Whittle

Strategic Mine Planning 2008

Theory of Pit Optimisation

 Exploration

Project Corporate
Scoping Objectives
Principles of Strategic
Pit Mining
Software
Optimisation Sensitivity Risk
Analysis Analysis

Scheduling
 Overview

 Mine Planning
 What is Pit Optimisation?
 Optimisation Algorithms
 Slopes
 Block Value Calculation
 Commodity Price
 Whittle Concepts
 Block Model Dimensions
 Structure Arcs and Slopes
 Costs
 Generation of Pit Shells
 Ore Selection Method
 What is mine planning?

• Working out where, when, how and how

much to mine
• Iterative process
• Affected by corporate objectives, decision-
making behaviour of company
• Can reduce risk i.e. planning for change
creates robust pits that give you greater
ability to deal with fluctuating markets
 Mine planning can ...

Identify the feasible domain

Identify the most profitable plan under different constraints
Rapidly evaluate many different alternatives
Help evaluate a wide range of consequences

..be a key contributor to the strategic decision making process

 Types of mine planning studies

Reserve definition
Scoping study
Prefeasibility study
Feasibility study
BFS
One off question
Resource definition
Resources and Reserves –
The Traditional View

Ore Body Model Resources

Ultimate Pit Design

Reserves
Long-term Schedule

Cut-off Schedule

Short-term Schedule
JORC Code(2004) Resource & Reserve
JORC Code(2004) - Mineral Resource

Resources require economic evaluation!

 JORC Code(2004) - Ore Reserve

Reserves must be economically viable

Ore Reserve Development Stages

Data collection and geologic interpretation

Geological block model construction
Mining dilution incorporation
Pit optimisation
Pit scheduling
Final design
Final schedule
Tabulation of reserve estimates
 Mining Factors

Human Nature Interest Rates

Inflation

Economic Uncertainty Power

Costs Labour
Costs
Capital Commodity Contractor
Dynamic and Costs Prices Costs

constantly changing

Mother Nature

Jointing
Geological Uncertainty & Bedding
Lithology
Constantly changing
as more information Faults
is collected Mineralization
Limits & Types
Complex
 Geological uncertainty

Mineralisation limits
Mineralisation grades Constantly
Faults changing as
Jointing and bedding more
Lithology information
Hydrology is collected
Topography
 Economic uncertainty

Interest rates
Inflation
Dynamic
Power costs
and
Capital costs
constantly
Commodity prices
changing
Contractor costs
Labour costs
 Technical parameters

Slope angles
Tonnage & grade model
Dilution
Mining recovery
Milling recovery
Rock properties, continuity, & bulk density
Mining methods
Production Rates
 Economic parameters

Discount rate

Mining costs

Processing & overhead costs

Commodity price
What types of risk affect mine planning?

Resource (grade and tonnage)

Political

Environmental

Operational
How can we assess risk or confidence?

Discount rate of return

Test sensitivity of project to changes in inputs

Spider diagram (single variable)
Scenario analysis (multi-variable)
Position on cumulative (subjective) probability curve

Conditional Simulation of grade

 Spider Diagrams

Vary 1 parameter at a time +/- a set % and measure

against 1 output parameter
 Scenario Analysis
Re-evaluate the complete LOM (scenario) while varying 1 or
more parameters at once
Metallurgical recovery varied in this case which required cut off
grades, optimal pit, schedule and NPV to be recalculated
 Cumulative Probability Curve

For each parameter, determine the subjective probability

distribution
 Cumulative Probability Curve

Calculate the total probability of each combination by

multiplying all individual probabilities
 Cumulative Probability Curve

Graph the cumulative probabilities vs NPV (or the chosen

measure)
Cumulative Probability Smoothed
5x5x5 Data set
1 1
0.95875

0.9

0.8185
0.8

0.7

0.6
Probability

0.532
0.5

0.4

0.3

0.2 0.186

0.1

0.0395
0 0
0 5000000 10000000 15000000 20000000 25000000
NPV
 Strategies for dealing with uncertainty

Reduce the uncertainty - spend more money/time on

inputs

Reduce the impact of the uncertainty

Tolerate uncertainty and accept the risk –

determined by decision making behaviour
 Reducing the Impact

Contract mining

Price hedging

Strategic cutback selection

 What is Pit Optimisation?

