IC 8495 Financial Evaluation Of Mineral Deposits Using Sensitivity And Probabilistic Analysis Methods

The purpose of this study was to develop methods for the financial evaluation of mineral deposits. This includes the selection of the best alternative mining and processing methods and production rates. This was done by performing a financial evaluation through computer simulation using sensitivity and probabilistic risk analysis. The criterion used to measure the relative advantages of these investment and operating alternatives is the discounted-cash-flow rate of return. Included is a description of the theory and methods used in the probabilistic analysis approach, which is based on the premise that the expression of a range of values in establishing an estimate for a parameter is more realistic than the choice of a single value. Numerous simulations are made using randomly selected values of the input parameters resulting in a frequency distribution of the rates of return and their relative probability of occurrence. The sensitivity analysis method is described and combined with the probabilistic analysis to interrelate mineral reserves, capital investments, operating costs, and production rates. The ability to vary these input parameters on successive runs has permitted the selection of the best alternative mining and processing methods and production rates for a given mineral deposit. For illustrative purposes the evaluation of a mineral deposit was performed using three alternative mining and processing methods at three different quantities of resources and various production rates and prices. The computer program used in this analysis was written in FORTRAN II for maximum compatability and should run without modification on most computers having BK (8,000-word) core memory, a card reader, and printer (120 characters per line).