Why You Must Include Equipment In A Mine's Financial Risk Model

Plenty of factors will feed into mining financial risk modeling. However, mines are asset and equipment-heavy operations. Worse, many of those pieces of equipment are industry or mine specific. Consequently, equipment problems can translate into notable financial risks at some mines.

If you're performing mining risk modeling, you need to consider the financial implications associated with the equipment. You will especially want to watch these four risks.

Above-Average Equipment Failures

Foremost, a business needs to know the mean time before failure for all its pieces of equipment. Many people are tempted to use this number for modeling a mine's financial risks related to hardware. However, the MTBF only serves as an average. It is informative in terms of maintenance schedules, but it doesn't state the peak risks associated with the potential for concurrent equipment failures.

You will need to take a stochastic view of equipment failures. This means accounting for unpredictable fluctuations in your mining risk modeling efforts. A stochastic model will tell you the probability that several key pieces of hardware will fail simultaneously. You can then calculate the potential losses associated with a peak failure event to determine the maximum acceptable risk.

Supply Chains

Repairing and replacing equipment takes time. If your mining financial risk modeling plans don't account for how long a manufacturer will take to send new equipment or ship parts, it doesn't fully account for the problem.

You need to be able to track supply chain slowdowns so you can stay ahead of potential changes in risk, too. Never stick with the same assumptions. Use a model that feeds real-world data into the system so you can make better estimates of how long it will take to get systems back in operation.

Financial Costs of Equipment Failures

The financial cost of a piece of equipment failing goes well beyond the money needed to repair or replace the asset. When equipment is down, it isn't doing work. Likewise, it may be physically in the way of other equipment and preventing those systems from being profitable. You need to calculate how much risk is associated with a catastrophic failure in the worst possible location.

Asset Values of Equipment

Your company's asset values are tied heavily to its equipment. Notably, mining equipment tends to depreciate quickly. It also doesn't offer great liquidity because there are only so many folks in the world at any given time willing to pay for it. Consequently, the insurance and borrowing risk profiles of a company will swing over time with the asset value of the equipment. A company like SCM Decisions has more information regarding this topic.



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Market Research Consultants: How Business Owners Can Benefit I always believed that I could make my hobby into my business, but I wasn't sure how to do that. I didn't know how to narrow down a consumer market or how to target them once I did. I ended up working with a consultant who specialized in new business development and market research. I learned a lot about evaluating consumer behavior, identifying the things that they were lacking, and how to market a solution to those problems. Now that my business is running, I created this blog to teach others that it is possible. I hope the information here helps you learn how to launch your own business, too.

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