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Main risks and issues in Mining EPCM projects

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  • MAIN RISKS AND ISSUES INMINING EPCM PROJECTS

    In January 2014, there were 104 projects with an estimatedbudget of over $1bn. The stage of the project is unrelated to the

    cost and schedule overruns, which plague 69% and 50% of theseprojects, respectively.

    7 Most Impactful Risks forMining Projects (with

    Impact Score):

    1. Incorrect mineralresource calculation 7.86

    2. Incorrect financialresource calculation 6.69

    3. Owner's financialdifficulties 6.45

    4. Diesel shortage in thecountry 6.27

    5. Price fluctuation ofminerals 6.16

    6. Changes in laws andregulations 6.13

    7. Poor management 5.95

    7 Most Common Risks toAffect Mining Projects (with

    Probability Score):

    1. Incorrect mineralresource calculation 6.152. Changes in laws and

    regulations 5.763. Price fluctuation of

    minerals 5.634. Owner's financial

    difficulties 5.515. Political instability 5.49

    6. Technical Problem(Breakdown) 5.47

    7. Insufficientinfrastructure 5.44

    Due to the way risk is allocated between the owner andcontractor/supplier, the overall cost of EPC projects tends to be

    10-20% higher than EPCM projects.

    EPCM Projectmanagement layers:

    Owner

    EPCM company

    Vendors/ Constructioncontractors

    PotentialSubcontractors

    Potential risks ofmultiple management

    layers:

    Extra overhead costs

    Relationshipmanagement issues

    Inefficientmanagement teams

    Potential conflict ofinterests

    http://www.ey.com/Publication/vwLUAssets/EY-Business-risks-facing-mining-and-metals-2014%E2%80%932015/$FILE/EY-Business-risks-facing-mining-and-metals-2014%E2%80%932015.pdfhttp://five-global.com/betasitev2/assets/Project%20Management%20Models%20-%20Five%20Global.pdf http://www.qualified-audit-partners.be/index.php?cont=824&lgn=3 http://cdn.intechopen.com/pdfs-wm/19862.pdf

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