NORTH RIVER NAMIB LEAD / ZINC PROJECT … · The cost estimate covers the capital cost requirements...

Proprietary Information This document has been prepared by and remains the sole property of Tenova Bateman SSA. It is submitted solely for use in conjunction with the submission for which it has been prepared and is to be held proprietary to Tenova Bateman SSA. The recipient agrees by receipt and/or use of this document to return it to Tenova Bateman SSA upon request, and not to reproduce, copy, lend or otherwise disclose or dispose of the contents, directly or indirectly, and not to use it for any purpose other than intended for.

Tenova Bateman SSA

Tenova Mining & Minerals

NORTH RIVER NAMIB LEAD / ZINC

PROJECT

FEASIBILITY STUDY

Volume 1

Section: 6 Basis of Estimate

NORTH RIVER NAMIB LEAD ZINC PROJECT

FEASIBILITY STUDY

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TABLE OF CONTENTS

1 CAPITAL COST ESTIMATE .............................................................................. 3

1.1 Introduction ................................................................................................. 3

1.2 Battery Limits .............................................................................................. 4

1.3 Estimate Criteria ......................................................................................... 6

1.4 Work Breakdown Structure (WBS) Level 2) ................................................. 8

1.5 Estimate Methodology ................................................................................. 9

1.6 Indirect Costs ............................................................................................ 23

1.7 Risks and Considerations .......................................................................... 25

1.8 Owner’s Costs ........................................................................................... 26

1.9 Exclusions ................................................................................................. 27

1.10 Capital Cost Summary .............................................................................. 29

1.11 Cash Flow, Forward Escalation and Financial Modelling ........................... 29


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1 CAPITAL COST ESTIMATE

1.1 Introduction

The following defines the Basis of Estimate (BOE) for the Feasibility Study

for the treatment of 250 000 ROM tonnes per annum Namib lead-Zinc

Project located near Swakopmund, Namibia for North River Resources

(NRR) and the manner in which the Feasibility Study Estimate was

compiled. The cost estimate covers the capital cost requirements only.

The details of estimated costs are available in the Capital Cost Estimate

Summary sheets. It must be stressed that this document must not be read in

isolation and that all engineering disciplines basis of estimates must be

consulted in conjunction with this document.

Tenova Bateman have neither provided for cost escalation nor exchange

rates fluctuations from the estimate base date. All costs are at base date of

December 2013.

The estimate was primarily compiled using deterministic estimating

methodologies in which components of the project scope definition are

quantitatively surveyed, generated and priced using the most realistic unit

prices available. Deterministic estimating methods are typically used for

Class 3 through to Class 1 estimates (AACEI Classification).

This type of estimate is typically used for budgetary purposes or determining

project viability and for appropriation or control baseline and will have to

form the basis for the completion of a Control Budget Estimate (CBE) prior

to project execution.

These estimates are generally not intended to be used for detailed control

baseline or for monitoring variation to the execution budget.

The Namib Lead-Zinc Project comprises the establishment of a brownfields

Lead-Zinc ore receiving, crushing, milling, flotation plant which included

dewatering of tailings and concentrates. The works are to be executed on an

existing mine which stopped production in 1992 and has since been

dewatered by North River Resources.


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The project is highly sensitive to capital cost and a “fit for purpose” approach

has been adopted for the plant design considering the small scale (250 000

tonnes/annum) and limited (approx. 7 years) lifespan of the plant.

It is envisaged that the plant will treat 250 000 ROM tonnes per annum,

producing both lead and zinc flotation concentrates. This will be achieved by

initial recovery of zinc concentrate from the existing tailings dump and then

subsequent recovery of lead and zinc concentrates from the underground

ore. It is intended that the overall design be based on the processing of

fresh ore.

The scope of this Feasibility Study estimate comprises:

Initial recovery of Zinc concentrates from tailings (Option 1).

Subsequent recovery of both Lead and Zinc concentrates from fresh

ore (Option 2).

1.2 Battery Limits

1.2.1 Incoming and Outgoing

The major battery limits for the Tenova Bateman scope are:

ROM ore storage and ore reception.

Tipping point for incoming tailings from old dams.

Lead flotation concentrate (filter cake) at drop point on Namib site.

