Mining Feasibility Studies: What Investors Need to Know

Introduction: The Bridge Between Exploration and Mining

Between discovering a mineral deposit and building a mine lies one of the most critical — and most misunderstood — phases in the mining project lifecycle: the feasibility study. It is during this phase that a promising geological discovery is subjected to rigorous technical, financial, environmental, and social analysis to determine whether it can be developed into a profitable mining operation.

For investors, lenders, and project developers, the feasibility study is the document that separates speculation from substance. It provides the quantitative foundation for every major decision that follows: whether to commit capital, how to design the mine, what processing methods to use, how to manage environmental obligations, and when the investment will generate returns. A mining project without a credible feasibility study is, from an investment perspective, little more than an idea.

Yet feasibility studies are not monolithic. The mining industry recognises three distinct levels of study, each progressively more detailed and expensive, designed to answer different questions at different stages of project development. Understanding these levels — what each includes, what it costs, and what it tells you — is essential for anyone involved in mining investment, project development, or mineral rights management.

This guide explains the three levels of feasibility study, details what each one covers, discusses why they are indispensable for investment decisions and regulatory approvals, and outlines what investors should look for when evaluating a study's conclusions.

Why Feasibility Studies Are Essential

Before examining the mechanics of each study level, it is worth understanding why feasibility studies occupy such a central position in mining finance and regulation.

De-Risking Capital Investment

Mining is among the most capital-intensive industries in the world. Developing a mine from greenfield to production can cost anywhere from tens of millions to several billion dollars. The feasibility study is the primary tool for de-risking this investment. It systematically identifies and quantifies the technical, financial, environmental, and social risks associated with the project, enabling investors to make informed decisions about whether the expected returns justify the capital at risk.

Regulatory and Licensing Requirements

In Uganda and most mining jurisdictions worldwide, a feasibility study is a prerequisite for obtaining a mining lease. The Mining and Minerals Act 2022 requires applicants for a mining lease to demonstrate that the proposed deposit is commercially viable and that the applicant has the technical and financial capacity to develop it. A completed feasibility study — typically at the prefeasibility or definitive level — provides the evidence base for this demonstration.

Resource Classification and Reporting

Feasibility studies are closely linked to the classification of mineral resources and ore reserves under internationally recognised reporting codes such as JORC (Joint Ore Reserves Committee), NI 43-101 (Canadian), SAMREC (South African), and the CIM Standards. The conversion of a mineral resource (an in-ground geological estimate) into an ore reserve (a commercially mineable quantity) requires the application of modifying factors — mining, metallurgical, economic, environmental, social, and regulatory — that are defined and evaluated through the feasibility study process.

Securing Financing

Banks, development finance institutions, private equity firms, and other sources of mining project finance universally require a feasibility study before they will commit capital. The level of study required depends on the stage of financing: early-stage or equity investors may accept a scoping study, while project finance lenders typically require a definitive (bankable) feasibility study prepared by an independent, qualified engineering firm.

The Three Levels of Feasibility Study

The mining industry uses a tiered system of feasibility studies, with each level providing greater detail, accuracy, and confidence than the last. The three levels are:

Scoping Study (also called a Conceptual Study or Order of Magnitude Study)
Prefeasibility Study (PFS)
Definitive Feasibility Study (DFS), also known as a Bankable Feasibility Study (BFS)

Each level serves a distinct purpose in the project development pipeline. Below, we examine each in detail.

Level 1: Scoping Study (Conceptual Study)

The scoping study is the first formal economic assessment of a mining project. It is conducted at an early stage, often immediately after initial exploration results have indicated the presence of a potentially significant mineral deposit. The primary purpose of a scoping study is to answer a fundamental question: Does this project have sufficient potential to justify further investment in more detailed studies?

