- Possibility of errors in engineering and forecast indicators of mining operations, payback;
- Disruption of construction deadlines;
- Inappropriate use of funds;
- Overestimation of purchasing prices.
Obligatory conditions of lending in the major banks of Russia comprise provision of quarterly reports on technical and financial audit of the project. As a rule, a borrower signs a contract for audit, and thereafter analysis results are quarterly sent by supervising organizations directly in the bank.
In the framework of technical and financial audit on the regular basis supervising organization (prior to first financing, prior to every redefinition of limit and quarterly) provides creditor bank with the following data:
- Confirmation of technical feasibility of project and attainability of planned level of extraction.;
- Expertise of significant terms of contracts with suppliers and contractors;
- Risks of non-compliance with deadlines of the project and risks of budget increase;
- Adequacy of budget cost parameters and expenses, comparison with mid-markets cost parameters in the region of construction, confirmation of appropriate use;
- Sufficiency of planned sources of financing, Cash-flow and financial models analysis;
- Key project risks (technological, judicial, ecological etc.);
- Sufficient rate of construction work progress, feasibility and correspondence of stated schedules of performance and financing, underrun estimation due to the critical path of the project;
- Correspondence of construction arrangement and cash flows management to standard practice in this industry sector;
- Recommendations on project optimization by means of stated risks minimization.
Report structure and additional sections are coordinated with Bank for every project individually.