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By Somchet Vongpaisal

This paper presents the R&D results on the development of a new knowledge-based system for predicting stope instability and associated unplanned dilution in deep underground mining operations. A new prototype was developed based on databases generated from 3D non-linear elasto-plastic finite element stress analysis, heuristic rules, and case histories. This prototype aims to assist mine operators to make decisions on strategic mine planning and feasibility in a quick and efficient manner thereby minimizing risk on ground failure and optimizing mining costs.

Jun 1, 2012

By Gautier Njiekak

The current study provides an experimental approach that aims at documenting the effects of different phases of CO2 (gas, liquid, supercritical fluid) on rock seismic responses. This has implications on obtaining quantitative estimates of fluid saturations for geological storage. The ultrasonic pulse transmission technique is the underlying methodology used in this work. Unlike previous rock physics studies involving CO2 as pore fluid, care is taken to fully saturate the studied samples and also to separate pore fluid effects from pore pressure build-up effects during the experiments. This allows to record seismic effects that are solely reflective of changes in the pore fluid properties. Measurements were done on a CO2 saturated Berea sandstone. Laboratory results show P- and S- waveform variations (velocity, amplitude) in response to CO2's varying phase state. Overall, CO2 phase changes (gas to liquid and gas to supercritical fluid) are marked by a drop in velocities, with the drop being smaller and less immediate over the gas-supercritical fluid transition than over the gas-liquid transition.

Jun 1, 2012

By J Rowland

"This paper was primarily put together in order to demonstrate what are believed to be acceptablestandards, in relation to ventilation surveys and the subsequent model assembly process. Thiswas brought about by the fact that in many parts of the world it is regarded as acceptable to carryout ventilation surveys and then build and supply the client with a æstick fi gureÆ type ventilationmodel. Such stick models have arguably litt le use and a very short life span in the real world and isalmost impossible for site staff to maintain. Thankfully most underground coal mines in Australia strive to maintain a true replica model of their ventilation circuits and to keep them in a relatively good state. Given that these mines own and maintain the models, it is often seen as necessary to update or rebuild them. The level of survey detail required to do so is totally dependent on the end use of the data and the criticality of the accuracy of the data set, to the ongoing safety and viability of the business. Mine technical personnel should think clearly about the use and importance of the ventilation survey and subsequent report outputs required that will help them bett er understand their mines and bett er prepare them to manage their ventilation circuits, on an ongoing basis. This paper provides some guidance for Australian ventilation engineers so they may plan and execute this work æin houseÆ, should they rightly choose to do so. To this end, methods of data collection and circuit analysis required for surveys of a high order of accuracy are detailed. Also, some of the issues which are important when formulating a strategy to carry out the appropriate ventilation survey for the required purpose are summarised. As well, the major details that should be furnished within any survey and some survey/report outputs and/or omissions, which are clearly not acceptable, are highlighted."

Jun 1, 2012

By Erik C. Westman

Knowledge of the orientation and relative magnitude of in-situ stresses at the mine scale is important for safe and efficient production from an underground mine. With this knowledge, stope location and scheduling can be optimized. Passive seismic tomography was used for imaging horizontal stress distribution at the mine scale. Microseismic measurements from the Creighton mine were used as input for the tomography calculations. The double-difference tomography algorithm was used, which provides the most precise results. The results clearly show a low velocity zone in the previously mined areas bounded by two high-velocity lobes located adjacent to the mined openings at locations consistent with those expected due to the horizontal stresses at the mine. The overarching goal of the research is to provide a tool that can augment both numerical modeling results and underground geotechnical measurements to allow the mine operator to produce in the safest and most efficient manner possible.

