CONCEPTUAL MINING STUDY STANDARD

May 2008

TABLE OF CONTENTS
1 DEFINITION........................................................................................................................3 2 GENERAL............................................................................................................................3 2.1 STUDY SCOPE.............................................................................................................3 2.2 STUDY ORGANISATION APPROACH....................................................................3 2.3 STUDY REPORT..........................................................................................................3 3 STRATEGY..........................................................................................................................5 4 RISK MANAGEMENT........................................................................................................6 5 MINERALS SPECIFIC........................................................................................................7 5.1 GEOLOGY AND MINERAL RESOURCES...............................................................7 5.2 MINING.......................................................................................................................11 5.3 METALLURGICAL PROCESSING..........................................................................17 5.4 INFRASTRUCTURE..................................................................................................21 5.5 ENGINEERING DEVELOPMENT............................................................................22 6 HUMAN RESOURCES......................................................................................................23 7 PROJECT EXECUTION....................................................................................................24 8 OPERATIONS MANAGEMENT......................................................................................25 9 CAPITAL COST ESTIMATE............................................................................................26 10 OPERATING COST ESTIMATE....................................................................................28

1 DEFINITION
The primary objective of a Concept Study is to develop and assess an investment opportunity in order to establish strategic fit and likely attractiveness of the business case. It identifies any possible options to be assessed during the next phase Prefeasibility, should the investment opportunity warrant further investigation.

2 GENERAL
2.1 STUDY SCOPE
Before proceeding with the Concept Study, the Project Leader/Director should define the scope of the Study. The Study should be structured to identify: The potential of the new or expanded business opportunity; The general features of the opportunity including potential cases to be studied in the next phase; The key business drivers for the opportunity and any potential fatal flaws; The order of magnitude of cost estimates for the opportunity (both capital and operating costs); Technical issues needing further investigation, such as geological drilling or test work required; The costs and time to undertake further development work for a Pre-feasibility Study to be completed; The resources and services required for undertaking further work on the opportunity.

2.2 STUDY ORGANISATION APPROACH

Prior to the actual commencement of the Study, the Project Leader/Director should: Establish an integrated owners team to direct and manage the Study, ensuring that the appropriate skills are brought to bear; Establish the contracting methodology, selection criteria and scope of work for external consultants and contractors; Assign the scope to the owners lead personnel, consultants, contractors or external groups; Establish mechanisms to control, monitor and report progress of the Study; Agree the format, frequency and circulation of a progress report with the CSG Board; Ensure that the principles of Front End Loading are applied to the development of the Study.

2.3 STUDY REPORT

The owners team should prepare a Concept Study report that presents the findings of the Study and reports on the requirements highlighted in this standard.

The report should include an Executive Summary that addresses the content in the following table.

Ref 2.3.1

Element Overview

Minimum Requirement Provide an overview of the project, highlighting the main economic benefits, the key business risks and the way forward. Recommend or not recommend that the identified opportunity warrants further funding to investigate the economic benefits of its development. The recommendation should demonstrate the business opportunity and the potential risk for reward in pursuing the opportunity further. Any recommendation may present a case for further Concept Studies, or a full recommendation for advancing the examination to Prefeasibility Study status. The recommendation should present alternative geological, mining, metallurgical and marketing approaches to be considered in the Prefeasibility Study. Include a statement of the scope of the opportunity, with any exclusion specifically nominated. Also include a description of the primary features of the opportunity and where appropriate, a description of location, history, ownership, topography and climate. Include a statement as to the scope of the studies performed to date, any exclusion or major assumptions made. Present the Key Performance Indicators (KPIs) for the opportunity, provided the accuracy of the indicators is not misleading and can be quantified. Include order of magnitude benchmarking of unit capital cost, unit operating cost, Execution Phase and the ramp-up schedule. Explain any major differences between the opportunity and the benchmarks, if data is available to support the basis of such an analysis. Address key issues as highlighted in Appendix 2 of the Investment Process Manual with the focus on assessing the probabilities of converting the proposed project into a viable investment, following commitment.

2.3.2

Recommendation s

2.3.3

Project Description and Scope

2.3.4 2.3.5

Scope of Study Key Performance Indicators and Benchmarking

2.3.6

Key Issues

3 STRATEGY
The Concept Study should include an analysis of the business opportunity and a statement as to whether (or not) the proposed project is relevant to and/or compliant with the companies Strategic Plan and the Customer Sector Strategic Plan. Only the potential economic benefits of the project to the company need be presented in conjunction with the Business Strategy Statement. The Study report should provide an outline of the following issues. Ref 3.1 Element Industry Attractivene ss Minimum Requirement Key supply and demand drivers. Revenue growth factors. Industry structures. Diversity of suppliers and customers. Industry cost curve. Forecast project position. Price assumption. Historical and forecast margins. Note

3.2

Strategic Rationale

Value adding sources, historically and forecast. Projects ability to exploit these opportunities. Companies capacity to achieve Value Adding. Strategy fit with companys framework and the
customer sector strategic plan. Review of project to business strategy. Strategic alternatives including exit / no go option. Basis of potential project being best option. Potential of staged development.

