OPEN PIT MINING : MINE PLANNING & DESIGN: FOCUS ON SURFACE

MINING TECHNOLOGY: LECTURE 2

Course objectives: to bring together aspects of planning & design for mining
highlighting the respective influence on the decision making process. Familialisation
with optimisation of planning & design and its base on net present capital values.

Organisational Structures

Definitions

Science: process of rationally and methodically seeking to understand nature. The

principal objective being: developing a predictive or problem solving capability

Engineering: involves the manipulation of nature to create systems for the benefit of at
least some segment of mankind

Decision: an irrevocable allocation of resources. The selection of design parameters for

an engineering system such as a computer of automobile constitutes an allocation of
resources. Design is a decision-making process and the selection of design parameters
represents decisions

To make decisions there are:

 Options
 Expectations for each option
 Placement of values on each option

This should result in selection of the most desired option

n.b. all decisions are made under conditions of uncertainty. i.e. outcomes cannot be
precisely determined in advance

Technology: ability to make good engineering decisions and to carry them through to
their desired conclusions

Example:

Beans in jar
Issue of option space (+ve integers)

Choosing option space for most engineering systems is complex. There are two tasks:

 Design synthesis
 Parameterization
Design synthesis: broad configuration of possibilities
Parameterization: parameter alternatives

Model for beans in jar:

n = Vj/Vb f , Vb = 4/2*Пrb3 , f= packing factor

Models reduce uncertainty for decision-making

Effects of design consideration of option space:

Consider 2 parallel hafts. One being driven and the other the driver through gears to turn
at ½ the speed of the driving shaft

Options:
 Number of teeth on driving gear
 Tooth design (straight, helical etc)
 Thickness of gears
 Driving gear material
 Driven gear material
 Method of attachment of driving gear to shaft
 Method of attachment of driven gear to shaft

Consider driving gears for 20 to 50 teeth (31 option)

Consider 2 standard tooth designs each of 5 materials for driving and driven gears (25
combinations)
3 possible attachments for each gear (9 possibilities)
Gear thickness could vary continuously over some range – an infinite possibility- narrow
to 10 discrete possibilities

The option space is now 139 500 possible design combinations

(31 x 2 x 25 x 9 x 10)

It is normal to consider limited designs i.e. a sub optimal position

Planning: is analytical process which involves the assessment of future, determination

of desired objectives in the context of that future, development of alternative courses of
action to achieve such objectives and selection of a course of action from among these
alternatives.

Important points are:

 Planning is a process i.e. it is dynamic ongoing effort on the part of the

organisation and its members

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  Idea that planning is future directed with intent focused on determining the
appropriate objectives of an organisation within the context of possible significant
changes in organisation’s operating environment
 Planning is flexible, requires planners to anticipate variety of possible scenarios
and develop alternative courses of action to deal with these scenarios and
depending upon environmental opportunities and threats likely to be encountered
select appropriate course of action that can most effectively address organisation’s
concerns

(place all this in its proper perspective)

Overview of planning & design on Mines with emphasis on Zimbabwean

experiences:

Stories Golden Shaft: Impact of unrelated discrete decisions on the mine and eventual
merger with Mazoe Mine

Gladstone Mine: as for Stories Golden Shaft – merger with Arcturus Mine

Patchway Mine: design shortcomings on mine access. Multiple shaft hoisting and
multi-level tramming on hoisting system. Effect of related manning levels. Remedial
work carried out on material handling. Space handling and impromptu decision on D-
shaft. Eventual merger with Golden Valley Mine

Brompton Mine: Short-term nature of decision making process-paucity of information.

Influence of large company’s manner of doing business – compare to small worker

Renco Mine: Effect of low overall productivity per man-hour. Need for decision based
on capacity of deposit, equipment & people. Huge potential of deposit and area.
Comparison with Renstrom Mine in Sweden (equivalent annual tonnages)

Dalny & Venice Mines: Discrete as opposed to continual approach on decisions and
their inter relationships

Shangani Mine: Initial work on decline following open pit.

BHP Hartley: Influence of worldwide events, politics and possibility of arbitrage

(taxation). Compare with Northam Platinum on hydropower.

Dyke Chrome operations: failure

Emeralds: problems

Buchwa: location

Freda Rebecca: problems with mechanized equipment

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Chiquicamata: massive failure of pit wall

Some success stories: there are many e.g.

Gaths Mine: introduction of false footwall, note also the work now being done on the
dumps albeit the previous acceptance of them

Shabanie: changing the mill from open to covered process under negative pressure in
the mill

Ngezi/Mimosa: introduction of mechanisation

Principles of Mine Planning and Design

Principles of Planning & Design

These are based on:

 Geography
 Legal status of land & mineral rights
 Historical, political & sociological factors
 Geology

Items to consider include:

1. available market & geographical location convenience

2. Geometry of deposit & depth
3. bench scale tests of mineralized core (indicate if acceptable concentrations can be
achieved)

Principles can be considered to include:

1. size of deposit e.g.

