Project Evaluation 2012
Project Evaluation 2012
Reducing Project Risk through Fact-Based Mine Planning
The most significant risk in developing a mine is that the planner's forecasts are not met. Cost and time allowances are rarely met and returns on investment are lower than predicted in 80 - 90 per cent of developments. A primary input of this is equipment production and often the rates forecast are not achieved. Three causes are proposed for this; technical deficiencies in the planning process; planner's optimism and strategic misrepresentation (deliberate deception). Because a mining company's balance sheet erodes every day they operate, there is pressure on the highest levels of the companies to convert discoveries/deposits to mines. Planners/consultants also have an interest in projects proceeding through the stages of feasibility studies. It is hardly surprising that in-house planners and consultants make forecasts which produce a result sufficient to justify the board approving the next stage of the development. The Australian industry uses the VALMIN Code (2005) and the JORC Code (2004). The ASX also has their own rules for listing. Each includes great detail on resource definition. However, they pay scant regard (eg The Valmin Code includes four lines in a 20 page document) to equipment performance; which is one of the primary drivers of the economics of a project (including converting a Resource to a Reserve). Mining companies have tight guidelines on the resource but clearly, this is not the only potential area of error? Neither The Valmin Code nor JORC Code are protecting investors adequately. They have simply shifted the source of error. The error (deliberate or not) is explained and demonstrated through six case studies. A better approach is recommended which includes better forecasting of equipment rates through reference class forecasting (benchmarking) against industry standards and more accountability. Not as many mines will be developed, but investors and shareholders will be better protected.CITATION:Lumley, G, 2012. Reducing project risk through fact-based mine planning, in Proceedings Project Evaluation 2012 , pp 123-130 (The Australasian Institute of Mining and Metallurgy: Melbourne).
Contributor(s): G Lumley
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- Published: 2011
- PDF Size: 0.196 Mb.
- Unique ID: P201204016