Zinc flotation concentrate (filter cake) at drop point on Namib site.

Water supply at off-take point on existing Rossing line.

Incoming flotation reagents and flocculant.

Handling and disposal of generated tailings to tailings dam.

Return water from tailings dam to plant storage pond.

Diesel fuel storage tank.


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In addition, reference must be made to all engineering disciplines battery

limits documents that clearly define the Incoming and Outgoing Battery

Limits of the scope of work for each discipline.

1.2.2 Temporary Construction Facilities

A suitable fenced lay-down/contractors area within 100m of the site, suitably

compacted, will be allocated to the contractors by the Client. The Client will

be responsible for the supply and erection of security fencing, access control

and security services for the duration of the works.

The Client will provide all the necessary potable water supply for

construction and operational requirements to the edge of the boundary of

the areas allocated for the construction facilities.

The contractors will be responsible for all necessary temporary electrical

power supply and the power distribution network and water reticulation to

the actual place of work. The contractors will also allow for their own waste

water disposal and ablution facilities during the construction period.

All site development which includes all infrastructure and utilities servicing

the plants are assumed to be available and are therefore excluded from this

estimate with the exception of the incoming 33kV overhead power line and

water supply pipeline from the existing Rossing Line. It is assumed that the

site has been cleared, prepared, graded and levelled by the client ready for

construction, and that it is free of any other obstructions and does not

require any drainage.

Any underground utilities and services that could be affected during

construction and/or the removal of old foundations have been excluded from

the estimate.


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It is assumed that Tenova Bateman personnel will utilise the on-site facilities

to be provided by the Client during the construction period. The costs for

these on-site facilities have been included in the estimate and comprise of:

Site offices (3 off prefab modular containerized units complete with air

conditioning)

Office furniture

Site vehicle (1 off utility vehicle)

Standby generator (75kVA generator set)

The Client will be responsible for the running and maintenance costs of the

site vehicle and standby generator during the construction period.

Tenova Bateman will be responsible for the accommodation and catering

facilities for its construction personnel during the construction period.

1.3 Estimate Criteria

1.3.1 Base Date/Escalation

The base date of the estimate is December 2013 and will be subject to

contract price adjustment and escalation as from 1st December 2013.

1.3.2 Base Currency/Exchange Rates

The estimate was compiled in South African Rand (ZAR). Prices for

imported items quoted in ZAR but subject to foreign currency fluctuations

have been converted to ZAR using the Rates of Exchange (ROE) as issued

by the Client on 24th February 2014 and therefore no foreign currency or

rate of exchange variations have been considered in the estimate.

The indicative ROE issued by the Client and utilised in the cost estimate is

shown below:


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Currency (1=) Equivalent in ZAR

US$ 11.00

EURO 15.00

GBP 18.00

Approximately 28% of the total direct field costs have exposure to foreign

currency fluctuations.

It will fall within the Client scope of work to make adequate provision and

risk allowance for cost escalation and rate of exchange variations or forward

cover.

1.3.3 Accuracy

This estimate for the Namib Lead-Zinc Project should be compared with the

Tenova Bateman Estimator’s Best Practice Guide PCNG-0920-002 Rev )

Class 2 estimate classification as a minimum and should be within an

accuracy range of -5% to +15% at a probability of no more than 70% after

inclusion of contingency. This closely conforms to the Association for the

Advancement of Cost Engineering International (AACEI) Class 2 estimate

classification guidelines.

The Tenova Bateman Estimator’s Best Practise Guide Class 2 estimate

classification relates to costs that have mainly been obtained through firm

bids and quotations based on defined work packages.

1.3.4 Scope of Pricing

The scope on which the estimate is based is as follows:

Process flow diagrams (PFD’s).

Equipment lists and data sheets.

General arrangement layouts and drawings.


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Bills of Quantities (BOQ’s) / Materials Take-Offs (MTO’s) (by

Bateman).

Engineering basis of estimate.

The pricing for direct costs are based on a variety of sources as follows:

Fixed and firm price quotations.

Informal budget quotations.

Tenova Bateman historical database / Schedule of unit rates.

Factored or estimating allowances.

Discipline engineers estimates.

Allowance of a sum of money.

1.3.5 Estimating System and Format

The overall capital cost estimate has been compiled using Microsoft Excel.