2. shape of deposit (regular, tabular)
items 1 & 2 relate to mining conditions

3. ore treatment requirements

4. location (city, environment, densely populated, industrial area, complaints,
destruction of natural resources (impacts), scar of open pits, rejected waste
treatment, pollution of streams & ground water, atmospheric pollution (gas &
dust), etc)
5. products
o 60-65% of western production from surface ops
 4 commodities make up 85% of this production being:
 hard coal
 crushed stone

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  copper ore
 iron ore
6. economics (costs), n.b. 1/100 of discovered deposits become successful
operations
7. closure costs
8. social
9. productivity
10. available information on the deposit (geology)
11. feasibility study

Note:
 purpose of mining is to produce metal or mineral as cheaply as possible
 ore - material that can be extracted from the ground at a profit today. This
depends on:
 geological circumstances
 availability of appropriate technology
 suitable market

feasibility study – (evaluation to determine if profitable mining of deposit is possible),

involves:

1. O/R (grades & tonnage)

2. calculation of metal tonnages
3. estimation or forecast of metal prices
4. determination of life of mine
5. preparation of preliminary production schedule throughout life of mine
6. schedule of capital and operating costs together with gross annual returns over life
of mine
7. preparation of net present cash flow calculations for project & testing e.g. DCF
8. comparison of different projects & strategies

Aspects of feasibility studies:

 political
 social
 legal
 geographical
 topographical
geographical & topographical to include, topography, ground conditions, water
aspects, weather & seasonal variations e.g. 1 in 100-year floods, 1 in 1000-year
floods
 slope stability
 cost of mining & stripping

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  location of waste dumps
 tailings disposal
 impact of footprint
 dewatering system
 tailings stability
 surface mining in rainy season, winter for cold areas, etc

Preliminary evaluation of mineral deposits – principles

 geography
 geology
 mining conditions
 ore treatment
 economic analysis
 legal status
 historical, political & sociological factors

the following are dynamic with available information:

 capacity
 unit costs
 final limits

they are also dependent on assumptions about methods, equipment and production
schedule.

note: evaluation is an iterative process

Incline Planning & design

 Influence of road maintenance

 Ventilation requirements
 Reduction in safety - poor roads
 Reduction in speed - “
 Higher fuel consumption - “
 Increased ventilation requirements - “
 (Parallel incline e.g. Kamoto Mine, DRC)
 Cost of parallel incline equates to 60% of 1st incline
 Traffic problems minimized
 Queues
 Head on meetings
 Varying speeds
 Improved ventilation

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Inclined drift has optimum gradient determined by:

 Production requirements
 Development requirements
 Operating costs
Additive effect of higher operating costs per hour & lower production as gradient
increases, optimum usually 8%-10%)

Open Pit Mining

Principles of Mine Planning & design

 Recovery
 Grade control
 Economics (costs)
 Flexibility of operation
 Safety
 Environment (work & effects on environment)
 Social
 Foot print

The various factors that influence the design are dependent on the capacity of the deposit
represented by:
 Assay results
 Geology
 Extent of ore reserves
 Topography
 Mining equipment
 Economic factors of operating costs
 Capital requirements
 Profit
 Types of ore
 Pit limits
 Cut-off grades
 Stripping ratios
 Rate of production
 Pit slopes
 Bench heights
 Road grades
 Ore metallurgical characteristics
 Hydrological conditions
 Property lines
 Marketing considerations

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Key elements for open-pit design
 Stripping ratio
 Pit slope angle
 Cut-off grade

Key elements for Underground Mining

 System operating costs - mining, milling, H/O charges, marketing. Related to
receivable value by the cut-off grade

Determination of Pit limits

Use vertical sections to approximate and fix limits in the design. Horizontal sections and
plans used to optimize the pit design (long ore-bodies rely on vertical sections)

Production Engineering:
 Solution of day to day production issues
 Short term planning

Drilling and Blasting Design

 Physical properties of rock and ore

 Types of equipment available or under consideration
 Types of blasting material

Each item has a relationship to the value determine for each option & therefore each
expected outcome.

Selection of the number and capacity of equipment is depended upon:

 Pit design/mine design
 Production rate
 Desired flexibility

The actual design is defined and limited by, slopes, rock and ore characteristics, water
conditions, cut-off grade etc.

The production rate is defined and limited by market conditions.

The size and number of machines are indirectly proportional i.e. in general terms,
capacity increase relates to a decrease in the number of pieces of equipment.

