The development and operation of a mining project requires the investment of many millions of dollars. Geological uncertainty is manifest in ore reserves through the estimation of ore grade prior to and during mining activities, and is a very significant but poorly understood risk factor in all decisions regarding the acquisition, design, planning and development of a mine. Accurate quantification of uncertainty in grade allows such risk to be correctly managed to the benefit of the mine owner, investors, and the wider community.
This thesis develops a recoverable resource estimate for an open pit gold mine, and implements a conditional simulation approach to quantify grade uncertainty in the ore reserve estimate. The effects of grade uncertainty on pit limit optimisation processes are revealed, and it is shown that the downstream effects of uncertainty behave in a non-linear fashion. The inability of conventional sensitivity analyses to identify areas of high risk and to quantify the effects of risk on key project parameters is demonstrated. A conditional simulation approach is shown to be a powerful facility for revealing and measuring risk arising from grade uncertainty. The conditional simulation approach allows regions of low risk and high return to be mapped out to ensure key parameters in the mine plan are met, and for regions of high risk to be selected for further drill testing, or removed from the mine plan. The quantification of risk is demonstrated for a variety of key decision and mine planning parameters, such as project net present value, mill feed grades, ore availability, cost of production, cash flows, and mine life.