Jun 1, 2012

By Gregory C. More O'Ferrall

Generally pillars in the Southern African hard rock tabular underground mining environment are designed using either empirical pillar design formulae or numerical modelling (analytical) methods utilizing the Hoek-Brown failure criterion. However, none of the pillar design methodologies employed takes cognizance of weak layers either within the pillar material or in the immediate foundation of the pillar. Over the past few years, the presence of a weak layer either within the pillar material or within the immediate foundation of the pillar has resulted in the closure of one platinum mine (Everest Mine), closure of one chrome mine (Wonderkop Chrome) and large-scale instability in a couple of chrome and platinum mines in South Africa and Zimbabwe. A study has been initiated to better understand the failure mode and strengths of the pillars where pillar failure associated with weak layers occurred. Owing to the infancy of the study into the failed pillar strength and failure mechanism, the purpose of this paper is to highlight the circumstances that led to the collapse of mining sections and a shaft, and the difficulty associated with designing pillars in the Southern African chrome and platinum mining operations.

Jun 1, 2012

By B Maybee

In underground mine planning, many potentially value-eroding decisions are made due to a lack of time and proper evaluation practices. The information required for mine planning decisions goes beyond external sources of uncertainty that are recognised by typical evaluation techniques used in the mining industry, to include technical factors (eg mine development layout) and the ability of a mineral extraction project to achieve its anticipated production levels. Due to the individual characteristics that define underground mining projects, each will exhibit a different risk profile, and thus advanced optimisation and evaluation techniques are required to capture this information.As underground mine planning tools become more sophisticated, mine planners have the capacity to investigate numerous mine sequencing options to identify the best strategy for a given project, creating higher value for shareholders. This paper describes a risk-based evaluation methodology (RbEM) that accounts for financial and technical risk in the evaluation of underground mining projects. While the use of the RbEM has been described in previous works, no benchmarking of the benefits that can be realised from a change in those decisions that are made early in the process has been undertaken. To show the benefits that can be achieved from using the RbEM, this paper updates a case study to which the RbEM was applied, and takes a retrospective look at whether additional value would have been gained by following the strategic recommendation of the RbEM versus a typical optimisation exercise that aims to maximise the net present value.CITATION:Maybee, B, 2012. Can a risk-based evaluation provide a more valuable mine design?, in Proceedings Project Evaluation 2012 , pp 53-58 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By P Guj, J A. Bell

The valuation of early-stage exploration projects requires a valuer to take into account a large number of uncertain value drivers, the interplay among which may be non-linear. This paper examines some of the key value drivers including geology, target metrics, project area and maturity, the market and the psychology behind the decision-making process. The commonly accepted valuation methods and their underlying logic are outlined, including a view on why they evolved, what value drivers they attempt to address and their potential shortcomings. These methods include the multiple of exploration expenditure, geoscience rating, expected values and market based methods. The potential future valuation methods of replacement values and neural networks are also introduced along with how to minimise heuristic bias and error within the market-based approach.CITATION:Bell, J A and Guj, P, 2012. Exploration value drivers and methodologies, in Proceedings Project Evaluation 2012 , pp 17-28 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By L Lorenzen, H Muller

"Every year a large number of projects are evaluated by small listed and unlisted mining companies that are hoping to find the ideal project, which will catapult them from a mining junior status to that of a mid-tier mining company. Usually this includes finding the æidealÆ or ærightÆ orebody and then developing a process which will allow cost-effective recovery of the valuable metals and the production of a saleable product. These dreams are seldom realised and there are a number of good and obvious reasons for this. Issues that are generally high up on the agenda for the smaller companies are: cost of developing a project before the feasibility study stage finding a suitable, or optimum processing technology financing of the project dealing with risk.The most expensive part of the development process for the small miner is often the exploration side of the business and finding the æidealÆ orebody. However, finding the right orebody will not be discussed in this paper. The æidealÆ orebody does not necessarily solve the problems of the mining junior, as much of the uncertainty lies in the process required to recover and produce the final metal product. Once a mineralised deposit has been identified and the grade at least reasonably qualified, the development of a suitable process becomes the driver to convert the deposit into an orebody. This paper proposes that a small exploration company has a very limited opportunity to succeed if it does not do sufficient homework before it identifies the æidealÆ orebody. The risk profile for the small mining company, by its very nature, has to be different to that of a major company and as a result the opportunities often lie in managing different and often new process options, which may be the key to bring such projects on line successfully.CITATION:Muller, H and Lorenzen, L, 2012. Project selection and process development for mining juniors, in Proceedings Project Evaluation 2012, pp 149-158 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