Bench height:
Is determined by:
 Vertical distribution of ore
 Production requirements and therefore equipment sizing

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  Existing equipment and availability of new equipment
 Other factors

This can be shown as follows:

a) In an irregular orebody, various bench heights are compared to obtain
optimum
b) To meet production requirements, the bench height is depended on the
equipment
c) Consideration of future against the current position may be necessary taking
into account that there tend to be increased savings with higher bench heights
d) Other factors can assume greater importance such as, safety (scaling),
remaining bench, shape of the broken pile and weather

Haul road design

Truck haulage (ore and waste) determinant in open pit mining

Larger operations - trucks are 100t or more
(electric wheel drive – inclination 8% on inner curve)

Smaller trucks – tend to have mechanized drive, gradient up to 10%

Feasibility Studies

Required due to:

 Scale of operations
 Scale of investments before production commences
 Time scale before production commences, exploration e.t.c
 Uncertain factors e.g. prices

Nature of decisions required:

 Commencement of exploration
 Decision to commence construction
 Increase in throughput
 Investment in new equipment

Aim:
 Consider consequences of different options
 Find the best option
 Describe in greater detail the feasibility, or profitability
 Provide recommendation for decision

Type of feasibility study and degree of certainty:

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  Pre-feasibility – at early stages of project. Uncertainty of the order of ±30%. To
obtain base for decision on more detailed study

Feasibility study:
 Base for preliminary decision to realise project. Uncertainty ±20%

Definitive estimate:
 Uncertainty ± 10%. Provides base for final decision for project go ahead

Detailed engineering study:

 Base for detailed layouts in the mine or plant. Base for negotiations with
contractors, consumers. Degree of certainty reduced to ±5%

Procedure:

Determine ore reserve:

 Optimize ultimate depth
 Determine cut-off depths
 Determine ore recoveries

Determine annual production rates, taking into account: market; size of ore reserve;
capacity restrictions; investment requirement of plant; mine and infrastructure, labour
requirements; costs and revenues

Determine mining method

Determine hoisting and haulage method

Optimize mine layout e.g. optimal location of haulages system; optimisation of the
number of ore passes; location of shafts; dumps and processing plant

Optimisation of ore processing: e.g. best method, how much should be outsourced etc.

Optimisation of transportation: e.g. alternatives between rail, highway and water

transportation

Consider use of contractors and leased equipment against owner owned or operated.

Other issues to consider are due diligence studies and acceptance of studies as bankable
projects.

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TUTORIAL EXAMPLES.

Example 1.

An ore body amenable to open pit mining contains Cu – ore with a small amount of gold
(0.25g/t ore) and silver (5.0g/t ore)

Ore reserve calculation show the following:

MINERALISATION INSIDE FINAL PIT

Million tonnes %Cu
50 1.20
50 1.00
50 0.80
50 0.70
50 0.60
50 0.50
50 0.45
50 0.35
50 0.25
50 0.15
TOTAL 500 0.60

There is 400Mt waste and overburden inside the final pit limits.

Mine capacity, ore 25 200 tpd

Concentrating capacity, ore 21 000 tpd
Recovery 88%

Head grade = average grade of blocks above cut-off grade

Working days per year:

 Open pit 300 days
 Concentrating plant 360 days
 Shifts per day 3
 Hours per day 8

Mining cost/tonne material $21 700.00

Concentrating cost/tonne ore $77 500.00
Smelting, refining and marketing (SRM)
Costs per tonne metal $17.05 million
Metal price per tonne Cu $48.05 million
By – products per tonne Cu:
 Gold $13.95 million

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  Silver $6.20 million

1.0 Assume cost given and calculate:

(a) Break-even cut-off grade at a stripping ratio of 1.5:1

(b) Marginal cut-off grade

2.0 (a) Use the calculated cut-off grade for 1(a)

(b) Assume a cut-off grade of 0.50% Cu

Assume an even feed to the concentrating plant and calculate for (a) and (b)
respectively:

 Overall stripping ratio

 Head grade
 Marginal stripping ratio
 Daily production of ore and waste
 Annual production of copper metal
 Mine life.

SOLUTION

Break-even cut-off grade Mining cost/t ore + concentrating cost per tonne ore
=
(Metal price per tonne – SRM costs per tonne metal) x
recovery

Mining cost per tonne ore = Mining cost per tonne material x (1 +
stripping ratio)
Mining cost per tonne ore = $54 250
($21 700(1+1.5)
Concentrating cost per tonne ore = $77 500
Metal price per tonne = $68.2 million
SRM costs per tonne metal = $17.05 million
Recovery = 88%

Break-even cut-off grade 54 250 + 77 500

=
(68.2 million – 17.05 million) x 0.88
= 0.29%
Say = 0.3%

Marginal cut-off grade = Concentrating cost per tonne ore

(Metal price per tonne – SRM costs per tonne metal) x
recovery

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 = 77500 = 0.17%
(68.2 million – 17.05 million) x 0.88

