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Optimal cut-off grade is one of the most critical parameters in openpit mine design because it defines the ore and waste and thus
determines the maximum net present value possible from the
mining operation. Although the algorithm presented by Lane
(Choosing the optimum cut-off grade. Colorado School of Mines
Quarterly, vol. 59, no. 4, 1964. pp. 811829) is the most common
one in the literature, it does assume constant capacities of the mine,
processing, and refinery. In this paper, Lanes original algorithm has
been modified to consider variable processing capacities in order to
determine the optimal cut-off grade in open-pit mines. The new
algorithm proposed here is compared to both Lanes original
algorithm and to a previous modification that incorporated rehabilitation costs into the cut-off grade estimation. The algorithm
proposed here that permits variable processing capacities is shown
to be superior for the determination of optimal cut-off grade to both
these previous versions. In addition, a computer-based program was
developed in Microsoft Office Excel to calculate the optimal cut-off
grade as proposed here.
Keywords
optimization, cut-off grade, variable capacity-based, NPV, open-pit
mining.
Introduction
Ore and waste are defined by means of cut-off
grade, such that material with a grade less
than the cut-off is transported to waste, and
that with a grade higher is transported to the
processing plant. However, blending opportunities between high- and low-grade ore mean
that the determination of the optimum cut-off
grade not only dominates mining economics,
but is also a crucial decision in the efficient
and effective utilization of the mineral
resources.
Determination of too high a cut-off grade
will result in a smaller overall resource as well
as economic material being send to the waste
dump, whereas conversely, the mine and
processing plant capacity will be unjustifiably
overextended in case of too low a cut-off
(Bascetin and Nieto, 2007). Therefore,
optimization of cut-off grade is the most
significant economic parameter in mining.
The Journal of The Southern African Institute of Mining and Metallurgy
VOLUME 112
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Synopsis
Where
is total profit ($)
is selling price ($ per pound)
is costs due to the smelting, refinery and selling stage
($ per pound)
g
is the average grade of material sent to the mill
y
is recovery of material in the refinery (metallurgical
recovery)
Qc
is the amount of ore to be sent to the concentrator
(tons)
m
is mining cost ($ per ton)
Qm is the amount of material to be mined (t)
c
is concentrating cost ($ per ton);
f
is fixed costs over the production period ($ per year)
T
is the production period or mine-life (years)
d
is interest rate (%).
As shown in Figure 1, the algorithm includes the
following steps:
Step 1Start
Step 2Determination of the number of loops using
Equation [3].
P
s
r
[3]
where
N
is number of loops
gmax is the maximum possible grade (considered here to be
equal to 1)
is the minimum possible grade (considered here to be
equal to 0)
gmin
[2]
Figure 1Flow chart of the variable capacities-based algorithm
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DECEMBER 2012
VOLUME 112
[4]
Step 5Calculation of mining, processing, and refinery
capacities as variable parameters.
It is notable that in Lanes original algorithm, cut-off
grade is restricted by the capacities of mining, processing,
and refinery, which are considered as being constant. As a
result, there are six different cases, on the basis of which
constraint is the limiting factor (Lane, 1964). According to
Lanes algorithm, Equation [5] introduces a relationship
between total concentrating material and the metal produced
during the mine-life. Therefore, if the maximum capacities of
processing and refinery are used, this relationship is
applicable between annual concentrating and refining
material, hence it can be rewritten as Equation [6]. In this
case, the maximum efficiency of the investment can be
obtained.
[5]
[6]
where
is the amount of material recovered from the
processing
C
is maximum concentrator capacity (tons per year)
R
is maximum refinery capacity (pounds per year).
Mining and processing capacities are calculated through
Eqations [6] and [7] to be variable. Let us assume the
refinery capacity equals the market demand, which is also
variable.
QR
[7]
where M is the maximum mining capacity (tons per year).
