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Gold/Mining/Energy : Royal Oak-RYO
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To: Bill Jackson who wrote (800)3/22/1998 7:33:00 PM
From: Che__Guevara  Read Replies (1) of 1706
 
I wouldn't count on the engineers errors and omissions insurance to make up the overrun. Capital cost estimates are imprecise at best and any reputable firm would be certain to indicate the range of uncertainty implicit in their estimates. Also, factors such as design changes, weather, and contractors walking off the job will have an impact.

It is very unlikely that:

1. The engineers errors were primarily responsible for the overrun
2. That the 'damage' to RYO would be equal to the overrun (the overrun itself would be booked as a capital asset rather than a cash cost)
3. That the insurer would pay anytime even remotely soon enough to make a difference to RYO (Figure 3 to 5 years)

Che
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