Modelling the initial pit design: the first step for project valuation

Martínez, L. and Wolff, R. (2006). Modelling the initial pit design: the first step for project valuation. In: 6th International Mining Geology Conference: Rising to the Challenge. Proceedings. IMGC2006: 6th International Mining Geology Conference, Darwin, NT, Australia, (269-281). 21-23 August, 2006.

Author Martínez, L.
Wolff, R.
Title of paper Modelling the initial pit design: the first step for project valuation
Conference name IMGC2006: 6th International Mining Geology Conference
Conference location Darwin, NT, Australia
Conference dates 21-23 August, 2006
Proceedings title 6th International Mining Geology Conference: Rising to the Challenge. Proceedings
Journal name 6th International Mining Geology Conference
Place of Publication Carlton South, VIC, Australia
Publisher Australasian Institute of Mining and Metallurgy
Publication Year 2006
Sub-type Fully published paper
ISBN 9781920806507
9781920806514
Volume 2006
Issue 6
Start page 269
End page 281
Total pages 13
Language eng
Formatted Abstract/Summary
One critical factor in open pit mining projects is the estimation of the recoverable reserves. The reason for this is that at the valuation stage there is a lack of information about future metal prices and production costs. Consequently, the estimation of the recoverable reserves needs to be done based on. a fixed break-even cut-off grade (BECG), in which fixed expected metal prices and production costs are assumed throughout the operating life of the mine (OLM).

In this paper, an alternative technique for estimating the recoverable reserves of an open pit mining project is presented and explained in detail. The main characteristic of this technique is that it estimates the recoverable reserves of the project using mining costs as reference: this is done due to the fact that mining costs are easier to model than metal prices. Another important characteristic of this technique is that it uses the uncertainty of the geology of the orebody, given by simulations of the deposit, to make final strategic decisions, such as the selection of the operating life of the mine and the optimal production rate, which minimise the risk of not achieving future production targets while maximising the upside potential of future rewards.

As it will be shown, the final outcome of the proposed technique is the generation of a robust open pit design, that include cutbacks and ultimate pit limits, called the marginal open pit mine design (MOPMD). One characteristic of the MOPMD is that, at each production period, it will be characterised by their respective geological uncertainty, given as probability distributions of ore, waste and metal quantities, and by marginal economical project indicators, such as cut-off grades and metal prices, among others. The details follow in the paper.
Keyword Metal price
Mining risk
Open pit design
Orebody estimation
Production costs
Real options
Q-Index Code E1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Conference Paper
Collection: W.H. Bryan Mining Geology Research Centre
 
Versions
Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 0 times in Thomson Reuters Web of Science Article
Scopus Citation Count Cited 0 times in Scopus Article
Google Scholar Search Google Scholar
Created: Wed, 18 Jun 2014, 02:04:45 EST by Rodney Wolff on behalf of WH Bryan Mining and Geology Centre