Feasibility study

Once the mineral identification and reserve amount is reasonably determined, the next step is to determine the feasibility of recovering the mineral deposit. A preliminary study shortly after the discovery of the deposit examines the market conditions such as the supply and demand of the mineral, the amount of ore needed to be moved to recover a certain quantity of that mineral as well as analysis of the cost associated with the operation. This pre-feasibility study determines whether the mining project is likely to be profitable; if it is then a more in-depth analysis of the deposit is undertaken. After the full extent of the ore body is known and has been examined by engineers, the feasibility study examines the cost of initial capital investment, methods of extraction, the cost of operation, an estimated length of time to payback, the gross revenue and net profit margin, any possible resale price of the land, the total life of the reserve, the total value of the reserve, investment in future projects, and the property owner or owners' contract. In addition, environmental impact, reclamation, possible legal ramifications and all government permitting are considered. These steps of analysis determine whether the mine company should proceed with the extraction of the minerals or whether the project should be abandoned. The mining company may decide to sell the rights to the reserve to a third party rather than develop it themselves, or the decision to proceed with extraction may be postponed indefinitely until market conditions become favorable.