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Conference Proceedings

Mineral Valuation Methodologies Conference - VALMIN 94

Conference Proceedings

Mineral Valuation Methodologies Conference - VALMIN 94

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Uncertainty and Risk in Mineral Valuation - A User's Perspective

The words ""Uncertainty"" and ""Risk"" pervade every
discussion about mining exploration and investment.
Perhaps these terms are subjectively understood by
industry professionals, but objective portrayal of these
concepts outside the industry is a woefully undeveloped
science. This paper addresses current industry
understanding and practice regarding quantitative risk
assessment techniques, and provides examples of the
application of three of these techniques. Probabilistic
techniques for financial risk assessment are valuable
adjuncts to conventional financial analysis, and address
a range of issues not assessable by any other means.
The value of whole-of-project probabilistic risk
assessment is currently debatable for decision-making
purposes, but is seen as important as a mechanism to
focus attention to the critical issues that ultimately impact on project success. The dissection of project
capital into risk and non-risk components provides
valuable insights into risk characteristics not readily
quantifiable in any other way. This technique also
provides a framework for more objective ""what if?""
scenario evaluation and for the capital structure of
resource projects. Finally, mechanisms for the valuation
of undeveloped reserves are examined, and guidelines
suggested. The importance of reliability in production
cost estimates is highlighted and the impact of early
development on reserve valuations is discussed. The
importance of economics throughout all stages of the
evaluation process is fundamental.
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  • Published: 1993
  • PDF Size: 1.127 Mb.
  • Unique ID: P199410023

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