Uncertainty assessment for the evaluation of net present value: a mining industry perspective

The mining industry faces considerable risks due to reliance on orebody estimations that involve numerous uncertain factors impacting investment decisions. This paper aims to analyze the sources of uncertainties and their influence on project evaluations, particularly focusing on the context of net present value (NPV) assessments. A modern approach to uncertainty evaluation, particularly through Monte Carlo Simulation (MCS), was employed to capture the distribution of variables affecting resource estimations. The methodology involved generating stochastic permutations aligned with the assumed probabilities of uncertainties. Results demonstrated that effective management of these uncertainties through simulations contributes significantly to more accurate and informed decision-making processes, potentially preventing significant financial losses. The findings suggest that understanding and addressing uncertainties not only enhance the reliability of project evaluations but also lead to better strategic planning in the highly volatile mining sector.