1.3.6 Estimate Structure

The estimate has been formatted around the traditional code of account

structure for direct cost calculation, indirect costs and EPC costs.

1.4 Work Breakdown Structure (WBS) Level 2)

A project WBS level 2 was prepared clearly defining the major plant areas

for ease of referencing and cost management. The cost estimate has been

compiled in line with the WBS.

The WBS level 2 reflects the following major plant areas:

Area 100 Ore receiving and Crushing

Area 200 Tailings Receiving

Area 300 Milling Circuit

Area 400 Flotation

Area 500

Area 600

Concentrate Dewatering / Thickening


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Area 600 Reagents Receiving, Make-up and Distribution

Area 700 Plant Services

Area 800 Plant General

1.5 Estimate Methodology

1.5.1 Earthworks and Infrastructure

The bulk earthworks and levelling of the site are excluded from the estimate.

The works are to be executed on a brownfield site and the Client is

responsible for providing levelled terraced areas, principally consisting of

exposed marble surface. It is assumed that the structures will be located on

terraces that have previously been established.

The ROM pad scope of work comprises an earth ramp access to the

stockpile, a reinforced earth wall, and an earth ramp and terrace for access

to the tip bin including a jockey slab to provide a working surface for the

front-end loader and to protect the bin against impact. Physical barriers such

as bollards have not been included in the estimate due to lack of Client

definition.

The ROM pad costs are based on preliminary designs based on information

extracted from the mechanical layout drawings. The drawings were then

quantified (rough material take-offs) and priced using all-inclusive unit rates

derived from Tenova Bateman historical database of pricing information for

recently completed cost studies.

The demolition and preparatory work to carry out the ROM pad scope of

work are excluded from the estimate and fall within the Client’s scope of

works.


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The preliminary and general (P&G’s) allowance has been assumed at 35%

of the total direct costs for the earthworks based on the P&G’s percentage

allowance priced by the recommended civil works contractor.

No cognisance has been taken of the underground structures as the location

and extent of this is currently not known.

The infrastructure works comprises of:

Supply and installation of the 7km water supply pipeline from the

existing Rossing Water Line.

Supply, delivery, installation and commissioning works for the 33kV

overhead distribution power line to the site boundary obtained from the

existing Nampower grid.

Supply, installation, testing and commissioning an extension of the

33kV overhead power line from the site boundary to the site

transformer.

The infrastructure costs are based on pricing obtained through single

sourcing from formal budget quotations submitted by Pexmart cc (water

supply) and Power Line Africa (33kV overhead power line). The quotations

include for contractor’s P&G’s, material and labour.

1.5.2 Civil Works

In the absence of a geotechnical report, it is assumed that all structures will

be constructed atop the exposed marble or prepared surfaces. In general

excavation is limited to the installation of drainage sumps approximately 1

metre deep and consisting of precast concrete pipes.

The civil scope of work was estimated using a combination of statistical

factors and preliminary sizing of critical elements. Preliminary designs were

then performed based on information extracted from the mechanical general


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arrangement layout drawings. The drawings were then quantified (material

take-offs) to produce bills of quantities (BOQ’s) which were priced using unit

rates received through competitive bidding from a formal tender submission

by Kennedy and Botes Civil Engineers and Contractors (B&K Civils).

The contractor’s preliminary and general (P&G’s) allowance has been priced

at 31% of the total direct costs for the civil works.

Contractor indirect costs (P&G’s) caters for the contractor’s mobilisation and

demobilisation including establishment and later removal of construction

plant and equipment, contractor’s manual indirect and non-productive

labour, scaffolding, safety equipment, personal protective equipment,

transport and travelling, accommodation and supervision including

contractual requirements relating to finance costs, insurance, bonds and

work permits.

Demolition of existing structures and grubbing up of foundations are

excluded from the estimate and fall within the Client’s scope of works.

All rates applied to the civil works reflect the preferred contractor’s pricing

based on technical and commercial adjudication of the formal, competitive

bid received.

The costs for the following on-site facilities and equipment have either been

obtained from single source budget/informal quotations or Tenova Bateman

historical cost data information:

Site Offices, Furniture & Computers

Protective Clothing (PPE)

Mobile Equipment

Workshop Tools

Telephone Data

Laboratory Facility & Equipment


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Change Houses

The refurbishments costs for the main workshop building and explosives

store have been included in the estimate based on single source quotation

obtained from MaxSpan Roofing CC as furnished by the Client.

