Stochastic Optimization Models for

Open Pit Mine Planning:

Applications and risk analysis
COSMO Stochastic Mine Planning Laboratory
Department of Mining and Materials Engineering
Andre Leite
Outline
Introduction
Models for optimisation
Stochastic integer programming (SIP) model
Case study at a disseminated copper deposit
Conclusions
The open pit long-term mine production schedule problem
addressed as a stochastic integer programming (SIP) model
The SIP model was recently developed and uses multiple
simulated orebody models to optimize the mine production schedule
taking into account uncertainty
This work studies an application of the method in a disseminated
copper deposit
Introduction
Introduction
The value of a stochastic solution
0
50
100
150
200
250
300
0 1 2 3 4 5 6 7 8 9
Period (years)
N
P
V

M
Max. Conventional Sched.
Min. Conventional Sched.
E-Type Conventional Sched.
Conventional Sched.
Max Stochastic Sched.
Min. Stochastic Schedule
Stochastic Sched.
26%
Leite and Dimitrakopoulos, 2007
Introduction
The traditional optimum scheduling methodsare based on
mathematical models that assume inputs are 100% certain and
are generally represented by smoothed images of reality
Uncertainty may exist from technical, environmental and
market sources. Grade uncertainty is examined in this study
The reason for the difference
Introduction
SIP accounts for uncertain inputs
Considers simulated grade realizations in the optimisation
process
Minimizes the risk of not meeting production targets caused
by geological variability
The reasons for the difference
Goal
To test, quantify the value and improve the understanding of a
stochastic scheduler founded on stochastic integer programming
Goal and objectives
Goal and objectives
Objectives
Application of a scheduler based on a stochastic integer
programming formulation
Analyse results, compare methods and recommend future
work
Mathematical formulation
An objective function
Max z OR Min z
where z = (x
1
, x
2
., x
n
)
Subject to a set of constraints
Models for Optimisation
Integer Programming
An objective function
Maximise (c
1
x
1
1
+c
2
x
2
1
+. )
Subject to
c
1
x
1
1
+c
2
x
2
1
+. =b
1
c
1
x
1
p
+c
2
x
2
p
+. =b
p
c
4
c
1
c
2
c
3
Period 1
Period p
Orebody model
c
n
= constant
X
n
p
= binary variable
Models for Optimisation
Maximise (c
11
x
1
1
+c
21
x
2
1
+.
c
12
x
1
1
+c
22
x
2
1
+.c
1r
x
1
p
+c
nr
x
n
p
)
Subject to
c
11
x
1
1
+c
21
x
2
1
+. =b
1
c
11
x
1
p
+c
21
x
2
p
+. =b
p
c
12
x
1
p
+c
22
x
2
p
+. =b
p
c
1r
x
1
p
+c
2r
x
2
p
+. =b
p
Stochastic Integer Programming
Period 1
Period p
s
4
1
c
1
1
c
2
1
C
3
1
s
4
1
c
1
2
c
2
2
c
3
3
s
4
1
c
1
3
c
2
3
c
3
3
c
4
1
c
1
n
c
2
n
c
3
n
Objective function
SIP - Production Scheduling Model
Mill & dump
Risk management
( ) { }

= =

p
t
N
i
t
i
t
i
b
1 1
NPV Max
( )

= =

+
p
t
m
s
ty
sl
ty
l
ty
su
ty
u
q c d c
1 1
SIP geological discount rate
Risk Management
Deviation from production targets c
ty
u
and c
ty
l
penalized by d
ty
ru
and d
ty
rl
for each simulation s
( )

= =

+
p
t
m
s
ty
sl
ty
l
ty
su
ty
u
q c d c
1 1
( )
t
y
u
ty
u
d
c
c
+
=
1
0
( )
t
y
l
ty
l
d
c
c
+
=
1
0
SIP Penalties
Risk Management
d = geological discount rate
( )

= =

+
p
t
m
s
ty
sl
ty
l
ty
su
ty
u
q c d c
1 1
( )
t
y
u
ty
u
d
c
c
+
=
1
0
( ) { }

= =

p
t
N
i
t
i
t
i
b
1 1
NPV
Total NPV
r = economic discount rate
( ) { }
( ) { }
t
i
t
i
r) 1 (
EV
NPV
0
+

