Abstract

CORDOVA, E.; MOBAREC, V.; PIZARRO, E.  and  VIDELA, A.R.. A structured key cost analysis methodology to identify value-contributing activities in mining projects: a case study of the Chuquicamata Underground Project. J. S. Afr. Inst. Min. Metall. [online]. 2018, vol.118, n.3, pp.279-288. ISSN 2411-9717.  http://dx.doi.org/10.17159/2411-9717/2018/v118n3a10.

Traditional project evaluation methods for estimating operating costs of mining projects mostly produce static and over-conservative evaluations. In this study, a systematic model for managing the economic risk of the operating costs for an ongoing 'supercave' project, the Chuquicamata Underground Project, is presented. Key cost generators are identified, and their inherent variability is characterized based on a similar underground operation and expert judgment. Using Monte Carlo simulations, variability is factored into the evaluation, and the economic risk associated with each variable is quantified, after which the simulated data is used to identify the underlying risk, as well as mitigating actions and opportunities. The methodology can serve to identify how variability may impact the value of the project and how mitigation actions could decrease the present value of the estimated operating cost of the project by more than 10%. As a result of the analysis, the project managers became aware that labour and energy costs are the major contributors from a risk-value perspective, and mitigating actions such as construction of a power plant and implementation of a well-designed labour productivity incentive plan could be justified with a reduction of the overall risk value of the project.

Keywords : risk quantification; risk management; underground mining operating cost; Monte Carlo simulation; quantitative risk analysis.

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