A scoping study typically includes:

Preliminary geological model — Based on available exploration data, including drill hole assays, geological mapping, and geophysical survey results. The resource estimate at this stage is usually classified as Inferred or Indicated under the applicable reporting code.
Conceptual mine design — A high-level assessment of the likely mining method (open pit, underground, or a combination), production rate, and mine life. This is based on broad assumptions rather than detailed engineering.
Preliminary processing flowsheet — An outline of the likely mineral processing route, based on initial metallurgical test work or analogy with similar deposits.
Order-of-magnitude capital and operating cost estimates — Cost estimates at this level typically have an accuracy range of plus or minus 35 to 50 percent. They are based on factored estimates, cost databases, and benchmarking against comparable projects rather than on detailed engineering designs or vendor quotations.
Preliminary financial analysis — A cash flow model that estimates the project's Net Present Value (NPV), Internal Rate of Return (IRR), and payback period based on assumed commodity prices, production rates, and costs. Sensitivity analysis explores how the project economics change under different price, grade, and cost scenarios.
High-level environmental and social review — Identification of the key environmental and social issues that will need to be addressed in more detailed studies.
Risk identification — A qualitative assessment of the major technical, commercial, and regulatory risks facing the project.

Typical cost: A scoping study for a mining project generally costs between USD 50,000 and USD 500,000, depending on the complexity of the project and the amount of existing data available.

What it tells the investor: The scoping study provides an early indication of whether the project has economic potential. It is not a basis for final investment decisions, but it is the tool that determines whether a project is worth advancing to the next stage. A negative scoping study result can save investors millions of dollars by identifying projects that are unlikely to be viable before significant capital is spent on detailed studies.

Level 2: Prefeasibility Study (PFS)

The prefeasibility study represents a significant step up in detail, rigour, and confidence from the scoping study. It is conducted after additional exploration, metallurgical test work, and environmental baseline studies have been completed. The PFS is designed to answer a more specific question: What is the optimal development concept for this project, and does it justify the investment required for a definitive feasibility study?

A prefeasibility study typically includes:

Updated resource and reserve estimate — Based on additional drilling and geological modelling, the resource estimate is upgraded to Indicated and Measured categories. The PFS may include a preliminary ore reserve estimate, reflecting the application of modifying factors. For a deeper understanding of resource estimation, see our article on ore reserve estimation methods.
Mine design and production scheduling — A more detailed assessment of the mining method, equipment requirements, pit design or underground development plan, and production schedule over the life of the mine. Alternative mining scenarios are evaluated to identify the optimal approach.
Process design and metallurgical test work — Detailed bench-scale and pilot-scale metallurgical testing to confirm the processing route, recovery rates, and reagent consumption. The process flowsheet is developed to a level sufficient for preliminary equipment sizing and layout.
Infrastructure planning — Assessment of the infrastructure requirements including roads, power supply, water supply, tailings storage, camp facilities, and port or rail access. Infrastructure costs are often a major component of total project capital.
Environmental and social assessment — A more detailed environmental baseline study and preliminary assessment of impacts and mitigation measures, building on the initial EIA scoping. Community and stakeholder engagement is conducted to identify and address social issues early.
Capital cost estimate — Cost estimates at the PFS level typically have an accuracy range of plus or minus 20 to 25 percent. They are based on preliminary engineering designs, equipment specifications, and vendor budget quotations, supplemented by factored estimates for less-defined components.
Operating cost estimate — Detailed estimates of mining, processing, and general and administrative costs based on the proposed mine plan and processing design.
Financial analysis — A comprehensive discounted cash flow (DCF) model incorporating updated capital and operating costs, production schedules, commodity price assumptions, tax and royalty structures, and financing scenarios. Key financial metrics include NPV, IRR, payback period, and sensitivity analyses.
Risk assessment — A more detailed risk register identifying technical, environmental, social, market, and regulatory risks, along with preliminary mitigation strategies.

Typical cost: A prefeasibility study generally costs between USD 1 million and USD 5 million, reflecting the substantial additional data collection, engineering, and analysis involved.

What it tells the investor: The PFS provides a robust basis for deciding whether to proceed with a definitive feasibility study. It narrows the range of uncertainty significantly compared to the scoping study and provides sufficient detail for early-stage project financing, strategic partnership discussions, and preliminary discussions with regulatory authorities. A well-executed PFS is also the document that typically supports applications for mining leases in jurisdictions that accept prefeasibility-level studies.

