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