A methodology for the management of risk related to uncertainty on the grade of the ore resources

Abstract

Mining investment decisions for giant mining projects involve an enormous financial risk. Nevertheless, traditional risk evaluation methods are based on Monte Carlo simulation of cash flows and are of little value for risk management. In most mining project scenarios, the main sources of risk are those related to the evaluation of the ore body, specially the grade of the ore reserves. In this study, a new risk management methodology based on conditional simulation is developed to quantify the riskassociated with uncertainty on the grade of the ore body. The methodology allows for quantifying risk for each period in the production plan and, therefore, it may be used as a powerful risk management tool to identify risk and ‘risk reduction’ objectives atthe prefeasibility stages of a mining project. This model is validated by its application in a case study of a real copper ore body in Chile.Keywords: mining; risk; feasibility study; simulation; resources evaluation