3.3

Strategic Fit

Develop to outline standard only.

3.4

Strategic Alternatives

3.5

Scenario Analysis Exit Strategy

3.6

Scenario development process used so far. Considerations of companys global scenario. Potential scenarios and impact on alternatives. Basis of exit strategy. Defined triggers or milestones for exit decision.

4 RISK MANAGEMENT
Risk Management is the culture, processes and actions that are directed towards the effective management of potential opportunities and adverse effects. Risk Management should be undertaken in accordance with the companies Risk Management Policy and Procedures. This section specifies the overarching requirements necessary for an integrated and holistic view of risks and their upsides to be formed. It is supplementary to sections in this document that cover specific risks such as HSEC risks, Market risks, Country risks, etc. It is important to establish effective risk management from the beginning of an Investment life cycle and to continue it through to feasibility, implementation, operational and ultimately the exit phase of the Investment.

5 MINERALS SPECIFIC
5.1 GEOLOGY AND MINERAL RESOURCES
The company should ensure that its Mineral Resources and Ore Reserves are reported according to the appropriate codes. All aspects material to the geology and resource evaluation should be investigated and reported. The investigation and report should include, but not be limited to the items and issues mentioned within these standards. Work must be performed by or under the direction of competent geologist and/or resource practitioner or consultants based on data and information derived from the investigation. Any discussion of the issues must clearly distinguish which data and information is attained through direct observation, inference, or assumption. Ref 5.1.1 Element Conventions Minimum Requirement Document the conventions used for the project and clearly define: The units used for the project; The Project Coordinate System and its relationship to World Coordinates; The term Reduced Level; Project Grid system including grid North; and Key terms and nomenclature used. State that: The right to explore has been obtained; A clear process to obtain secure tenure and licence is identified and understood;

5.1.2

Tenure

 A plan for approval to the next phase is prepared; and A clear mechanism (purchase, lease, option or
compensation agreement) to obtain secure access to the necessary surface rights for the mine, process plant, tailings disposal and infrastructure are in place. Provide a summary of the regional geology, the stratigraphic, structural and tectonic setting for the ore body that forms the basis of the geological concept to this Study. Outline in detail the exploration history, work completed by whom, when and the techniques used. This should include a description of the various interpretations and estimates made over time. Present ranges of outcomes derived from previous work. Provide a description of the methods used to acquire data to facilitate the preliminary evaluation of the deposit, including an assessment of the accuracy and precision of the data acquired. Note: The distribution of data will be such that it will allow for a preliminary or conceptual interpretation of the geological framework for the ore body. The continuity of the mineralisation is assumed. Lithologies, alteration, structure, ore-types and metallurgical characteristics are assumed or estimated from available samples. Data collection must use appropriate techniques and should be qualified bythe sources and method of collection, and be subject to QA and QC procedures such that the data collection trail is fully trackable. Geological and Topographic Mapping: Outline a description of the geological and topographic mapping undertaken with quality control and assurance methods. Drilling and Other Sampling Methods: Describe the sample methods: including surface, grab or channel sampling if undertaken with QA and QC procedures used. Drill data acquisition description should include: Drilling methods, the basis of the drill contract and comparison between drill methods applicable with discussion of any bias introduced by the drilling method/s applied; Drilling locations; Sampling methods, intervals and recovery; Analysis methods; Quality control and assurance methods and results; In-situ density sampling and test work (wet and dry density, moisture content, porosity etc.); and Residual sample storage. Data Management: Include a description of the data management: Survey control, hole position and set-up angle;

5.1.3 5.1.4

Regional Geology Exploration History

5.1.5

Data Acquisition

Downhole position and survey method; Data organisation and storage; Audit trail; and Security.

Logging: Reference the drill logging system used: Geological (including lithological, structural, mineralogical etc.); Hydrogeological; Geophysical; and Geo-technical. Geochemical Analysis: Include the validation of the geochemical analysis, description and summary results for quality control and assurance methods used and refer to the more detailed reporting in an Appendix. 5.1.6 Deposit Geology Provide a description of the local geology that hosts the ore body; clearly distinguish between the factual observations and the interpreted geology, and indicate preferred and possible alternate and likely ranges of interpretations. The description should cover: Lithology full description of the host and wall rock lithologies; Structure; Mineralisation reference should be made to the metallurgical characterisation outlined in Section 5.1.8 below; and Alteration. Consider using summary cross sections, longitudinal sections and plans to illustrate the geology data and interpretation. Include reference to a complete set of plans and sections as an Appendix. Note: The deposit geology, mineralogy and continuity of the mineralisation must be understood on a general and global scale. Provide a description of the methods and techniques used to estimate the insitu resource. This should include a summary of the justification for the major decisions taken and the methods used and should indicate ranges of possible outcomes. Resource models developed should (where possible) contain inferred information on all aspects of the ore body that may have potential to significantly impact on mining, processing, the environment, or the saleability of the mineral contained. The resource models developed should estimate the global resource covering the gross spatial variability of key ore body parameters and characteristics suitable for a conceptual life of mine planning. Spatial variability should be assumed and the assumptions

