Strategic project evaluation for open pit mining ventures using real options and allied econometric techniques

Open pit mine operations are complex businesses that demand a constant assessment of risk. This is because the value of a mine project is typically influenced by many underlying economic and physical uncertainties, such as metal prices, metal grades, costs, schedules, quantities, and environmental issues, among others, which are not known with much certainty at the beginning of the project. Hence, mining projects present a considerable challenge to those involved in associated investment decisions, such as the owners of the mine and other stakeholders. In general terms, when an option exists to acquire a new or operating mining project, , the owners and stock holders of the mine project need to know the value of the mining project, which is the fundamental criterion for making final decisions about going ahead with the venture capital. However, obtaining the mine project’s value is not an easy task. The reason for this is that sophisticated valuation and mine optimisation techniques, which combine advanced theories in geostatistics, statistics, engineering, economics and finance, among others, need to be used by the mine analyst or mine planner in order to assess and quantify the existing uncertainty and, consequently, the risk involved in the project investment. Furthermore, current valuation and mine optimisation techniques do not complement each other. That is valuation techniques based on real options (RO) analysis assume an expected (constant) metal grade and ore tonnage during a specified period, while mine optimisation (MO) techniques assume expected (constant) metal prices and mining costs. These assumptions are not totally correct since both sources of uncertainty—that of the orebody (metal grade and reserves of mineral), and that about the future behaviour of metal prices and mining costs—are the ones that have great impact on the value of any mining project. Consequently, the key objective of this thesis is twofold. The first objective consists of analysing and understanding the main sources of uncertainty in an open pit mining project, such as the orebody (in situ metal grade), mining costs and metal price uncertainties, and their effect on the final project value. The second objective consists of breaking down the wall of isolation between economic valuation and mine optimisation techniques in order to generate a novel open pit mine evaluation framework called the ―Integrated Valuation / Optimisation Framework (IVOF)‖. One important characteristic of this new framework is that it incorporates the RO and MO valuation techniques into a single integrated process that quantifies and describes uncertainty and risk in a mine project evaluation process, giving a more realistic estimate of the project’s value. To achieve this, novel and advanced engineering and econometric methods are used to integrate financial and geological uncertainty into dynamic risk forecasting measures. The proposed mine valuation/optimisation technique is then applied to a real gold disseminated open pit mine deposit to estimate its value in the face of orebody, mining costs and metal price uncertainties.

From the editor

In this issue of the Journal, the articles presented to the readers cover the breadth and depth of project management research and practice by addressing the relationship between project strategy and managing projects (Patanakul and Shenhar, “What Project Strategy Really Is: The Fundamental Building Block in Strategic Project Management”), on the need to align corporate strategy with program management (Ritson, Johansen, and Osborne, “Successful Programs Wanted: Exploring the Impact of Alignment”), identifying metrics to measure program success across project contexts (Shao, Müller, and Turner, “Measuring Program Success”), managing individual projects by identifying major risks in customer relationship management (CRM) implementation projects (Papadopoulos, Ojiako, Chipulu, and Lee, “The Criticality of Risk Factors in Customer Relationship Management Projects”), application of earned value management (EVM) to aerospace projects (Kwak and Anbari, “History, Practices, and Future of Earned Value Management in Government: Perspectives From NASA”), and capturing tacit knowledge of construction project professionals to determine the optimal construction site layout (Abdul-Rahman, Wang, and Siong, “Knowledge Acquisition Using Psychotherapy Technique for Critical Factors Influencing Construction Project Layout Planning”)...

