scholarly journals Analysis of the variables: Commodity price and discount rate on long-term open pit mine planning

2021 ◽  
Vol 6 (2) ◽  
pp. 142-150
Author(s):  
Fontes MP ◽  
Koppe JC ◽  
Silva Neto JA
Keyword(s):  
Discount Rate ◽  
Net Present Value ◽  
Market Price ◽  
Commodity Price ◽  
Open Pit Mine ◽  
Mine Planning ◽  
Open Pit ◽  
Economic Criterion ◽  
Physical Constraints

Long-term open pit mine planning is a complex process which deals with numerous uncertainties, whether they are economical (commodity price, operational costs, production schedule, discount rate, inflation, among others); geological (grade distribution, density, hardness, etc); or physical constraints (property limits, environmental issues, legislation, etc). In this context, this paper aims to evaluate the effects of the variation of two important variables: commodity price and discount rate, with regard to the economic criterion, represented by the Net Present Value (NPV) of the mining business. Starting from a baseline value of US$ 80/t, the commodity (phosphate rock was used as a case study) price was varied within a 50% range, above and below the baseline value, obtained from historic values from the last 5 years. The discount rate values adopted in the analyses were 6%, 8%, 10%, 12%, 14%, 16%, 18% and 20%. The results showed increases in the market price yielded higher NPV and life of mine values. On the other hand, it was noted that increases in the discount rate can significantly alter the NPV, materially reducing the value of the mining undertaking. It is also worth noting that, in contrast to more robust approaches such as Real Options Theory (ROT), traditional Discounted Cash Flow (DCF) methods, such as NPV, assume variables, such as commodity price, to be fixed, which could either lead to the undervaluation or overvaluation of a project.

scholarly journals Incorporation of Geometallurgical Attributes and Geological Uncertainty into Long-Term Open-Pit Mine Planning

Minerals ◽  
2019 ◽  
Vol 9 (2) ◽  
pp. 108 ◽  
Author(s):  
Nelson Morales ◽  
Sebastián Seguel ◽  
Alejandro Cáceres ◽  
Enrique Jélvez ◽  
Maximiliano Alarcón
Keyword(s):  
Production Scheduling ◽  
Programming Model ◽  
Mineral Resources ◽  
Mineral Deposit ◽  
Open Pit Mine ◽  
Mine Planning ◽  
Open Pit ◽  
Operational Parameters ◽  
Financial Outcomes

Long-term open-pit mine planning is a critical stage of a mining project that seeks to establish the best strategy for extracting mineral resources, based on the assumption of several economic, geological and operational parameters. Conventionally, during this process it is common to use deterministic resource models to estimate in situ ore grades and to assume average values for geometallurgical variables. These assumptions cause risks that may negatively impact on the planned production and finally on the project value. This paper addresses the long-term planning of an open-pit mine considering (i) the incorporation of geometallurgical models given by equiprobable scenarios that allow for the assessing of the spatial variability and the uncertainty of the mineral deposit, and (ii) the use of stochastic integer programming model for risk analysis in direct block scheduling, considering the scenarios simultaneously. The methodology comprises two stages: pit optimization to generate initial ultimate pit limit per scenario and then to define a single ultimate pit based on reliability, and stochastic life-of-mine production scheduling to define block extraction sequences within the reliability ultimate pit to maximize the expected discounted value and minimize the total cost of production objective deviations. To evaluate the effect of the geometallurgical information, both stages consider different optimization strategies that depend on the economic model to be used and the type of processing constraints established in the scheduling. The results show that geometallurgical data with their associated uncertainties can change the decisions regarding pit limits and production schedule and, consequently, to impact the financial outcomes.

The Role of Economic Uncertainty on the Block Economic Value – a New Valuation Approach / Rola Czynnika Niepewności Przy Obliczaniu Wskaźnika Rentowności – Nowe Podejście

2012 ◽  
Vol 57 (4) ◽  
pp. 991-1014 ◽  
Author(s):  
H. Dehghani ◽  
M. Ataee-Pour
Keyword(s):  
Net Present Value ◽  
Economic Value ◽  
Operating Cost ◽  
Mine Planning ◽  
Open Pit ◽  
Economic Uncertainty ◽  
Present Value ◽  
Wrong Decision ◽  
Binomial Tree ◽  
Conventional Methods

Abstract The block economic value (BEV) is one of the most important parameters in mine evaluation. This parameter can affect significant factors such as mining sequence, final pit limit and net present value. Nowadays, the aim of open pit mine planning is to define optimum pit limits and an optimum life of mine production scheduling that maximizes the pit value under some technical and operational constraints. Therefore, it is necessary to calculate the block economic value at the first stage of the mine planning process, correctly. Unrealistic block economic value estimation may cause the mining project managers to make the wrong decision and thus may impose inexpiable losses to the project. The effective parameters such as metal price, operating cost, grade and so forth are always assumed certain in the conventional methods of BEV calculation. While, obviously, these parameters have uncertain nature. Therefore, usually, the conventional methods results are far from reality. In order to solve this problem, a new technique is used base on an invented binomial tree which is developed in this research. This method can calculate the BEV and project NPV under economic uncertainty. In this paper, the BEV and project NPV were initially determined using Whittle formula based on certain economic parameters and a multivariate binomial tree based on the economic uncertainties such as the metal price and cost uncertainties. Finally the results were compared. It is concluded that applying the metal price and cost uncertainties causes the calculated block economic value and net present value to be more realistic than certain conditions.

scholarly journals Economic Feasibility of Semi-Underground Pumped Storage Hydropower Plants in Open-Pit Mines

Energies ◽  
2020 ◽  
Vol 13 (16) ◽  
pp. 4178 ◽  
Author(s):  
Michael Wessel ◽  
Reinhard Madlener ◽  
Christoph Hilgers
Keyword(s):  
Power Plant ◽  
Value At Risk ◽  
Financial Risk ◽  
Net Present Value ◽  
Analytical Framework ◽  
Open Pit Mine ◽  
Economic Feasibility ◽  
Production Costs ◽  
Open Pit ◽  
Specific Production

This work aims at the economic evaluation of a semi-underground pumped hydro storage power plant erected in an abandoned open-pit mine. For the exploratory model-based analysis, we develop and apply both a simple deterministic and a stochastic net present value (NPV) approach, the latter of which uses a Monte Carlo simulation to account for revenue uncertainty from electricity price fluctuations. The analytical framework developed is applied to two promising sites in the Rheinland region in Germany, Hambach and Inden, making reasonable parameter value assumptions and considering and ignoring the lengthy duration of lower reservoir flooding. The investor’s value-at-risk is computed for alternative performance indicators (NPV, net cash recovery, profit-to-investment ratio, and specific production costs) to compare the different outcomes in terms of the project’s financial risk distribution. Calculations show that a semi-underground pumped hydro storage power plant in an abandoned open-pit mine can be constructed at reasonably low investment costs and operated at low specific production costs. However, because the investment has to be made long before the pit lake is (naturally) flooded—a process that for realistic flow rates may take up to 20 years—the project is highly uneconomical and would require substantial subsidies, as compared to a situation where flooding happens immediately.

Real options decision framework: Strategic operating policies for open pit mine planning

2016 ◽  
Vol 47 ◽  
pp. 142-153 ◽  
Author(s):  
Inthanongsone Inthavongsa ◽  
Carsten Drebenstedt ◽  
Jan Bongaerts ◽  
Phongpat Sontamino
Keyword(s):  
Real Options ◽  
Open Pit Mine ◽  
Mine Planning ◽  
Open Pit ◽  
Decision Framework ◽  
Operating Policies
Sign in / Sign up

Export Citation Format

Share Document