Best Practice Mining Risk Management – Cradle to Grave
1
John Wheadon
Manager, Risk & Compliance
Oyu Tolgoi LLC
Context and Applicability
2
• The thoughts and information included in this presentation
are based on many years of providing risk services to
numerous mining projects
• The approach taken for managing risk in the Oyu Tolgoi
project has not been considered when writing this
presentation, and while there are some common elements, a
direct comparison is not intended
The Life of Mine Risk Process
4
• Cradle to Grave – from inception of a mine – after exploration
and resource proving – through to closure and in many
instances well past closure
• The information presented is generic – it is a typical risk
process for newer mines seeking approval in Australia.
• The risk process throughout the life of a mine is a continuum
– while there are numerous discrete risk assessments, they
all build on previous work – nothing is lost, nothing is left
behind – everything has value.
Stages of a Mining Project
5
DiscoveryPre -
FeasibilityFeasibility Approval Design
Construct OperationsUpgrade
ProjectsOperations Closure
Discrete Risk Phases
6
DiscoveryPre -
FeasibilityFeasibility Approval Design
Construct OperationsUpgrade
ProjectsOperations Closure
RESOURCE RISKS
ESIA RISKS
PROJECT RISKS DESIGN RISKSFINANCIAL RISKS
BUSINESS RISKSDELIVERY RISKS PROJECT RISKS
FINANCIAL RISKS
DESIGN RISKS
BUILD RISKS
ESIA RISKS
ESIA RISKS
CLOSURE RISKSBUSINESS RISKS
HSE RISKS HSE RISKS
PROJECT
DiscoveryPre -
FeasibilityFeasibility Approval Design
RESOURCE Risks
7
Construct OperationUpgrade
ProjectsOperation Closure
RESOURCE
ESIA RISKS
DESIGNFINANCIAL BUS & HSEDELIVERY P F D
ESIA RISKS
CLOSUREBUS & HSED
RESOURCE Risks - Pre feasibility study phase
Driver Good Corporate Governance – aid to decision making
Evaluation Uses organisation’s evaluation criteria (risk matrix) - qualitative
Knowledge Basic, conceptual, order of magnitude (<50%)
Issues Considerable uncertainty, size / quality of resource, political risks, processing risks, markets, logistics, return on investment
Output Provide level of confidence to proceed to next phase (Feasibility Study) of project. Allows further investigation into areas of greatest concern – areas that might otherwise have substantial negative impact on viability of project
RESOURCE
ESIA RISKS
DiscoveryPre -
FeasibilityFeasibility Approval Design
ESIA Risks
8
Construct OperationUpgrade
ProjectsOperation Closure
ESIA RISKS
PROJECT DESIGNFINANCIAL BUS & HSEDELIVERY P F D CLOSUREBUS & HSED
ESIA (Environmental & Social Impact Assessment) Risks – Feasibility study phase
Driver Regulatory / Legal and Good Corporate Governance (& Financing?)
Evaluation Uses public acceptability criteria (not the organisation’s) - qualitative
Knowledge Utilises the ongoing preliminary design – often done in parallel.
Issues Looks at whole life of mine. ONLY considers social issues – not mine viability etc. Often required to look hundreds of years past closure and at EVERY aspect of the mine operations – cradle to grave – construction, operations, closure, housing, transport, energy, greenhouse gas etc.
Output Provide level of confidence to the governments and public that the project will not have any significant detrimental impacts on society (community), environment or any health / safety issues.
FINANCIALRESOURCE
DiscoveryPre -
FeasibilityFeasibility Approval Design
PROJECT Risks
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Construct OperationUpgrade
ProjectsOperation Closure
ESIA RISKS
PROJECT DESIGN BUSINESSDELIVERY P F D
ESIA RISKS
CLOSUREBUSINESSD
PROJECT Risks – Feasibility study phase
Driver Good Corporate Governance
Evaluation Uses organisation’s evaluation criteria (risk matrix) - qualitative
Knowledge Improved information regarding all aspect of project – degree of uncertainty reduced (<30%). Typically takes as additional inputs the risks identified as part of the ESIA.
Issues Greater focus on the mechanism for delivery of the project, including processing options, transportation, construction and negative social / environmental issues. Typically based on the preliminary design. Due to design, level of certainty improved.
Output Confidence that the project has no fatal flaws (project is viable).
