Geotechnical value quantification through real options

Authors: Venter, J; Hamman, ECF Download Paper Open access courtesy of:

DOI https://doi.org/10.36487/ACG_rep/1905_21_Venter

Cite As:
Venter, J & Hamman, ECF 2019, 'Geotechnical value quantification through real options', in J Wesseloo (ed.), MGR 2019: Proceedings of the First International Conference on Mining Geomechanical Risk, Australian Centre for Geomechanics, Perth, pp. 353-372, https://doi.org/10.36487/ACG_rep/1905_21_Venter



Abstract:
Slope stability acceptance criteria is often applied from standard tables representing industry practice or corporate risk tolerance. While in many cases such standard off-the-shelf solutions are fit for purpose, in the case of slopes with a high value increase per incremental slope angle increase, or where highcost infrastructure or other sensitive locations are nearby, it pays to have a custom Probability of Failure acceptance criteria determined through risk analysis. The value lies in being able to quantify the consequences of hazards that are slope angle driven, and in determining the mining schedule consequences of these hazards through Probability of Failure. This paper demonstrates the concept of the risk-based geotechnical assessment through a practical example of a small saprolite pit in West Africa, how such an analysis was carried out, and how the costappropriate risk controls were put in place. The example is based on a gold mine, and considers the timing and size of potential failure as well as the mining schedule and cash flow schedule. The type and size of appropriate risk controls are also estimated in the calculation. Finally, the paper demonstrates through the model how the value of geotechnical engineering controls can be calculated using the concept of real options.

Keywords: real option, economic risk, cash flow, slope stability

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