1.5.3 Structural Steelwork

Structural steelwork quantities have been extracted from the Namib Lead-

Zinc Plant mechanical general arrangement layout drawings for the different

plant areas. Approximate quantities were extracted from a combination of

preliminary design and sizing of critical elements and volumetric take-offs to

produce structural bills of quantities (BOQ’S).

The supply, shop detailing, fabrication, painting and erection cost for

structural steel is based on unit rates obtained through competitive bidding

from Concor Engineering priced bills of quantities for the structural,

mechanical, platework and piping (SMPP) package. The supply cost

includes for transportation to site, Swakopmund, Namibia based on the total

tonnage of approximately 65 tons of structural steelwork.

Contractor’s indirect field cost (P&G’s) has not been apportioned from the

overall P&G’s for the SMPP Contractor and is reflected in the Capital Cost

Estimate summary sheet.

The preliminary and general allowance has been priced at 187% of the total

direct field costs for the SMPP Contract. It will be necessary to conduct

further bid clarifications and interrogate the P&G’s allowance with the

preferred SMPP contractor prior to execution.

The costs of major construction equipment including cranes and scaffolding

have been priced within the SMPP contractor’s P&G’s costs.


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All rates applied to the structural steelwork estimates reflects the preferred

contractor’s pricing based on technical and preliminary commercial

adjudication of the formal, competitive bid received.

Provision has been included in the estimate for 13 tons of secondary pipe

supports and fittings not covered by the structural discipline. The estimated

total tonnage of steel has been priced using the unit rates for supply and

erection derived from the SMPP contract.

1.5.4 Platework and Liners

Platework quantities and items preliminary bill of quantities (BOQ) rev. F

was compiled by the relevant discipline engineer. For each platework item,

the platework area has been estimated from the mechanical layouts and

volumes required according to the Process Flow Diagrams (PFD’s).

The following values were then used in calculating the platework mass:

Bins and Sumps

Platework Thickness based on 8mm

Density of Steel based on 7860kg/m3

Stiffeners & Flanges based on 25% Allowance (added to mass of “flat”

measured platework)

Chutes and Bag Breaker

Platework Thickness based on 8mm

Density of Steel based on 7860kg/m3

Stiffeners & Flanges based on 25% Allowance (added to mass of “flat”

measured platework)

The ROM hopper lining is included with the crushing plant package. All

transfer chutes and bins are VRN lined internally. All sumps and tanks are

rubber lined internally.


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The supply cost is based on the total estimated platework tonnages

multiplied by the unit rates obtained from the Concor Engineering priced bills

of quantities for the SMPP package. The supply cost includes for

transportation to Swakopmund, Namibia. The erection unit rates in Namibia

are based on the Concor Engineering priced unit rates.

The contractor’s indirect field cost (P&G’s) has not been apportioned from

the overall P&G’s for the SMPP Contractor and is reflected in the Capital

Cost Estimate summary sheet.

Provision has been made for 6mm thick HDPE plate lining to the sumps.

1.5.5 Conveyor Mechanicals

The conveyor mechanicals have been priced within the mechanical

equipment costs.

1.5.6 Mechanical Equipment

The mechanical equipment list rev F. identifying and quantifying the major

mechanical equipment was prepared by the discipline engineer from

process flow diagrams (PFDs). The mechanical equipment packages

complete with relevant specifications was issued to selected vendors to

obtain current market prices. The estimate reflects the recommended

vendor’s pricing based on technical evaluation and commercial adjudication

of the bids received.

The mechanical equipment supply pricing comprises of formal fixed and firm

price bids, budget quotations and Tenova Bateman historical database of

pricing information obtained from recently completed cost studies.

Tenova Bateman will be responsible for the preparation of procurement

documentation for the Client to place orders and will assist with the logistics


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for delivery to Swakopmund, Namibia of the mechanical equipment

packages.

