Is it true that bite-sized development are less risky than mega mines?
Jul 9th, 2015
bite-sized development are less risky than mega mines?
The world’s gold miners and most likely other capital intensive industries are changing their views: after decades of mega projects, many of which have backfired or proven to be disastrous, the new credo is “bigger isn’t better”. At Riskope we have been in the situation where we had to exhort clients to pull the plug on such projects following the results of preliminary holistic risk assessments: very painful moments indeed, when you think you are going to lose the client forever, especially if they occur at times of high metal prices and the world seems bound to eternal growth! Fortunately we did not lose any of our clients, on the contrary, we gained increased trust and respect.
Round Mountain gold mine, aerial photo, 2008. Located in Big Smokey Valley, Nevada. Owned by Kinross Gold Corporation and Homestake Mining Company. Photo by Patrick Huber
Replacing the old credo there is the new “bite-sized development” one, seen as a carrier of lesser holistic risks, potential budget disasters and fewer of the political and environmental disputes that have derailed mega-mines in recent years.
But is this true or just an illusion?
We are certainly not going to shoot from the hip a reply, as this would be unprofessional, just bring forward a few thoughts:
- The idea that “size does matter” in terms of politics, environmental disputes and public opinion seems highly disputable, unless regulations are such that for smaller operations conditions are indeed easier to meet. However public opinion is emotionally driven and not regulatory driven and even a small(er) mine may seem too big to swallow.
- The idea that “diversification is good” in terms of multiplying the number of operations and geographical locations seems appealing, but each new mine means adding a whole set of infrastructures, pipelines, supply chains, tailings dam(s) and monitoring systems. A careful analysis should be performed to verify the statement.
- Mega projects are notorious sources of catastrophic cost exceedances and pricing spiralling. Again, a careful analysis should be performed to verify that n bite sized projects have less chances to exceed budget that a mega one.
- logistics risks may become a nightmare in a system made of n bite sized operations.
- Managing to the best cannot look at each mine individually and ERM, decision making support become extremely important for a cluster of bite sized operations.
- Smaller mines represent smaller individual cap-ex and are easier to moth-ball in case of recession.
The list above is certainly not exhaustive and should be considered as a starting point for a detailed discussion.
Ideas? Let us know you points and hopefully we will be able to perform such a comparative risk assessment using ORE and CDA/ESM.
Tagged with: bite-sized development, gold miners, less risky, mega mines, mega projects
Category: Consequences, Hazard, Mitigations, Optimum Risk Estimates, Risk analysis, Risk management