Risk assessment in reserve estimation and open-pit planning

Paper presented at the conference Risk assessment in the extractive industries, held in Exeter, 23-24 March 1994. Sensitivity analyses based on financial variables are now routinely applied to the forecast financial results of mining projects especially during the feasibility stage. Risk analysis is gaining acceptance but is still almost universally confined to the effects of variations in financial variables. The single most sensitive factor in almost all mining projects is the ore reserve, but it is either ignored or improperly used in sensitivity and risk analyses. Unlike financial variables, the components of the ore reserve (grades and tonnages of mining blocks) are a function of location within the orebody. Physical (mining) access to these components is therefore a function of time which has a crucial effect on forecast cash flows. It is critical that these fundamental concepts are included in risk analyses of mining projects. The effects are considered of the uncertainty of the ore reserve on feasibility studies and open-pit mine design for a small gold mining venture. Geostatistical simulation is used as a method of quantifying the risk in using grades and tonnages estimated from sparse data