SOLUTION TO 2.0

Overall stripping ratio = Tonnes material –total tonnes ore

Total tonnes ore

a) b)
Total tonnes material 900 900
Total tonnes ore 400 300

Overall stripping ratio:

a) 900-400 = 1.25:1
400

b) 900-300 = 2:1
300

Head grade = average grade of blocks above cut-off grade. N.b. all blocks are the same
size. Therefore, average grade is the same as the arithmetic mean.

a) (1.2 +1.0+0.8+0.7+0.6+0.5+0.45+0.35) divided by 8 = 0.70%

b) (1. 2 +1.0+0.8+0.7+0.6+0.5) divided by 6 = 0.80%

Daily production rate ore:

a) 25 200 tonnes
b) 25 200 tonnes

Daily production waste:

= (Daily production rate ore) x (overall stripping ratio)
a) = 25 200 x 1.25 = 31 500 tonnes
b) = 25 200 x2.00 = 50 400 tonnes

Annual production of copper metal = (Daily ore production) x (Head grade) x (Working
days per year) x Recovery =

c) = 25 200 x 0.007 x 300 x 0.88 = 46 570 tonnes

d) = 25 200 x 0.008 x 300 x 0.88 = 53 222 tonnes

Mine life = Mineable ore reserves

Annual ore production

Mineable ore reserves = all ore tonnages above or equal to cut-off grade

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 a) = 400 Mt
b) = 300Mt

Annual ore production = Daily ore production x working days per year

a) 25 200 x 300 = 7.56Mt

b) 25200 x 300 = 7.56Mt

Mine life =
a) 400 million = 52.9 years
7.56 million

b) 300 million = 39.7 years

7.56 million

Marginal stripping ratio = Recoverable value/tonne ore – production cost/ tonne ore
Stripping cost/tonne waste

Where, recoverable value/tonne ore = head grade x recovery x metal price

a) = 0.007 x 0.88 x $48.05 million = $295 988.00

b) = 0.008 x 0.88 x $48.05 million = $338 272.00

Production cost per tonne ore

= Mining cost/tonne ore + concentrating cost/tonne ore + SRM cost/tonne ore

Mining cost/tonne ore = mining cost per tonne material x (1 +stripping ratio)

SRM costs per tonne ore = head grade x recovery x SRM costs/tonne metal

a) $21 700(1+1.25)+$77 500+0.007x0.88x$17.05 million = $231 353

b) $21 700(1+2)+$77 500+0.008x0.88x$17.05 million = $262 632

Stripping cost per tonne waste = $21 700.00

Thus marginal stripping ratio:
a) 295 988 –231 353 = 2.97:1
21700
b) 338 272 – 262 632 = 3.48:1
21700

Example No 2

Cut-off grade in a copper deposit

Consider the deposit shown below. The copper content varies in different blocks,
ranging from less than 0.25% Cu to over 2.5% Cu. The depiction can be a section of a

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horizontal deposit suitable for surface mining or a plan/section through a deposit to be
mined underground. It is assumed that any part of deposit can be mined independently of
the adjoining parts. There are 30 blocks or areas in the deposit, each with 1Mt of ore.

Copper deposit with varying copper contents, %Cu

0.6 0.6 0.9 0.3 1.0 0.5 0.3 0.7 0.5 0.4
0.6 0.7 0.8 0.3 0.6 0.9 1.5 1.9
1.5 2.0 1.8 2.6 2.0 2.6
2.5 2.5 2.0 2.6
2.5 2.5

The profitability study shows the following:

Average copper content: 1.34%

Mining cost: $12 000/t
Processing cost; $24 000/t of ore
Smelting cost: $3.6 million/t of refined copper
Refining cost; $1.5 million/t of refined copper
Recovery: 90%
Fixed investment: $1.2 trillion
Copper price: $12 million/t of refined copper

How large a part of this deposit is it worth mining?

What is the total profit/loss if the whole deposit is mined?
What is the cut off grade? How much will the profit increase by using the right
cut off grade?

Solution:

If one mined out all parts, the total profit will be:
$1.42trillion-$1.2Trillion = $220Billion where, $1.42 trillion is given by:
(1.34% Cu x 90% x ($12 million - $3.6 million -$1.5 million) - $24 000 - $12 000) x
30Mt

It is thus profitable to start this mine.

But to avoid mining those parts not worth mining, the cut-off grade must be found. It
will be 0.58% Cu, given by:
X x 90% x ($12 million -$3.6 million - $1.5 million) - $24 000- $12 000) = 0

There are six areas with less than 0.58% Cu. These are thus not worth mining and can be
excluded from the ore reserve estimation. By excluding the 6 non-profitable parts, the
average copper content will increase from 1.34% to 1.57%.