Answers some of the questions - how big and where

to mine?

Maximises cash flow

Provides nested shells - mine schedule

– Where to start
– How to schedule to maximize NPV
Definition of Optimal Outline

AIR

WASTE

MINERAL

With fixed prices, costs and slopes:

the optimal outline is fixed
 What is Optimum?

Potential value
Extra value
improvement
NPV foregone

Strategy 1 Strategy 2
Selected
Pit size

Pit size
 NPV - The primary objective

(m) Tonnes Maximum NPV NPV (m)

500.0 120.0

450.0
Tonnage vs NPV 100.0
400.0

350.0
NPV 80.0
300.0
Tonnage
250.0 Possible push backs 60.0

200.0
40.0
150.0

100.0
20.0
50.0
Possible push backs

0.0 0.0
1 6 11 16 21 26 31 36
 A Simple Optimization Example

surface

1
2

3
4

5
bench level
100 tonnes waste 6

7
8
500 tonnes ore
 Pit Tonnages and Values

Tonnages

Pit 1 2 3 4 5 6 7 8

$2
Ore 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
-$1 Waste 100 400 900 1,600 2,500 3,600 4,900 6,400

Total 600 1,400 2,400 3,600 5,000 6,600 8,400 10,400

Values
Pit 1 2 3 4 5 6 7 8
Value 900 1,600 2,100 2,400 2,500 2,400 2,100 1,600
 Pit Values

$3,000

$2,500 4
5
6

3 7
$2,000
Pit Value

2 8
$1,500

$1,000 1

$500

$0
0 2,000 4,000 6,000 8,000 10,000 12,000

Pit Tonnes
 Project Sensitivity

$3,000

$2,500
B
Pit Value

$2,000

$1,500 A

$1,000

$500

$0
0 2,000 4,000 6,000 8,000 10,000 12,000

Pit Tonnes
 What Affects the Optimal Outline?

In general:

– If the price increases, the pit gets bigger

– If the costs increase, the pit gets smaller

– If the slopes increase, the pit gets deeper

 What Affects the Optimal Outline?

Price
Costs
Slopes

Fix these and

you Fix the
Optimal
Small Pit Larger Pit Outline!
Pit Size
 What is required ?

Prepared in GMP Physical Constraints

– Density – Pit Slopes
– Topography – Capacities
– Tonnes
– Grade (metal) Costs
– Rock Types – Mining
– [CAF (Cost Adjustment – Processing
Factors)] – Selling

Prices
 Optimisation Algorithms

Heuristics (searches)

Trial & Error

Floating Cone

Lerchs-Grossman
 Floating Cone Method

Position an inverted cone, with the required slopes, on each

block with a positive value

If the total value of all blocks in the cone is positive, “mine”

those blocks

Repeat these steps until no cone has a positive value

There are two problems – could mine too little or too much.
 Mining too little

Does not share

mining costs
Mining too much - start
Mining too much - first removal

Mines this in
error
 Three Dimensional L-G

Works with block values

Works with block mining precedences

Guarantees to find the three-dimensional outline with

the highest possible value
 NPV Maximization

Lerchs-Grossmann - maximizes undiscounted value only

To Maximize NPV  Need Pit Outline and Specific Schedule

Circular Problem:
1. To find Pit Outline and Schedule  Need to know NPV of the
individual blocks

2. To find NPV of blocks  Need to know which ones are included

and when they will be mined
 Traditional Whittle Technique

• Generate a set of nested pits, schedule and produce NPV

Steps:
1. Generate nested pits
2. Analyse pits and select pits
3. Produce a schedule and calculate NPV
4. Repeat for another combination of pits
5. Choose the schedule/pits which maximizes NPV
Slopes
 What is an ARC?