The costs for the supply of the following mechanical equipment were

obtained either through formal fixed and firm price bids or budget quotations:

Ball Mill

Flotation Cells

Crushing Plant

Mobile Impact Crusher (Option 1 Only)

Hydro cyclones

Thickeners

Filter Presses

Conveyors

Centrifugal Pumps

Peristaltic Pumps

Dosing Pumps

Froth Pumps

Agitators

Samplers

Weighbridge

Belt Feeders (BQ)

Tanks (BQ)

Fire Water Pumps and Tanks

Flocculant Make-up (BQ)

Air Compressors

Diesel Storage & Dispensing Facility

Hoists

The costs for the on-site erection and installation of the mechanical

equipment are based on unit rates extracted from the SMPP Contract

submitted by Concor Engineering through competitive bidding.


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Contractor’s indirect field cost (P&G’s) has not been apportioned from the





further bid clarifications and interrogate the P&G’s allowance with the

preferred SMPP contractor prior to execution.

The pricing for the on-site erection and installation of mechanical equipment

includes costs for major construction equipment such as cranes and

scaffolding which have been priced within the SMPP contractor’s P&G’s.

1.5.7 Pipework and Valves

The scope of work used for the piping priced BOQ covered the process and

utility pipe and tubing systems. The piping bills of quantities (BOQ’s) were

generated from MTO’s derived from process lines modelled from the

mechanical 3D model, mechanical general arrangement drawings and

piping layout comprising of single line routings supported by the Process

flow diagrams (PFD’S). The PFD’s were redlined with preliminary line

numbers and valves to facilitate control and revisions to the BOQ’s.

The pipe lengths and elbow quantities were recorded by the drawing office

and the remaining pipe fittings estimated by the discipline engineer.

Additional quantities were allowed for in the BOQ to cater for pipe lines

smaller than 65NB.

The following pipe layouts were created for the study:-

7km Overland Water Supply Pipe Line

Tailings Slurry Delivery Line


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Tailings Reclaim Water Return Line

The piping supply and installation packages comprise of:-

Manual Control Valves

Metallic Piping (Carbon Steel)

Non-Metallic/Plastic Piping (HDPE)

Bolts & Gaskets

Pipe Supports (U-bolts and pipe clamps)

The supply and installation packages for piping complete with specifications

were issued to selected vendors to obtain current market prices. The

estimate reflects the recommended vendor’s pricing based on technical and

commercial adjudication of the bids received.

The piping and valves estimated costs are based on the pricing submitted

by the Structural, Mechanical, Platework and Piping (SMPP) contractor,

Concor Engineering, through a competitive bidding process. The costs

include for the supply and delivery of all piping materials to Swakopmund,

Namibia including offloading, storage on site, on site handling and site

erection and installation complete with new pipe support systems.

An allowance to cater for detail design components such as vents, drains,

instrument connections, flushing points, etc. has been included in the

estimate.

NDT testing, hydro-testing, painting and insulation including all quality

documentation is included in the cost.

Contractors indirect field cost (P&G’s) has not been apportioned from the




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further bid clarifications with the preferred SMPP contractor prior to

execution.

Provision has been made for air piping and ducting costs from the blower to

all re-agents based on Tenova Bateman historical database of pricing

information obtained from recently completed cost studies.

The costs for stainless steel tubing for the transportation of re-agents are

based on single source budget quotation obtained from Pentair Valves and

Controls. The costs for the pressure reducing valves are based on an

informal budget quotation obtained from Duplex Liquid Meters.

Piping and Instrumentation Diagrams (P&ID’s) are excluded from the

Tenova Bateman scope of works at this stage of the project and have

therefore not been prepared for the project study.

1.5.8 Electrical

The relevant discipline engineer produced and issued electrical equipment

list for preparation of electrical packages, specifications and bills of

quantities (BOQ’s) for electrical bulks for inclusion within the estimate. The

mechanical load list was used to create a corresponding electrical load list

from which the single line diagrams (SLD’s), cable schedules, bill of

quantities (BOQ’s) and electrical equipment list was developed. The BOQ’s

was then used to quantify the electrical requirements for the plant. Plant

general arrangement layouts were used for estimating the lighting, cable

and cable rack quantities.

