A retail investors guide to all things ‘Pre-Feasibility Study’

By Hannah Goldman. Published at Jan 15, 2021, in Investor 101

Once a mining company has established the size and quality of its deposit, ample research must then be conducted to determine whether the resource can be extracted both economically and profitably.

To determine this outcome, an enormous amount of research and proof of concept is required to establish whether the project should go ahead, be redesigned, or abandoned.

Usually, four stages of proof are undertaken which represent the general levels of certainty reached:

  • Scoping (or Conceptual) Study
  • Pre-feasibility (or Preliminary) Study (PFS)
  • Definitive Feasibility Study (DFS)
  • Bankable feasibility study (BFS)

In brief, the Scoping Study is an early-stage study based on the forecast economics and assumptions of the mining project.

It is used for development planning and aims to determine whether further studies should go ahead. If the results obtained in the study are compelling, then the company should proceed to the PFS, which is more detailed and results more reliable.

The DFS follows the PFS and is the most detailed and comprehensive study, determining definitively whether to proceed with the project.

All parameters including geological, engineering, legal, operating, economic, social, environmental are considered in order for the company to have near certain confidence of the success of the project.

The BFS is the final stage before development, including the necessary detail on what terms financiers should lend to the company.

This study determines whether the project is profitable and how much capital will be required, allowing for the bank and engineers to determine if risks are acceptable, and confirm that the project is viable.

In this article, we will concentrate on the PFS stage.

What is a PFS?

The pre-feasibility is an early-stage analysis of a potential mining project.

Conducted by a small team of consultants, the PFS is designed to provide company stakeholders with key information such as logistics, capital requirements, and key challenges; all needed to help guide the decision-making process.

The PFS is a critical step in project development as it denotes the minimum prerequisite for conversion of a geologic resource into a reportable reserve.

When and why are PFSs undertaken?

A PFS is the key intermediate step in the assessment of a mining project and is intended to ascertain if a mineral resource is likely to support a viable mining project.

There are three common reasons for conducting a PFS:

  1. As a foundation when committing to a major exploration programme following a successful preliminary programme.
  2. To attract a joint venture partner, interest a buyer to the project or as a basis for a major underwriting to raise the required risk capital.
  3. To help justify proceeding to the final feasibility studies.

What is included in a PFS?

The PFS should identify the critical issues and risks to be resolved during the final feasibility stages.

A comprehensive PFS should include detailed designs and descriptions for the mining operation, as well as cost estimates, project risks, safety issues and other important information.

In addition to geological and mining design information, a PFS also takes into account factors that may impact or interfere with the final project. These can include community issues, geographic obstacles and permit challenges.

The following list covers the main items in a PFS:

  • assessing reserves and saleable product from the delineated resources
  • generic mine design
  • non-detailed, staged life of mine planning and production scheduling assessing the mining methods, treatment routes and identifying cut-off factors, recoveries, dilution and losses in both mining and treatment
  • outlining probable plant, infrastructure, services and other facilities
  • producing a summary development structure and timetable
  • determining capital and operating costs
  • evaluating the specification and marketability of the commodity
  • setting up the deterministic economic evaluation model
  • determining financial viability

The PFS phase may become a series of iterative evaluations that are progressively updated and modified as exploration and engineering design proceeds.

What can an explorer deduce from the PFS?

Whilst a Prefeasibility Study is at a lower confidence level than later stage studies, it is intended that through iterations and adjustments in this PFS stage, optimal development choices are deduced to form the basis of the next stage, the DFS.

What happens if the results of the PFS are positive? Negative?

If the PFS yields a positive results, the company is likely to progress to the next stage – a definitive feasibility study.

However, if negative, they may choose to either head back to the drawing board, or abandon the potential project entirely.

Should investors be excited by a PFS?

Although a PFS might only be considered ‘exciting’ when it provides positive results, it can be seen as a valuable tool regardless.

The study provides investors with useful and tangible updates on the progress of a company’s project, which helps paint a clearer picture of project milestones and challenges.

As such, investors can possess higher confidence when deciding whether to continue, increase or exit the investment.


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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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