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
RisksAssessmentMatrix 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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RiskAssessment 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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RiskAssessment 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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RiskAssessment 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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Miningmodifying 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!
ssabanov@srk.kz

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© SRK Consulting (Kazakhstan) Limited 2016
version: JAN 2015
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