Capital Project Workflow in Mining: From Concept to Asset Register

A full deep-dive into how capital projects move through governance, SAP, and the accounting lifecycle — for mining finance professionals.

Every capital project in mining follows a predictable arc: someone identifies a need, money gets approved, things get built, and eventually an asset lands on the balance sheet and starts depreciating. Simple in theory. In practice, the workflow spans governance committees, procurement systems, construction management tools, SAP modules, and a series of accounting judgements that directly affect your financial statements, AISC reporting, and audit outcomes.

This article walks through all eight stages of the capital project lifecycle — with the SAP transactions, accounting treatments, and practical pitfalls that matter most for mining finance professionals.

Concept→Approval→SAP Setup→Procurement→Cost Capture→Capitalisation→Depreciation→Close-Out

1. Project identification & concept

It starts on the ground. Site operations or engineering identify a capital need — a haul truck reaching end of life, a processing bottleneck, an underground development drive required to access the next ore block.

At concept stage, a preliminary scope and cost estimate is prepared. Accuracy is typically ±40–50% at this point — enough to determine whether to invest in a fuller business case, not enough to commit funding.

Critical early decision: The sustaining vs. growth classification should be made here. This determines the approval pathway, the AISC treatment, and how analysts view the spend. Getting this wrong at concept means correcting it under time pressure later.

SAP at this stage

No project object exists yet. Feasibility study costs and internal engineering time may sit temporarily on a cost centre. If this is exploration-phase activity, AASB 6 applies and costs may be captured on an exploration WBS.

2. Business case & capital approval

The formal gate. Before any commitment can be made, a Capital Approval Request (CAR) is prepared and submitted through the governance framework. A robust CAR includes scope of work, cost estimate (Class 3–5), project schedule, NPV/IRR/payback analysis, risk register, sustaining vs. growth classification, AISC impact, and environmental considerations.

Approval authority levels

Project value	Approval level
< $500K	Site General Manager
$500K – $5M	CFO
$5M – $20M	CEO
> $20M	Board

SAP at this stage

Once approval is granted, a WBS Element or Internal Order is created in SAP PS. The approved budget is loaded via CJ30. If budget availability control is active, SAP will warn or hard-stop any postings that would cause an overspend — a critical internal control.

3. Project setup in SAP PS

This is where the accounting infrastructure is built — and where the quality of your project setup determines everything downstream.

Project structure

Project Definition (CJ20N) └── WBS Element — Level 1 (Project) ├── WBS Element — Level 2 (Phase / Discipline) │ ├── WBS Element — Level 3 (Cost Package) │ └── WBS Element — Level 3 (Cost Package) └── Network / Activity (if schedule integration needed)

Key SAP transactions

Transaction	Purpose
CJ20N	Create and maintain project structure
CJ30	Load original approved budget
CJ32	Budget supplements and transfers
CJ40	Plan costs against WBS elements

Asset Under Construction (AuC)

As soon as a project is set up, an AuC record is created in FI-AA — typically asset class 4000. The AuC accumulates all WBS costs during construction, is not depreciated while under construction, sits on the balance sheet as CWIP, and is linked to the WBS via a settlement rule. It is the bridge between SAP PS and FI-AA.

4. Procurement & commitment

PR (ME51N) → Approval → PO (ME21N) → GR (MIGO) → Invoice (MIRO) → Payment

Commitment accounting

One of the most important concepts in capital project control — and one that trips up finance teams who come from a purely invoice-driven mindset.

Term	Definition	SAP location
Budget	Approved spend authority	CJ30 / CJ32
Commitment	Obligated but not yet spent (open POs)	CJI5 report
Actual	Costs posted via GR or invoice	WBS actuals
Available budget	Budget − Commitment − Actual	CJ31 / S_ALR

Remember: A $10 million earthworks contract creates a real financial obligation the moment the PO is raised — even if no invoice has arrived. Ignoring commitments gives a dangerously optimistic view of budget headroom.

Aconex integration

For larger capital projects, engineering and construction documents are managed in Aconex. Payment claims and progress certificates from contractors flow from Aconex into the AP process. Finance validates certified amounts against contract milestones before posting the goods receipt and invoice in SAP. This handoff is a common source of timing differences at month-end.

