INCORPORATING FINANCIAL RISK ATTITUDES IN ORE SELECTION DECISIONS FROM PROBABILISTIC MODELS

Optimal ore selection decisions under uncertainty are currently considered in terms of the expected utility, which involves post-processing conditional probability distributions of grade values using economic objective functions. The expected utility concept, which weights the financial consequences by their probabilities, implies that the decision-maker is totally impartial to money and the magnitude of potential profits and losses. A probabilistic framework to account for the decision-maker's financial risk attitude in ore selection decisions through the use of certainty equivalents (expected utilities on a preference scale) is proposed. The risk-reward nature of mining selections under uncertainty and the certainty equivalent approach to optimal ore selection is demonstrated in an artificial grade control case study.