5.1.7

Resource Estimation

clearly stated. Alternate models and interpretations could be assessed to indicate ranges of possible outcomes. Note: Tonnage and grade of the deposit will be estimated by a "Competent Person" and is at least known at the Inferred classification (as per appropriate code). Geological Interpretation and Exploratory Data Analysis: Include data analysis by geological and modelling domains (where possible) with justification of domains chosen and discussion of the links to the geology, analysis: Univariate classical statistical analysis; Bi-variate and multi-variate classical statistics; and Geo-statistics. Block Modelling: If undertaken, include the following: Choice of block size, orientation and origin; Domain modelling; Grade modelling; Density modelling; and Model validation. Resource Classification: Include a description of the criteria used. Mineral Resource Estimation Results: Include the following resource estimation results: Cut-off determination, including presentation of tonnes and grade v cut-off illustrations; Comparison of the current resource with previous estimates and comment on the differences and the reason for those differences; Resource classification; Mineral Resource tabulation, by classification and domain; and Range of possible outcomes for Tonnes and Grade, based on the current knowledge of the deposit and alternative geological interpretations. 5.1.8 Metallurgical Characterisati on Data presented and discussion should include but not be limited to: Reference and listing of the metallurgical samples taken (i.e. drill core samples etc.), either as an Appendix or separate reference; Ore mineralogy, mineral species, grainsize, texture, etc.; Gangue mineralogy, species, grainsize, texture, etc.; Chemistry of minerals present including a scan for minor or deleterious elements; and Chemistry of the ore and waste rock types.

Note: Initial characterisation of the ore and waste rock-types is sought in order to relate them to potential metallurgical processes (see Section 5.3.1). Typically this would be supported by initial field observations. 5.1.9 Hydrogeology Deposit Hydrology Provide a description of the ground water regime likely to be encountered within the deposit, including a general description of possible aquifers, aquicludes, water levels, likely porosity and permeability, with initial speculation on the impact on mining. This discussion should identify likely risks by identifying potential outcomes and the likelihood of each occurrence. Project Water Supply: If the project requires a water supply that could be provided via a borefield or other means, then a description of the proposed options and the test work needed to define these options is required. Provide a description of the known geo-technical domains, the rock mass character and the potential impact on mine planning and operations. Identify potential risks and ranges of possible outcomes and translate them into likely impacts on mining. Provide a discussion of the technical risks associated with the Study. In particular there must be clear definition of the ranges of possible outcomes for key outputs (such as tonnes and grade) as well as a discussion of likely ranges to be expected for items such as continuity, ore body geometry, boundaries, and contacts etc. Identify the methods used to determine these ranges of outcomes. Provide a description and cost estimate of the geological, drilling and resource work to be undertaken during the Prefeasibility Phase of the project. Comment on whether such work is to improve the confidence in and/or to add to the existing resource. Produce the project Mineral Resource statement as per appropriate code. Note: This must be a stand-alone statement that can be lifted out of the Study for public reporting purposes and must be signed by the Competent Person. 5.1.1 4 Appendices Provide the following documents (where possible) as appendices.

5.1.1 0

Geotechnical Appraisal

5.1.1 1

Risk Assessment

5.1.1 2

Forward Work Program

5.1.1 3

Mineral Resource Statement

5.2 MINING

The Study should investigate and report on the most likely mining scenario based on the existing body of knowledge, which supports the contention that the opportunity presented by the project may be viable. Generally, the depth of Study required does not extend beyond rule of thumb or industry standard assumptions, first pass assessments, or application of proven methods to a similar deposit. The professional judgment of a competent mining engineer or consultant, based on cursory or minimal information, will be sufficient in some areas. Ref 5.2.1 Element General Mine Planning Criteria Minimum Requirement Conventions: Document the conventions used for the mining Study including full description of the survey co-ordinate system used and its relationship to the Universal Coordinate System. Provide a glossary of terms as appropriate. Site Description: Present a summary description, including but not limited to: Local and regional setting, including: climatic, surface and seismic conditions; Tenure conditions, including ownership, mineral titles, water rights, operating licenses and surface access rights; Site access plus existing and proposed local and regional infrastructure facilities relevant to the project; General site location map with coordinate system consistent with that adopted for the project. Resource Description: Summarise key issues, including: Particular aspects of the geological block model on which the mine plan places high reliance (e.g. ore types, high grade zones etc.) Material characteristics and their variability that may affect mining or processing operations such as hardness, abrasion, insitu and loose density, moisture content, excavatability, swell factor, dust generation, contaminants, etc. Geotechnical Parameters: Summarise key geotechnical assumptions based on the available information, including: Geotechnical data by material class or rock type, including where appropriate in-situ stress regimes; Stability (risk) analyses with consideration of seismic and hydrological action and the potential modes of failure; Geotechnical recommendations for mine design, incorporating ground support requirements, equipment selection, and equipment performance. Hydrogeological Considerations: Summarise key issues, including: Surface and groundwater regimes; Historical data such as water analysis, water table level and fluctuation, porosity, permeability, etc.; Possible water control practices such as dewatering, grouting, etc.