C
An arc is a relationship between
two blocks. An arc from block A to
block B indicates that, if A is to be
mined, then B must be mined to
expose A. The reverse is not true. B
If B is to be mined, block A may or
may not be mined. If A is mined
so is C
Used to control pit slopes A
 Arc Relationships

B If A is to be mined, B
must be mined to
expose A
Arc from
A to B The reverse is not true

If B is to be mined, A
may or may not be
A mined
 Arc Chaining

All slopes are translated

C into a large number of block
relationships
It is wrong to assume we
need an arc from each
B block to every block which
is “above” it

If A is mined This is because arcs can

so is C chain

A
 Slope accuracy depends on No. benches
used for arc generation
Benches

Desired Slope
 Slope Accuracy

Slope accuracy is controlled by number of

benches used in arc generation for a given block
size

Exact slope accuracy is very unlikely because only

whole blocks are mined
Demonstration of L-G Algorithm

A simple example
45 degree slopes
2-dimensions (merely to make it easier to
visualise)
Blocks are cubic
Principles are the same for 3-dimensions but
harder to show.
 Start

23. 23.
6.9
9 9

Start with a 2-dimensional model. Only 3 blocks contain ore

& have values as shown. All other blocks are waste and
have a value of –1.0
 Step 1

23. 23.
6.9
9 9

The 1st arc from a flagged block that we

find is to a block which is not flagged
 Step 2

23. 23.
6.9
9 9

22.9
To resolve this we link the two blocks together. The total value of the
two-block branch is 22.9, therefore both blocks are now flagged to be
mined.
 Step 3

23. 23.
6.9
9 9

20.9

We deal with the other two arcs from this block in the same way. The
total value of the four-block branch is 20.9
 Step 4

23. 23.
6.9
9 9

17.9 3.9 20.9

We continue in the same way along the bottom bench, and then
along the next bench
 Step 5

23. 23.
6.9
9 9

17.9 3.9 20.9

The next flagged block has an arc to a block which is also flagged.
We do not create a link for this arc or for the vertical one from the
same block, because nothing has to be resolved.
 Step 6

23. 23.
6.9
9 9

15.9 3.9 20.9

The next arc from a flagged to another flagged block is between two
branches. The procedure is unchanged – we do not insert a link
 Step 7

23. 23.
6.9
9 9

15.9 0.9 20.9

Continue adding links. The dotted link when added will change the
value of the branch to –0.1. All blocks in the model have their flags
turned off.
 Step 8

23. 23.
6.9
9 9

15.9 -0.1 20.9

The next arc of interest is from a flagged block to a block which is
part of a branch which is not flagged. Effectively, the centre and right
hand branches can co-operate in paying for the mining of the
common block
 Step 9

23. 23.
6.9
9 9

15.9 20.8

The Lerchs-Grossman includes a procedure for combining the two

linked branches into one branch, with only one total value. Note that
there is no requirement to always branch upwards from the root.
 Step 10

23. 23.
6.9
9 9

8.9 16.8

Lerchs-Grossman detects that the extra waste will remove the ability
of the centre branch to co-operate with the right hand branch in
paying for the mining of the circled block.
 Step 11

23. 23.
6.9
9 9

8.9 -0.1 15.9

Lerchs-Grossman includes a procedure for breaking the single

branch into two branches by removing a link
 Step 12

23. 23.
6.9
9 9

-0.1 -0.1 8.9

Continue adding links and eventually the total value of the left-hand
branch becomes negative. The next arc after this is again between a
positive and negative branch.
 Step 13

23. 23.
6.9
9 9

-0.1 8.8

This is dealt with in the same way as before, and the left and right-
hand branches are combined into one, with one total value.
 Step 14

23. 23.
6.9
9 9

-0.1 0.8

The L-G program scans for arcs from blocks which are flagged to
blocks which are not flagged. We can see that in this instance it will
find none and the optimization is complete
 Optimal Pit

