Independent cost modelling reveals operator-reported operating expense forecasts lag benchmark estimates by 39% on average, raising questions about the reliability of feasibility studies used by investors worldwide.
A systematic comparison of mining project cost forecasts against independently derived estimates has found that operating cost projections in company- and consultancy-authored technical studies are, on average, significantly lower than benchmark figures, a pattern that holds across projects in multiple jurisdictions including Canada, Chile, the United States, Mexico, Australia, and Pakistan.
The analysis, which benchmarks project economics drawn from engineering studies against cost modelling by Costmine analysts, found that company operating expense figures lagged the independent model by an average of 39%. The gap for capital expenditure was smaller and more varied, averaging 26% higher in the independent estimates, with some projects showing negative variance, indicating instances where company capital expenditure projections actually exceeded the independent benchmark.
Costmine, a leading mine cost analytics firm, used technical parameters such as mine and mill method, reserves and throughput from company NI 43-101 reports and other similar disclosures. The analysis applies its own proprietary cost data and models to form its independent views on capex, opex and valuation for mine projects, which have given another perspective on so-called independent mine cost estimates.
Key Findings
- Opex divergence: Company-reported operating cost estimates lagged independent benchmarks by an average of 39% across sampled projects.
- Capex variance: Capital expenditure estimates showed an average gap of 26%, though with wide variance and directionally mixed results across individual projects.
- Geographic breadth: The pattern was observed across projects in Canada, Chile, the United States, Mexico, Australia, and Pakistan.
Methodology
Costmine’s independent estimates include project equipment, infrastructure, design and engineering, direct and indirect costs, and contingency, a scope broadly consistent with company studies. Off-site infrastructure items such as rail, power, and port facilities were excluded from both sides of the comparison to preserve comparability. Costmine’s own mining and milling Cost Indices were applied to escalate all mining reports to 2025.
Implications for Investors and Lenders
The findings carry significant implications for how investors and lenders assess the economic viability of proposed mine developments. If operating cost assumptions embedded in Preliminary Economic Assessments (PEAs), Pre-Feasibility Studies (PFSs) and Feasibility Studies (FS) are systematically optimistic, net present values and internal rates of return would overstate economic returns, a concern that has historically contributed to capital destruction in the mining sector. “Operators and investors need to be really honest with themselves about what these massive projects will cost to operate, never mind the capex that is sunk. Most mining cost overruns are predictable and preventable when scope, sound data, including costs, and execution is the focus.”, says Michael Sinden, Managing Director of Costmine.
No single cause for the observed gap was identified in the mining reports analyzed, and the range of variance across projects is wide. Projects in some jurisdictions showed relatively modest differences, while others, particularly those with long periods between study completion and cost benchmarking, showed more substantial discrepancies. Gordon Sobering, Head of Cost Analysis at Costmine, warns “investors need to understand that development studies, commissioned and paid for, often by junior miners, are not just technical reports they are also marketing documents.”
Looked at in this light, the findings of Costmine and the role of independent cost analysis are more important than ever when making investment decisions.
About Costmine Intelligence
Costmine Intelligence is a leading provider of mine cost data, analytics, and independent cost modelling for the global mining industry. Trusted by engineers, analysts, and investors worldwide, Costmine delivers the benchmark data and proprietary tools needed to evaluate the true economics of mining projects. Its WOODY platform applies Costmine’s proprietary cost data to project technical parameters to generate independent capital and operating expenditure estimates, helping users cut through optimism bias in operator-reported feasibility studies. Learn more at www.costmine.com.
Media Contact
Olivia Spilker
Sales and Marketing Operations Associate
Costmine Intelligence
[email protected] | 509-328-8023