Kaleidoscope : Reframing learning and teaching evaluation through a shared stakeholder lens

Sector wide interest in Reframe: QUT’s Evaluation Framework continues with a number of institutions requesting finer details as QUT embeds the new approach to evaluation across the university in 2013. This interest, both nationally and internationally has warranted QUT’s collegial response to draw upon its experiences from developing Reframe into distilling and offering Kaleidoscope back to the sector. The word Reframe is a relevant reference for QUT’s specific re-evaluation, reframing and adoption of a new approach to evaluation; whereas Kaleidoscope reflects the unique lens through which any other institution will need to view their own cultural specificity and local context through an extensive user-led stakeholder engagement approach when introducing new approaches to learning and teaching evaluation. Kaleidoscope’s objectives are for QUT to develop its research-based stakeholder approach to distil the successful experience exhibited in the Reframe Project into a transferable set of guidelines for use by other tertiary institutions across the sector. These guidelines will assist others to design, develop, and deploy, their own culturally specific widespread organisational change informed by stakeholder engagement and organisational buy-in. It is intended that these guidelines will promote, support and enable other tertiary institutions to embark on their own evaluation projects and maximise impact. Kaleidoscope offers an institutional case study of widespread organisational change underpinned by Reframe’s (i) evidence-based methodology; (ii) research including published environmental scan, literature review (Alderman, et al., 2012), development of a conceptual model (Alderman, et al., in press 2013), project management principles (Alderman & Melanie, 2012) and national conference peer reviews; and (iii) year-long strategic project with national outreach to collaboratively engage the development of a draft set of National Guidelines. Kaleidoscope’s aims are to inform Higher Education evaluation policy development through national stakeholder engagement, the finalisation of proposed National Guidelines. In correlation with the conference paper, the authors will present a Draft Guidelines and Framework ready for external peer review by evaluation practitioners from the Higher Education sector, as part of Kaleidoscope’s dissemination strategy (Hinton & Gannaway, 2011) applying illuminative evaluation theory (Parlett & Hamilton, 1976), through conference workshops and ongoing discussions (Shapiro, et al., 1983; Jacobs, 2000). The initial National Guidelines will be distilled from the Reframe: QUT’s Evaluation Framework’s Policy, Protocols, and incorporated Business Rules. It is intended that the outcomes of Kaleidoscope are owned by and reflect sectoral engagement, including iterative evaluation through multiple avenues of dissemination and collaboration including the Higher Education sector. The dissemination strategy with the inclusion of Illuminative Evaluation methodology provides an inclusive opportunity for other institutions and stakeholders across the Higher Education sector to give voice through the information-gathering component of evaluating the draft Guidelines, providing a comprehensive understanding of the complex realities experienced across the Higher Education sector, and thereby ‘illuminating’ both the shared and unique lenses and contexts. This process will enable any final guidelines developed to have broader applicability, greater acceptance, enhanced sustainability and additional relevance benefiting the Higher Education sector, and the adoption and adaption by any single institution for their local contexts.

Citizen journalism and political participation : the youdecide project and the 2007 Australian Federal Election

The 2007 Australian Federal election not only saw the election of a Labor government after 11 years of John Howard’s conservative Coalition government. It also saw new levels of political engagement through the Internet, including the rise of citizen journalism as an alternative outlet and mode of reporting on the election. This paper reports on the You Decide 2007 project, an initiative undertaken by a QUT-based research team to facilitate online news reporting on the election on a ‘hyper-local’, electorate-based model. We evaluate the You Decide initiative on the basis of: promoting greater citizen participation in Australian politics; new ways of engaging citizens and key stakeholders in policy deliberation; establishing new links between mainstream media and independent online media; and broadening the base of political participation to include a wider range of citizen and groups.

