Recent years have seen a number of mining projects exceed their original project cost budgets by significant margins, earning them the label of “overrun blow-outs”. These have occurred with juniors developing their first properties and majors with large project portfolios and a history of successful mine development. Neither is immune. Capital-cost overruns are not new to the mining industry. They have been a persistent fixture over the years, with overruns of 20% not uncommon. Does this persistent pattern of cost overruns suggest the industry and its lenders should be reexamining the customary EPCM model for construction contracting? If so, is the turn-key, fixed price EPC model so prevalent in other industries really a viable alternative? Shearman & Sterling partners Robert Nelson Jr. (San Francisco-Project Development & Finance) and Cynthia Urda Kassis (New York-Project Development & Finance) examine EPC versus EPCM and whether or not there is a “third way.”View the article, One way, or another: Shearman & Sterling considers the implications of capital cost ‘blow-outs’ for the EPCM model
