Sensitivity analysis of Mining Projects

Posté le 01/10/2015

Scenario analysis provided by Excel could give another dimension to mining project evaluation.

The sensitivity analysis of a mining project helps estimating the impact of changes in one estimated variable such as grade, mill recovery, CAPEX, OPEX, etc., on NPV, IRR, etc.

The sensitivity analysis in today's project evaluation calculates the impact of changing one variable at a time (grade, mill recovery, CAPEX, OPEX, etc.), on NPV, IRR, etc.

 The sensitivity analysis can also calculate the impact of changing simultaneously two variables (grade, mill recovery, CAPEX, OPEX, etc.), on NPV, IRR, etc.

 

 

 

NPV (M$)

Changes in mill recovery

 

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Changes in Gold Price

50%

 

 

 

 

 

 

 

 

 

 

 

60%

 

 

 

 

 

 

 

 

 

 

5.9

70%

 

 

 

 

 

 

 

4.9

12.2

19.5

26.8

80%

 

 

 

 

 

5.9

14.3

22.6

31.0

39.4

47.7

90%

 

 

 

2.8

12.2

21.6

31.0

40.4

49.8

59.2

68.6

100%

 

 

5.9

16.4

26.8

37.3

47.7

58.2

68.6

79.1

89.5

110%

 

7.0

18.5

30.0

41.4

52.9

64.4

75.9

87.4

98.9

110.4

120%

5.9

18.5

31.0

43.5

56.1

68.6

81.1

93.7

106.2

118.8

131.3

130%

16.4

30.0

43.5

57.1

70.7

84.3

97.9

111.4

125.0

138.6

152.2

140%

26.8

41.4

56.1

70.7

85.3

100.0

114.6

129.2

143.8

158.5

173.1

150%

37.3

52.9

68.6

84.3

100.0

115.6

131.3

147.0

162.6

178.3

194.0

 

The base case scenario gives an NPV of 89.5 M$. With a 40% drop in the mill recovery and a 30% increase in the gold price, the resulting NPV is 43.5 M$. With both mill recovery and gold drops of respectively 20% and 10% the resulting NPV is 31.0 M$.

 

This approach, using Excel, is likely to add another dimension to sensitivity analysis of mining projects by improving risk management.

 

More information is available at: gesmine@gesmine.ca