Quantifying the mine project risk management value of orebody knowledge
Our Ore-body knowledge theme is developing an NSERC Alliance grant focused on quantifying the value of in depth understanding of rock and ore bodies in mine development projects.
The mining industry has a poor track record of shareholder value creation and one of the top sited causes of value destruction is over-optimistic commodity price predictions over the life of the mine (Northern Miner Survey 2015 (475 responses). What’s more is that over 40% write-downs are due to poor orebody knowledge.
The usual approach to the evaluation of innovations in mining is to focus on efficiency gains. These are typically incremental improvements where the economic value created is a similar order of magnitude to the new technology’s costs. Our approach to orebody modelling technology is different, and we focus on the large loss events that have crippled the industry in recent decades. Putting a value on different categories of orebody-related write-downs will enable mine planners to understand the economic significance of different types of risks that are currently poorly understood. This will make a more robust business case for new orebody characterization technology and raise Canadian risk management in mine development to international best practice.
Ultimately, pending funding, the theme plans to develop an open online mining project risk-assessment tool. This is essentially a reference class forecast of the likelihood of geological risks resulting in mine project problems. Industry users can input a mining project’s characteristics and receive statistics on the likelihood of write-down events and estimate orebody information needed to mitigate against the write-down.
By developing a more thorough understanding of orebody knowledge and write-downs related to a lack of understanding, BRIMM hopes to demonstrate the important value of this knowledge to the industry.