Gas Regimes: Summarise, where applicable, the available information and data to establish the nature of in-situ gas regimes (to extent possible) and the likely impacts on mining. Ventilation: Summarise, where applicable, the proposed ventilation system, required to sustain the proposed mine development and operation, including: Regulatory requirements; Conceptual design, including design parameters, airflow regulation/control, infrastructure and equipment design. Environment and Cultural Considerations: Summarise the key issues and considerations that impact on, or influence the mine plan and mine design. Process and Market Considerations: Summarise the key issues and considerations that impact on, or influence the mine plan and mine design, including: How the design is influenced or constrained by the presented Market assessment of factors such as demand, supply and price of the mineral commodity being produced. Show that key business assumptions have been challenged and verified. Recovery or yield of the mineral commodity being produced from ore mined and processed; Mineral processing parameters expected to affect mine design and operation; How potential marketing and process risks affect the mine. Show that market and process driven constraints or requirements have been challenged and verified. Economic Criteria: Summarise the key issues and considerations that impact on or influence the mine plan and mine design. Information and discussion presented, where applicable may include but not be limited to: Revenue Drivers: price, recovery, treatment terms, etc. Show how net back to mine revenue is calculated. Cost Drivers: mining cost assumptions, off-site costs, overheads, assumptions about sustaining mine capital, etc.

5.2.2

Mine Design

General Approach: Provide a description of the methods used to acquire data and to facilitate the preliminary or conceptual mine design, including an assessment of the accuracy and precision of the data acquired and risks associated with the mine design. Note: Sufficient data will have been collected: From desktop investigations and preliminary site visits to describe or infer in general, mine design criteria. To carry out conceptual mine planning with global estimates of time, quantities and costs. Optimisation processes are not expected to be applied at this stage.

The report as a minimum, should include a comprehensive listing, description and explanation of the mine design parameters applied to the project, including the following main headings: Mineable Resource Model: Provide a description of the mineable resource model as developed from the geological resource model and other sources, including: Development of the mineable resource model from the geological resource model through application of such factors as cut off grade, ore dilution, ore recovery, grade control data, mineral processing response, etc.; Resource classification which may or may not be per JORC Code, depending on the existing level of definition; Mineral Resource tabulation with relevant discussion as to the confidence level of the estimate. Note: At the concept level, a good guideline is that the overall limits of the deposit are known and that an overall resource tonnage and grade can be inferred from the available data. Mine Production Rate: Provide a description of the range of mine production rates suggested to be applied to the project. Mining Method: Provide descriptions of the potential mining methods to be applied to the project: A description of the considered mining methods based on available site information and regional or deposit type knowledge. (Include operating examples as appropriate); Methods previously applied to the ore deposit; Existing mine operations of similar magnitude and nature elsewhere on the same deposit. Ore/Waste Determination: Provide a description of the

proposed criteria for ore / waste determination that would be used in planning and design for the proposed mining operations as presumed from similar operations or from historical data. Mining Limits: Provide a description of the methodology applied to establish the final mining limits from the mineable resource model. Illustrate schematically the final limits in maps and sections. Information and discussion presented, where applicable should include but not be limited to the following: Reference to physical and economic parameters to be applied from other sections of the Study document; Mineable resource model used; Method by which the results were verified or validated; Tabulation of mineable resource and reserve with discussion as to the confidence of those estimates. Note: The limits presented here are not expected to be optimal. It is expected that the final mining limits are the engineers best judgment estimate as to the most likely outcome given the available body of knowledge. Final Mine Layout: Include a schematic description to a level of detail consistent with the level of understanding of the project. Information and discussion presented, where applicable should include but not be limited to, the following: A summary of design criteria applied and key assumptions; Tabulation of ore reserves and resources (including waste) by classification, rock type, etc. within the design; Sections and plans produced to show proposed positioning of mine excavations, waste dumps, ore stockpiles, ore processing plant and the mine infrastructure, with cross reference made to a more complete Appendix. Ore Reserves Statement: It is not generally expected that a code compliant statement can be made at the Concept stage. However, if a statement is made it must be compliant to the appropriate code. 5.2.3 Mine Operations Production Sequence and Schedule: Provide an idealised sequence and schedule. Mine Equipment Requirements: Provide a listing and description of the size and type of mine equipment assumed, including: The mining equipment (with assumed sizes of primary equipment); Operating cost estimate for primary and secondary mining

