Analysis of the variables: Commodity price and discount rate on long-term open pit mine planning

Long-term open pit mine planning is a complex process which deals with numerous uncertainties, whether they are economical (commodity price, operational costs, production schedule, discount rate, inflation, among others); geological (grade distribution, density, hardness, etc); or physical constraints (property limits, environmental issues, legislation, etc). In this context, paper aims to evaluate the effects of variation two important variables: commodity price and regard economic criterion, represented by Net Present Value (NPV) mining business. Starting from baseline value US$ 80/t, (phosphate rock was used as case study) varied within 50% range, above below value, obtained historic values last 5 years. The rate adopted in analyses were 6%, 8%, 10%, 12%, 14%, 16%, 18% 20%. results showed increases market yielded higher NPV life values. On other hand, it noted that can significantly alter NPV, materially reducing undertaking. It also worth noting that, contrast more robust approaches such Real Options Theory (ROT), traditional Discounted Cash Flow (DCF) methods, assume variables, be fixed, could either lead undervaluation overvaluation project.