The total profit from mining these 24 areas will be

$1.476 trillion - $1.2trillion = $276 billion, where $1.476 trillion is given by:

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(1.57% Cu x 90% x ($12 million - $3.6 million - $1.5 million) -$24 000 - $12 000) x 24
Mt

The profit thus increased from $254billion to $276 billion.

In the above example, it is assumed that the mining of one area could be done
independent of the other areas. However, let us assume that the picture through the ore
body above was a cross section through a deposit, which could be mined entirely by open
pit mining, as shown below.

Copper deposit with varying copper contents, %Cu

0.6 0.6 0.9 0.3 1.0 0.5 0.3 0.7 0.5 0.4
0.6 0.7 0.8 0.3 0.6 0.9 1.5 1.9 FINAL PIT WALL
1.5 2.0 1.8 2.6 2.0 2.6
2.5 2.5 2.0 2.6 FINAL PIT BOTTOM
2.5 2.5
In the above case: low-grade ore on higher levels must be mined to reach the high-grade
ore on deeper benches. The question here is: How much of the rock does one have to
mine that has to be taken into the processing plant? This rock must also be considered as
a part of the ore reserve. To find the right answer, one has to exclude the mining cost
from the calculation of the cut off grade, because that money must spent anyhow as
deepening proceeds to the high grade ore at deeper levels.

i.e. what is the cut-off grade above, assuming the same costs etc as in the latest example?

Solution:
The cut-off grade will be 0.39% Cu given by:
X x 90% x ($12 million -$3.6 million -$1.5 million) -$24 000 = 0

All rock mined with more than 0.39% Cu should therefore be taken into the plant. There
are only three areas out the 30 that are not worth taking into the plant.

MINING OF SMALLER DEPOSIT IN CONJUCTION WITH MAIN DEPOSIT

In an underground mine, production is at 1Mt of ore. The ore reserve is 10Mt. The
market demand limits the ore to 1Mtpy. The total production cost is $60 000/t
And the revenue is $90 000/t.

The company has just found a smaller deposit of 1Mt in the hanging wall. This deposit
must be mined immediately or left and cannot be mined in the future because of the
caving hanging wall. The revenue will be the same as for the main deposit, but the
mining cost will be higher at $75 000/t

Is it profitable to mine the newly found smaller deposit?

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The discount rate has been determined to be 15%.

Solution:

The revenue for the smaller deposit is $90 000/t and the total cost only $75 000 per tonne.
One may therefore easily assume that the smaller deposit is worth mining. This should
only follow if mining the smaller deposit results in increased sale in the near future, but
this in not possible because of the market restriction.

The comparison of the alternatives is as follows:

 x: mine main deposit during 10 years
 Y: mine small deposit during 1 year and after that the main deposit during 10
years.

Mining of the smaller deposit will thus result in higher costs during the first year. The
revenues will show up during the 11th year. The net present capital value is:
X: 1mtpy x (90 000-60 000) $/t x 5.02 = $150.6 billion
Y: (1mtpy x 90 000-75 000) $/t/ (1+0.15)) +150.6billion/ (1+0.15) =$144 billion

The conclusion is that the small deposit should not be mined because the NPV decreased.

The conclusion however, strongly depends upon what discount rate is used and how
much ore is left in the main deposit. Use of discount rates of 5% and 10% gives a totally
different picture.

OPTIMAL ANNUAL PRODUCITON FOR A DEPOSIT

An ore deposit contains 100 million tonnes of ore. Revenues and operating costs will be:

Revenues: $120 000/t of ore

Operating costs: $60 000/t of ore

The investment in mining and processing equipment etc to get production started will be
higher if a high annual production is chosen and can be split up like this:

Fixed investment: $600 billion

Variable investment: $300 000/tonne of crude ore

What is the optimal annual production level? The discount rate has been determined to
be 10%

Solution:

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The table below shows calculation of the net present capital value of the deposit for
different annual production rates. An annual production of approximately 5Mtpy yields
the highest value and should therefore be chosen.

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 NET PRESENT CAPITAL VALUE (10%0 OF A DEPOSIT FOR DIFFERENT
ANNUAL PRODUCTION RATES

Mt of ore per year 1 2 5 10 15 20

Life time, years 100 50 20 10 7 5
Annual operating profit, $billion/year 60 120 300 600 900 1 200
Present value of operating profit (10)% 600 1200 2550 3690 4380 4550#
Investment required, $billion 900 1200 2100 3600 5100 6600*
Net present capital value (10%) -300 0 450 90 -720 -2050

#: given by $1 200 Billion/year x 3.79 = $4 550 billion

*: given by $600 billion + 20 Mtpy x $300 000/tonne = $6 600

MINING SEQUENCE BETWEEN DIFERRENT DEPOSITS (MINES)

This applies when a decision has to be made on which deposit to mine first. Should the
largest deposit have to be mined first or the richest? Is it the deposit that yields the
lowest cost?