equipment; Capital cost estimate or lease option costs. Overburden and Waste Disposal: Provide a general description of the waste/overburden material disposal sites and methods: Waste disposal site selection and design criteria; Environmental and cultural considerations to disposal sites; Condemnation activities and results; Mining activities for waste disposal (site preparation, topsoil storage, dump construction, rehabilitation and decommissioning, etc.) Operations Summary: Provide a summary of the schedules developed for the mining operations. Schedules will be preliminary and presented as summarised annual statistics to include: Ore production and feed to process; Ore and waste excavation; Waste disposal movements; Equipment required for mining operations; Manning levels for all mining activity related personnel; Infrastructure required to support the mining operations; Mine capital expenditure; Mine operating costs. Note: Provide clearly organised tabulated results of the mining section. Operations Management: Provide a cursory description of the mine operations proposed for the project, including: Mine equipment operation and maintenance; A schedule of mine operation activities. 5.2.4 Capital Cost Estimates Present summary tabulations to illustrate the mine capital expenditure. Note: Sufficient data would have been collected to provide global estimates based on scaled or industry history for the size and type of potential operations contemplated. Reference to in house data on operations of similar magnitude and scope will be adequate for a Concept Study. Present summary tabulations to illustrate the mine operating costs. Note: Sufficient data would have been collected to provide global estimates based on scaled or industry history for the size and type of potential operations contemplated. Reference to in

5.2.5

Operating Cost Estimates

house data on operations of similar magnitude and scope will be adequate for a Concept Study. 5.2.6 Risk Manageme nt Provide a discussion of the potential technical risks associated with the mining aspects of the project and if possible, the method of mitigation to be adopted following this Study. In particular there must be a discussion of the potential value outcomes and likely impacts to mining from items such as reserves, production risk, mining method, schedules, operating costs and capital expenditure. Provide a Work Plan with detailed costing and implementation program for a Pre-feasibility Study on the opportunity of the proposed project.

5.2.7

Future Work Program

5.3 METALLURGICAL PROCESSING

The Study should investigate and report on the most likely processing option that supports the contention that the opportunity presented by the project may be viable and identify all options to be considered in the next phase. The Study report should address the following. Ref 5.3.1 Element Conventions Minimum Requirement Document the conventions used for the project and clearly

define: Measurement units the SI system is the standard, with conversions quoted if other units are employed; Key terms, symbols and abbreviations. Note: The use of the word ore is deemed to apply to both mined ore and to plant feedstocks in the case of downstream processing (e.g. smelters and refineries. Detail the method and results of the initial ore and waste Metallurgical Characterisation work (including any assumptions), which as a minimum, should address, in accordance with Section 5, the following metallurgical processing issues: Details of ore and waste mineralogy, mineral species, grainsize and texture; Mineral chemistry and relevant physical properties (e.g. SG distribution), in particular, minor deleterious elements or minerals, that typically present commercial or technical issues in processing and marketing; Details of any evidence that indicates ore variability and the presence of significantly metallurgically different ore types. Detail how any metallurgical samples were obtained and what considerations (and assumptions) were made to ensure that test work was carried out on relevant samples that are representative of future processing plant feed or blends. Basic metallurgical test work must be conducted to verify each key unit operation that makes up one or more of the potential metallurgical processing options identified during process selection. Detail the basic metallurgical test work as follows: Identification of the samples tested and the scale of the test work conducted; Metallurgical test method adopted for each unit operation; Where a simulation or model has been used, details of such simulation software and how it was applied; Test work or simulation results obtained; Interpretation of these test results including the derivation of metallurgical design basis from the results; Degree of metallurgical behaviour variability indicated. Detail the following in relation to potential mineral or metallurgical processing options: Potential metallurgical processing options identified for subsequent test work based on ore characterisation data;

5.3.2

Ore Characteristi cs

5.3.3

Laboratory, Pilot and Demonstrati on Plant Test Work

5.3.4

Process Selection and Basis

Any historical metallurgical test programs that have

been carried out on the ore body, including who completed the work, when it was completed, the

metallurgical techniques used and the interpretation of results. Where appropriate, any differences should be highlighted and discussed. Details of metallurgically similar ore bodies that have been identified that could be used as a benchmark for ore characterisation, process route selection and processing risks. Identify the potential processing options that are likely to capture the maximum value of the ore body at an acceptable level of risk. Provide the details of all selected processing flow sheets and, as a minimum, indicate: All potential flow-sheets considered and/or the most likely flow-sheet to be adopted and the reasons for its selection; Any alternative processing options to be considered in the future; Possible product specifications indicated by the test work results; Scale-up factors required; Potential consumption rates; Process design criteria. Address any key technology issues relating to the processing of the ore and the handling and storage of plant residues including: Potential source, costs and terms for technology needed to be acquired; Whether the technology has been used before, where used and the success or otherwise of its use; Whether patented or proprietary; Extent of further test work required to validate its use on this project; Areas where, if the technology were developed, BHP Billiton would achieve significant competitive advantage. Estimate the potential benefits to allow focussed research and development activities to be proposed. 5.3.5 Facility Description Include, as a minimum, the following: Facility Description: Conceptual block process diagram; Process flow diagrams outlined with the major streams characterised; Preliminary mass, energy and water balances; Possible plant, infrastructure and disposal sites for plant residues, and location footprint plan. Design Criteria: Product quality specifications; Annual ore and product capabilities; Outline mass, energy and water balances; Predicted plant availability;

