PLANIFICACIÓN MINERA

Open pit optimization

ASIEH HEKMAT
SESSION 7
Reference: Surface mining, Pages 470 - 479
The meaning of pit optimization
The first thing to realize about pit optimization is that any feasible pit outline has a dollar value which
can, in theory, be calculated. To calculate the dollar value we must decide on a mining sequence and
then conceptually mine out the pit, progressively accumulating the revenues and costs as we go.

If we wish to allow for the time value of money-that is the fact that a dollar we receive today is more
valuable than one that we (might) receive next year-then we must discount the revenues and costs by
a factor which increases with time.

The second thing to realize is that in doing this calculation we have, in effect, allocated a value to
every cubic meter or to every block of rock. What is more, we have allocated these values without
taking any account of the mining which has gone before, except that the value may depend on the
position.
 Example
Assume that we have a flat topography
and a vertical rectangular ore body of
constant grade as is shown in the figure.
Further assume that the ore body is
sufficiently long in strike for end effects
to be ignored. Under these
circumstances, we only have to concern
ourselves with a section.
If we assume that ore is worth $2.00 per
tonne after all mining and processing
costs have been paid, and that waste
costs $1.00 per tonne to remove, then
we obtain the values of each pit.
Tonnages for the Possible Pit Outlines
Relationship between pit tonnage and value
 What we can learn from this curve
1- Outlines four and six have values which are
close to that of outline five, and this is not just an
artefact of this particular ore body. For any
continuous ore body, as the pit is expanded
towards optimality, the last shell which is added
will have only a small positive value. If it had a
large one, there would probably be another
positive shell to follow. This means that in this
case, and in the vast majority of real ore bodies,
the curve of value against tonnage is smooth and
surprisingly flat at the peak. It is common to find
that a 10% range of pit tonnage covers only a 1%
range of pit value. The trick is to find the peak,
and good optimizers guarantee to do this.
 What we can learn from this curve
2- If we are working without an optimizer and doing a
detailed design for a realistically complex ore body, then
we might be working away from the peak at • A', where
changes in pit tonnage can have a significant effect on the
value of the pit. In fact, generations of mining engineers
have learned that a series of small adjustments, involving
a great deal of work, can significantly affect the
profitability of the mine. Contrast this with starting from
an optimized outline at 'B'. From this point, providing that
ore and waste are kept in step with each other, it is
difficult to go wrong. Certainly there is no need to
experiment with small adjustments. Since, with modern
software, we can plot this graph for real ore bodies, we
can actually find out how much freedom of movement we
have before we start the detailed design. In other words,
designs based on optimized outlines are very much easier
to do.
The effect of scheduling on the optimal outline
When we schedule a pit, we plan the sequence in which various parts of it will be mined and the
time interval in which each is to be mined. This affects the value of the mine because it
determines when various items of revenue and expenditure will occur. This is important because
the dollar we have today is more valuable to us than the dollar that we are going to receive or
spend in a year's time. There are various reasons for this:
 Delayed revenue may increase our need to borrow funds and pay interest, thus reducing the
effective revenue;
 Delayed revenue may not eventuate-one of the risk factors;
 Delayed expenditure may reduce our need to borrow funds and pay interest, thus reducing
the effective expenditure;
 Something unexpected may go wrong with the operation- another risk factor; etc.
The effect of scheduling on the optimal outline
The standard way to consider time in the calculation is to discount next year's dollar by a certain
percentage and to apply that idea cumulatively into the future. Thus we discount future
revenues and costs by a particular discount rate and reduce them all to a net present value.
There are two discount rates:
The notional discount rate is applied to actual revenues and costs which are likely to occur. That
is, revenues and costs which follow the inflation rate. Thus the notional rate (typically 20%)
includes an allowance for inflation.