The mining sequence that yields the highest net present capital value of the whole ore
field supplies the best combination.

Example:
A mining company has located 4 different deposits, A-D. Each one is too small to carry
the cost of a processing plant. A new processing plant with an annual capacity of 1 mtpy
of crude ore will be constructed in the middle of the ore field and can be supplied with
crude ore transported from the different mines. Find out the best sequence for mining the
deposits?

Ore grades, costs and possible annual crude ore productions are different and summarized
in the table below:

A B C D
Crude ore tonnage, Mt 5.0 5.0 2.5 2.5*
Possible & recommended annual crude 1.0 0.5 0.5 0.5
ore production, Mtpy
% Cu in crude ore 2.0 0.5
% Pb in crude ore 1.0 4.0 3.0
%Zn in crude ore 2.0 2.5 6.0
Mining operating cost ($/t)# 12 000 12 000 12 000 12 000
Mine investment ($billion) 120 60 60 90

* after taking ore recovery and waste dilution into account

# including costs for transportation to the plant.

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The investment in the processing plant will be $300 billion
The annual cost for processing, administration etc is independent of ore processed and
will total $60 billion/year. Three different types of concentrates can be extracted from
the crude ore: copper, lead and zinc concentrate. The metal recovery will be 90% for
each metal.

After smelting and refining, refined copper, lead and zinc are produced. The metal
recovery is 90% for each metal. The cost for transportation to the smelter for smelting
and refining is:

Copper: $4.5 million/t refined copper

Lead: $1.5 million/t refined lead
Zinc: $2.4 million/t refined zinc

The prices for the different metals are expected to be:

Copper: $12 000/kg of refined copper

Lead: $6 000/kg of refined lead
Zinc: $9 000/kg of refined zinc

Find the optimal mining sequence within the ore field and the cash flow for the whole
venture. The discount rate is 10%.

Solution:

The table below summarises the annual amount of refined metals for sale, annual
revenues and costs and finally, the net present capital value of each deposit at the point in
time when mining starts in the deposit without considering the costs for processing:

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 A B C D
Life time for each mine (Yrs) 5 10 5 5
Metals for sale per year
Copper, thousand tonnes 16.2# 2.0
Lead, thousand tonnes 8.1 16.2 12.1
Zinc, thousand tonnes 8.1 10.1 24.3
Revenues ($billion/Yr)
Copper 194.4 24.0
Lead 48.6 97.2 72.6
Zinc 72.6 90.6 219
243.0 169.8 163.2 243.0
Operating cost ($billion/Yr), excl. processing
Mining 12.0 6.0 6.0 6.0
Smelt. & refining
Copper 73.2 9.0
Lead 12.0 24.0 18.0
Zinc 19.2 24.0 58.2
96.0 49.2 48.0 73.2
Mine investment ($billion) 120.0 60.0 60.0 90.0
Capital value(10%) of each deposit, when
mining starts on it:
(243-96)x3.79-120.0 437.1
(169.8-49.2)x6.14-60.0 680.4
(163.2-48.0)x3.79-60.0.0 376.8
(243-73.2)x3.79-90.0 553.8

Where 3.79 and 6.14 are Uniform Series Present Value factors for 10% and 5 and 10
years respectively.

# given by 1 Mtpy x 2% x 0.9 x 0.9 = 16.2 tonnes. Similarly for other values.

The total ore reserve is 15million tonnes of crude ore. This will give a total lifetime of
15 years.

The first thing to do is to check if there are any restrictions to consider which will limit
the number of combinations. They are:

When A is mined, only A has to be mined to feed the plant with crude ore during
5 years.

When B is mined during 10 years, two other deposits, C & D must also be after
each other, each lasts 5 years.

Deposit D has the highest value and should be mined before C.

Page 21
The only possible combinations are now:

a) A is mined during 5 years. B is then mined in parallel with D during the first
five years and after that in parallel with C during the next 5 years.
b) B is mined parallel with D during 5 years, followed by B in parallel with C
during the next five years, after that A is mined during 5 years.

The net present capital value of these combinations is:

a) 437.1+680.4x0.62+553.8x0.62+376.8x0.39 = $1 226.8 billion

b) 680.4+553.8+376.8x0.62+4237.1x0.39 = $1 496.2 billion

where 0.62 and 0.39 are single payment present value factors for 5 and10 years
respectively for 10%.

Combination b) has the highest value and should therefore be chosen.

