Abstract
Abstract Long-term mining planning is a complex process which involves a large number of variables and uncertainties. Traditional discount cash flow (DCF) is usually used in the evaluation of mining projects. DCF includes net present value (NPV), internal rate of return (IRR), and profitability index (PI). A sensitivity analysis is usually carried out to evaluate the impact of the main variables on the project. Another way to measure uncertainties is through the Monte Carlo simulation (MCS). The objective of this study is to evaluate and compare the DCF methods and measure uncertainties through sensitivity analysis and MCS in the evaluation of mine sequencing. A case study of a phosphate mine project was used to chart the comparative study. In the results, NPV and uncertainty analysis through MCS were more consistent.
Highlights
Mining activities have contributed to the development of society for thousands of years and the high standard of living today is dependent on minerals
The net present value (NPV) method has the following advantages: I) it recognizes the value of money over time; II) it is not affected by accounting techniques; III) it reflects the increase of the shareholder’s wealth; IV) it can be added to another NPV; V) it only depends on cash flows and opportunity cost
The payback period discounted is the time to recover the investment at the chosen interest rate, which in this case study was 16%. This method is close to NPV, and the results show that the initial investment is repaid in the 4th year and is still generating a profit of US$ 2.35 million
Summary
Mining activities have contributed to the development of society for thousands of years and the high standard of living today is dependent on minerals. According to IBRAM (Brazilian Mining Institute 2017/2018), mining exported 403 million tons of mineral goods, and generated a foreign exchange of FOB US$ 28.3 billion. This value represented 13% of Brazil's total exports and 30.5% of the trade balance. The mineral extractive industry has fundamental participation in the gross domestic product (GDP) and represents 1.4% of total Brazil’s GDP, according to IBGE (Brazilian Institute of Geography and Statistics), employing around 180,000 workers directly. It is necessary to develop ways to choose, among many options, those which maximize the value of the company for their shareholders and creditors, rejecting the others
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call