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Prefeasibility hazard adjusted NPV

A mining company asked us to perform a Prefeasibility hazard adjusted NPV evaluation. Our action first focused on bringing clarity in their risk register which presented numerous classic mistakes. Among these the usual confusion in terminology, confusing risks and hazards, uncertainties vs risks, etc. Once the risk register was corrected it was possible to perform the requested hazard adjusted NPV and to draw valuable conclusions. Among these, we highlighted potential fatal flaws of the project which warranted in depth analyses…

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Broken window fallacy parable amid risk misinformed decision

The broken window fallacy parable amid risk misinformed decision is the belief that destruction is good for the economy. Frederic Bastiat, a French economist, introduced the concept in 1850. It illustrates why destruction and related recovery expenditures are not beneficial to society. The broken window fallacy parable amid risk misinformed decision The aim of the broken window fallacy parable is to discuss hidden, or ignored effects of opportunity costs and unintended consequences on economic activities. The opportunity cost is the loss of…

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Mining Activities Gamification

In a Mining Activities Gamification initiative in cooperation with Microsoft, Codelco, the world’s biggest copper producer, announced a contest. The objective is to see who can design the best Chuquicamata underground mine using Minecraft. Codelco’s chairman said the event could expose “thousands of children and young Chileans” to the mining industry. “We need to engage new generations in the importance of the mining industry in the country’s development”. These were the words of  Microsoft Chile general manager. Mining Activities Gamification is…

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Net Present Value Forever? No, thanks, it’s too risky!

We were very pleased when we read on a mainstream media a paper discussing the Advantages and Disadvantages of Net Present Value Method. Net Present Value Forever? Indeed Net Present Value Forever? No, thanks, it’s too risky! The paper addressed investment purposes. However the relation to projects is quite obvious. Actually, aren’t all projects  investments? No, CDA/ESM is way better! As our readers know, Riskope has been proposing and successfully applying the proprietary CDA/ESM methodology in planning, projects’ evaluations world-wide, in a number…

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How to select among alternatives. A better and safer method than NPV

How to select among alternatives. A better and safer method than NPV? For mining rehabilitation or mining transportation system, the “strongest alternative” is the one that has the largest Economic Safety Margin (ESM), evaluated as the difference between the Project Net Gain (PNG)= Project Returns (PR) – Costs (C) and Total Risk (TR), i.e. the value obtained through the Comparative Decision Analysis (CDA) methodology. Where: ESM=PNG-TR=PR-C-TR=PR- (C+TR). The ESM is the difference between the capacity (the “strength” of a project…

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Comparative Decision Analysis-Economic Safety Margin (CDA-ESM): finally an alternative to the obsolete NPV.

We have included CDA/ESM  in our Edumine Risk courses for mining for many years. In 2010 we published the article (STOP PROCRASTINATING! NPV IS DEAD: USE RISK AS A KEY DECISION PARAMETER.) in the Canadian Reclamation. Indeed it showed two mining applications. Is CDA/ESM more complex than NPV? Yes, of course! Like a motorcycle is more complex than a motorbike. The point here is that NPV will not take you anywhere safely. Indeed it is misleading, especially for long term projects…

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Delicate Balancing Act of Innovation Risk Management

Delicate Balancing Act of Innovation Risk Management Riskope thanks Eve Pearce for this contribution. Running a business is a bit of a tightrope walk at times. Running a successful business, doubly so. It’s very difficult to make a decision to try something different – something truly innovative – without rocking the boat too much and putting your financial future on the line. Or, in worst case scenarios, spelling the end of the business altogether. As we’ve discussed at length in…

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Can we stop misrepresenting reality to the public?

We gave a presentation in Toronto. We were at the CIM 2013 conference  and  the topic was Can we stop misrepresenting reality to the public? The discussion was of course set in the risks related to mining and extractions. Summary of the main points The main points made are summarized below. You will not: manage (your) capital if you do not understand risks. be able to make proper decisions if you do not understand risks and finally, able to operate if…

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