConcept Studies, but should be factorised from capital andoperating cost relationships. The basis of derivation should bereported.

10.7 Escalation Do not make allowance for escalation within the operating costestimate, as this will be included in the Financial Analysis.

Identify any input costs likely to be subject to unusual escalationrates.10.8 Sources of

DataIdentify sources of cost data i.e.:

Current operating data; OEM data provided; Benchmarked data.


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