 Preliminary consumption rates for major operating and

maintenance consumables; Preliminary utility usage; Design life; Product handling and transportation strategy (pipeline / rail / shipping). Facility Operations Basis: Possible operating strategy; Typical availability of metallurgical processing plant; Ramp-up rate from commissioning to full production. Capital and Operating Costs: Develop this in accordance with the estimating guidelines. 5.3.6 Future Work Program Provide a description of the metallurgical investigations and test programs proposed to be undertaken during the Pre-feasibility Phase of the project and include: Direction of the future investigation, including the objectives and reasons; Scope of the investigative work; Engineering development; Provide a preliminary risk assessment of those processing routes considered for selection in accordance with Section 4 of this minimum standard to identify specific metallurgical processing risks such as: Technical risks associated with the processing route selected and alternatives considered; Key process performance parameters including those which are the processing economic drivers; The likely range of outcomes for the key drivers and the methods used to estimate these ranges; Process scale up if likely to present significant process risk or whether the scale up behaviour is well known and proven. Where significant processing risks are identified, provide a clear mitigation strategy that would include pilot testing of the process at an appropriate demonstration plant scale in the Pre-feasibility or Feasibility Phase of the project.

5.3.7

Risk Assessment

5.4 INFRASTRUCTURE
For the purpose of this standard, infrastructure is defined as all facilities of a nonproduction nature required to support the operation and typically includes items tabled below. Major aspects of both on and off-site infrastructure should be outlined in the Concept Study to identify the proposed development of infrastructure needed to support the project. On-site infrastructure comprises facilities of a non production nature, which are proposed to be located on lands controlled or owned by the operation. Off-site infrastructure comprises facilities of a supporting services nature, proposed to be located away from the lease on lands controlled by the company or leased from others. The Concept Study should identify which items of infrastructure are located on or off site. The extent to which existing infrastructure may be available to support a project, should be stated in the Concept Study. Concept studies should identify options and optimisation cases and develop basic evaluations to justify further review at the next stage. The battery limits between on-site infrastructure and mining and processing facilities must be clearly stated. Similarly the battery limits between off-site infrastructure to be developed and existing infrastructure needs to be stated. The Concept Study should address these issues. Ref 5.4.1 Element Infrastructu ral Requiremen ts Minimum Requirement Define the requirements for the following, in accordance the statements above: Utilities: Power, fuel, water and other utilities compressed air, steam etc. Disposal and Drainage: Sewage, waste disposal, tailings and stormwater drainage. Buildings and Facilities: Administration and service buildings, accommodation, warehouses and community related facilities housing, schools, clinics, etc. Transport Infrastructure: Roads, rail, port and airstrips. Communications: Landlines, satellite - including IT/IS interfaces. Temporary Facilities: Temporary facilities required during construction power, water, accommodation, lay-down areas, etc. Other: Security, fire protection, etc. 5.4.2 Location Study Identify potential locations proposed for the infrastructure. Note: Ground-level geotechnical survey (by surface observation and

5.4.3

Engineering Design Basis and Deliverables

local pits), and topographical investigations via existing data should be completed, to provide a reasonable level of support for the viability of the locations selected. Include significant parameters and factors influencing the engineering design basis of the Study: Site conditions general data; Environmental potential limitations.

5.5 ENGINEERING DEVELOPMENT

During the course of the Concept Study, the project team will identify the production facilities and infrastructure required. For the purposes of indicating the potential value of the project, it is necessary for the engineering thereof to be developed to the extent that the owners can define the scope of work of the project, in order to;

Establish an order of magnitude estimate of the capital cost appropriate for a

concept study. Establish an indication of the schedule As engineering development (including a preliminary site selection) is critical to defining the right business opportunity, it is a key component for the early phase of Front end loading. The minimum requirements for a Concept Study are as follows. Ref 5.5.1 Element Basis of Design Minimum Requirement Preliminary Design Basis document covering: Site conditions topographical, seismological, climatic data. Environmental potential issues and limitations. Logistical Limitations. Criteria for operability, reliability and maintainability Potential locations for the production facilities, infrastructure and waste disposal sites. Note: Ground-level geotechnical survey (by surface observation and local pits), and topographical investigations via existing data should be completed, to provide a reasonable level of support for the viability of the locations selected. For all production facilities and infrastructural requirements, provide the following (where applicable) on a preliminary basis: Heat and Mass balance Plant Block Flow Diagram Process Flow diagrams for major facilities. Utility Flow Diagrams Mechanical Equipment list Electrical Single Line Diagrams Plant Layout Drawing Process Control System Configuration

5.5.2

Location Study

5.5.3

Engineeri ng Deliverabl es

5.5.4

Front End Loading

Demonstrate that basic principles of FEL have been applied and support the validation of the business opportunity and the selection of alternatives to be analysed in the next phase. Although not applicable to a concept study, practices appropriate for developing alternatives should be identified. Review and outline new and/or competing technologies.