It is evident that the material extracted from the mine on
the basis of the assigned cut-off grade will be send to either
the processing plant, where the material has a grade greater
than the cut-off, or the waste dump for material with a lower
grade. Therefore, an amount of material (C ) can be sent to
the processing plant, expressed as a fraction of the total
material extracted annually from the mine (M ) according to
the assigned cut-off grade and considering the maximum
efficiently utilization of the investment. Hence, the amount of
waste rock can be determined using Equation [8]:
[8]
[9]
Hence, the following relation is derived to calculate waste
rock amount.
[10]
Case example
In this section, the authors used a case example previously
employed by Gholamnejad (2009) in order to describe and
analyse the variable capacities-based algorithm proposed
here.
The example illustrates an open-pit mine which includes
1200 t of ore and waste rocks within its pit outline. Table I
summarizes the grade distribution in equal grade intervals of
0.1. All data required for the analysis such as operating
costs, selling price, capacities, and so on are given in Table II.
Quantity (tons)
0.00.1
0.10.2
0.20.3
0.30.4
0.40.5
0.50.6
0.60.7
0.70.8
0.80.9
0.91.0
130
145
115
140
110
170
110
90
125
65
Total
1200
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Value
100
50
40
1
2
5
100%
300
25
12%
Table III
Qc (t)
1200.0
1187.0
1174.0
1161.0
1148.0
1135.0
1122.0
1109.0
1096.0
1083.0
1070.0
1055.5
1041.0
1026.5
1012.0
997.5
983.0
968.5
954.0
939.5
925.0
913.5
Qr (lb)
H (W/O)
R (lb)
C (t)
M (t)
Tm (year)
Tc (year)
Tr (year)
Profit ($)
NPV ($)
556.000
555.350
554.700
554.050
553.400
552.750
552.100
551.450
550.800
550.150
549.500
547.325
545.150
542.975
540.800
538.625
536.450
534.275
532.100
529.925
527.750
524.875
0.000
0.011
0.022
0.034
0.045
0.057
0.070
0.082
0.095
0.108
0.121
0.137
0.153
0.169
0.186
0.203
0.221
0.239
0.258
0.277
0.297
0.314
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
86.331
85.405
84.499
83.612
82.744
81.893
81.060
80.243
79.443
78.658
77.889
77.034
76.198
75.380
74.579
73.794
73.027
72.275
71.538
70.816
70.109
69.554
86.331
86.341
86.371
86.421
86.492
86.583
86.695
86.827
86.981
87.156
87.352
87.580
87.836
88.120
88.433
88.775
89.148
89.551
89.985
90.452
90.952
91.368
13.900
13.898
13.894
13.886
13.874
13.860
13.842
13.821
13.796
13.768
13.738
13.702
13.662
13.618
13.570
13.517
13.461
13.400
13.336
13.267
13.194
13.134
13.900
13.898
13.894
13.886
13.874
13.860
13.842
13.821
13.796
13.768
13.738
13.702
13.662
13.618
13.570
13.517
13.461
13.400
13.336
13.267
13.194
13.134
13.900
13.884
13.868
13.851
13.835
13.819
13.803
13.786
13.770
13.754
13.738
13.683
13.629
13.574
13.520
13.466
13.411
13.357
13.303
13.248
13.194
13.122
3350.000
3363.468
3377.916
3393.343
3409.749
3427.134
3445.499
3464.843
3485.166
3506.468
3528.750
3524.985
3522.459
3521.173
3521.126
3522.319
3524.751
3528.423
3533.334
3539.485
3546.875
3530.405
1592.752
1599.262
1606.460
1614.350
1622.936
1632.222
1642.213
1652.916
1664.335
1676.478
1689.351
1690.119
1691.781
1694.340
1697.803
1702.177
1707.468
1713.686
1720.838
1728.937
1737.992
1734.406
Table IV
Cut-off (lb/ton)
M (t)
C (t)
R (lb)
Qc (t)
Qr (lb)
T (year)
Profit ($)
NPV ($)
0.40
0.375
0.20
100
100
90.95
50
50
70.11
40
40
40
670
715
925
450
472
527.75
13.4
14.3
13.19
2440.0
2277.5
3546.88
1185.07
1064.75
1737.99
Lane (1964)
Gholamnejad (2009)
Variable capacities-based
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DECEMBER 2012
VOLUME 112
Conclusion
Cut-off grade determines material to be sent to the waste