Level 3: Definitive Feasibility Study (DFS / Bankable Feasibility Study)

The definitive feasibility study is the most detailed and rigorous level of technical and economic assessment in the mining industry. It is called "bankable" because it is the document on which project finance lenders — banks, export credit agencies, and development finance institutions — base their lending decisions. The DFS answers the ultimate question: Is this project technically feasible, financially viable, and ready for a final investment decision?

A definitive feasibility study typically includes:

Final resource and reserve statement — Based on the most complete geological dataset, including all infill drilling, the resource estimate is maximised at the Measured and Indicated level, and a final ore reserve estimate is prepared in full compliance with the applicable reporting code. The ore reserve statement forms the basis for mine planning and financial projections.
Detailed mine design — Complete mine design including pit optimisation, stope design, development scheduling, equipment selection, ventilation planning (for underground), and detailed production schedules by period. Geotechnical investigations inform slope design and ground support requirements. For insights into this process, see our upcoming guide on mine planning and design.
Final process design — Complete process engineering, including equipment sizing, process control philosophy, reagent supply, laboratory design, and plant layout. Detailed metallurgical test work at pilot or semi-industrial scale confirms recovery rates, product quality, and operating parameters.
Infrastructure design — Detailed engineering for all project infrastructure, including access roads, power supply (grid connection or on-site generation), water supply and management, tailings storage facility design, waste dump design, accommodation, and logistics.
Environmental and Social Impact Assessment — A fully approved ESIA, including a comprehensive Environmental and Social Management Plan (ESMP), mine closure plan, and community development agreement. In Uganda, this means securing the EIA Certificate from NEMA.
Capital cost estimate — Cost estimates at the DFS level typically have an accuracy range of plus or minus 10 to 15 percent. They are based on detailed engineering, firm vendor quotations, construction schedules, and contingency allowances. Costs are broken down into direct costs (mining equipment, processing plant, infrastructure), indirect costs (engineering, procurement, construction management), owner's costs, and contingency.
Operating cost estimate — Fully detailed operating costs built up from first principles, incorporating labour rates, energy costs, reagent consumption, maintenance schedules, and administrative overheads.
Comprehensive financial model — A detailed DCF model that incorporates all capital and operating costs, production and revenue projections, tax and royalty calculations, working capital requirements, financing structures, and closure liabilities. The financial model produces NPV, IRR, payback period, and annual cash flow projections under base case and multiple sensitivity scenarios.
Implementation plan — A detailed project execution plan covering procurement, construction, commissioning, and ramp-up to full production, with a critical path schedule and budget.
Risk assessment and management plan — A comprehensive quantitative risk assessment, often including Monte Carlo simulation to model the probability distribution of project outcomes.

Typical cost: A definitive feasibility study generally costs between USD 5 million and USD 25 million or more for large and complex projects. This reflects the extensive engineering, field work, environmental assessment, and specialist consulting required.

What it tells the investor: The DFS is the definitive answer to whether a mining project should be built. It provides the level of detail and confidence required for a final investment decision, project finance loan applications, and the commencement of detailed engineering and construction. A positive DFS is the green light that launches a project from evaluation into execution.

Key Financial Metrics in Feasibility Studies

Investors reviewing a mining feasibility study should focus on several key financial metrics, each of which provides a different perspective on the project's viability:

Net Present Value (NPV)

NPV is the sum of all future cash flows generated by the project, discounted back to present value at an appropriate discount rate (typically 8-12% for mining projects). A positive NPV indicates that the project is expected to generate value above the required rate of return. The higher the NPV, the more value the project is expected to create.

Internal Rate of Return (IRR)

The IRR is the discount rate at which the NPV of the project equals zero. It represents the project's effective annual rate of return. For mining projects, investors typically look for IRRs well above the cost of capital — often 20% or higher for projects in jurisdictions perceived as higher risk.

Payback Period

The payback period is the time required for the project to recoup its initial capital investment from operating cash flows. Shorter payback periods reduce the duration of capital at risk and are generally preferred, particularly in less stable jurisdictions.

