INCREASING PROJECT IRR BY 70%

The next phase in the development of a resource deposit was experiencing challenged economics in the conceptual design stage. This brought the overall development strategy into question. The project was put on pause until the economics could be substantially improved.

A Zero-Based Value Engineering exercise was launched to determine the theoretical best case for the project and layout a roadmap of opportunities to achieve the threshold rate of return (and beyond). The exercise:

  • Examined every driver on project economics in terms of its impact on project NPV
  • Determined the theoretical best value for each economic driver on a case-by-case, data-driven basis, by working with the local team members responsible for each part of the project
  • Discovered unforeseen downside risks which when incorporated actually made the project case less favorable, but more accurate and credible. By identifying them early, a portion of the lost value could be avoided
  • Learned that the total magnitude of the opportunity to improve the project (net of downside) was well in excess of the requirement to make it viable
  • Selected the highest value, lowest complexity opportunities then systematically vetted them for incorporation into the new project case for a 450% increase in IRR compared to the true baseline (all downside risks identified).
  • Produced a new project case with the required rate of return and achieved staunch alignment amongst the project stakeholders to proceed to the next stage

 

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