The following electrical equipment packages supply prices are based on

preferred vendor quotes obtained through formal, competitive bidding:


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Low Voltage Motor Control Centres (LV MCC’s) Containerized

Low Voltage Substation Containerized

Transformers

The vendor package for the low voltage MCC’s includes for the supply of 2

off UPS including detail design, factory acceptance testing (FAT), internal

cabling and installation of the MCC’s and UPS’s in containers. The

containers are modified and equipped as per specification complete with

ventilation, air conditioning and fire protection.

A provisional allowance has been included in the estimate for the

procurement of an emergency standby generator set for provision of

emergency power supply to small motors, instrumentation UPS and MCC

control power supply UPS. The change-over between diesel generator and

grid power will be manual.

Provision for earthing and lightning protection is included in the estimate

based on the vendor quote obtained from HHK Earthing & Lightning

Protection Systems through competitive bidding. Provision has been made

within the vendor quote for earth conductivity survey on site.

The electrical scope of work includes all electrical equipment installation,

reticulation and distribution of electrical power to all electrical motors and

other electrical loads in the plant. The scope also covers the reticulation and

distribution of small power including plant lighting. The supply of small

electrical equipment such as light fittings, local isolators, socket outlets and

motor control station as well as electrical materials such as cables, cable

racking, cable terminations and support steel is also included.

Electrical bulks and installation contractor’s estimated costs are based on

unit rates submitted by SMEI Projects for the Electrical Installation Contract

obtained through competitive bidding. Technical bid evaluations and


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commercial bid adjudications were conducted to identify the preferred

Electrical Installation contractor.


direct field costs for the electrical installation contract.

1.5.9 Control and Instrumentation

Control and Instrumentation costs have been factored from the mechanical

equipment total cost based on industry accepted norms for the Beneficiation

and Materials Handling areas.

A provisional allowance has been included for cyanide detectors based on a

single source budget quotation from Drager SA.

Contractor’s P&G’s are factored based on a percentage of the total capital

costs for control instrumentation works.

The preliminary and general allowance has been assumed at 65% of the

total direct field costs for the control and instrumentation works based on the

P&G’s percentage allowance priced by the recommended Electrical

Installation contractor.

1.5.10 Growth Allowances

Experience tells us that there is a gap between what is known and identified

during the estimating process and what is expected during the execution or

construction phase. The addition of growth is intended to allow for the most

likely cost in the estimate. For this reason an allowance for growth on

quantities and prices should be included in the estimate.

A quantity growth allowance is a subjective amount added to the material

take-off (MTO) based on the degree of engineering completed and a

comparison to historical experience of the expected quantity.


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Estimates are generally based on budget quotations that rarely take into

account firm specifications or commercial terms and conditions. A price

growth allowance is an amount added to the price of materials and

equipment to account for the cost difference between the budgetary amount

quoted now and the expected firm price quotation obtained prior to

execution.

The following growth allowances have been included in the estimate based

on guidelines recommended by the Tenova Bateman Estimator’s Best

Practice Guide for a class 2 estimate classification:

Earthworks - 15%

Civil Works - 8%

Structural Steel - 8%

Mechanical Equipment - 5%

Piping - 10%

Electrical Packages - 5%

Electrical Installation contract - 10%

Control and Instrumentation - no growth allowance (factored)

Traditionally, the accuracy range in an OOM estimate accounts for the

growth allowances, considering the conceptual nature of the estimate and

the defined scope of work. No allowance for growth in quantities and price

has been included for Control & Instrumentation for reasons that the

discipline costs have been factored and already includes allowances for

design growth and wastage.

1.5.11 Allowance for Transport of Equipment

The costs for sea freight and inland transportation costs included in the

estimate for delivery of equipment from the country of origin to

Swakopmund, Namibia is based on formal competitive logistics costs

obtained from reputable freight forwarders. The package types vary from


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40ft containers, wooden skids, break bulk, skeleton crates, full crates and

pallets. The estimate reflects the recommended logistics services vendor’s

pricing based on technical bid evaluation and commercial bid adjudication of

the tenders received

An allowance has been included for the delivery to site of equipment

excluded from the logistics services vendor package.

The logistics costs will have to be firmed up through competitive bidding

from reputable freight forwarding companies prior to execution.

Marine insurance, customs/import duty and import VAT are excluded.

1.5.12 Allowance for Commissioning Spares Only

An allowance based on a factored percentage of the total capital cost of

equipment was allowed for commissioning spares only.

