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# Conditional Simulation notes:

## Uncertainty and Confidence Intervals

Introduction
Simulated deposits are computer models that represent a deposit or a system. These models
are used in place of the real system to represent that system for some purpose. The simulation
models are built to have the same distribution, dispersion characteristics, and spatial relation-
ships of the grade values in the deposit. Conditionally simulated models also have the same
values at the known sample data locations.The difference between models of estimation and
the conditional simulations lies in their objectives.

## The Objectives of Simulation

Local and global estimations of recoverable reserves are often insufficient at the planning stage
of a new mine or a new section of an operating mine. For the mining engineer, as well as the
metallurgist and chemist, it is often essential to be able to predict the variations of the character-
istics of the recoverable reserves at various stages in the operation.

For instance, in the processing of low-grade iron ore deposits, keeping final product within strict
quality standards may be a complex task whenever impurities such as phosphorus are involved.
The blending process and the flexibility of the plant will depend on the dispersion variance of the
grades received at all scales (daily, monthly, yearly).

Therefore, a detailed definition of an adequate mining control method is essential. For a prelimi-
nary design, it is admissible to use average values to perform an evaluation. When it comes to
detailed definitions, however, these averages are not sufficient due to local fluctuations.

If the in-situ reality was known, the required dispersions, and thus the most suitable working
methods, could be determined by applying various simulated processes to this reality. Unfortu-
nately, the perfect knowledge of this in-situ reality is not available at the planning stages of the
operation. The information available at this stage is usually incomplete, and limited to the grades
of a few samples. The estimations deduced from this information are far too imprecise or smooth
for the exact calculations of dispersions that are required.

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notes: Simulation or Estimation

Estimation and simulation are complementary tools. Estimation is appropriate for assessing
mineral reserves, particularly global in situ reserves. Simulation aims at correctly represent-
ing spatial variability, and is more appropriate than estimation, for decisions in which spatial
variability is a critical concern and for risk analysis.

In the case of Kriging, for instance, the minimization of estimation variance involves a smooth-
ing of the true dispersions. Similarly, the polygonal method of estimation would consider the
grade as constant all over the polygon of influence of a sample. Therefore, it would also
underestimate the local variability of true grades. The estimated deposit is, therefore, a biased
base on which to study the dispersions of the true grades.

Conditional Simulation, on the other hand, provides the same mean, histogram, and the
variogram as the real grades (assuming that the samples are representative of the reality).
Therefore, it identifies the main dispersion characteristics of these true grades.

In general, the objectives of simulation and estimation are not compatible. It can be seen from
Figure 1 that, even though the estimation curve is, on average, closer to the real curve, the
simulation curve is a better reproduction of the fluctuations of the real curve. The estimation
curve is preferable to locate and estimate reserves, while the simulation curve is preferred for
studying the dispersion characteristics of these reserves, remembering that the real curve is
known only at the experimental data points.

## Figure 1. Real, simulated, and estimated profiles

(thick solid line=reality, normal solid line=conditional simulation, dashed line=kriging,
o=conditioning data)

## Conditional Simulation Page 2

Typical Uses of Simulated Deposits notes:
A conditionally simulated deposit represents a known numerical model on a very dense grid.
As the simulation can only reproduce known, modeled structures, the simulation grid is limited
to the dimensions of the smallest modeled structure. Various methods of sampling, selection,
mining, haulage, blending, ore control and so on, can be applied to this numerical model, to
test their efficiency before applying them to the real deposit.

## Some of the examples of typical uses of simulated deposits include:

t Application in grade control to determine dig-lines that are most likely to maximize the
profit or minimize the dollar loss.

problems.

## t Studies to determine the probability of exceeding a regulatory limit and application in

development of emission control strategy.

## t Studies to quantify the variability of impurities or contaminants in metal or coal delivered

to a customer at different scales and time frames.

## t Prediction of recoverable reserves.

It must be understood that the results obtained from simulated deposits will apply to reality,
only to the extent to which the simulated deposit reproduces the essential characteristics of
the real system. Therefore, the more the real deposit is known, the better its model will be, and
the closer the conditional simulation will be to reality. As the quality of the conditional simula-
tion improves, not only do the reproduced structures of the variability come closer to those of
reality, but so do the qualitative characteristics (geology, alteration, and so on) that can be
introduced into the numerical model. It must be stressed that simulation cannot replace a good
sampling campaign of the real deposit.