23. 23.
6.9
9 9

The flagged blocks constitute the optimal pit. The ‘W’-shaped pit is
worth 0.8. The centre branch has a negative value so none of its
blocks are flagged and none are mined.
Block Value Calculation
 Block Value Calculations

Profit = Revenue - Costs

Value =
[ (Ore*Grade*Recovery* (Price-CostS))
- (Ore*CostP) ] - Rock*CostM)
Ore = ore tonnes
CostP = cost of processing
CostM = cost of mining
Rock = total tonnes
 In other words…

Block Value = Revenue - Costs

Revenues can be calculated from:
– Ore tonnages
– Grades
– Recoveries
– Product price
Costs can be calculated from:
– Mining cost
– Milling cost
– Overheads
 What is Value?

Which Truck is Worth the Most?

1. 50 tonnes of 2g/t Gold

2. 100 tonnes of 1 g/t Gold
3. 150 tonnes of 0.5% Copper & 0.25 g/t Gold
 50 tonnes of 2g/t Gold

= [(2 * 50 * 92.5% * $12.30/g ) - (50 * $15)] - (50 * $1.20)

Revenue Costs

[(1137.75) - (750)] - (60)

$327.75
 100 tonnes of 1 g/t Gold

[(1*100 * 92.5%* $12.30/g) - (100 * $15)]- (100 * $1.20)

Revenue Costs

[(1137.75) - (1500)]- (120)

-$242.25
 But wait!

If we just call this truck load waste

We only pay $120 to mine it.

We would be $122.25 better off
 150 Tonnes of 0.5% Copper & 0.25 g/t Gold

Revenue from gold Revenue from Copper

= [(0.25*150 * 50%* 12.30 + 0.5%*150 *75%*2094 )

- (150 * 8)]- (150 * 1.20)

Costs
[(230.625)+ (1177.875) - (1200) ]- (180)

1408.50- 1380

$28.50
 When does the truck go to the waste dump?

Whenever the cost of processing is higher than the

revenue, we should treat the truck load as waste

Value =
The Section in square
Brackets must => 0
[ (Ore*Grade*Recovery* Price) - (Ore*CostP) ] - Rock*CostM
 In other words…

The block will be mined regardless of the destination and

CostM will be incurred either way.

The decision of whether the truck is ore or waste (i.e. the cut
off grade) is made at the top of the pit.

The cut off grade is independent of mining cost – a marginal

cut off grade.
 The Marginal Situation

Ore * Grade * Recovery * Price  Ore * CostP

Revenue Cost

by transformation this becomes

Ore * CostP
Marginal Grade 
Ore * Recovery * Price
 Marginal Cut-off

CostP
Marginal Grade 
Recovery * Price

This marginal cut-off condition will change

whenever Processing costs, Recoveries or Prices
change!
 Summary

Block Value = Revenue - Costs

•Cut off grade is dependent on CostP,

metallurgical recovery and price.

•Cut off grade is independent of CostM

Commodity Price
What commodity price do we realize?

Profit = [ (Ore*Grade*Recovery* (Price-CostS))

- (Ore*CostP) ]
- (Rock*CostM)

Price - Selling Cost

Refining
Royalty
Insurance
Market
 Commodity Price

Predictions are often not right

"Wall Street indices predicted nine out of the last five
recessions ! "

- Paul A. Samuelson in Newsweek, Science and Stocks, 19

Sep. 1966.
 Commodity Price

Price most powerful influence on profit.

Future prices influenced by:
– Historic/Statistical (trend, cyclical, random).
– Forces driving change (in market analysis context).
Strategic responses:
– Forecast future prices.
– Plan to accommodate future uncertainty.
– Decision points, mine life considerations.
– Price control (hedging, become a price-setter).
Strategic Responses to Future Price Scenarios

Take into account future uncertainty (P50, P90).

Build decision points / options into your plan.