The real discount rate is easier to work out revenues and costs in today's dollars and then to use
the real discount rate (typically 10%), which does not allow for inflation.
Production of the detailed design from an optimal outline
Whatever the method, the aim is to produce a detailed design which deviates as little as possible from the
outline provided by optimization. Where deviation is unavoidable, we try to balance extra tonnage in one
place with reduced tonnage in another. The resultant design should in most cases contain ore and waste
tonnages very similar to those contained by the optimal outline. If it is not possible to achieve this, then it
may be that the slopes were not set correctly for the optimization. For example, insufficient allowance
may have been made for the effect of haul roads.

As a starting point, a smooth line should be

drawn through the square edges as is
shown in the figure.

Remember that the block edges are

artefacts, they do not represent geological
or grade boundaries.
Sensitivity work
Although an optimized block outline and the corresponding detailed design are not the same, they do
have a close relationship and, provided a good optimizer is used, are very similar in value.
Consequently, when comparing two designs, the difference in value between the two optimal block
outlines will be very similar to the difference in value between the two detailed designs. This means
that sensitivity work can be carried out without doing any detailed designs at all.
During sensitivity work, we explore the economic and slope sensitivity of the mine. We sort out the
general scale of mining and hence the operating costs. We decide approximately where the haul
roads are to go and adjust the slopes in these regions to the average slope.
This requires a large number of quick optimization runs. However, it is probably the most valuable
part of the whole design exercise because it inevitably leads to a much better understanding of the
ore body and its economics. Graphs can be prepared which show how various characteristics of the
mine, such as value or tonnage, are related to product price, costs, etc.
Undiscounted best case and worst case NPV plotted against pit tonnage

A set of optimal outlines is prepared,

where each is optimal for a different
product price.
For some fixed product price, each of the
outlines is then scheduled as though it
was to be the limiting pit.
If an automated practical scheduling
scheme is available, it should be used.
In producing this figure, two limiting
schedules have been used:
• Best case
• Worst case
Best / worst case
In worst case mining, each bench is mined completely before the next bench is started. Waste at
the top of the outer shells is mined early, and the cost is discounted less than the revenue from
the corresponding ore which is mined much later. This can make the outer shells uneconomic.
The optimal pit for worst case mining is thus generally smaller than is indicated by simple
optimization using today's costs and revenues.
In best case mining, each shell is mined in turn and thus the related ore and waste is mined in
approximately the same time period. In this case, the optimal pit is usually close to the one
obtained by simple optimization.
In small pits, worst case mining may be the only possibility. The larger the pit, the more
opportunity there is for creative sequencing, and the closer it is possible to get to best case
mining.
 Undiscounted best case and worst case NPV
The NPV for any practical mining schedule
must lie somewhere between the two lower
curves, with smaller pits tending towards the
bottom curve and larger pits providing
opportunities to get nearer to the middle
curve.
This graph, which can be plotted for different
product prices, is the single-most useful
presentation. It is meaningful to engineers,
accountants, and management alike and can
usefully be discussed in committee.
Once a pit size has been chosen, it is easy to
use the corresponding pit outline as a starting
point for the detailed design.
Block size
For Outlining the Ore Body
The size of the block that is needed for outlining the ore body depends on the shape and size of
the ore body and on the particular computer modelling package that is being used. It may be
quite small, which can lead to a model consisting of millions of blocks.
For Calculating Block values
The value of blocks should be calculated with a block size which is similar to the selective mining
size. That is, a parcel of rock should not be so small that it could not be mined separately, nor so
large that grades are artificially smoothed. This block is sometimes bigger than that needed for
outlining the ore body, requiring blocks to be combined and their grades averaged.
Block size
For Designing a Pit
There is now considerable experience in pit design using optimization techniques and, assuming that
the pit occupies most of the width and length of the model and that the outline is not too convoluted,
then a full model of 100,000 to 200,000 blocks is usually more than sufficient for pit design purposes.
This leads to a block size which may be bigger than that for calculating values. If it is necessary to re-
block the value model, then it should be done by adding component block values and NOT by
averaging grades.
For Sensitivity Work
If we want to do a series of optimizations using, say, different product prices so as to plot a graph of
pit value against price, a model of 20,000 to 50,000 blocks will give just the same shape of graph with
a very small shift of absolute value. Thus, most optimizations for sensitivity work can be done very
quickly and this approach generally leads to a much more thorough sensitivity analysis.
Production schedule
The method and sequence of extraction, and the cutoff grade and production strategy will be affected by the following
primary factors:

1. Location and distribution of the ore in respect to topography and elevation;

2. Mineral types, physical characteristics, and grade/tonnage distribution;

3. Direct operating expenses associated with mining, processing, and converting the commodity into a salable form;

4. Initial and replacement capital costs needed to commence and maintain the operation;

5. Indirect costs such as taxes and royalties;

6. Commodity recovery factors and value;

7. Market and capital constraints;

8. Political and environmental considerations.

Production schedule
The procedure used to establish the optimal mining schedule can be divided into three stages:

 The first defines the extraction order or mining sequence,

 The second defines a cutoff grade strategy that varies through time and will be optimal for a
given set of production parameters,

 The third defines which combination of production rates of the mine, mill, and refinery will be
optimal, within the limits placed by logistical, financial, marketing, and other constraints.
Production schedule- Deposit modeling
Before the mine production planning commences, a great deal of work has already been
completed in exploration and modeling the deposit. From this work, a number of tentative
assumptions have been made, including the most probable mining method and hence, the
bench height, type, and approximate size of the loading equipment and the mining selectivity.
Other test work and assumptions will also have been made regarding the type of process
needed to recover the commodity.

These parameters will be used to estimate the most probable range of mining and processing
costs.
Optimum production schedule
In order to develop an optimum production schedule, a sequence or extraction order inside of the so-called
ultimate pit must first be determined. The extraction sequence depends on two subsets of parameters.

 The first deals with the strip ratio associated with recovering the ore, the grade of that ore, and the
physical location of that ore in respect to availability through time.

 The second subset of parameters consists of costs associated with starting and maintaining the whole
operation.

Direct operating costs can be used to define a breakeven cutoff grade and strip ratio, but the objective of
mine planning is to devise a strategy that will optimize the total investment. Operating at breakeven cutoffs
and strip ratios is only optimal for the final phase at the end of the mine life.
Production schedule- designed phases
Computer designed phases can be determined by feeding the data developed and stored in a
computer block model into a set of programs that can be used to calculate an economic phase limit.

The objective is to develop three dimensional equal profit potential surfaces throughout the mineral
deposit. Each surface has to be sufficiently spaced apart to allow adequate room for mining the slices
between the surfaces.

Since the distance between equal profit potential surfaces will vary, some manual adjustments will be
required, as well as the addition of haul roads out of a phase and if required, access left for the next
phase.
Production schedule- designed phases
Production schedule- costs
The accuracy of the estimated costs, recoveries, and commodity price parameters need only be
reasonably precise, since they are only used to determine the location of the ores with the
relative highest to lowest net values. Cost estimates needed for determining the extraction
sequence can be broken down into three distinct major categories:
(1) costs per ton of material mined;
(2) costs per ton of ore treated; and
(3) costs per pound of commodity produced.
Cost per ton of mined material
Costs per ton of material mined include the direct mining costs per ton for the drilling, blasting,
loading, hauling, ancillary equipment, and mine general and administrative functions.

The cost per ton of the capital and replacement expenditures for mine mobile equipment
related to the total material mined is also included because the major mobile mining equipment
is consumed in approximate direct proportion to the amount of material handled by the
equipment, unlike the major initial capital cost components of the plant and infrastructure.