5.5.5

Value Improving Practices

6 HUMAN RESOURCES
Based on the outline of the potential Operations Management Plan (see Section 8), a brief review of human resources must be conducted to report on the following issues according to the standard stated: An assessment of the skills required and available to execute and operate the planned facilities; The sources of human resources available; The potential human resource impacts if the potential project was to be developed. The issues which should be addressed, include: Organisation model to be potentially adopted; Cultural fit; Recruitment and training strategy; Employee relations strategy; Performance management and compensation strategy; Statutory obligations and requirement pertaining to the employment of local and expatriate staff. At the Concept Phase, the extent of definition and evaluation of these issues need only to be outlined, with an emphasis on identifying high-impact issues.

7 PROJECT EXECUTION
At the Concept Phase, the owners team should develop an outline of the potential approach to Project Execution that forms the proposed basis for implementing the project. This outline should address the following. Ref 7.1 7.2 Element Scope Work Breakdown Structure (WBS) Execution Methodology Minimum Requirement State the physical scope of the project along with any major assumptions. Prepare a preliminary WBS that represents the major elements of the project in line with the intentions for project execution, as they are envisioned at this stage. Broadly outline the proposed approach to executing the project and the various contracting strategies that could be use to deliver the project and the approach / strategy selected / nominated to support the basis of factorised estimates for indirect costs. Broadly address the Project Organisation for implementation of the project including the general type of structure etc. that may be employed. Identify key or special health, safety, environment and security issues thatwill require management during the Execution Phase of the project.

7.3

7.4 7.5

Project Organisation Project Health, Safety, Environment and Security Planning and Scheduling Engineering

7.6

7.7

Prepare a schedule showing all the major activities during subsequent studies and phases, execution and start-up of the project. Structure the schedule generally in accordance with the WBS. Explain the approach to engineering delivery, including the

7.8

Procurement and Contracts Construction Precommissioni ng and Commissioni ng Risk

requirements for specialist input, the application of new technologies, use of computer aided engineering, reviews (constructibility, operability, and maintainability) and the engineering resources required for the Execution Phases. Identify key items of equipment with long lead times or critical technology issues including potential manufacturers and suppliers. Outline major contracts. Outline the broad approach to construction, industrial relations, labour resourcing, logistics and specific construction issues. Outline the broad approach to pre-commissioning and commissioning including the involvement of operations staff and any specific requirements due to new technology, shutdowns, tie-ins etc. any recognised Execution Phase major risks or potential project killers and propose potential mitigation concepts.

7.9 7.10

7.11

8 OPERATIONS MANAGEMENT
The Concept Study should include a general appraisal and commentary of the possible methods of establishing (or increasing) the companies capability to establish, commission, start-up and operate the proposed facility and associated infrastructure. The Concept Study report should address the following issues with supportable statements meeting the following standards. Ref 8.1 8.2 Element Organisation Resources and Sources of Personnel Operating Cycles Conditions of Employment Accommodati on Operations Maintenance Minimum Requirement Include the broad structure of the Operations group needed to support the development and operation of the potential project and a statement to this effect. Present an assessment of the resourcing and sourcing of the proposed operating workforce, to an acceptable level of accuracy. No assessment is required. No assessment is required. Briefly investigate the basis of accommodation and state the results and any assumptions made. Report on the operability of the proposed facilities and the plant options considered, taking into account lessons learnt. Report on the maintainability of proposed facilities by means of benchmarking and/or experienced judgement.

8.3 8.4 8.5 8.6 8.7

8.8 8.9 8.10

Transport Administratio n Other Issues

Include an assessment of logistic transport requirements to support thepotential project. No assessment is required. No assessment is required, unless addressed elsewhere in this standard, i.e. marketing, HSE, information management.

