The dire state of the global economy may be prompting the considerable number of preliminary economic assessments (PEAs) that I see being published.
The problem is that PEAs are no foundation for production decisions in mining projects, and serve little purpose in detailed value-creation forecasts. For these reasons, investors should be reminded that there is not much value in the detailed value projections that often accompany these assessments.
Many PEAs include calculations on envisaged production levels, capital costs, operational costs and even net present values (NPVs) and internal rates of return (IRRs). 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.