Strategic directions report for the social determinants of health project

This report presents the outcomes of a project undertaken by the VACCHO Public Health Research Unit to explore ways to build capacity in Aboriginal and Torres Strait Islander social determinants research. The project was funded by the Cooperative Research Centre for Aboriginal Health.----- The project involved a series of four social determinants research workshops conducted in July and August 2009 and a collaborative forum conducted in September 2009. Invitations to participate were extended to the VACCHO membership and the nine universities in Victoria. Three workshops were held with ACCHOs (in Bendigo, Melbourne and Gippsland), and one workshop with universities (in Melbourne).----- The workshops aimed to build VACCHO’s social determinants research capacity and provide direction for VACCHO on ways to more effectively engage in Aboriginal health research. Through the workshops, VACCHO aimed to work with ACCHOs to identify research processes and issues that are equitable and sustainable, and which address the social determinants of health.----- At the workshops, participants explored questions around the priorities for the social determinants of Aboriginal health and considered the key partnerships that might be important to social determinants research.----- At the workshops with ACCHOs, participants identified key research priorities and questions in Aboriginal social determinants and health. This focus reflects the need for Aboriginal and Torres Strait Islander community representatives to identify the priorities in health and social determinants research. Identifying these priorities is important if researchers are to respond in a meaningful way and undertake relevant research in the most urgent areas of need. At the university workshop, participants focused on identifying research process and implementation issues in social determinants research.----- The final forum brought together ACCHOs, university representatives, invited presenters and participants from justice, education and housing departments, and representatives from non-government funding organisations. The forum aimed to provide an insight into how priorities and funding decisions are made, and how research can help to ensure they are influenced by the priorities of the community. The findings from the workshops were presented at the forum and used to develop pathways for future research.

Project managers and technical change : curriculum development in strategic technology management

Traditional business approaches do not take account of the rapid technological developments underpinning today's world. Further understanding the role of technology and its efficient management to build and maintain a competitive edge in business can allow project managers to more successfully manage organisations, and to adapt to and capitalise on, today’s rapidly changing environment. Strategic Technology Management links engineering, science and management principles to identify, choose, and implement the most effective means of attaining compatibility between internal skills and resources of an organisation and its competitive, economic and social environment. This paper reviews the rationale and the development of a new Strategic Technology Management subject in QUT’s Master of Project Management program. It discusses recent developments in the area of technology management from an international perspective, provides details of the curriculum developed and discusses the experience of completing two years of teaching the new program.

A strategic marketing approach to national development initiatives involving large scale collaborative ventures (LSCV)

This paper relates to government initiatives which aim at advancing their country’s economic development and investor attractiveness. It identifies large scale projects that involve collaboration between government and business (termed: large scale collaborative venture – LSCV) as one aspect of competing in the new economy. The study pursued the research proposition that a LSCV can be effectively facilitated by following a theory based process similar to what is used in corporate practice. An approach to managing such ventures is outlined, based on strategic marketing theory applied to a major project, the Multifunction Polis. It is proposed that such an approach may enhance the success of a collaborative venture and thereby help countries participate more successfully in global competition through such ventures.

Literature Review Value Alignment Process for Project Delivery

The objective of the project “Value Alignment Process for Project Delivery” is to provide a catalyst and tools for reform in the building and construction industry to transform business-as-usual performance into exceptional performance. The outcomes of this project will be beneficial to not only the construction industry, but to the community as a whole because a more sophisticated industry can deliver more effective use of assets, financing, operating and maintenance of facilities to suit the community’s needs. The research project consists of a study into best practice project delivery and the development of a suite of products, resources and services to guide project teams towards the best approach for a specific project. These resources will be focused on promoting the principles that underlie best practice project delivery, rather than on identifying a particular delivery system. The need for such tools and resources becomes more and more acute as the environment within which the construction industry operates becomes more and more complex, and as business and political imperatives shift to encompass or represent diverse stakeholder interests. To this end, this literature review looks at why it is essential to achieve transformation in the Australian construction industry in the context of its importance to the Australian economy. It seeks to investigate the concepts of ‘alignment’ and value’ as they pertain to construction industry processes and relationships. It comprehensively reviews drivers of project excellence and best practice project delivery principles and looks at how clients approach selection of project delivery systems. It critiques existing project delivery strategies and gives an overview of recent best practice initiatives. The literature review represents a milestone against the Project Agreement and forms a foundation document for this research project

Sydney Opera House – FM exemplar project

The Sydney Opera House Facilities Management Exemplar Project (SOH FM Exemplar Project) aims to develop innovative research on facility management (FM) with the focus on asset maintenance. The project utilises the Sydney Opera House (SOH), one of most unique buildings in Australia, to research and create innovative FM strategies and models that will have a direct beneficial role for the Australian facilities management industry as well as the economy as a whole. The procurement, benchmarking and digitisation are crucial in improving the performance of FM. The procurement develops strategic plan and deployment framework enabling products, services, etc. meet objectives of performance, economic, environment, etc. Benchmarking is a technology used to compare practice and assess performance against the competitors recognised as industry leaders who achieve most successful activities in the field. Digitisation develops digitized FM modelling that facilitates the integration and automation of facility management. The project carries out the research on all the three areas as well as the relationship between them. It aims to develop an integrated approach for the improvement of FM performance.

International practices in investment decision making in road sector

This document provides the findings of an international review of investment decision-making practices in road asset management. Efforts were concentrated on identifying the strategic objectives of agencies in road asset management, establishing and understanding criteria different organisations adopted and ascertaining the exact methodologies used by different countries and international organisations. Road assets are powerful drivers of economic development and social equity. They also have significant impacts on the natural and man-made environment. The traditional definition of asset management is “A systematic process of maintaining, upgrading and operating physical assets cost effectively. It combines engineering principles with sound business practices and economic theory and it provides tools to facilitate a more organised, logical approach to decision-making” (US Dept. of Transportation, 1999). In recent years, the concept has been broadened to cover the complexity of decision making, based on a wider variety of policy considerations as well as social and environmental issues rather than is covered by Benefit-Cost analysis and pure technical considerations. Current international practices are summarised in table 2. It was evident that Engineering-economic analysis methods are well advanced to support decision-making. A range of tools available supports performance predicting of road assets and associated cost/benefit in technical context. The need for considering triple plus one bottom line of social, environmental and economic as well as political factors in decision-making is well understood by road agencies around the world. The techniques used to incorporate these however, are limited. Most countries adopt a scoring method, a goal achievement matrix or information collected from surveys. The greater uncertainty associated with these non-quantitative factors has generally not been taken into consideration. There is a gap between the capacities of the decision-making support systems and the requirements from decision-makers to make more rational and transparent decisions. The challenges faced in developing an integrated decision making framework are both procedural and conceptual. In operational terms, the framework should be easy to be understood and employed. In philosophical terms, the framework should be able to deal with challenging issues, such as uncertainty, time frame, network effects, model changes, while integrating cost and non-cost values into the evaluation. The choice of evaluation techniques depends on the feature of the problem at hand, on the aims of the analysis, and on the underlying information base At different management levels, the complexity in considering social, environmental, economic and political factor in decision-making is different. At higher the strategic planning level, more non-cost factors are involved. The complexity also varies based on the scope of the investment proposals. Road agencies traditionally place less emphasis on evaluation of maintenance works. In some cases, social equity, safety, environmental issues have been used in maintenance project selection. However, there is not a common base for the applications.

National practices in investment decision making in road sector

This document provides the findings of a national review of investment decision-making practices in road asset management. Efforts were concentrated on identifying the strategic objectives of agencies in road asset management, establishing and understanding criteria different organisations adopted and ascertaining the exact methodologies used by different sate road authorities. The investment objectives of Australian road authorities are based on triple-bottom line considerations (social, environmental, economic and political). In some cases, comparing with some social considerations, such as regional economic development, equity, and access to pubic service etc., Benefit-Cost Ratio has limited influence on the decision-making. Australian road authorities have developed various decision support tools. Although Multi-Criteria Analysis has been preliminarily used in case by case study, pavement management systems, which are primarily based on Benefit Cost Analysis, are still the main decision support tool. This situation is not compatible with the triple-bottom line objectives. There is need to fill the gap between decision support tools and decision-making itself. Different decision criteria should be adopted based on the contents of the work. Additional decision criteria, which are able to address social, environmental and political impacts, are needed to develop or identify. Environmental issue plays a more and more important role in decision-making. However, the criteria and respective weights in decision-making process are yet to be clearly identified. Social and political impacts resulted from road infrastructure investment can be identified through Community Perceptions Survey. With accumulative data, prediction models, which are similar as pavement performance models, can be established. Using these models, the decision-makers are able to foresee the social and political consequences of investment alternatives.

Firm social, cultural and intellectual capital : strategic indicators of international client satisfaction

Despite the increasing significance of the construction industry as an emerging sector of the Australian economy, there is inadequate research performed on construction design firms in terms of theoretical and empirical foundations. Although past research has identified the barriers and success factors for firm market entry, evidence suggests that to date no research has explicitly explored the sustainability of construction design firms in international markets. SMEs and their approach to firm internationalisation differ significantly from large manufacturing firms and a vast majority of construction design firms operate as SMEs. This paper develops a sustainable business model for construction design SMEs, which rely upon the development of clear Client Following (CF) versus Market Seeking (MS) strategies to support internal firm strategic and operational management. The understanding of these strategies is vital as the application of either will shape the design management approach of firms, which would in turn impact on the sustainability of these firms in foreign markets. Long-term sustainability of firms in international markets relies heavily upon client satisfaction. Client and project team participants’ communication during various design processes has often been problematic and the added difficulty of communicating across international boundaries further compounds the problem of capturing and maintaining client’s requirements. Therefore this paper develops a model for economic sustainability of Australian construction design firms working in international markets by exploring factors that affect client satisfaction across international boundaries, through the development of business performance indicators. These include not only the critical financial capital but also other ‘softer’ indicators, namely: social, cultural and intellectual capital. These act as a firm’s measure of success and the acquisition of this type of capital will provide significant advantages to firms’ success, hence sustainability in international markets.

Mapping the Australian political blogosphere

Network crawling and visualisation tools and other datamining systems are now advanced enough to provide significant new impulses to the study of cultural activity on the Web. A growing range of studies focus on communicative processes in the blogosphere – including for example Adamic & Glance’s 2005 map of political allegiances during the 2004 U.S. presidential election and Kelly & Etling’s 2008 study of blogging practices in Iran. There remain a number of significant shortcomings in the application of such tools and methodologies to the study of blogging; these relate both to how the content of blogs is analysed, and to how the network maps resulting from such studies are understood. Our project highlights and addresses such shortcomings.

The strategic and operational dimensions of staff training and professional development for information professionals : what neXus2 has revealed

The paper seeks to continue the debate about the need for professionals in the library and information services (LIS) sector to continually engage in career-long learning to sustain and develop their knowledge and skills in a dynamic industry. Aims: The neXus2 workforce study has been funded by the ALIA and the consortium of National and State Libraries Australasia (NSLA). It builds on earlier research work (the neXus census) that looked at the demographic, educational and career perspectives of individual library and information professions, to critically examine institutional policies and practices associated with the LIS workforce. The research aims to develop a clearer understanding of the issues impacting on workforce sustainability, workforce capability and workforce optimisation. Methods: The research methodology involved an extensive online survey conducted in March 2008 which collected data on organisational and general staffing; recruitment and retention; staff development and continuing professional education; and succession planning. Encouragement to participate was provided by key industry groups, including academic, public, health, law and government library and information agencies, with the result that around 150 institutions completed the questionnaire. Results: The paper will specifically discuss the research findings relating to training and professional development, to measure the scope and distribution of training activities across the workforce, to consider the interrelationship between the strategic and operational dimensions of staff development in individual institutions and to analyse the common and distinctive factors evident in the different sectors of the profession. Conclusion: The neXus2 project has successfully engaged LIS institutions in the collection of complex industry data that is relevant to the future education and workforce strategies for all areas of the profession. Cross-sector forums such as Information Online 2009 offer the opportunity for stimulating professional dialogue on the key issues.