9 CAPITAL COST ESTIMATE

This section sets out the minimum standards applicable to preparing a Capital Cost Estimate for the Concept Phase. Changes to, or deviations from this standard should be subject to approval prior to commencement of the Concept Study. Ref 9.1 Element Accuracy of Estimate Minimum Requirement Develop capital cost estimates for Project Concept Studies to be targeted within an accuracy of 50%. Note: On completion of the Study the accuracy of the estimate shall be assessed. Basis : Include a description of the estimating basis used and in particular any deviations from the Cost Estimating guideline. The estimate must be referenced to the scope of work. Definition of Costs: Sufficiently define operating costs in accordance with the BHP Billiton standard General Ledger and Cost Elements, to allow an accurately defined financial evaluation to be undertaken. Base Date and Exchange Rates: State the base date of the capital cost estimate. The estimate will be expressed in the functional

9.2

Basis of Estimate

currency of the project. State the exchange rate conversion factors used. Estimate Strategy: The basis of the estimate should state the strategy followed and should demonstrate a methodology that is appropriate in support of the stated accuracy of the Study. Consultants Estimates: Instruct those sub-consultants who, as part of their scope of work, are required to prepare elements of the capital cost estimate, to prepare their estimates in accordance with the agreed Estimate Strategy. 9.3 Work Breakdow n Structure Structure of Estimate Presentati on of the Estimate Prepare a preliminary WBS to produce a structure for the capital costs as detailed in Section 7.2. Structure capital cost items according to the Work Breakdown Structure. Present capital costs as: Capital Direct; Indirect Costs; and Owners Costs including Pre-production, Commissioning; Provisions including Foreign Exchange, Escalation and Contingency. A summary of the capital cost estimate should be included in the body of the Study report, with any detailed estimates to be presented in Appendices to the Study report. Specifically identify owners and pre-production costs; these need only be factorised values. Highlight any escalation provisions and show them separately: the basis of calculation should be shown. Foreign exchange components of the costs need not be identified, unless the information is readily available and deemed as reasonably representative. Respectively identify working and sustaining capital as percentages of annual revenue and of capital cost. Include a contingency allowance in accordance with the Cost Estimating guideline. Clearly state the methodology for calculating or arriving at the allowance. Include an assessment on an annual basis for:

9.4 9.5

9.6 9.7

Owners Costs Escalation and Foreign Exchange Working and Sustaining Capital Contingen cy

9.8

9.9

9.10

Cash Flow

Forecastin g

Pre-feasibility Study; Final Feasibility Study; Execution Phase.

Note: A detailed cash flow is not required. Identify sources of cost data i.e.: Previous Concept Studies for similar projects; Benchmarked estimate data; EPC/EPCM contractors; Equipment vendors; Bulk material suppliers; Specialist project estimating consultants.

9.11

Sources of Data

10 OPERATING COST ESTIMATE

This section sets out the minimum standard for an Operating Cost Estimate for the Concept Phase. Changes to, or deviations from this standard should be subject to approval prior to commencement of the Concept Study. Ref 10.1 10.2 Element Accuracy of Estimate Basis of Minimum Requirement Develop operating cost estimates with a targeted accuracy of 50 percent. Basis: Include a description of the basis of estimate, and in

estimate

particular any deviation from the Cost Estimate guideline. Base Date and Exchange Rates: State the base date of the operating cost estimate. This should be the same base date as stated for the Capital Cost estimate. The estimate will be expressed in the functional currency of the project. The exchange rate conversions used should be stated. Definition of Costs: Provide a definition of costs between capital and operating costs, sufficient to allow a preliminary financial evaluation to be undertaken. Present Operating Costs in the form per the following: Fixed Operating Costs (i) Labour Costs: Present a broad assessment of staffing requirements and of the unit labour costs based on the operating philosophy of the facilities. (ii) Fixed overheads: Factorise fixed overheads from similar projects. Variable Operating Costs (i) Chemicals, Reagents and Fuel: Base significant chemical, reagent and fuel quantities and costs on likely rates derived from test work or industry norms. (ii) Operating Consumables: Base rates of consumption for operating consumables on factorised costs. (iii) Product Transport and Insurance: Derive the rates for transportation and insurance costs associated with the transportation of product from factorised costs. Derive quantities of product to be transported and insured from estimates and unit costs applied. (iv) Maintenance, Consumables and Spares: Factorise Maintenance, Consumables and Spares costs from similar projects where possible. Note: The operating cost estimate should include only a contingency provision for undefined areas and a commentary and reasoning for the provision Develop the Operating Cost Estimate using spreadsheets in a format that can input directly into the Financial Model.

10.3

Structure of Estimate

10.4 10.5

Contingen cy Allowance Presentati on of the Estimate

Ensure fixed operating costs are outputs that can input

directly into the Financial Model.

 Express the Variable Operating Costs in costs per tonne of ore

milled in a format to be agreed that shows units per tonne of ore milled and unit rates used. The output will be used input directly into the Financial Model. 10.6 Start-up Costs Ensure the Capital Cost estimate includes owners costs and pre-production costs up to the date of introduction of ore for commissioning purposes. Note: Thereafter, annual operating costs shall take effect, including all special startup costs. These need not be assessed in detail for Concept Studies, but should be factorised from capital and operating cost relationships. The basis of derivation should be reported. Do not make allowance for escalation within the operating cost estimate, as this will be included in the Financial Analysis. Identify any input costs likely to be subject to unusual escalation rates. Identify sources of cost data i.e.: Current operating data; OEM data provided; Benchmarked data.

10.7

Escalation

10.8

Sources of Data