These costs should be verified with detailed spare listings and quotations

before execution.

No allowance for strategic or two year critical spares has been included in

the estimate as instructed by the Client.

1.5.13 Allowance for Re-agents

The cost for first fills of re-agents comprising steel balls for the mills and

flocculants for the tailings thickening has been estimated and provided by

the process engineer.

These costs should be verified with detailed quotations before execution.

1.5.14 Allowance for First Fills of Lubricants

An allowance based on a factored percentage of the total mechanical and

electrical equipment supply cost was allowed for first fills of lubricants.


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These costs should be verified with detailed quotations before execution.

1.5.15 Allowance for Vendor Assistance during Construction

An allowance for vendor assistance during construction and commissioning

based on a factored percentage of the mechanical, electrical and control

instrumentation equipment supply cost has been allowed for within the

estimate.

These costs should be verified with detailed man-hour estimates and

quotations prior to execution.

1.6 Indirect Costs

1.6.1 Engineering, Procurement and Construction Management

These costs cover the project management, detailed engineering and

procurement, and construction management, pre-commissioning (C1 & C2)

and cold commissioning (C3) costs directly associated with the

implementation of the project.

Hot commissioning (C4) assistance is excluded from the estimate. Should

hot commissioning assistance be required, this will be charged at day work

rates to be agreed.

A detailed man-hours estimate based on the EPCM scope of work, project

schedule, defined deliverables and required resources has been included in

the estimate.

The EPCM costs are based on a reimbursable contract type using Bateman

2014 WIP rates for computing the man-hour costs. The WIP rates are

subject to escalation from January 2015 to project completion.


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A fee of 10% of the total man-hours costs has been included within the

EPCM costs.

1.6.2 Bonds and Guarantees

An allowance based on a factored percentage of the Total Net Cost (TNC)

has been included in the estimate to cater for bonds and guarantees.

1.6.3 Insurance

Insurance included in the estimate is an allowance for project related risks

which are insurable. It is dependent on project variables and project specific

circumstances. It typically includes for the following:

o Contractors All Risk on construction and site activities typical

cover - this depends on the extent of cover required

o Third Party Liability insurance typical cover

o Medical Evacuation and casavac typical cover. This depends on

the area, location and the detailed circumstances

o Marine Cargo and difference in excess typical cover

The following risks are not allowed for in the estimate and thus excluded due

to the specific requirements the owner may have. These should be strongly

considered in addition to those listed above:

o Delay in Start-up insurance (DSU)

o Project Specific required professional indemnity

o Advance Loss of Profits (ALOP)

An allowance based on a factored percentage of the Total Net Cost (TNC)

been included in the estimate for insurance. The insurance estimate

allowance should be finalized by performance of an insurance review by

specialized parties, once the exact requirements of the owner and the

project are available in more detail.


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1.6.4 Contingency

Contingency is a sum of money included in an estimate to allow for

uncertainty. Project contingency is not intended to cover scope changes or

project exclusions. Scope changes are covered by the Owner’s

contingency.

Since no quantitative risk analysis has been done on the capital estimate

and considering the engineering/scope definition currently available and the

estimating methodologies followed, a nominal contingency allowance of

12% has been included in the estimate. The typical level of contingency

recommended is between 10% and 15% based on the Tenova Bateman

Estimator’s Best Practice Guide Class 2 estimate classification.

1.7 Risks and Considerations

No risk review has been held to quantify risks to the project. The estimate

therefore does not qualify or quantify risk. However a few items identified at

this stage need to be considered further:

No geotechnical information has been received from the Client. The

earthworks and civil works costs are therefore based on certain

assumed geotechnical conditions. This may have significant impact on

the costs for these disciplines during execution.

The validity of all quotations received will have expired by the

assumed contract start date of 15th May 2014. It will be necessary to

verify and re-validate all quotations prior to their expiry dates. Cost

escalation from study through to project completion is a risk that will be

borne by the client.

All budgetary and informal quotations for equipment supply will have to

be confirmed through a formal, competitive bid process prior to

execution.


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Logistics costs related to transportation of equipment and materials to

site needs to be firmed up based on final equipment specifications

sizing and tonnages.

The estimate does not consider the risk in foreign exchange variations.

This will be for client scope.

