The key economic parameters to model risks and uncertainties for optimal decision-making in the planning of a mining project include commodity price, discount and monetary exchange rate. The current status of these key parameters is known but, the risk associated with their unknown values is of importance for decision making. In this research, economic variables such as, commodity price, mining costs, annual change in price and costs, and discount rate were modelled stochastically using predefined probability distribution functions. Monte Carlo Simulation was then used to evaluate the uncertainty and risk assuming changes in the input parameters and quantifying them for optimal decision-making. From economic risk analysis, metal price was observed to be the variable affecting Net Present Value (NPV) the most. This modelling method was applied on an iron ore mine in Sierra Leone. In the analysis, it was shown that even a price decrease to just less than $42 per tonne, the project could still be profitable.
Keywords: Monte Carlo Simulation, Mine Planning, Probability Distribution Function, NPV, Risk Assessment and Decision-Making