5. Cost capture during execution

Cost type	How it gets to the WBS
Contractor invoices	MIRO → WBS cost element
Materials and equipment	MIGO goods receipt → WBS
Internal labour	CO timesheet allocation (CAT2)
Plant and equipment usage	Internal activity rates from maintenance orders
Capitalised borrowing costs	Manual FI journal (AASB 123)
Engineering and project management	Labour recharges from cost centre to WBS

Month-end capital accruals

One of the most important — and most error-prone — tasks in the monthly close for capital accounting.

1. Request progress certificates or % complete from project managers

2. Calculate accrued Capex: certified progress × contract value (not yet invoiced)

3. Post accrual: Dr AuC / Cr Accrued Liabilities

4. Reverse in the following period when the actual invoice arrives

5. Reconcile WBS actuals + accruals vs. budget → prepare variance commentary

A project manager's estimate of 65% complete is the input to your accrual — which means the quality of your CWIP balance depends on the quality of that conversation.

6. Capitalisation

The critical accounting event. When a project is complete and an asset is ready for its intended use, costs must move from the AuC to a final fixed asset record — triggering the start of depreciation.

When to capitalise (AASB 116)

An asset is ready for its intended use when construction is physically complete, commissioning and testing is finished, and the asset is capable of operating as intended. The asset does not need to be in actual production use — capability, not utilisation, is the test.

Common error: Delaying capitalisation because "we haven't started using it yet" understates depreciation and overstates CWIP.

The capitalisation process in SAP

Step 1 — Confirm completion with engineering and operations Step 2 — Obtain commissioning certificate / practical completion sign-off Step 3 — Create Asset Master in FI-AA (AS01): set class, useful life, depreciation key Step 4 — Run settlement (CJ88): transfers WBS/AuC balance to fixed asset Step 5 — Confirm depreciation start date Step 6 — Asset appears in FI-AA register; depreciation commences

Asset Master key fields (AS01)

Field	Why it matters
Asset class	Drives depreciation key and useful life defaults
Useful life	Determines straight-line depreciation rate
Depreciation key	SL (straight-line) vs. UOP (units of production)
Cost centre	Links asset to operational area for depreciation posting
WBS element	Maintains traceability back to originating project
Capitalisation date	Anchor for depreciation start

7. Depreciation

Method	How it works	When used
Straight-line (SL)	Cost ÷ useful life, evenly across periods	Buildings, infrastructure, surface assets
Units of production (UOP)	Cost × (period production ÷ remaining reserve)	Mining fleet, processing plant, mine development

UOP in practice

Depreciation = Net Book Value × (Production this period ÷ Remaining Reserve)

Reserve updates (typically annual) reset the denominator — changing depreciation rates prospectively. This is a change in accounting estimate under AASB 108, applied prospectively. High production periods generate higher depreciation charges; reserve downgrades accelerate depreciation per unit.

Key implication: The annual reserve update is not just a geology exercise — it's a financial event that your depreciation model must respond to immediately.

8. Project close-out

Finance close-out checklist

• All invoices received and posted — no open GR/IR items

• All month-end accruals reversed

• Final retention payments released and posted

• WBS budget vs. actual variance documented and approved

• Uncommitted budget released (CJ32 budget return)

• Final CJ88 settlement run — AuC balance confirmed at nil

• Asset register confirmed: all assets created with correct classes and useful lives

• Project status set to CLSD in SAP PS

• Post-completion review completed: actual vs. estimated cost and benefit

Common close-out issues

Issue	Financial impact
Stranded AuC balances	Small residual amounts remain on CWIP after settlement; require manual clean-up
Incorrect asset splits	Project settled as one asset when multiple were delivered; requires AS02 edits or transfer postings
Missing commissioning dates	Depreciation start delayed, understating D&A for the period
Open GR/IR	Balance sheet misstatement; invoices expected but not received or matched

Where things go wrong

Issue	Impact	Prevention
Late capitalisation	Depreciation understated; CWIP overstated	Monthly capitalisation pipeline review
Wrong asset class	Incorrect useful life; wrong D&A	Engineering input at AS01 creation
Opex posted to WBS	Capex inflated; assets overstated	WBS cost element restrictions in SAP
Capex posted to cost centre	Assets understated; Opex overstated	AP team training; invoice coding review
Reserve not updated	UOP depreciation rates incorrect	Annual reserve update linked to depreciation model
GR/IR mismatches	Balance sheet misstatement	Month-end GR/IR reconciliation as standing close task

The quality of what goes into SAP PS at project setup — the WBS structure, budget loading, settlement rules, and asset master data — directly determines the reliability of everything that comes out: your CWIP balance, your fixed asset register, your depreciation charge, and your AISC per ounce.