The cash flow for the whole ore field will be like this:

Year REVENU MINING PROCESSING SMELTI NET

Deposit ES (BILLIONS) (BILLIONS) NG & CASH
(BILLIO REFININ FLOW
NS) G (BILLIO
(BILLIO NS)
NS)
OPERA INVEST OPER INVE
T. . AT ST.
0 -150 -300 -450
1 B,D 413 -12 -60 -110 231
2 B,D 413 -12 -60 -110 231
3 B,D 413 -12 -60 -110 231
4 B,D 413 -12 -60 -110 231
5 B,D 413 -12 -60 -60 -110 171
6 B,C 333 -12 -60 -85 176
7 B,C 333 -12 -60 -85 176
8 B,C 333 -12 -60 -85 176
9 B,C 333 -12 -60 -85 176
10 B,C 333 -12 -120 -60 -85 66
11 A 243 -12 -60 -85 86
12 A 243 -12 -60 -85 86
13 A 243 -12 -60 -85 86
14 A 243 -12 -60 -85 86
15 A 243 -12 -60 -85 86

Page 22
The mining and processing cost have bee assumed to be constant for simplicity. These
vary considerably between different deposits.

The net present capital value for the whole ore field can be calculated. It will be $880
billion given by:

-450+231x3.79-60x0.62+176x(6.14-3.79)-120x0.39+85x(7.61-6.14) = $880 billion

The net present capital value is positive and it will be profitable to open this ore field.

THE EFFECTS OF BOTTLENECKS

This shows how bottlenecks and the size of the ore reserve will affect optimal cut-off
grade in an underground mine in which for low-grade ore not mined, it will not be
possible to recover it in the future.

Example:

Description of the deposit.

The deposit considered is a hypothetical copper deposit. The technique applied can be
used for any type of deposit.

The deposit is almost vertical, with a length of 400 metres and an average width of 50
metres. The depth is believed to be 500 metres.

The ore grade is highest close to the footwall, where 20 metres have an average of 2%
Cu. The copper content decreases towards the hanging wall.

How large a portion of this deposit will it be possible to mine profitable with depth?

Mining method:

This deposit is assumed to be mined by underground. The ore body is divided into levels,
each 100 metres high.

A drilling level is developed at the top of each level from which long parallel large
diameter holes are drilled into the ore body for blasting.

A loading level is developed at the bottom of each level from where LHD equipment
clean blasted ore from draw points into trucks for haulage through an inclined ramp up to
a primary crusher at a higher level.

Page 23
There will be five levels as the deposit is 500 metres deep.

Ore quantity:

The total amount of recoverable ore in one level is 6 million tones of which there are:

2.4 million tones with 2.0% Cu

1.2 million tones with 1.5% Cu
1.2 million tones with 1.0% Cu
1.2 million tones with 0.5% Cu

Mining plans:

The basic alternative is to produce 600 000 tonnes of ore per year from the high-grade
part close to the footwall. This will give a life of 4 years per level.

A lower cut-off grade will result in changed yearly ore production and/or changed life.

The following two situations will be studied here:

a) mining of low-grade ore can be used to increase the total mine production
and keep the lifetime of each level as well as the whole mine constant.
b) There is a bottleneck in the hoisting system or the processing plant such
that the mining of low grade ore results in high grade ore being replaced
by low grade ore or making the lifetime longer.

These are extreme alternatives. Different combinations should also be studied in a real
life situation to get a fuller picture.

Ore beneficiation capacity is available in an existing plant.

A copper concentrate is obtained following grinding and floatation and is sent to the
smelter for production of refined copper for sale.

A total copper recovery of 90% is assumed.

The table below summarises the mining plans.

Page 24
 MINING PLANS
CUT-OFF GRADE (%Cu)
2.0 1.5 1.0 0.5
Average Cu content % 2.0 1.83 1.62 1.40
A: Increased mine production and
constant lifetime
Lifetime (years/level) 4 4 4 4
Ore (million tonnes /year) 0.6 0.9 1.2 1.5
B: constant mine production
Ore (million tonnes/year) 0.6 0.6 0.6 0.6
Life time (years/level) 4 6 8 10

Revenue and costs

Underground development: $30 billion. $35 billion, $40 billion and $45 billion
respectively, this will increase by 10% per level on depth.

Mining operating cost: $30 000/tonne of ore mined respectively, which will increase by
10% per level

Extra cost for pillar recovery: $6 billion, $8 billion, $10 billion and $12 billion
respectively which will increase by 10% per level with depth

Ore beneficiation: $6 billion per year + $20 000 per tonne ore milled.

Misc. operating cost: $6 billion per year

Copper price: $12 000/kg refined copper, of which the smelter to cover its costs will keep
30%.

OPTIMISATION

To find the optimal cut-off grade, the net present capital value for different cut-off grades
will be calculated and compared. The cut-off grade that gives the highest net present
value is the cut-off grade that should be chosen. A real interest rate of 15% is assumed.