Reduce mine life (less exposure to long term trend)

Increase mine life (less exposure to price cycles)

Strategic Responses to Future Price Scenarios

Become a price controller:

– Consolidate
– Differentiate

Write long term supply contracts

Hedge:
– Options
– Forward Sales (fix nominal price)

Cost Positioning
Whittle Concepts
 Whittle Block Model (mod file)

Block line I J K No parcels MCAF PCAF tonnes

19 36 1 1 1.000 1.000 2160.
19 36 1 SULF 2160. 159. 769.
Parcel line I J K ROCK tonnes metal1 metal2
20 36 1 1 1.000 1.000 2160.
20 36 1 SULF 2160. 97. 305.
 Whittle Framework Origin

Gemcom

Medsystem

Datamine
Vulcan
Whittle (Block 1,1,1)
 Whittle vs GMP

Whittle works in IJK which is No blocks in x,y,z

Surpac works in N,E,RL which is co-ords in y,x,z
Whittle does not store grade – only contained metal
GMP has user blocks and (smaller) sub-blocks
Whittle has blocks and parcels
MCAF and PCAF and slope attached to blocks, ROCK and
grades attached to parcels
 What’s a “Parcel”?

Part of a block for which rocktype, tonnage, and metal

content are known
The total tonnage of the parcels may be the same or less
than the block tonnage
If the parcel tonnage is less than the block tonnage, the
remaining tonnage is undefined waste (unknown rocktype)
If a block has no parcels, the total tonnage of the block is
undefined waste
Neither the position of a parcel within a block, nor it’s shape
is defined UNLIKE sub-blocks in Surpac
 Parcels

C1
Ore A Tonnes A Metal A
Ore B Tonnes B Metal B A
C2
Ore C1 Tonnes C1 Metal
B
C1
Ore C2 Tonnes C2 Metal
C2 C3
Ore C3 Tonnes C3 Metal
C3
+
Profit = (Ore*Grade*Recovery*
Undefined Waste (Price-CostS)) - (Ore*CostP) ] - Rock*CostM)

Metal A Tonnes A Tonnes A

Metal B Tonnes B Tonnes B
Metal C1 Tonnes C1 Tonnes C1
Metal C2 Tonnes C2 Tonnes C2
Metal C3 Tonnes C3 Tonnes C3
+

Undefined
Waste
 Parcels

In the previous diagram, each parcel is evaluated separately

to determine destination
Each parcel within a block can go to a DIFFERENT
destination i.e. ore and waste in the same block
Parcel size is important for selective mining issues
Block Model Dimensions
Different Block Dimension for Different Purposes

Geology - outlining the orebody

Mining - calculating values

Sensitivity analysis - pit value vs. price

 Dimensions of a Block - Geology

• Often depends on method of interpolation

• 1/dn interpolation often results in small block size
• Kriged model often results in larger block size
 Dimensions of a Block - Mining

Minimum block size is SMU size (smallest mining unit)

– reblock geological blocks to SMU size (consider parcel size)

Equipment size
– minimum working space
– multiple SMU’s in equipment size block
– use template in Minimum Mining Width
 Dimensions of a Block - Sensitivity
Analysis

Geological model often contains millions of blocks

Coarser approximation of grade distribution (100,000

blocks) sufficient for sensitivity analysis
Framework Expansion – Easy to add blocks
in Whittle

Original Model
Extended topography
Sub-region boundaries

X offset
Additional waste blocks

Z offset

Expanded Model
 Adjusting Framework

Blocks that are added contained all of the information of

the last block in the mod file EXCEPT metal content
which is zero.
Possible to increase and decrease block size and
framework
Slopes and Structure Arcs
 Slopes

Rectangular regions (Whittle)

Rock codes (Mod file – Character attribute in Surpac)
Zone Numbers (Mod file – Integer attribute in Surpac)
Profile Number File (Text file containing I, J, K, Number)
One method – bearing and slope

Bearing Slope Angle

20 42
77 38
135 46
180 42
260 38
335 44
 If using bearing, be careful….

