30.11.2011 best practice mining risk management cradle to grave, john wheadon

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

But Why?

3

The Life of Mine Risk Process

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• 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 -


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 -


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 -


ESIA Risks

8



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 -


PROJECT Risks

9



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 -


DESIGNPROJECT FINANCIALRESOURCE

FINANCIAL Risks

1

0



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



ESIA RISKS

FINANCIAL

DiscoveryPre -


DESIGN & DELIVERY Risks

1

1

RESOURCE

ESIA RISKS

PROJECT DESIGN DELIVERY P F D CLOSUREBUS & HSED

DESIGN Risks – Design phase


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


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.

CONSTRUCTION

1

2

CONSTRUCTION

1

3

CONSTRUCTION

1

4

Maintenance or Design Risk?

1

5

CLOSURE



DPDELIVERY BUS & HSE

ESIA RISKS

FINANCIAL

DiscoveryPre -


BUSINESS & HSE Risks

1

6

RESOURCE

ESIA RISKS

PROJECT DESIGN F D BUS & HSE

BUSINESS Risks – Operations phase



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


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.

Operations Risks

1

7

BUS & HSE


ProjectsOperation ClosureDiscovery

Pre -


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)

Risk Management

2

1

T T T

Cradle to Grave Risk Management

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2

Thank you.

QUESTIONS?

What went wrong?

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3

What is a NEAR MISS?

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4

Near Miss

2

5

Constructability

2

6

Understand the Hazards

2

7