The plant components that are replaced or repaired are usually included in the operating
maintenance costs per ton of ore, and are not related to the total tonnage moved in the mine.
Cost per ton of mined material- depreciation
The depreciation cost to cover mobile surface mine equipment purchase and replacement will usually
be in the range of $0.15 to $0.25 per ton of material mined. The magnitude of the cost will depend on
the size, type, and anticipated life of the equipment, the mine production level, the haulage
distances, and the work schedule.
The most important reason for including mine mobile equipment depreciation is that the method of
producing three-dimensional equal profit surfaces in the ore deposit must consider all relevant costs
per ton of material mined. If the equipment depreciation were not included, then the cost per ton of
material mined will be understated and the phase design will tend to move out into higher stripping
ratio areas. This would not matter if the relative strip ratios were equal in all directions around the pit
perimeter, but this is rarely so. In most mineral deposits, there will be areas of high and low strip
ratios, so moving too far out into a high strip ratio area will lower the net value of the phase, and the
3-D surface generated will no longer be of equal value.
The significance of this costing philosophy can be realized in mining operations where the direct
operating costs per ton of material are low relative to the mine equipment depreciation costs per
ton of material.
Cost per ton of mined material- Example
As an example, compare two surface mining operations, one located in the Philippines, the
other in Alaska. The net value of a mining increment in each of the pit walls is compared.
Cost per ton of ore treated
the cost per ton of ore treated and includes expenditures applied to the ore once it has left the mine
area. These costs are not related to the total quantity of material removed from the surface mine, but
only applicable to the ore tonnage to be treated. Direct costs applied would be:

1. Extra costs associated with transporting the ore to treatment facilities;

2. Crushing and grinding costs;

3. Concentrating cost; and

4. Overhead costs to cover site and head office administrative and general expenditures as well as
marketing, sales, and property management costs.
costs per unit of commodity produced
This would cover the sums spent for concentrate handling and transportation, smelting, and
refining, and any royalties or taxes that relate to gross revenues rather than profits.
In addition, a certain amount could be inserted into this category to ensure a minimum profit
per unit of salable product.
In order to determine the quantity of salable product, recoveries have to be estimated for the
concentrating, smelting, and refining processes. Recoveries should be based on pilot plant
results or on recoveries obtained at mines with similar ores and processes.
Gross revenues are determined from the quantity of salable commodity produced multiplied by
a specified commodity price.
Basic Economic Parameters Used to Determine a Sequence of Phases
The first phase
In selecting the economic parameters governing the size of the first phase, the objective is to
establish a phase that contains sufficient ore reserves for about a five-year period. This interval
would correspond to the payback period and, therefore, it is important to locate the ore with
the highest net value during the initial mining sequence.
For example, to try to design the initial phase, an artificial cost of $0.50 per pound of copper
could be added or subtracted from the commodity price so that the ore cutoff would be raised
to 0.80% and only material above this cutoff would be classified as ore and generate funds to
pay for the removal of waste. The objective will be to generate a series of phases spaced
sufficiently apart for practical mining, commencing with an initial phase that roughly
corresponds to the payback period, followed by a series of progressively larger phases out to the
ultimate pit boundary. The variations in costs and the number of phases are determined by
combining judgment with a trial-and-error method.
Optimum cutoff grade strategy
The second step is the determination of the optimum cutoff grade strategy to be used from one
phase to the next, for a defined trial production rate.
Only cutoff grades equal to, or less than, the cutoff grade for a particular phase can be used for
determining the optimum cutoff grade. If an attempt is made to use a higher cutoff grade, the
physical shape of the phase will no longer be valid since the pit wall location depended on
revenues from a specified amount of ore that will no longer be available. That is, previous low
grade ore blocks will now be waste with negative revenues.
In the situation where low grade rock has to be removed from the pit to expose ore, a lower
cutoff grade can be used to determine if that low grade material should be processed. This
lower cutoff grade is called the internal cutoff grade and is determined by ignoring the mining
cost in the breakeven cutoff grade calculation.
Optimum cutoff grade strategy
The optimum cutoff grade will usually start at a somewhat higher level than the breakeven
cutoff grade and will be reduced in time to equal the internal breakeven cutoff grade. The higher
the production level, or for a marginal deposit. the less difference there will be between the
optimum and breakeven cutoff grades.
The optimum production level can be determined on a strictly economic basis, but with large
ore deposits, other constraints such as mining logistics, marketing, and financing will provide
limits.
The best strategy can be determined graphically by varying the production rate and cutoff grade
for a number of combinations.
Optimum production
the results from twelve strategies:
three production rates and four cutoff grade
alternatives. For example, if three pit phases
were determined using different breakeven
cutoff then the alternative cutoff grade
strategies could be:
Breakeven/Internal cut-off grades
Breakeven cut-off grades and Internal cut-off grades are defined as follows:
Breakeven cut-off grade is defined as the grade where revenue generated will exactly pay all
costs and give 0 profit. Internal cut-off grade is defined as the grade where revenue generated
will pay for all processing costs only. Material between the lower internal cut-off grade and the
higher breakeven cut-off grade will pay for all processing costs and part of the mining cost. The
idea behind the internal cut-off grade is that if you must mine block X to uncover higher grade
ore block Y below and block X has enough metal to pay for its processing costs and part of its
mining cost (say 60%), than you are better off sending block X to the processing plant rather
than the waste dump. The Lerch Grossman pit optimization program makes sure that the deeper
block Y has a sufficient profit to pay for the other 40% of the mining cost of block X in this
example.
Breakeven/Internal cut-off grades
Following are detailed numerical examples of breakeven cutoff grade and internal cutoff grade
calculations for both mill ore and leach ore.

