Parametric Estimation of Capital Costs for Establishing a Coal Mine: South Africa Case Study

"SynopsisCapital cost estimates are important in decisions on whether a project will be approved, mothballed, or abandoned. In South Africa, junior coal miners do not have extensive databases of historical projects from which to estimate capital costs. The purpose of this paper is to establish formulae that can be used for estimating capital costs of developing coal mines in a coal-producing country, using South Africa as a case study. The costs are estimated to an error of magnitude level of -30% to +50%, which is suitable for a concept study level, using a parametric estimation technique. The study uses data from completed coal mining projects from selected coal-producing countries. Three formulae are developed and presented for estimating capital costs of underground bord and pillar, surface shovel and truck, and dragline operations.IntroductionCapital cost estimates play a critical role in deciding whether projects will proceed, be delayed, or abandoned. It is therefore important that capital cost estimates are carried out accurately as determined by the estimation guidelines based on the level of estimation conducted (Shafiee and Topal, 2012). The lack of literature on estimation of capital costs in many coal mining countries is adversely affecting junior coal miners, since they do not have an extensive database of historical projects on which to base estimations. In South Africa, the difficulty in estimating capital costs is attributable to lack of publicly available data on completed South African mining projects (Hall, 2013)."