The Probabilistic Analysis of Block Economic Value (BEV) in Open-Pit Mines Considering the Effect of Uncertainties in Metal Price and Operational Costs

Summary In this research, the Block Economic Value (BEV) and project NPV in an open-pit mine has been analyzed probabilistically by using the Monte Carlo Simulation (MCS) method to deal with the uncertainties in the nature of the most important economic parameters including metal price and operational costs. The results showed that the outcomes are closer to the reality by this method compared to the results of the classic methods.
Introduction The basic input in the process of open-pit limit optimization is a set of block values representing the net economic worth of each block. Based on the estimated block economic values (BEV’s), the optimizer selects the optimum destination of each block in order to maximize the overall pit value under some given technical constraints. A dollar value is usually assigned to each block by estimating the revenue of recoverable metal at a given fixed metal price and subtracting applicable mining, processing and other costs. The variation trend of metals price and mining costs over the years shows that deterministic assumptions for values of such parameters will result in errors in the process of BEV calculation. The effective parameters such as metal price, operating costs, grade etc. are always assumed deterministic in the conventional methods of BEV calculation. While, these parameters have, obviously, uncertain nature.
Methodology and Approaches In this paper, the BEV and project NPV were initially determined using Whittle’s formula based on deterministic economic parameters. Then the Monte Carlo Simulation (MCS) method was employed and the economic uncertainties such as the metal price and cost uncertainties were taken into account. The economic data of Grassberg Copper Mine were utilized to achieve this goal.
Results and Conclusions The results showed that the Monte Carlo simulation method is highly capable of estimation of economic uncertainties. The estimated block economic values using this method are closer to the actual values compared to other methods and the error percentage is lower. As well, it was observed that the net present values obtained by the Monte Carlo simulation are closer to the reality compared to the other calculations.