=
SIP a stochastic definition of ore
{ }

>
=
waste is i block ; if ,
ore is i block ; if ,
V E
i
i i i i
i i i i i
PC NR PC MC
PC NR PC MC NR
) ( cost Selling Price = rec G T NR
i i i
A probability cut-off (p) is also utilized to classify a block as ore
{ }
waste is i block else,
ore is i block , Prob if p g G
off cut i


Case study
Disseminated low-grade copper deposit
Orebody dips mainly N180/60S
185 DH in a pseudo-regular grid of 50x50m
2
Mineralized envelop defined using the drill core logs
Direct block simulation
20 simulations, directly generated on a 20x20x10m
3
mining
block size
Generates equally probable scenarios of the deposit
Conditional simulations
1
2

n
An average type deposit is used to defined a final pit and a set of
nested pits
Final pit and push-back definition
SIP The base case
A base case production schedule is generate considering a
ore production target of 7.5 M tonnes and a 20% probability
cut-off and 20% geological discount rate
Parameters for the SIP
Total blocks 15,391
Block dimensions (m) 20 x 20 x 10
Processing input capacity (PC) 7.5 Mtpa
Total mining capacity (TC) 28 Mtpa
Economic discount rate 10 %
Cost of shortage in ore production 10,000 /t
Cost of excess ore production 1,000 /t
Cut-off 0.3% Cu
Number of simulated orebody models 20
ORE RISK PROFILE
20% probability cut-off
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7 8
Production period (year)
O
r
e

(
M
x
t
o
n
n
e
)
min
average
max
Ore production risk profiles
WASTE RISK PROFILE
20% probabi l i ty cut-off
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8
Producti on peri od (year)
W
a
s
t
e

(
M
x
t
o
n
n
e
)
min
average
max
Waste production risk profiles
Cumul ati ve NPV - Ri sk Profi l e
20% probabi l i ty cut-off
-
100
200
300
400
500
600
0 1 2 3 4 5 6 7 8
Production period (year)
N
P
V

(
M
x
U
S
$
)
min
average
max
NPV risk profiles
2
3
4
5
6
7
8
9
0 2 4 6 8 10
Period
O
r
e

M

x

t
o
n
n
e
s
Maximum
Minimum
Expected
Conventional schedule
Risk analysis - conventional schedule
The SIP value
29%
The rule of geological discount rate
ORE RISK PROFILE
20% probability cut-off
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7 8
Production period (year)
O
r
e

(
M
x
t
o
n
n
e
)
min
average
max
ORE RISK PROFILE
20% probabi l i ty cut-off
30% geol ogi cal di scount rate
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7 8
Producti on peri od (year)
O
r
e

(
t
o
n
n
e
)
min
average
max
The rule of probability cut-off
ORE RISK PROFILE
20% probability cut-off
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7 8
Production period (year)
O
r
e

(
M
x
t
o
n
n
e
)
min
average
max
ORE RISK PROFILE
35% probability cut-off
0
1
2
3
4
5
6
7
8
9
0 1 2 3 4 5 6 7 8
Production period (year)
O
r
e

(
M
x
t
o
n
n
e
)
min
average
max
The rule of probability cut-off
WASTE RISK PROFILE
20% probabil ity cut-off
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8
Producti on peri od (year)
W
a
s
t
e

(
M
x
t
o
n
n
e
)
min
average
max
WASTE RISK PROFILE
35% probabil ity cut-off
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8
Production period (year)
W
a
s
t
e

(
M
x
t
o
n
n
e
)
min
average
max
The rule of probability cut-off
WASTE RISK PROFILE
20% probabil ity cut-off
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8
Producti on peri od (year)
W
a
s
t
e

(
M
x
t
o
n
n
e
)
min
average
max
WASTE RISK PROFILE
35% probabil ity cut-off
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8
Production period (year)
W
a
s
t
e

(
M
x
t
o
n
n
e
)
min
average
max
Cross-Sectional Views of the Schedules
20% Probability cut-off
20% geological discount rate
20% Probability cut-off
30% geological discount rate
35% Probability cut-off
20% geological discount rate
Conclusions
The model proved to provide a efficient and robust
tool to account for risk in the mine production
schedule problem. Different levels of acceptance for
risk represents different possible returns
Explicitly accounts for geological risk
Allows risk management by:
manage the magnitude of risk within a period
manage the variability of risk
control the risk distribution between time periods
Maximises NPV for a desired risk profile