60

45 55
Constant Constant
Slope Slope

60

• Slope is defined at four azimuth points

• Between points the slope is interpolated • Slope is defined at six azimuth points
• Between differing points the slope is interpolated
• Between similar points the slope is constant
 Slope Bearings

It is very important to note that

bearings are given instead of wall
positions. Any walls at right angles
to the bearings, in a particular slope
region, will have the given slope
applied.

In the diagram, the slope

specified for a bearing of 45 degrees
would be used by the program in the
positions indicated by the arrows.
 Slope Considerations

Rule of thumb bench search for arc generation in each

sub-region
– (max(x,y) x 8) / z

Whittle uses overall slopes which need to include

allowance for the ramp
Mining Dilution and Mining Recovery
 Mining Dilution

Whittle defines dilution as extra waste taken to the mill

Ore tonnes are increased while metal is the same so
grade decreases.
For a dilution of 5% on 100t @ 2 g/t, the resulting ore is

100x1.05 t for 200g (grade = 200/105 g/t)

=105t @1.90g/t
 Mining Recovery

Whittle defines mining recovery as ore taken to the waste

dump
Ore tonnes and metal are decreased so that grade is the
same
For a recovery of 5% on 100t @ 2 g/t, the resulting ore is

100x0.95 t for 0.95x200g

=95t @2g/t
 Mining Recovery and Dilution

Dilution

ORE

Mining Recovery
(extraction loss)

MINING LIMIT
Profit =
[ (Ore*Grade*Recovery* (Price-CostS)) - (Ore*CostP) ] - Rock*CostM)

x Mining Recovery x Mining Recovery

x Dilution
Costs
 Calculating Costs

Types of Costs Units

Mining cost $/tonne mined
Processing cost $/tonne processed
Selling costs $/unit of product

Some time costs must also be included

 Block Value - Rule 1

The value must be calculated on the assumption that

the block has already been uncovered

– Make no allowance for stripping

 Block Value - Rule 2

The value must be calculated on the

assumption that the block will be mined

– If block contains some ore that can be profitably

processed it should be included in the value of the block
- even if total value of block is negative.
 Block Value - Rule 3

Any expenditure that would stop if mining stopped

must be included in the cost of mining, processing
or selling.

– The converse is also true

 Block Value – Rule 4

No bias. Loading any cost estimate just to be

conservative must be avoided

– Use sensitivity runs to determine the impact of

cost variations.
– If you use bias you will end up with a smaller pit
and a lower NPV.
 The Block Value Formula

VALUE = (METAL x RECOVERY x PRICE – ORE x COSTP) – ROCK x COSTM

METAL = units of product eg ore tonnes x grade

RECOVERY = Proportion of metal recovered from processing
PRICE = the price per unit of product sold
ORE = tonnes of ore in a parcel
COSTP = the extra cost of mining a parcel as ore and processing it
ROCK = total amount of rock (ore and waste) in a block
COSTM = the cost of mining a tonne of waste
Why Time Costs Must be Included

When Whittle adds a block

to the pit outline, it
effectively extends the life
of the mine.

Any extra costs which

result from extending the
life of the mine must be
paid for.
 Sharing Time Related Costs

How costs are shared will depend on whether

production is limited by:

– Mining

– Processing, or

– Marketing
 Reference Block

Reference Block :
•Used to calculate CAFs
•Represents the base case
scenario for mining
•Typically positioned at the
top of the pit
•Does not have to
physically exist
Reference Block and Positional Cost Adjustment
Factors

Positional Cost Adjustment

Factor:
•Increased mining cost
with depth
•Variable mining cost for
ore and waste (equipment)
•Variable processing costs
•Applied either in Whittle or Profit =
[ (Ore*Grade*Recovery* (Price-CostS))
GMP
- (Ore*CostP) ] - Rock*CostM)
x PCAF x MCAF
 Positional CAF’s
How much $ to mine the facility?