Example 1: Leach ore

Mining cost = $0.75/tonne

Leaching cost = $0.10/tonne
SXEW cost =$0.16/lb cu
Selling costs = $0.04/lb cu
Recovery = 25%
Cu price = $0.85/lb cu
Breakeven/Internal cut-off grades
1. Breakeven cut-off grade is grade where revenue generated will exactly pay all costs and give 0
profit. Since SXEW costs and Selling costs are in units of $/lb we include these costs in the
revenue calculation by subtracting them from the copper price. Calculate breakeven cut-off
grade with the following formulas:
Profit/tonne = Revenue/tonne – Cost/tonne
0 = Revenue/tonne – Cost/tonne
Revenue/tonne = (Cu Price – SXEW cost – selling cost) * lbs cu/tonne * recovery
Cost/tonne ore = mining cost + leaching cost
Substitute numbers and solve for lbs cu/tonne:
0 = ((0.85 – 0.16 – 0.04) * lbs cu/tonne * 0.25) – (0.75 + 0.10)
lbs cu/tonne = 5.23
Convert 5.23 lbs cu/tonne to % cu:
(5.23/2204.6) * 100= 0.237% cu = breakeven cut-off grade for leach
Breakeven/Internal cut-off grades
2. Internal cut-off grade is grade where revenue generated will exactly pay processing costs only.
Since SXEW costs and Selling costs are in units of $/lb we include these costs in the revenue
calculation by subtracting them from the copper price. Calculate internal cut-off grade with the
same formulas but leave mining cost out this time:
Profit/tonne = Revenue/tonne – Cost/tonne
0 = Revenue/tonne – Cost/tonne
Revenue/tonne = (Cu Price – SXEW cost – selling cost) * lbs cu/tonne * recovery
Cost/tonne ore = leaching cost
Substitute numbers and solve for lbs cu/tonne:
0 = ((0.85 – 0.16 – 0.04) * lbs cu/tonne * .25) –0.10
lbs cu/tonne ore = 0.615
Convert 0.615 lbs cu/tonne to % cu:
(0.615/2204.6) * 100 = 0.028% cu =internal cut-off grade for leach