May 24, 2012

By B Maybee, L Fava, D Millar

In the context of a case study for an underground gold mine, the value generated by a schedule optimisation tool (SOT) is assessed. SOT is a software tool for underground mine planning that maximises the net present value (NPV) of a development and production schedule. A baseline study measures the NPV of a schedule generated by SOT from a sequence prepared by the site mine planners. Operational resource constraints and precedence constraints are adhered to by the schedule and NPV is evaluated with a financial model including revenues, costs and discount rate, as specified by the mine planner.The case study has several facets in addition to the baselining component. Scenarios were conducted that examined the degree of constraint on operational resources, the projected gold price and unit costs. Life-of-mine schedules subject to optimisation using SOT allowed for equitable comparisons.Haulage was identified as a dominant constraint for the mine. It was one of six operational resources that were used to constrain the optimisation of the mine schedule, with alternative levels for some of these constraints being identified so that their effects on the NPV could be studied. Alternative price projections for gold and different cost projections were identified and their effects on the optimised schedule examined. Price and cost scenarios that brought additional economic material into the schedule at various times in the mine life were considered in comparison to a scenario that assumed no additional economic material would become available.This case study illustrated that the use of a schedule optimisation tool to optimise mine schedules provides mine planners with an ability to perform a wide variety of analyses in a relatively short period of time. Such tools thereby support strategic decision-making that can add significant value to an orebody.The case study demonstrates that by fixing the set of development and production activities to be carried out before optimising the life-of-mine schedule, the mine planners can inadvertently set up a situation where the NPV would be progressively eroded in the last several years of the mine life. This clearly illustrates the need for schedule optimisation to be integrated with life-of-mine planning.CITATION:Fava, L, Maybee, B and Millar, D, 2012. Decision support for an underground gold mining operation - A case study using the schedule optimisation tool, in Proceedings Project Evaluation 2012 , pp 41-48 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By P Myers, T Elkington, S Wonday

Sierra Rutile LimitedÆs (SRL) heavy mineral sand mining operation in Sierra Leone, West Africa, is embarking on a new phase of its life. After confronting many challenges during the 1990s and 2000s, SRL is embarking on a strategy of growth to recover maximum value from the mine over the rest of its life. Sophisticated linear programming techniques have been used to develop an optimum strategy for extracting SRLÆs many known deposits of economic grade, while considering options for expansion and for a variety of mining and processing methods and combinations. CITATION:Myers, P, Elkington, T and Wonday, S, 2012. Strategic optimisation at Sierra Rutile - A case study in maximising project value, in Proceedings Project Evaluation 2012 , pp 59-66 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By S Watson, L Martinez

Mine projects are complex opportunities that demand a constant assessment of uncertainty, ie risk and upside potential. This is because the value of a mine project is typically influenced by many underlying economic and physical uncertainties, such as metal/mineral prices, metal/mineral grades, costs, schedules, quantities, and environmental issues, amongst others, which are not known with much certainty at the beginning of the project. But, is uncertainty an enemy or an ally of the mine planner/analyst? To answer this question, this paper first assesses and elaborates upon the general concept of uncertainty. It then looks at the different sources of uncertainty in a mining project, such as the orebody, costs and product price uncertainties, and their effect on the final project value. Next, a general?review?of current mine evaluation techniques highlighting their limitations when dealing with uncertainty is made. Finally, an extended evaluation and risk management framework that addresses the existing uncertainty in the (greenfield/brownfield) mine evaluation process is proposed. One important characteristic of this framework is that it uses and manages uncertainty in order to generate additional value to the project; this is done through operational and managerial flexibility, which allow mine planners to minimise/maximise project risk/upside-potential giving a more realistic estimate of the projectÆs market value - this is shown in practical and simple examples occurring at different stages of a mine project, such as exploration and operation. Final conclusions are provided at the end.CITATION:Martinez, L and Watson, S, 2012. Uncertainty - An important source of (additional) value for mine projects, in Proceedings Project Evaluation 2012 , pp 131-140 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By A Chandra, P Guj

