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Stochastic Optimization Models for Open Pit Mine Planning:

Applications and risk analysis

for Open Pit Mine Planning: Applications and risk analysis Andre Leite COSMO – Stochastic Mine Planning

Andre Leite

COSMO – Stochastic Mine Planning Laboratory Department of Mining and Materials Engineering

Introduction

Outline

Models for optimisation

Stochastic integer programming (SIP) model

Case study at a disseminated copper deposit

Conclusions

Introduction

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

The value of a stochastic solution

300 250 200 150 100 50 Max. Conventional Sched. Min. Conventional Sched. E-Type Conventional Sched.
300
250
200
150
100
50
Max. Conventional Sched.
Min. Conventional Sched.
E-Type Conventional Sched.
Conventional Sched.
Max Stochastic Sched.
Min. Stochastic Schedule
Stochastic Sched.
0
NPV M

26%

0123456789

Period (years)

Leite and Dimitrakopoulos, 2007

Introduction

The reason for the difference

The traditional “optimum scheduling methods” are 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

Introduction

The reasons for the difference

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

Goal and objectives

Goal

To test, quantify the value and improve the understanding of a stochastic scheduler founded on stochastic integer programming

Goal and objectives

Objectives

Application of a scheduler based on a stochastic integer programming formulation

Analyse results, compare methods and recommend future work

Models for Optimisation

Mathematical formulation

An objective function

Max z OR Min z where z = ƒ(x 1 , x 2 …., x n ) Subject to a set of constraints

Models for Optimisation

Integer Programming

An objective function

Maximise

Subject to

(c 1 x 1 1 +c 2 x 2 1 +…. ) …

c 1 x 1 1 +c 2 x 2 1 +…. = b 1

… c 1 x 1 1 +c 2 x 2 1 +…. = b 1 c

c 1 x 1 p +c 2 x 2 p +…. = b p

Orebody model c 1 c 2 c 3 c 4
Orebody model
c 1
c 2
c 3
c 4

c n = constant X n p = binary variable

Period 1

Period p

Stochastic Integer Programming

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

1 1 x 1 1 +c 2 1 x 2 1 +…. = b 1 c

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

1 r x 1 p +c 2 r x 2 p +…. = b p Period
1 r x 1 p +c 2 r x 2 p +…. = b p Period

Period 1

Period p

c 1 1 c 2 1 C 3 1 c 1 2 s 4 1
c 1 1
c 2 1
C 3 1
c 1 2
s
4 1 c 2 2
c 3 3
s 4 1
c 1 3
c 2 3
c 3 3
s 4 1
c
1 n
c 2 n
c 3 n
c 4 1

SIP - Production Scheduling Model

Objective function

Max

p

N

∑∑

t

=

1

i =

1

Ε

{(

NPV

)}

t

i

b

t

i

p

m

∑ ∑

t

=

1

s =

1

(

c d

u

ty

ty

su

+

ty

c q

l

ty

sl

)

⎣ p m ∑ ∑ t = 1 s = 1 ( c d u ty
⎣ p m ∑ ∑ t = 1 s = 1 ( c d u ty

Mill & dump

Risk management

SIP – geological discount rate

p m ⎡ ⎤ 0 y c ty ∑ ∑ ( ty ty ty )
p
m
0 y
c
ty
∑ ∑
(
ty
ty
ty
)
c d
+
c q
ty
u
c =
u
su
l
sl
u
(
) t
t
=
1
s =
1
1 + d
0 y
c
ty
l
Risk Management
c =
l
(
1 + d
) t

Deviation from production targets c ty u and c ty l penalized by d ty and d ty rl for each simulation s

ru

SIP – Penalties

p

N

∑∑

t

=

1

i =

1

Ε

{(

NPV

)}

t

i

b

t

i

t = 1 i = 1 Ε { ( NPV ) } t i ∗ b

Total NPV r = economic discount rate

Ε

{(

NPV

)}

t

i

=

Ε

{(

EV

i

0

)}

(1

+

r )

t

p

m

∑ ∑

t

=

1

s =

1

(

c d

u

ty

ty

su

+

ty

c q

l

ty

sl

)

t = 1 s = 1 ( c d u ty ty su + ty c

Risk Management d = geological discount rate

ty

c =

u

c

0 y

u

(

1 + d

) t

SIP – a stochastic definition of ore

E

{

V i

}

=

NR

i

MC

i

MC

i

PC

PC

i

i

, if

, if

NR

NR

i

>

i

PC

NR = T G rec (Price Selling cost)

i

i

i

PC

i

; block i is ore

i

; block i is waste

A probability cut-off (p) is also utilized to classify a block as ore

{

if Prob G

i

g

cut off

}

else, block i is waste

p , block i is ore

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

Conditional simulations

Generates equally probable scenarios of the deposit

1
1

2

Conditional simulations Generates equally probable scenarios of the deposit 1 2 … n
Conditional simulations Generates equally probable scenarios of the deposit 1 2 … n

n

Conditional simulations Generates equally probable scenarios of the deposit 1 2 … n