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notes: Uncertainty and Confidence Intervals

Confidence intervals are perhaps the most familiar way of reporting uncertainty. A confidence
interval accounts for our inability to determine the unknown block grade exactly. However, the
confidence intervals for individual blocks are not very easy to derive. There are many factors
contributing to the width and degree of symmetry of these intervals, such as data errors,
estimation errors and modeling errors.

One of the advantages of Conditional Simulation is that it can provide many equally probable
realizations, instead of one single answer. This can be useful for sensitivity analysis of many
problems. For example, by having a possible range of values for each block, one can get the
distribution of the grades for these blocks. From this distribution, the uncertainty associated
for the block and the confidence intervals can be calculated.

An Alternative Method

When applied properly, Conditional Simulation can give the best possible answers for the
confidence intervals and uncertainty. However, it may not always practical to perform the
simulation on any deposit at any given time. Is there a short cut to provide us some approxi-
mate figures for us to work with? If we can assume some distribution for the blocks, we can
compute some theoretical answers for the confidence intervals.

Although it is important to be able to establish a range within which the unknown true value is
likely to fall, the confidence intervals may not be very helpful if they are used on a per block
basis. Rather, they will be more useful for ranking the uncertainty associated with the esti-
mates relative to each other.

Many variables encountered in resource analysis have positively skewed distributions. Even
though not all positively skewed distributions are lognormal, most of these distributions can be
described adequately by a lognormal model, depending on ones objective. In a typical case
one may encounter where the majority of the grades often plot on straight line with the excep-
tion of low grades and a few outlier values. Since we are interested in grades above an ore
cutoff, it will seem appropriate that a lognormal model can be an approximate for such distri-
bution of grades within an ore block.

The mean of this model is taken as the Kriged estimate (m k) for this block and the variance is
represented by the Combined Variance (F2cv). Combined variance is described in a paper
published in APCOM 1999 proceedings (Arik, 1999). Then we can calculate the correspond-
ing log mean (a) and variance (\$2) of the lognormal distribution as follows:

a = log mk - \$2/2

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We will first compute the confidence intervals in the log space. At 95% confidence level, we notes:
get:

Lower CI = a = a - 2 /(\$2/n)
L
Upper CI = a = a + 2 /(\$2/n)
U

The n in these equations is the number of composites used to estimate the block. Now we
compute the confidence intervals in terms of original variables:

## Lower CI = m = exp (a + 1/2 \$2)

L L
Upper CI = m = exp (a + 1/2 \$2)
U U

Example

To calculate the confidence intervals, one must calculate the combined variance for the blocks.
The combined variance can be calculated in the Kriging procedure P62401.DAT as an option.
Figure 2 shows the panel where one can specify the combined variance option.

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notes: Once the combined variance is known, then the procedure PMODCI.DAT can be used to
calculate the confidence intervals for the blocks in the model. One should have an extra item
in the model to store the lower confidence limit, and another item to store the upper confidence
limit. Figure 3 shows the panel where one can specify the items for the confidence intervals.

## Conditional Simulation Page 6

References notes:

Arik, A., 1999, An Alternative Approach to Resource Classification, 28th APCOM
Symposium Proceedings, Colorado School of Mines, pp. 45-53.
Arik, A., 1999, Uncertainty, Confidence Intervals and Resource Categorization: A
Combined Variance Approach, ISGSM Symposium, Perth, W. Australia.
Crozel, D., David, M., 1985, Global Estimation Variance: Formulas and
Calculation, Mathematical Geology, Vol. 17, No. 8, pp 785-796.
Dagdelen, K., Verly, G., and Coskun B., 1997, Conditional Simulation For
Recoverable Reserve Estimation, SME Annual Meeting, Preprint 97-201.
David, M., 1977, Geostatistical Ore Reserve Estimation, Elsevier, Amsterdam.
Davis, B.M., 1992, Confidence Interval Estimation for Mineable Reserves, SME
Annual Meeting, Preprint #92-39.
Froidevaux, R., 1984, Conditional Estimation Variances: An Empirical Approach,
Mathematical Geology, Vol. 16, No. 4, pp 327-350.
Isaaks, E.H., Srivastava, R.M., 1989, Applied Geostatistics, New York, Oxford
University Press.
Journel A.G. and Huijbregts Ch.J. (1978). Mining Geostatistics, Academic Press,
London.
Kim, Y.C, Knudsen, H.P. and Baafi, E.Y. (1980). Application of Conditional
Simulation to Emission Control Strategy Development, University of Arizona,
Tucson, Arizona.

notes: