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Maths-based solution will boost mining profits

16 Dec 2009

A team from the School of Mathematics and Manchester Business School has developed a novel means of helping mining companies accurately calculate the value of their reserves.

Dr Paul Johnson, Prof Peter Duck, Dr Geoffrey Evatt, Prof Sydney Howell
Dr Paul Johnson, Prof Peter Duck, Dr Geoffrey Evatt, Prof Sydney Howell

The technology provides a solution to an inaccurate methodology used commonly within the mining industry for the past 40 years – and will have a positive impact on helping to increase mining companies’ profits and their longer-term stability.

The cutting-edge techniques used to create the Reserve Valuation and Optimisation Model (RVOM) are a significant step forward from traditional methods, and the team is now seeking a leading commercial partner to join the project to enable RVOM to become the mining industry standard for valuation.

Before developing RVOM, Professor Peter Duck and Dr Paul Johnson from the School of Mathematics, along with Professor Sydney Howell and Dr Geoffrey Evatt from Manchester Business School (MBS) had been working together investigating the valuation and optimal control of stored quantities in the presence of what is known as ‘stochastic uncertainty’, specialising in model formulation and partial differential equation (PDE)-based numerical schemes.

The team is applying these powerful techniques to a number of problems, including optimal temperature control, the optimal trading and storage of wind power and the valuation of mortgage-backed financial securities; prior to RVOM the Team had not studied finite natural resources.

Work on the RVOM began in earnest in 2008, when a generic model for valuing a finite resource was needed in relation to Uranium stocks, for a UK government sponsored investigation into the sustainability of nuclear power.

Since much of the team’s research over the past few years had been in logically similar problems, they already possessed the necessary set of skills with which to tackle the resource valuation problem.

Prof Peter Duck, who is Head of The School of Mathematics, said: “Being able to make fast and accurate valuations of reserves in the presence of economic and geological uncertainty is of critical importance to mining companies.

“RVOM draws upon recent advances in financial mathematics, to make faster and more accurate reserve valuations than before. It can achieve this in the presence of numerous uncertainties, such as price fluctuations and ore grade uncertainty, and can even set the optimal processing rules a mining company should use.”

The University of Manchester Intellectual Property Ltd (UMIP) – the commercialization arm of The University of Manchester – is helping the team explore the industrial and commercial potential of the solution.

Notes for editors

For more information please contact Alex Waddington, Media Relations Officer, The University of Manchester, Tel 0161 275 8387.