Final pit and push-back definition

An average type deposit is used to defined a final pit and a set of nested pits

Final pit and push-back definition An average type deposit is used to defined a final pit

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 Block dimensions (m) Processing input capacity (PC) Total mining capacity (TC)

Economic discount rate

15,391

20 x 20 x 10 7.5 Mtpa 28 Mtpa

10 %

Cost of shortage in ore production Cost of excess ore production Cut-off

Number of simulated orebody models

10,000 /t 1,000 /t 0.3% Cu

20

Ore production risk profiles

ORE RISK PROFILE 20% probability cut-off

9 8 7 6 5 4 min 3 average 2 max 1 0 Ore (Mxtonne)
9
8
7
6
5
4
min
3
average
2
max
1
0
Ore (Mxtonne)

012345678

Production period (year)

Waste production risk profiles

WASTE RISK PROFILE 20% probability cut-off

25 20 15 10 min average 5 max 0 Waste (Mxtonne)
25
20
15
10
min
average
5
max
0
Waste (Mxtonne)

012345678

Production period (year)

NPV risk profiles

Cumulative NPV - Risk Profile 20% probability cut-off

600 500 400 300 200 min average 100 max - NPV (MxUS$)
600
500
400
300
200
min
average
100
max
-
NPV (MxUS$)

012345678

Production period (year)

Risk analysis - conventional schedule

9 8 7 6 5 4 Maximum Minimum Expected 3 Conventional schedule 2 0 2
9
8
7
6
5
4
Maximum
Minimum
Expected
3
Conventional schedule
2
0
2
4
6
8
10
Ore M x tonnes

Period

The SIP value

29%
29%

The rule of geological discount rate

ORE RISK PROFILE 20% probability cut-off

9 8 7 6 5 4 min 3 average 2 max 1 0 Ore (Mxtonne)
9
8
7
6
5
4
min
3
average
2
max
1
0
Ore (Mxtonne)

012345678

Production period (year)

ORE RISK PROFILE 20%probability cut-off 30%geological discount rate

9 8 7 6 5 4 min 3 average 2 max 1 0 Ore (tonne)
9
8
7
6
5
4
min
3
average
2
max
1
0
Ore (tonne)

012345678

Production period (year)

The rule of probability cut-off

ORE RISK PROFILE 20% probability cut-off

9 8 7 6 5 4 min 3 average 2 max 1 0 Ore (Mxtonne)
9
8
7
6
5
4
min
3
average
2
max
1
0
Ore (Mxtonne)

012345678

Production period (year)

ORE RISK PROFILE 35% probability cut-off

9 8 7 6 5 4 min 3 2 average 1 max 0 Ore (Mxtonne)
9
8
7
6
5
4
min
3
2
average
1
max
0
Ore (Mxtonne)

012345678

Production period (year)

The rule of probability cut-off

WASTE RISK PROFILE 20% probability cut-off

25 20 15 10 min average 5 max 0 Waste (Mxtonne)
25
20
15
10
min
average
5
max
0
Waste (Mxtonne)

012345678

Production period (year)

WASTE RISK PROFILE 35% probability cut-off

25 20 15 10 min average 5 max 0 Waste (Mxtonne)
25
20
15
10
min
average
5
max
0
Waste (Mxtonne)

012345678

Production period (year)

The rule of probability cut-off

WASTE RISK PROFILE 20% probability cut-off

25 20 15 10 min average 5 max 0 Waste (Mxtonne)
25
20
15
10
min
average
5
max
0
Waste (Mxtonne)

012345678

Production period (year)

WASTE RISK PROFILE 35% probability cut-off

25 20 15 10 min average 5 max 0 Waste (Mxtonne)
25
20
15
10
min
average
5
max
0
Waste (Mxtonne)

012345678

Production period (year)

Cross-Sectional Views of the Schedules

20% Probability cut-off 20% geological discount rate

35% Probability cut-off 20% geological discount rate
35% Probability cut-off
20% geological discount rate
discount rate 35% Probability cut-off 20% geological discount rate 20% Probability cut-off 30% geological discount rate

20% Probability cut-off 30% geological discount rate

discount rate 35% Probability cut-off 20% geological discount rate 20% Probability cut-off 30% 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