The management of cash flows and risk during production is a critical part of a surface mining venture as well as an integral part of a strategy in developing new and operating existing mines. Orebody uncertainty is a critical factor in strategic mine planning, the optimisation of mine design and long-term production scheduling are available; however, none of them is explicitly developed to effectively deal with, incorporate and take advantage of geological risk.
In this research a new approach to mine design based on risk quantification and alternative strategic decision-making criteria is developed. First, the concepts of risk integration and quantification in decision-making for both new an operating surface mines are reviewed. In addition, it is demonstrated that its inclusion in economic evaluation is a critical part of assessing the real value of mining assets. Subsequently, a new method for dealing with quantified
geological and grade uncertainty in the context of optimal pit design, where the designs and long-term production schedules are optimised under uncertainty, is defined. The method is based on the definition of two components. The first component includes the key project indicators to be considered, such as the minimum annual ore production, amount of metal produced in giving mining periods or discounted cash flows over the life of the mine. The second component includes the decision making criteria, such as a minimum acceptable project DCF, the minimum acceptable risk in meeting given production targets, and the minimisation of cash flow risk in the short-term while maximising the potential for profits in the future. The approach developed is presented in a step-by-step fashion in optimising the design of an open pit epithermal gold mine under conditions of uncertainty.