How to take advantage of

market uncertainties in the

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evaluation of mining projects

Rodrigo Ugas
Mining Engineer Student
Intern- Services Appl. Consulting
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Analysis
Objectives
Motivation

Conclusions
Methodology
Summary

What’s Antifragile?
 Motivation
• Scale production?
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• Risk analysis? Where?

• Are mining projects robust?

• What conditions make a robust

project?

• Considerates stochastic
parameters?

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 Motivation
El Mostrador Mercados, 28 Agosto de 2015
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Diario Financiero, 31 Enero de 2018

If we…
Plan, design and evaluate mining projects considering the uncertainty on commodity prices…
We can minimize risk associated

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 “Antifragile”
Beyond robust
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Antifragile Fragile
Things that has more upside than downside from Things that has more downside than upside
randomness from random events.

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 “Antifragile”
Beyond robust
Fragile Robust Antifragile
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“Easily damaged, broken, “Able to withstand or “Some things benefit from

or harmed” overcome adverse shocks; they thrive and grow
conditions” when exposed to volatility,
randomness, disorder, and
stressors”
N. N. Taleb

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 Objectives
Create, applicate and validate a methodology that allow to select scales production that benefits
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from randomness of commoditie’s prices .

• Select scale production

considerate economic risk
Appropriate relation risk-expected return for
• Classify projects as fragile, robust each investor
or “antifragile”

• Create a methodology that can be

replicated to any asset with market
uncertainties

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 Scope
Market uncertainties
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Copper price represents over 25% of

the NPV’s variation

Source: F. Contador (2017)

Stochastic evaluation to represent

the randomness of commodities

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 Methodology
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Technical- Automatization Analysis

economic
scenario
• Parameters • Design of • Evaluation and
definition experiments selection of
• Results best cases

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 Analysis Mine
Plant Cap Cut-off
Configuration Cap
(Mt/year) (%)
(Mt/year)
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85x18x0.65 85 18 0.65
• Fragile
Risk • Robust 75x16x0.75 75 16 0.75
Analysis • “Antifragile”
90x18x0.60 90 18 0.60

90x18x0.75 90 18 0.75

• E(NPV) > NPV(E(Price))

Behaviour • Median
80x18x0.65 80 18 0.65

Source: G. Monsalve (2017)

NPV evaluate with deterministic long-term price
• Interquartile range
Select
“Antifragile”
production Appropriate relation risk-expected return for
Scales each investor

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 Conclusions
• This methodology arise like an alternative to the “usual way” to evaluate
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Proposed Methodology Value at Risk

mining projects.

• Methodology gives advantages in relation to other risk analysis (CVaR, Evaluate fragility Measure potential lost
VaR or Stress testing).
Problem of probabilistic
• Advantegeous application in pre-feasibilities studies (PFS). Especial attendant to
measurement of infrequent
infrequent events
events

Unbiased by considering
Biased by asumming
sensibilization of dispersion
probabilities distribution
parameters.

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