Only a few complex real options can be valued using closed-form equations, such as the Black and Scholes formula, because these algorithms are restrictive and prevent the construction of practical project evaluation models. Although a binomial lattice method paired with the ærisk-neutral probabilityÆ provides an easier and flexible modelling of exploration and mining projects, it has limitations when projects are complex, long-lived and influenced by the interplay of various market and private uncertainties. In order to overcome these limitations, modern decision tree software using dynamic programming capability can be used for real option valuations. This is a powerful computational tool in which the impact of various sources of uncertainties can be differentiated, so that the optimal decision path can be explicitly displayed visually. There has been significant academic controversy surrounding whether different real option (RO) valuation methods would lead to different real option values (ROV). This paper, using a realistic copper mining example, demonstrates that as long as the same degree of subjectivity and consistency are used in different real option valuation methods, they yield the same result. This conclusion is valid irrespective of whether the cash flow volatility generated by various sources of uncertainties is handled in an aggregated or in an explicit and differentiated manner. This paper compares two choices for an investor either to æbuy now and developÆ a project or to enter into a ætwo-year option to purchaseÆ after the proponents have developed it. It also shows how significantly different net after-tax operating cash flows may be generated by these different choices on the same underlying asset represented by the project. This is due to the difference in the amount and timing of the relevant capital investments affecting the depreciation and amortisation charges and as a consequence, the income tax paid. CITATION:Guj, P and Chandra, A, 2012. Real option valuation of mineral exploration/mining projects using decision trees - Differentiating market risk from private risk, in Proceedings Project Evaluation 2012 , pp 177-188 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

Risk management has become an essential tool for mining companies to ensure their projects are well-managed and profit expectations are achieved. Risk management has also become a mandatory corporate governance requirement in Australia for publicly listed companies and equally important to attract investors. This paper provides a brief overview of the essential tools needed to implement a practical risk management framework to comply with the internationally recognised ISO 31000:2009 risk management-principles and guidelines from the perspective of small or soon to be producing mining companies. To?successfully?deal with the unknown and to manage the opportunities and risks involved with a mining project requires a clear understanding of the basic risk management principles. These include how to develop a project risk register, how to develop a project risk treatment plan and how to manage and monitor project risks to take full advantage of the opportunities presented.The first step is to identify and fully appreciate the risks that face a mining project. There are many risk identification methods that can be used including checklists, brainstorming and hazard and operability (HAZOP) studies. These often lead to a telephone book full of risks which are near to impossible to manage. A risk library specifically designed?for mining?projects containing no more than 100 risks will cover the major showstoppers, is practical and can be readily implemented and successfully managed.A risk framework also needs to be established which is compatible with the companyÆs structure and objectives. Once each risk has been assessed in regard to consequence and likelihood and the risk control systems are in place they need to be assigned to the responsible manager. The extreme or high risks will require a risk treatment plan to be developed. Risks will change during the life cycle of a mining project. Hence, a reliable monitoring system is also required for compliance.CITATION:Jones, J A, 2012. Mine project risk management, in Proceedings Project Evaluation 2012 , pp 117-122 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By A M. Ebbels, D Pratt

The current commodities super-cycle has seen an explosion in the number of mining projects demanding human resources throughout the world. The demand for key personnel currently far outweighs the international talent pool and will take several years to subside. A highly effective project team can be the difference between a successful project and a bad public relations exercise. Building an effective team and retaining the team members has become one of the major influencing factors for successful project development in the mining industry in the last decade.Increasingly, international teams are being established combining skill sets, subject matter experts, unique previous experiences and diverse cultures to deliver mining projects all around the world.This paper explores the characteristics of a highly effective team, the communication and geographic challenges and some potential pitfalls which influence the ability to form effective teams within the mining industry.CITATION:Ebbels, A M and Pratt, D, 2012. A great project team - Bringing together location and culture, in Proceedings Project Evaluation 2012 , pp 197-202 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By J Gould, T Elkington

Mine operation strategies are commonly optimised with a net present value (NPV) maximisation objective. There are well known properties of a typical mining project optimised for NPV, including high production rates and declining cut-off grade schedules. In practice, however, frequently there are operations that diverge from such NPV-maximising properties. Although a range of reasons for this can be at play, one possible explanation is that operators intuitively adjust their strategies to compensate for the flaws inherent to NPV maximisation. In particular, NPV analysis does not reflect the benefits of managerial flexibility inherent in a mining plan. Real options valuation (ROV) is an alternative approach that addresses this issue. We compare the properties of NPV and ROV optimisation solutions generated for the same scenario. Our simple case study demonstrates that the presence of real operating options in the optimisation model not only entails increased project value as expected, but also tends to encourage lower processing capacity (with lower associated capital cost), higher cut-off grades and greater use of stockpiles.CITATION:Elkington, T and Gould, J, 2012. Real option value optimisation, in Proceedings Project Evaluation 2012 , pp 35-40 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By S Shafiee, N Abbate

The evaluation of mining projects requires a methodology that will give flexibility and manage the existing uncertainty within the projects. The discount cash flow (DCF) and other traditional evaluation approaches, which are widely used in evaluating a significant number of mining projects, have simply assumed that the main variables remain constant in their evaluation; elements such as discounted rate, mine life, operating cost and production rate. The DCF ignores managementÆs flexibility to adapt and reforecast and revise decisions. Real options valuation (ROV) is one of the modern evaluation methodologies that provide a tool to adapt and revise mining projects under uncertainty and future variables movements. ROV brings more variables into the evaluation model compared to DCF and assumes them as uncertain and dependent. Finally, ROV provides a range of solutions that can assist in managing this flexibility.This paper endeavours to compare ROV and DCF for mining projects comprehensively and applies these two techniques in the model. The paper shows that ROV will be inclusive of extra value in mining projects due to variables not allowed for, or even ignored, when the DCF model alone is used. One of the significant advantages of the ROV method is being able to evaluate mining projects under different scenarios from the inception of the projects. Furthermore, ROV gives the ability to evaluate the mining project while allowing for abandonment, temporary suspension, or expanding the mining project. In other words, the ROV evaluation process creates an analytical environment, which allows for optimisation of the mining plan within the mining project, as well as the ability to change the capital structure dependant on existing circumstances over the life of the project. The ROV is a new evaluation method that can add value in mining project analysis and offers opportunities to amplify gains, or to mitigate losses. This paper also discusses some of the reluctance to use ROV instead of DCF in current project evaluation.CITATION:Shafiee, S and Abbate, N, 2012. Now, this is the time for mining companies to choose - Real option valuation or discount cash flow, in Proceedings Project Evaluation 2012 , pp 225-234 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By P Card

Some project managers accept unsatisfactory economic evaluation modelling because they are unaware of what constitutes good practice. They tend to leave it to the evaluation specialist or others to decide. The AusIMM has published on its website a draft set of guidelines for technical economic evaluation which will allow these project managers to take control and demand worldÆs best practices.The style of the guidelines is described and the source of a worked spreadsheet example in Excel is given.Economic evaluation in project management is described. A simple test for the acceptance or rejection of evaluation work is offered. The nature of modelling and evaluation in each of the three study phases of concept, prefeasibility and final feasibility are described. Suggestions on the selection of specialists for each phase are given. The three levels of evaluation thinking are described, namely, modelling, valuation and evaluation. Finally the meaning of æfinancial analysisÆ is explained.The conclusion is that æthe role of an economic evaluation specialist is to create models and evaluations for the whole project team to readily understand and use: it is not to create models for his/her own useÆ.CITATION:Card, P, 2012. What project managers must demand from an economic evaluation!, in Proceedings Project Evaluation 2012 , pp 173-176 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By G Lumley

PlannersÆ optimism (or maybe commercial necessity) means that most mine plans use equipment rates that are rarely achieved (Lumley and Beckman, 2009). This lack of understanding of what equipment actually moves is causing erroneous equipment forecasts, leading to incorrect mine development plans and economic evaluations. Compounding this problem is a downward trend in actual equipment performance in some areas. Consequently, the presentation of realistic mine plans that are actually achieved in practice is not a common occurrence. However, rational, fact-based mine planning is available to those who want it. Hundreds of millions of cycles of data from open cut mining equipment has been collected from mines around the world since 1992. This unique and highly valuable databank is growing at an exponential rate and is being used by a number of our big miners to support rational and fact-based decision-making. However, neither the use nor the appreciation of the value of this data is universal. There is a challenge to everyone in the mining industry - how do you access value from it? The databank was drilled into and the results analysed for, the Australasian Mining and Metallurgical Operating Practices (AMMOP) publication (Lumley, in press). For this paper the analysis has been extended to include interpretation of trends for draglines, shovels, excavators and trucks. It investigates trends between coal and non-coal mines and across geographic areas. It is known that mining equipment performance in most sections of the industry is falling. This paper attempts to quantify the fall and provide explanations. The trends are analysed to extract the reasons behind the changes and most importantly, what can be done about it.CITATION:Lumley, G, 2012. Understanding trends in performance of open cut mining equipment, in Proceedings Project Evaluation 2012 , pp 203-224 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By G M. Jones, J Rademan

Debswana, owned by the Government of the Republic of Botswana (GRB) and De Beers in a 50:50 joint venture partnership, operates the Jwaneng diamond mine in Botswana - the most valuable diamond mine in the world. The mine provides between 60 - 70 per cent of DebswanaÆs earnings, and about 30 - 40 per cent of the GRBÆs income. In 2008, the company embarked on the Cut 8 Project - an open pit waste cut-back to expose more diamond bearing ore to sustain mine life by another six to seven years. This undertaking was much larger than previous cut-backs; it increased the waste stripping ratio threefold, increasing significantly the waste handling fleet of trucks, shovels and infrastructure, and impacted a large part of the materials handling plant which required replacement with new facilities. The project coincided with the beginning of the Global Financial Crisis (GFC) and a slowdown in the economy. Its $4 billion total life cost was billed as æthe largest private investment project in BotswanaÆ which produced heightened expectations amongst stakeholders that it would redress some of the issues brought about by the GFC and leave behind a legacy of jobs, increased opportunities for citizen owned business and improved social infrastructure.Most of the big project challenges were non-technical and ranged from dealing with various stakeholders?at?all levels, a 25 per cent currency depreciation of the Botswana Pula against the South African Rand, obtaining work permits for non-citizens in a job starved environment, managing construction to world class safety standards, managing the low productivity of construction workers and producing a viable legacy program that satisfied the GRB and stakeholders. Whilst most of these risks were identified in front end studies, the magnitudes were in many instances underestimated. Managing this uncertainty on Cut 8 can provide valuable lessons to other projects in a similar environment, or at least provide the information to indicate that these factors should be adequately provided for in the financial evaluation of a project in the form of budget, schedule, contingency or risk mitigation.CITATION:Jones, G M and J Rademan, 2012. Reliability of expert judgements and uncertainty assessments, in Proceedings Project Evaluation 2012 , pp 109-116 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

By D Jeffery, R Whittering, G Lane

Most aspects of process design are best addressed via bench scale or pilot plant scale test work. However, as experience is gained, fundamental or indicative data can provide more than adequate information to manage the risk associated with some process aspects of concentrator design.Historical precedence exists where minimal design test work has resulted in successful projects. On many occasions benchmarking, sometimes supported by fundamental data such as mineralogy, has been used to successfully develop effective process plant outcomes. Of course, this style of approach is most common with æfast trackÆ projects and often comes with the usual surprises that result from inadequate geometallurgy to define the project cash flow.This paper explores the risks and opportunities associated with the various facets of process development and design for a base metals concentrator. The paper is intended to provide guidance to project managers rather than address the technical aspects of process engineering.CITATION:Lane, G, Whittering, R and Jeffery, D, 2012. Benchmarking versus test work - How should you manage process risk?, in Proceedings Project Evaluation 2012 , pp 49-52 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012