Risks Assessment Matrix and its importance in Oil Shale Mining Projects

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© SRK Consulting (Kazakhstan) Ltd 2016. All rights reserved.

Presenter:

Location:

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International Oil Shale Symposium

2016

Risks Assessment Matrix and its

importance in Oil Shale Mining Projects

Dr Sergei Sabanov, Principal Consultant, Mining Engineering (CEng, MIMMM)

Tallinn, Estonia, 2016

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Content

• Introduction

• Risk assessment matrix

• Deposit Risks Estimation

• Project Value Risks

• Mine Planning and Scheduling Considerations

• Conclusions

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Introduction

• Risks Assessments in oil shale mining

projects are based on technical,

operational, financial, economic,

environmental and social criteria.

• The Risk Assessment process is used to

ensure that risks are suitably quantified

and mitigation plans put in place where

necessary.

• Risk classification provides a context for

the level of evaluation required for

different estimation processes.

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Risk Assessment Matrix

Ranking an event on a risk matrix can be done

in three ways:

• Worst case scenario. This is done by taking

the worst that could happen. For instance in the

case of a slope failure, there will be multiple

fatalities and it might be likely to occur.

Essentially when looking at the worst case

scenario, all barriers are ignored and only the

Hazard, Top event and Consequences are

considered. These types of incidents might

occur in reality, but they will most likely be the

exception, not the rule.

• Current situation strategy tries to evaluate the

severity and probability of the average event.

So the average severity for a slope failure might

be a single fatality, and it’s unlikely to happen.

This strategy takes into account all the barriers

that are currently implemented.

• Future situation strategy tries to make an

estimate of how the risk might go down after

improvements to barriers, or implementation of

new barriers. It aims to estimate the future

average of incidents.

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Risk Assessment main steps

1. Problem Area or Activity: The phase, area or activity that is likely to face risks.

2. Risks Identified: A list of the likely risks associated with each of the activities identified.

3. Description: A short description of the kind of risk and the possible damages it can cause.

4. Probability of Occurrence: The risks can be categorized as very likely, probable and unlikely based on the

likelihood of these risks cropping up.

5. Impact Intensity: The impact intensity of the risk can be categorized as High, Medium and Low depending on

how critical the risk and its effects can be.

6. Priority: Based on the probability of occurrence then the intensity of the impact, the risk factors can be

assigned a priority level using a scale ranging from for instance 1 to 5, where 1 means high priority and 5

means least important.

7. Existing Measures: The policies, procedures and resources which are already available to prevent or reduce

the impact of the risk.

8. Mitigation Strategy: After analyzing all the aspects of the risks and the existing preventive measures that can

be used, the project team needs to decide on the mitigation strategy to deal with the risk.

9. Additional Measures: This field needs to be filled in only for those risks for which control mitigation strategy is

decided.

10.Contingency Plan: A contingency plan can also be added for high impact risks with a high probability of

occurrence, just in case the basic measures fail to perform. http://www.brighthubpm.com/risk-management/87576-making-the-risk-assessment-process-more-fluid-use-this-sample-form/

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Risk Assessment Form (a brief example)

Name Risk Factors Probability Impact Risk Indicators Risk Control

Oil Shale

Reserves

Estimate

Low confidence study: Lack of

water for processing; Impact of

density on tonnage, Impact of

lower recovery due to grinding

High High Independent consultants on

project board

Project Manager to check off

project deliverables and ensure

Resources and Reserves tables

signed-off by Competent Persons

Financial Poor Financial Strategy, Debt

and interest rate, Amortisation,

Capital and Operational

Expenses

High High Information from any source

accounting for risk. Regular

reporting mechanisms to

funder and institutional finance

Further refinement of a project cost

estimates are undertaken in order to

optimise Project profitability; The

financial model is updated regularly

to reflect new information relative to

revised production plans and

resource estimates.

Legislative Revision to the current fiscal terms Low Medium Disputes with staff unions, or

need to address concerns of

public representative bodies

Public relations and normal

negotiating procedures in place

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Greenfield Exploration – generally high risk

• No known mines or prospects

• Requires background data

• Some companies may do their own research

• Others may rely on data from other companies

(unsuccessful exploration programs?)

