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Math in Mining: Statistical Analysis and the Business in Numbers

Mathematics is the study of topics including numbers (quantity), space and change. From calculating slope stability to estimating ore resources, math is used every day in mining to plan and run our operations safely and profitably. Following from our last STEM blog on engineering, we are focusing our attention today on the role of a mining economist at Newmont and discussing how their skills in statistical analysis – a branch of mathematics – keep our business strategy in line with ever-changing gold prices.

Newmont’s strategy is to lead the gold sector in creating value for our shareholders and other stakeholders. In order to realize this strategy, we work to build a longer-life, lower-cost portfolio of mining operations and projects and to run our business more efficiently and effectively every day. Having a strong understanding of the value of the minerals we mine is a key component of that strategy.

Each year, Newmont creates a business plan which forms the foundation and direction for the Company for the next twelve months. Critical to these plans are forecasts of future key commodity prices (gold, silver, copper and oil), foreign exchange rates (for the Australian dollar, Peruvian sol, etc.) and other financial rates. These estimated prices and rates are then used by mine planners (who design how particular ore bodies will be physically mined); reserve and resource estimators (responsible for determining how much gold, silver and copper may be eventually economically extracted at the Company’s properties)[1] and accounting personnel (responsible for compiling the firm’s public financial reports).

Our economists bring depth of knowledge to these forecasts and, using their skills and training, create econometric models – a process that measures past relationships among variables like gold price and supply and demand dynamics. Collecting and analyzing this market information requires a great deal of research and statistical analysis, of both historical time series data and current market insights.

Using the updated forecasting models, our chief economist will create a market review and outlook presentation to share with the various departments and key executives within Newmont so that our accountants, mine and business planners, and supply chain employees are all using the same information to make their respective business and operations decisions.

The World Gold Council is one of the leading authorities on gold and offers comprehensive analysis of the dynamic drivers of the gold market to the public. The organization has created a highly visual animated video that helps explain how it provides its Gold Demand Trend reports:

Layered over any type of quantitative analysis is more qualitative assessment, including longer-term demographic trends in both developed and emerging countries. As the global economy continues to evolve, it is especially important that our team of economic experts build from their quantitative skills in economics, statistics and finance, so that they have the ability to draw sound qualitative conclusions. Understanding the interplay among various commodity, foreign exchange and equity markets and being able to clearly communicate their findings is critical to the role of the mining economist.

For more information about Newmont, visit our website and follow us on Facebook, Twitter and LinkedIn.

[1] We publish our reserves and resources annually. These figures take into account production costs, metallurgical recovery rates, metal prices, future production and capital costs, mine designs, model changes, divestment and depletion, as well as any acquisitions and additions during the year.
Tags : Corporate, Performance

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