dump and to the processing plant. If the cut-off is high, there
is a risk that some economic material is mistakenly
considered as waste. Conversely, if the cut-off grade is too
low, then some uneconomic material will be erroneously
defined as ore. Therefore, determination of optimum cut-off
grade is a critical issue in economic mining. To this end,
Lanes algorithm has been applied extensively, even though
the mining, processing, and refinery capacities are assumed
to be constant. In this study, Lanes original algorithm has
been modified by considering variable capacities in the
determination of the optimum cut-off grade in open-pit
mines. The results of this new algorithm show that the
optimum cut-off grade, and maximal NPV, is determined to
be less than that obtained from previous algorithms, and it is
suggested that the proposed algorithm is more capable in
determination of the optimum cut-off grade. It is also
concluded that mine, processing plant, and refinery can all
work with full capacities during of the mining project.
The results indicate that the variable capacities-based
algorithm is preferable for utilization in optimum cut-off
grade determination. In order to facilitate use of the new
proposed algorithm, a computer-based program was
developed in Microsoft Office Excel.
Asad, M.W.A. 2007. Optimum cut-off grade policy for open pit mining
operation through net present value algorithm considering metal price and
cost escalation. International Journal for Computer-Aided Engineering and
Software, vol. 24, no. 7. pp. 723736.
BASCETIN, A. and NEITO, A. 2007. Determination of optimal cut-off grade policy
to optimize NPV using a new approach with optimization factor. Journal of
the Southern African Institute of Mining and Metallurgy, vol. 107.
pp. 8794.
CAIRNS, R.D. and SHINKUMA, T. 2003. The choice of the cut-off grade in mining.
Resources Policy, vol. 29. pp. 75-81.
GHOLAMNEJAD, J. 2009. Incorporation of rehabilitation cost into the optimum cutoff grade determination. Journal of the Southern African Institute of
Mining and Metallurgy, vol. 109. pp. 8994.
LANE, K.F. 1964. Choosing the optimum cut-off grade, Colorado School of
Mines Quarterly, vol. 59, no. 4. pp. 811829.
LANE, K.F. 1988. The Economics Definition of Ore: Cut Off Grades in Theory
and Practice. Mining Journal Books, London. p. 145.
MINNITT, R.C.A. 2004. Cut-off grade determination for maximum value of a
small Wits-type gold mining operation. Journal of the South African
Institute of Mining and Metallurgy, vol. 104. pp. 277283.
OSANLOO, M., RASHIDINEJAD, F., and REZAI, B. 2008. Incorporating environmental
issues into optimum cut-off grades modeling at porphyry copper deposits.
Resources Policy, vol. 33. pp. 222229.
WHITTLE, J. 1999. A decade of open pit mine planning and optimization- the
craft of turning algorithms into packages. Proceedings of the 28th
International Symposium on Application of Computers and Operations
Research in the Mineral Industry, Colorado School of Mines, Golden,
Colorado. pp.15-23.
References
ASAD, M.W.A. 2005a. Cut-off grade optimization algorithm with stockpiling
option for open pit mining operations of two economic minerals.
International Journal of Mining, Reclamation and Environment, vol. 19,
no. 3. pp. 176187.
kers
Keynote Spea
innitt
M
rd
ha
ic
R
.
Prof
es
m
ol
Dr Ralph H
eg
nw
an
H
Norbert
is proud to be hosting a
CONFERENCE
Sampling and analysis: Best-practice in African mining
Reducing operational risk using sampling and assay
56 June 2013, Misty Hills, Muldersdrift
OBJECTIVES
The objective of the conference is
for companies involved in African
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