No escalation allowance has been included in the estimate. Cost

escalation from study through to project completion is a risk that will be

borne by the client.

1.8 Owner’s Costs

This estimate specifically excludes Owner’s costs. These costs shall fall

under the Client scope of work. Owner’s costs will not be included in the

estimate unless specifically directed and provided by the Owner.

Generally Owner’s costs are, but not necessarily limited to, the following:

Owner's project management team and consultants

Owner’s contingency for changes in scope or additional work

Pre-development costs (cost of study, etc.)

Land acquisition

Community relations

Insurance as indicated above

Business systems

Loss of production and efficiency resulting from implementation

Owner’s start-up and commissioning crew

Project taxes, fees, duties, customs, permitting and approvals

Development fees and approval costs of statutory authorities

Cost of any disruption to normal operations

Cost of shutdowns

Working capital or any additional stay in business capital

(sustainability capital)


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Pre-production costs (operator training)

Workplace health and safety fees

Site medicals and safety induction services

Medical staff and practitioners during construction

Geotechnical, site survey and soils testing

Environmental considerations (EIA)

Operational readiness

Finance fees or cost of capital

Provisional sums based on Client information and consultancy budget

estimates have been included in the estimate for the following Owner’s cost:

Tailings Storage Facility capital costs allowance (Provision of circa

US$237 728 included in the estimate)

1.9 Exclusions

The following costs are specifically excluded from the estimate:

Costs of EIA permitting and regulatory compliance requirements,

together with any costs associated with process design changes

necessitated by the outcome of such investigations

Any costs associated with process design changes necessitated by

the outcome of geotechnical investigations, site surveys and

metallurgical test work

Any costs associated with statutory requirements, local permits,

licensing, royalties and approvals, social, community or environmental

requirements

Owner’s costs unless provided by Owner

Owner’s contingency allowance


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Development fees and approval costs of Statutory Authorities unless

specifically included

Value Added Tax (VAT) and Goods & Services Tax (GST)

Sales tax, excise duties, import surcharges, withholding, service or

other taxes unless specifically included

Financing costs

Marketing costs

Business system costs

Pre-development and operational readiness costs

Operational costs (included in the Operating Costs Estimate)

Higher level management systems (MIS, MES or ERP)

External auditing costs

Appointment of Approved Inspection Authority (AIA)

Permit applications unless specifically included

Escalation from the estimate base date unless specifically included

Foreign currency exchange rates variations from the estimate base

date

Money for risk in schedule variances from what has been assumed

Any cost resulting from weather conditions other than fair

Schedule acceleration costs

Schedule delays and associated costs, such as those caused by:

o Unexpected site conditions

o Weather conditions other than fair

o Unidentified ground conditions

o Labour disputes

Force Majeure

Any cost for a logistical study or resulting increase in capital cost as a

result of such a study

For “Brownfields” work, the cost of any disruption to normal operations

All infrastructure, bulk earthworks and site development


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ROM stockpile blending and management strategy

Test work and laboratory costs

Special tools and general equipment for maintenance

Any spares costs in excess of allowances made

EPCM contractor support charges and Owner’s costs associated with

hot commissioning activities (Only assistance to Client)

Provision of landscaping and nursery services

Facilities for disposal of hazardous products generated by operations

Mining and mine closure/rehabilitation costs

Site security during construction

Medical staff and practitioners including emergency vehicles during

construction

Communications and Data/IT infrastructure

Laboratory information management systems (LIMS)

1.10 Capital Cost Summary

Refer to the Cost Estimate Summary sheets which are provided separately

to this document.

1.11 Cash Flow, Forward Escalation and Financial Modelling

1.11.1 Cash Flow

An indicative cash flow forecast has been prepared on the basis of a generic

typical project monthly expenditure expressed as a percentage of the total

project cost assigned to an S-Curve based on the duration of the project.

The project cash flow will have to be prepared on the basis of the proposed

implementation schedule by taking the total cost for each package and the

vendor payment terms and spreading it across its duration according to the

dates in the schedule.


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1.11.2 Forward Escalations

No escalation allowance has been included in the estimate. The Client

should make appropriate allowance for forward escalation.

1.11.3 Financial Modelling

Financial Modelling is excluded from the Tenova Bateman scope of work

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