Predicting the Failure of Developmental Gold Mining Projects

Abstract

This paper investigates firm-level financial and non-financial information and their association with project failure for a sample of pre-production gold development firms. Pre-revenue generating ‘single project’ mining companies are chosen, since project failure is synonymous with company failure for these firms. The setting is interesting due to the high information asymmetry and limitations of the GAAP-based Altman Z-score in this context. A definition of project failure is applied and both financial and non-financial predictors are compared. Failure is driven by whether the deposit is open pit or underground, and whether the cash cost of production is disclosed at feasibility completion.