Scenario thinking – a powerful tool for strategic planning and evaluation of mining projects and operations

Vann, J., Jackson, S., Bye, A., Coward, S., Moayer, S., Nicholas, G. and Wolff, R. C. (2012). Scenario thinking – a powerful tool for strategic planning and evaluation of mining projects and operations. In: Project Evaluation 2012: Proceedings. Project Evaluation Conference 2012, Melbourne, Australia, (5-14). 24-26 May 2012.

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Name Description MIMEType Size Downloads
Author Vann, J.
Jackson, S.
Bye, A.
Coward, S.
Moayer, S.
Nicholas, G.
Wolff, R. C.
Title of paper Scenario thinking – a powerful tool for strategic planning and evaluation of mining projects and operations
Conference name Project Evaluation Conference 2012
Conference location Melbourne, Australia
Conference dates 24-26 May 2012
Proceedings title Project Evaluation 2012: Proceedings
Place of Publication Melbourne Australia
Publisher AusIMM: Australasian Institute of Mining and Metallurgy
Publication Year 2012
Sub-type Fully published paper
Open Access Status
ISBN 9781921522635
Start page 5
End page 14
Total pages 10
Language eng
Formatted Abstract/Summary
A new approach to mineral project evaluation is described called Scenario-Based Project Evaluation (SBPE). SBPE incorporates well established ‘scenario planning’ and ‘scenario thinking’ approaches, which are used extensively in other industries, most notably the petroleum industry. While most scenario planning is qualitative and non-probabilistic, the approach described here includes both quantitative and qualitative aspects. SBPE is complementary to optimisation approaches and allows mining firms to build and operate projects that are more robust in the face of adverse changes as well as proactively respond and exploit the upside offered by a realistic assessment of variability. The approach has potential to improve project performance and decrease operational risk. It also has important applications for currently operating mines.

Conventional evaluation of metalliferous mineral deposits uses estimates of metal grades and deleterious attributes in singular ‘orebody models’, usually 3D block models, which fail to capture two critical aspects that underpin the realised value of mining projects:

the inherent uncertainty of the estimated attributes
the spatial variability of attributes, at the scale of mining selection, which impact on downstream processing steps and fundamentally drive realised value.

While singular models are appropriate for estimating block averages, conditional simulation (CS) models of the relevant attributes are needed to represent uncertainty and capture spatial variability. Any attributes that can be either built into CS models and/or modelled in the envisaged mining/processing steps, can be evaluated fully through to highly ‘granular’ (ie detailed and un-smoothed) cash flows.

A complete view of SBPE relies on selected strategies being tested against plausible ‘scenarios’ of factors external to the project and thus outside management control. ‘Externalities’ captured in such scenarios include market prices, costs and taxes. Via SBPE, project managers may demonstrate that there is material value in preserving or purchasing options that provide future flexibility to respond to the changing externalities or changes in orebody performance. Such flexibility generally comes at a cost but is very difficult to value. It is argued that full value chain evaluation using SBPE can help to value these options for a mining company.

A case study for a gold mine is presented.

Q-Index Code E1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Conference Paper
Collections: W.H. Bryan Mining Geology Research Centre
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Created: Thu, 11 Apr 2013, 16:11:10 EST by Diep Tran on behalf of WH Bryan Mining and Geology Centre