More than a roll of the dice
by alex forrest
Reprinted with permissing from
10 January 2008

A MINING project's viability ultimately hinges on minimising risk. While doing this may not be as simple as analysing your chances at the tables in Vegas, the software available to help mining companies assess their project risk is becoming increasingly advanced. Alex Forrest looks at a leading risk management software provider.

New York-based software developer Palisade, which also has an Asia-Pacific office in Sydney, produces what it calls decision support tools. One of those is called @RISK, and a new, redesigned version called @RISK 5.0 has just been released to the Australian market.

Among its capabilities is a process called Monte Carlo simulation, a computational algorithm which relies on repeated random sampling to compute its results.

This means it can show users a number of possible outcomes in their Microsoft Excel spreadsheet and tell them how likely they are to occur. Palisade says it means users have the most complete picture possible, allowing them to make an educated judgment on which risks to take and which to avoid.

While no software package can predict the future, this means @RISK can help users choose the best strategy based on available information.

The advantage of Monte Carlo simulation lies in the picture of possible outcomes it creates. By running a simulation, @RISK is able to take a spreadsheet model from representing just one possible outcome to representing thousands.

Palisade said that with @RISK, users can answer questions like, "What is the probability of profit exceeding $10,000,000?" or "What are the chances of losing money on this venture?"

This new version 5.0, which was released late last year, can be totally integrated with Microsoft Excel, meaning users do not have to move from Excel to other programs to perform certain risk calculation tasks.

"We have a lot of mining customers – Rio Tinto, BHP Billiton, Western Mining Corporation, Xstrata and several other majors," Palisade's managing director for the Asia-Pacific region Mark Meurisse told

"Our @RISK software is used in things like mine closures, optimising mineral extraction methods and mining exploration strategies."

Meurisse said @RISK is an add-in to both Excel and the project management package Microsoft Project, so mining engineers, project managers, finance people and anyone involved in risk management would use Palisade's tools in either the Excel environment or the Project environment.

"Those professionals would be effectively defining their own parameters and data, and our tools – @RISK, PrecisionTree and RISKOptimiser – make use of that data and do the mathematical calculations behind them."

Meurisse said the level of training required for users new to @RISK would depend on their familiarity with Excel, but that most customers undergo some level of training.

"For the most part, people are able to do a one-time training course, but for this most recent upgrade to version 5.0, it's a major upgrade and we have a lot of new features in there for quality control and six sigma (a statistical process) application that were not available previously, so we will be seeing a lot of customers returning for additional training."

The package is also able to help users identify the most important tasks by providing them with sensitivity and scenario analyses to determine the critical factors in their models. In other words, it ranks the distribution functions according to the impact they have on outputs.

It can also replace uncertain values in spreadsheets with probability distribution functions. These include normal ("bell curve"), uniform, and triangular distributions. Furthermore, users can use their own historical data and @RISK's integrated data fitting tool to select the best function and the right parameters.

"The customer base has been really excited for the new release. There's a new level of sophistication in the customer base out there, and they're ready for the advanced functionality within the software," Meurisse said.

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