DiscoveryPre -
FeasibilityFeasibility Approval Design
DESIGNPROJECT FINANCIALRESOURCE
FINANCIAL Risks
1
0
Construct OperationUpgrade
ProjectsOperation Closure
ESIA RISKS
BUS & HSEDELIVERY P F D
ESIA RISKS
CLOSUREBUS & HSED
FINANCIAL Risks – Approval phase
Driver Good Corporate Governance – retain shareholders value
Evaluation Uses organisation’s evaluation criteria (risk matrix) – qualitative – maybe quantitative – Monte Carlo simulations
Knowledge Improved information regarding all aspects of project – degree of uncertainty reduced (<25%).
Issues Done in parallel with government approval of ESIA. Normally utilisesimproved resource data. Includes added conditions from ESIA approvals. Based on reasonably detailed design.
Output Provides inputs into financial analysis – ROI etc – enables organisation to commit to expenditure.
BUS & HSE
Construct OperationUpgrade
ProjectsOperation Closure
ESIA RISKS
FINANCIAL
DiscoveryPre -
FeasibilityFeasibility Approval Design
DESIGN & DELIVERY Risks
1
1
RESOURCE
ESIA RISKS
PROJECT DESIGN DELIVERY P F D CLOSUREBUS & HSED
DESIGN Risks – Design phase
Driver Good Corporate Governance
Evaluation Uses organisation’s evaluation criteria (risk matrix) – qualitative –may include specialist tools
Knowledge Reliable - uses ongoing detailed design as inputs. ESIA inputs
Issues Focus on process / construction. Will include HAZOP’s, RAM’s etc.
Output Provides confidence design is safe & will provide expected performance and it can be built.
DELIVERY Risks – Construction phase
Driver Good Corporate Governance
Evaluation Uses organisation’s evaluation criteria (risk matrix) – qualitative
Knowledge Utilises finalised detailed designs and EISA inputs.
Issues Work closely with construction contractor who is responsible for all site works. Focus on HSE issues and timelines.
Output Provides confidence of on time, on budget & safe delivery.
CLOSURE
Construct OperationUpgrade
ProjectsOperation Closure
DPDELIVERY BUS & HSE
ESIA RISKS
FINANCIAL
DiscoveryPre -
FeasibilityFeasibility Approval Design
BUSINESS & HSE Risks
1
6
RESOURCE
ESIA RISKS
PROJECT DESIGN F D BUS & HSE
BUSINESS Risks – Operations phase
Driver Good Corporate Governance
Evaluation Uses organisation’s evaluation criteria (risk matrix) – qualitative
Knowledge Very good – mine and process plant operational.
Issues Business performance impacts, including reputation, financial and output, while safety & environment both high level.
Output Identified high consequence risks which impact business.
HSE Risks – Operations phase
Driver Employee Safety
Evaluation Uses organisation’s evaluation criteria (risk matrix) – qualitative
Knowledge Very good – mine and process plant operational. Use ESIA as input (closes out these risks).
Issues This is a separate detailed risk assessment which only considers safety and environmental issues.
Output Provides mechanism to better manage safety / environmental.
BUS & HSE
Construct OperationUpgrade
ProjectsOperation ClosureDiscovery
Pre -
FeasibilityFeasibility Approval Design
DESIGNPROJECT FINANCIALRESOURCE
CLOSURE Risks
1
8
ESIA RISKS
BUS & HSEDELIVERY P F D
ESIA RISKS
CLOSURED
CLOSURE Risks – Closure phase
Driver Good Corporate Governance, Legal / regulatory (ESIA conditions)
Evaluation Normally public acceptability criteria (not organisation’s) – qualitative.
Knowledge Some very good, some speculative. Have history of decades of mine operation, but often looking hundreds of years into future. Include ESIAidentified issues / conditions.
Issues Completed as part of ESIA, continually updated through life of mine. Allows knowledge to influence risk analysis and alternative (new) control measures to be considered. Focus on tailings, water bodies and aquifers, environmental and health issues – loss of containment.
Output Provides confidence to the public, communities and government.
Cradle to Grave
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9
• The whole of life mine risk process:
• perhaps 10 or more discrete risk phases
• for some phases,(eg Operations) there may be 15 or 20
concurrent risk registers
• all risk registers are live, in constant revision
• one risk register / phase flows into the next risk register /
phase
• will consider a wide range of sources including
processing, mining and other physical activities, business
activities (ethics/ compliance etc), country issues,
logistics, markets, supply chains etc etc
Summary
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0
• The risk process:
• is a continuum
• requires a substantial commitment by the organisation
• must be managed and delivered by an experienced,
capable and ethical risk leader
• must have senior management and board support
• risks and controls MUST have owners
• can prevent social, safety and environmental disasters
• can assist the business to maximise shareholder value
• is a proven process and is normally demanded by
financial institutions (lenders)
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