Managing Risk in Mining Investment Decisions: A Global Focus

Abstract

Quantifying risks associated to mining investment decisions is a key challenge for the mineral industry executives and investors. However, risk analysis in most bankable mine feasibility studies is based on stochastic modelling of the net present value (NPV) of a project which, in most cases, fails to quantify risk associated to uncertainty on technical and management variables of the project and, as a result, are of little use for feasibility decision taking. This paper is, in part, based on the author’s publications, discusses mining investment as stepwise decision process under uncertainty and risk and proposes a global methodological model for the management of risk throughout the project value chain, focusing on risk quantification and value-added optimization. The paper includes a case study where the model is validated by its application to a copper ore body in Chile.