Engineering construction (such as water conservancy project, road engineering, and so on) in mountain areas bring mass of waste soil and rock fragment, whose stability is critical to the ecological environment and the safe operation of engineering facilities. The biggest waste dump of the Pumped Storage Power Station Project in Hunyuan County, Shanxi Province, China, with a volume of 7 million m³ and a maximum height of 240 m, is to be located at the origin of Mahua Valley. To assess the potential risk of the waste dump, reconnaissance, geomorphological analysis was undertaken to provide basic data. The potential failure area and volume was determined utilizing Flac3D depending on strength reduction method. The kinematic process and the potential hazards after failure was presented by Particle flow code. The results showed that the factor of safety of the waste dump under heavy precipitation was 1.15, less than the stability requirement of slope in hydropower station, and the potential failure volume was about 4.8 million m³. The scenario-based debris mass run-out paths indicated that, considering the worst cases scenario, the ground ventilation platform and ventilation tunnel exit on the right bank of the gully might be destroyed rapidly by landslide debris. Besides, the debris flow would accumulate at the gully mouth, and even run into the lower reservoir. Thus, more attention should be taken to increase the stability of the waste dump. These results are useful information for decision support and future hazard assessment of such engineering project.