Computer simulation model for determining reclamation liability costs of the Ekati Diamond Mine™ in the Northwest Territories, Canada

Abstract

Estimation of closure liabilities for financial reporting and security deposits in the mining industry is often based on past estimates or deterministic models. These methods are limited in their ability to account for the variability of contributing costing factors. In 2001, Komex International Ltd. developed a Monte Carlo simulation (MCS) model to provide a best estimate for the reclamation liabilities of the Ekati Diamond Mine™ (BHP Billiton Diamonds Inc.). The model was built upon Decisioneering's ® Crystal Ball risk analysis and forecasting software to simulate the various facets of the mine's closure plans and reclamation activities. Reclamation activities included decommissioning, demolition, site remediation, reclamation and post closure monitoring for seven mine pits and related infrastructures over four time periods. The model predicted the median, 10th and 90th percentile costs and other statistical measures. A sensitivity analysis was also conducted to identify the most significant cost contributors. This type of model offers many advantages for companies in determining probable costs of future environmental activities. Through the identification of cost contributors, work scenarios, computer code and modeling software, a MCS model can simulate a wide range of probable costs and scenarios. Probabilistic models are more effective at incorporating risk and uncertainty in liability estimates than deterministic estimation tools that rely heavily on global contingencies to account for risk.