• Or government data – sponsored programs

• Typically starts with soil sampling or geophysics

• Many near surface targets have been found

Greenfield vs Brownfield Risk Considerations

• The operating mine, old mine site, industrial complex

• Could have legacy issues - indemnity

• Has a track record in the past

• There may have been economic changes since it was

closed eg commodity prices have increased or

technology has advanced

• Some risks that investors may look for:

o Presence of sulphur that can present refinery issues

in a project

o The old mine was low grade, are there higher grade

extensions?

o What role can new technology play?

o Can bulk mining be considered?

Brownfield Exploration – generally lower risk

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Resources vs Reserves The Humble Cut-off Grade

• Grade of any oil shale deposit is key to economic viability

• Tend to be two extremes – small tonnage deposit but high grade

or large tonnage with low grade

• Cut off grade (CoG) is key to assessing a deposit viability and is

a function of commodity price, grade of the deposit, process

recovery and operating costs for mining and processing

• The CoG is the grade or amount of contained oil or calorific value

that is required to cover the cost of mining and processing the oil

shale

• The average grade of the oil shale from the mine must be higher

than the CoG – this is because the CoG is based on the

operating costs and a reasonable margin is required to pay back

capital investment

• If you have a list of oil shale deposits and the oil content is less

than 3-5% then is will not be attractive to investors because many

know that the basic economics require more grade

• A deposit may have an oil shale where only 40% of the oil can be

recovered with current technology. This factor must always be

considered

• A Resource is a concentration of oil shale that has

reasonable prospects of economic extraction

• A Reserve is a concentration of oil shale that is

economic to mine under prevailing conditions

• A Resource may remain a resource until high

commodity prices are higher or technology allows

oil shale to be recovered

Why are all deposits not viable?

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© SRK Consulting (Kazakhstan) Ltd 2016. All rights reserved. More investment in the project, the higher the value

Project Value Risks

• Most of oil shale

projects are early

stage – but they

are not worth

much

• Advanced

projects are

worth more but

require risk

capital to be

invested

Confidence

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Mining modifying factors

Technical factors

Oil shale

Interburden

waste rock

Oil shale

Interburden

waste rock

Volume, tonnage, density, moisture,

thickness, swell factor, excavatability,

losses and extraction ratios, dilutions, grade

and deleterious elements (sulphur), cut-off

grade, beneficiation/processing recovery

and mass yield, product content and grade,

haulage distance

24 gal/t

32 gal/t

38 gal/t

Volume, tonnage, density, moisture,

thickness, swell factor, rock excavatability,

haulage distance, disturbed surface

Economic factors

Mining cost, haulage cost, dumping and

rehabilitation

Mining, haulage, crushing,

beneficiation/processing, transportation,

G&A costs. Royalties, Selling price.

Beneficiation

recovery 91%

Beneficiation

recovery 82%

Beneficiation

recovery 88%

6.4MJ/kg 8.5 MJ/kg

10 MJ/kg

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Mine planning and scheduling considerations

By running mine optimisation, the mine planner determines which areas or oil shale seams in the mine are economic:

• some mining blocks can be split vertically for selective mining

• mining sequence should be applied for the highest value blocks in the deposit

$/gal $/gal $/gal $/gal





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Margin Ranking results

10 gall/t

15 gall/t

20 gall/t

25 gall/t

30 gall/t

35 gall/t

40 gall/t

45 gall/t

50 gall/t

55 gall/t

A

C

B

D

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Cumulative Net Cash Flow

• NPV can be increased by

minimising the stripping

ratio in early years,

selective mining or blast

and sieving options. Also

on optimisation of mine

phases and design.

• The reduction in capital

expenditure early in the

mine life can significantly

improve project

economics.

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Conclusions

• A properly undertaken Risk Assessment can determine that all risks have been appropriately

mitigated and appropriate design measures implemented prior to construction.

• SRK’s experience shows generally that certain risk factors, such as the accuracy of the

resource estimate, may be low and that other factors over the projected life of the project, such

as selling price and future changes in environmental legislation, are less predictable and higher

risk.

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Thank You for Your Attention!

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© SRK Consulting (Kazakhstan) Limited 2016

version: JAN 2015

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