• Firstwe must determine the

location of the facility in Whittle
blocks
• Link all those blocks to a key
block Facility

• We can then assign a MCAF to

the key block which when
multiplied by appropriate mining
cost will represent the cost to
Proposed Pit Outline
move the facility
• The optimization and analysis
are run, and the results determine
if we move the facility
Generation Of Pit Shells
 Revenue Factors

A simple way of scaling values to provide a range of pit

shells which are optimal for different prices

If the base price (RF=1) of gold is $800/oz

RF = 0.5 has a gold price of $400/0z

RF = 2.0 has a gold price of $1600/oz

 Parametric Pit Shells
Inner pit shells show where
it is best to begin mining

Intermediate pit shells

show possible practical
cutbacks

Pits near RF of 1 are

used for sensitivity and
risk analysis
Higher RF pit shells show
Plan possible future expansions
 Deriving Nested Pit Shells

• A range of revenue factors

yields nested shells
• A revenue factor of 1
corresponds to the
commodity price in the
parameter file

Revenue =
[ (Ore*Grade*Recovery* (Price-CostS)) - (Ore*CostP) ] -
(Rock*CostM) x Revenue Factor
 Mining Direction

This technique is based on the use of user-defined

expressions in Whittle, to drive Revenue Factor Pit
Parameterization in a different way.

Rather than generating pits on the basis of a changing

price/cost ratio (the normal Revenue Factor approach),
this technique includes increasingly more ore blocks in
the optimization for each increment of a factor that relates
to the distance from the block to an origin position.
Mining Direction

DST(x,y,z,0,0,z)/DST(0,0,0,mx,my,0)
Mining Direction

Standard pit optimization showing "onion skin" type shell Same final pit, but with a Mining Direction
applied (From South East Radial)
Ore Selection Methods
 Ore Selection Methods

Two main methods are cut-off or cashflow

In simple situations they will give the same result.
If expressions using cut off grade variables are included
then MUST use cashflow
 Ore Selection Methods

Ore selection by Cut-off:

– Selection is done by comparing the grades of the material with pre-
calculated processing cut-offs.
– If it does not satisfy the cut-offs, it is treated as waste.

Ore selection by cash flow:

– Selection is done by comparing the cash flow which would be produced
by processing it and the cash flow which would be produced by mining it
as waste.
– If the cash flow from processing it is higher, the material is treated as ore.
If not, it is treated as waste.
Ore Selection by Cut Off – Single Element

CUT–OFF = PROCESSING COST/RECOVERY *

PRICE

Often used since the cut-off grade is printed in

the report.
BEWARE – the reported cut-off grade is only
valid for blocks with PCAF=1
The cut-off grade is different for every block with
a different PCAF.
Ore Selection by Cut Off – Single Element
 Ore Selection by Cut Off – Multiple Elements

If the sum of the grades divided by the corresponding cut-

offs is greater than one, then the material is processed.
 Ore Selection by Cash Flow

Profit =
[ (Ore*Grade*Recovery* (Price-CostS) - (Ore*CostP) ]
- Rock*CostM)

If in doubt, use cashflow.

Summary
 Input

Finance Mining
• Commodity Price(s) •Costs
• Discount Rate •Ore Selection
• Corporate Objectives •Dilution & Recovery

Economic
Model Geotech
•Slope Stability
Metallurgy
•Recovery Geology
•Costs •Tonnes
•Processing Rates •Grade
•Cut-off Grades •Rocktypes
The planning process using optimisation

Make assumptions - view(s) Set constraints

– Market conditions
– Ore body
characteristics(geology)
– Geo-technical issues
– Operating cost levels
– Operation efficiency,
recoveries, productivity
– Capital limits
– Environmental issues
– Social issues
– Employee issues
– Timing issues
– Land rights

Perform the optimization

Evaluate the result(s)
Repeat
 Events which warrant a review of the
Strategic Mine Plan

• Change in product price/demand

• Change in hedging practice
• Change in operating costs
• Change in interest rates
• Change in technology options
• Change in corporate strategy/objectives
• New information on ore body
• Change in constraints (political, economic, social,
etc.)