Quantified Strategies

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Genuine Value

At Quantified Strategies we work to add genuine value to our client organisations through seamless collaboration with internal and external resources, continually striving to achieve new levels of technical innovation, and by maintaining absolute standards of professionalism and excellence in all activities undertaken.

Effective and Productive

The services and products provided by Quantified Strategies have a specialist focus. A technical edge is maintained through an ongoing R&D program, an active PD program, and an ongoing focus on broader industry developments. As such Quantified Strategies specialises in working effectively and productively within the teams in which we are placed.

Qualified Network

We also have a network of highly qualified colleagues from a wide range of disciplines that we can call upon to complement teams as the client may require. Quantified Strategies was established in 2018, and is based in Brisbane, Australia.

Team

Quantified Strategies has a proven track record of providing strategic planning services to the mining industry.

Professional services provided range from brainstorming and mind mapping of options, through to detailed strategic optimisation models using the latest cutting edge software and optimisation algorithms for individual mines through to entire country and commodity business units.

Such analyses have been conducted using a range commercially available software solutions, at times supplemented with customised software and modelling solutions. Refer to the Software Solutions section for a range of software packages used by Quantified Strategies.

Our core strategic planning services include:
  • Ultimate pit selection
  • Cut-off grade optimisation
  • Grade-throughput-recovery optimisation
  • Schedule optimisation
  • Schedule optimisation
  • Throughput optimisation
  • Capital sizing optimisation
  • Strategic scenario selection
Relationships exist between costs and prices in almost all mining valuations (e.g.: between the copper price and the diesel price). Not including these relationships will result in inaccuracies in the valuation model. This can then lead to suboptimal decisions relating to investments or future strategy.
It is especially important to incorporate these relationships any time the absolute valuation outcome is important, or significant capital is to be invested.

The Correlated Valuation Methodology (CVM) has been developed by Quantified Strategies and can be used to:

  • Analyse and model the key relationships.
  • Improve the accuracy of the valuation outcomes.
  • Calculate and assess the internal cashflow probability.
  • Model and assess the residual uncertainty.
  • Make confident investment decisions based on superior strategic analyses.

Quantified Strategies has developed a number of proprietary tools and methodologies to quantifiably improve the valuation accuracy of almost any mining asset. These methodologies are underpinned by sound financial theory, as well as a statistical and mathematical basis the process for which can be clearly explained.

Quantified Strategies has filed provisional patent applications for a range of the valuation approaches and techniques developed.

Relationships can be seen to exist between parameters in mining valuations, consider the following graphs.

These relationships have all been analysed by Xtega, and all of these are statistically significant. As such each of these parameter pairs can be seen to be correlated, meaning that the two variables move in relation to each other. Note that this does not imply causality.

If these correlations are not considered, the resulting valuations will have an unquantified error. The CVM covers this and more.

The purpose of the CVM is to:

  • Increase the valuation model accuracy.
  • Recognise and incorporate the relationships between parameters.
  • Reduce and quantify the risk resulting from systemic market forces.
  • Reduce the variation in the residual uncertainty.
  • Therefore increase the overall confidence in the valuation outcomes.

The concept has a pragmatic framework which selects a central parameter (e.g.: for a copper mine this would typically be the copper price), and then seeks to assess and model the correlations between the remaining key correlated parameters (typically including diesel, steel based consumables, labour, power, tyres, explosives, chemicals, etc., etc.).

Whilst sections of the CVM analysis are complicated, the concept overview and the presentation of the outcomes are designed to be simple to interpret and easy to understand.

An overview of the main tasks required to be completed when incorporating the CVM into a valuation model includes the following.

  1. Select a central parameter. This would typically be the main revenue driver, i.e. for a copper mine this would be the copper price.
  2. Assess and analyse the historical relationships between the central parameter and each of the other relevant input parameters.
  3. Where correlations are identified, develop a regression analysis equation including the central parameter as a variable in the equation.
  4. Utilise a combination of the predictive time series for the central parameter (typically sourced from the corporate assumptions) and the CVM equations developed to generate the cashflow statement.
  5. Measure the resulting internal probability of the cashflow.
  6. Simulate and assess the residual uncertainty.

Once the CVM has been incorporated in the financial valuation framework it becomes possible to calculate the internal cashflow probability (ICP) of both the preceding valuation and the CVM valuation. The ICP is a measure of the risk consequent from systemic market forces. This risk is considered to be comprised primarily of variations in the expected outcomes from the correlated parameters.

Resultant CVM internal cashflow probabilities are typically +P80, whereas standard models which do not incorporate the correlations between parameters are often sub-P50. Thus the accuracy of an otherwise high quality financial model can be significantly lower if the relationships between key parameters are not recognised and modelled.

Subsequent to calculating the internal cashflow probability it is then possible to calculate a value at risk (VaR) as a measure of the value of the resultant risk based exposure to systemic market forces.

Almost all projects and operations have the main revenue price assumption (the central parameter) as the parameter to which the value is the most sensitive.

If the uncertainty in this variable is modelled stochastically inclusive of the CVM the resultant distribution changes. Consider the following two graphs.

Note that the second distribution which is inclusive of the CVM has a narrower distribution and a reduced range. The range has been reduced from –US$806M – US$4,299M in the first graph (excluding the CVM), to –US$89M – US$3,645M for the second graph (inclusive of the CVM). Subsequent to including the CVM this project could say with a level of confidence based on sound analyses that it should not expect to lose circa a billion dollars.

The inclusion of the CVM in the project valuation has resulted in the uncertainty based variance being reduced by 19%, and the standard deviation by 10%.

The coefficient of uncertainty (coefficient of variation) has been reduced from 0.52 to 0.38, a reduction of 27%, and therefore a significant improvement.

The final valuation outcome, inclusive of the uncertainty caused by market volatility, is now more constrained. An intuitive outcome which allows greater confidence in investment decisions.

Quantified Strategies provides a significant range of mining engineering services.

Whilst having an established reputation in delivering on a range of core services, Quantified Strategies also specialises in non-standard and more complex assignments. These have often involved assignments covering the review of multiple disciplines at a range of levels.

As an example such assignments have involved product reconciliation from block model, through mine design, mining operations, plant operations and transport to point of sale, and reviewing the processes of the EOM reconciliation processes.

Quantified Strategies is also able to compile multi-disciplinary teams from our pool of associates and colleagues.

Our core engineering services include:
  • Technical reviews and audits
  • Production performance reviews and improvement projects
  • Mine cost modelling and cost model development for budgets and LOM/LOA planning
  • Haulage simulation, modelling, and system calibration
  • Project management
  • Management support or infill roles
  • Performance improvement programs (operational and technical)
  • Capital expenditure justifications
  • Valuation of options
  • LOM/LOA scheduling
  • Operational reporting system review, development or upgrades
  • Mining engineering for scoping studies, prefeasibility studies, feasibility studies
  • Workshop facilitation

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QS Innovations

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