Sensitivity Analysis

No feasibility study can predict the future with certainty. Sensitivity analysis systematically varies key assumptions — commodity prices, grades, capital costs, operating costs, exchange rates — to show how the project economics change under different scenarios. This is one of the most important sections for investors, as it reveals the project's resilience to adverse conditions and identifies the variables that have the greatest impact on value.

ALOM's Feasibility Study Experience

ALOM Mining & Geohydro Services has delivered feasibility studies for mining projects across Uganda, supporting clients from scoping through to bankable feasibility level. Our multidisciplinary team integrates geological, mining engineering, metallurgical, environmental, and financial expertise to produce studies that meet international standards and satisfy the requirements of investors, lenders, and regulatory authorities.

Our feasibility study work for Goodwill Uganda involved a comprehensive assessment of their mining project that included geological modelling, mine design optimisation, processing flowsheet development, environmental and social impact evaluation, and detailed financial analysis. The study provided Goodwill Uganda with the technical and financial evidence base needed to support investment decisions and regulatory applications.

For Nyamuriro Krone Mines, ALOM delivered a feasibility study that addressed the specific challenges of the project's geology and location. Our team conducted detailed ore body modelling, evaluated multiple mining scenarios, designed a processing route tailored to the ore characteristics, and prepared a financial model that clearly demonstrated the project's economics to potential investors. This work directly supported Nyamuriro Krone Mines' efforts to secure financing and advance toward production.

These engagements exemplify ALOM's approach to feasibility studies: technically rigorous, commercially focused, and tailored to the specific requirements of each client and project. Our mining services provide end-to-end support across all three levels of feasibility study, ensuring continuity and consistency as projects progress through the evaluation pipeline.

Common Pitfalls in Mining Feasibility Studies

Investors and project developers should be aware of common weaknesses that can undermine the credibility and reliability of feasibility studies:

Insufficient geological data — Basing a feasibility study on inadequate drilling data can lead to unreliable resource and reserve estimates, which in turn undermine all downstream analyses. The level of geological confidence should match the level of the study.
Optimistic assumptions — Overly optimistic commodity price assumptions, unrealistically high recovery rates, or underestimated capital costs are red flags. Conservative assumptions tested through sensitivity analysis provide a more reliable picture of project viability.
Inadequate metallurgical test work — Processing costs and recovery rates are major drivers of project economics. Feasibility studies based on limited or unrepresentative metallurgical samples can produce misleading results.
Underestimated infrastructure costs — In many African mining jurisdictions, including parts of Uganda, the cost of building roads, securing power supply, and establishing water infrastructure can be a significant portion of total project capital. These costs are sometimes underestimated in early-stage studies.
Ignoring social and environmental risks — Community opposition, permitting delays, and environmental liabilities are real risks that can derail projects. Studies that treat environmental and social assessment as an afterthought rather than an integral component are incomplete.
Lack of independent review — Feasibility studies prepared entirely by the project developer without independent verification lack credibility with external investors and lenders. Engaging independent qualified persons to prepare or review the study is standard practice.

Conclusion

Mining feasibility studies are the analytical backbone of every successful mining project. They provide the structured, evidence-based framework through which geological discoveries are evaluated, optimised, and transformed into investment-ready projects. The three levels of study — scoping, prefeasibility, and definitive — serve distinct purposes at different stages of project development, each progressively refining the project's technical design and economic projections while narrowing the range of uncertainty.

For investors, a credible feasibility study is the most important document in the project evaluation process. It is the basis for capital allocation decisions, financing applications, regulatory approvals, and the ultimate decision to build a mine. Understanding what each level of study contains, what it costs, and what it tells you is essential for making sound investment decisions in the mining sector.

ALOM Mining & Geohydro Services brings the multidisciplinary expertise, local knowledge, and international standards required to deliver feasibility studies that stand up to scrutiny from investors, lenders, and regulators alike. Whether your project is at the scoping stage or ready for a bankable feasibility study, our team is equipped to guide you through every step of the process.