The optimal cut-off grade must be found before the first block is developed. The next
table shows net present value of all costs (excl. investment) and revenues associated with
the first level at constant lifetime.

The table shows that a cut-of grade of 1.0% will yield the highest value. A cut-off grade
of 1.0% Cu should therefore be chosen if there is only one level.

Page 25
NET PRESENT CAPITAL VALUE OF ONE LEVEL AT CONSTANT LIFE TIME

CUT-OFF GRADE (%Cu)

REVENUES ($Billion/year) 2.0 1.5 1.0 0.5
0.9x0.7x$12 000/kgx
x 0.6 million tonnes/year x 2.00% Cu 90.7
x 0.9 million tonnes/year x 1.83% Cu 124.5
x 1.2 million tonnes/year x 1.62% Cu 147.0
x 1.5 million tonnes/year x 1.40% Cu 158.6
MINING OPERATING COST
0.6 million tonnes/year x $30 000/tonne -18.0
0.9 million tonnes/year x $30 000/tonne -27.0
1.2 million tonnes/year x $30 000/tonne -36.0
1.5 million tonnes/year x $30 000/tonne -45.0
ORE BENEFICIATION
Fixed cost -6.0 -6.0 -6.0 -6.0
0.6 million tonnes/year x $20 000/tonne -12.0
0.9 million tonnes/year x $20 000/tonne -18.0
1.2 million tonnes/year x $20 000/tonne -24.0
1.5 million tonnes/year x $20 000/tonne -30.0
Miscellaneous -6.0 -6.0 -6.0 -6.0
48.7 67.5 75.0 71.6
PRESENT CAPITAL VALUE (15%)
($billion)
ANNUAL OPERATING PROFIT
$48.7billion/year X 2.85 139
$67.5billion/year X 2.85 192
$75.0billion/year X 2.85 214
$71.6billion/year X 2.85 204
Mine development -30 -35 -40 -45
Pillar recovery
$6 billion x 0.571 -3
$8 billion x 0.571 -4
$10 billion x 0.571 -5
$12 billion x 0.571 -6
NET PRESENT CAPITAL VALUE +105 +153 +169 +152

The next table shows the same calculation if there is a bottleneck. The bottleneck results
in constant mine production of crude ore per year.

The table shows that a cut off grade of 1.5% will yield the highest value. A cut-off grade
of 1.5% should therefore be used.

Page 26
The final conclusion is therefore that the existence of a bottleneck means a higher cut-off
grade.

The two tables also show that a bottleneck will reduce the profitability. The net present
capital value will decrease from $169 billion to $117 billion.

NET PRESENT CAPITAL VALUE OF LEVEL 1 AT CONSTANT MINE

PRODUCTION

CUT-OFF GRADE (%Cu)

REVENUES ($Billion/year) 2.0 1.5 1.0 0.5
0.6 million tonnes/year X 0.9x0.7x
x $12 000/kg x 2.00% Cu 90.7
x $12 000/kg x 1.83% Cu 83.0
x $12 000/kg x 1.62% Cu 73.5
x $12 000/kg x 1.40% Cu 63.56
MINING OPERATING COST
0.6 million tonnes/year x $30 000/tonne -18.0 -18.0 -18.0 -18.0
ORE BENEFICIATION
Fixed cost -6.0 -6.0 -6.0 -6.0
0.6 million tonnes/year x $20 000/tonne -12.0 -12.0 -12.0 -12.0
Miscellaneous -6.0 -6.0 -6.0 -6.0
48.7 41.0 31.5 21.5
PRESENT CAPITAL VALUE (15%)
($billion)
ANNUAL OPERATING PROFIT
$48.7billion/year X 2.85# 139
$41.0billion/year X 3.78 155
$31.5billion/year X 4.49 141
$21.5billion/year X 5.02 108
Mine development -30 -35 -40 -45
Pillar recovery
$6 billion x 0.571* -3
$8 billion x 0.432 -3
$10 billion x 0.327 -3
$12 billion x 0.247 -3
NET PRESENT CAPITAL VALUE +105 +117 +98 +61

Note: initial investment not included

# uniform series present value factors, 15% and a life for a level of 4, 6, 8 and 10 years.
* single payment present value factors, 15%

Page 27
THE EFFECTS OF THE SIZE OF THE ORE RESERVE

The question arises; does that mean that all parts in the whole deposit with 1.5% Cu or
more should mined?

The answer is : only if this level (level 1) is the only level we have.

It is apparent that there are 5 levels in the deposit and it is necessary to take them all into
account.

The next table shows the capital value of each level at the point in time when mining of
that level starts.

CAPITAL VALUE OF EACH LEVEL AT CONSTANT MINE PRODUATION

CUT-OFF GRADE (%Cu)

(no initial investment 2.0 1.5 1.0 0.5
included)
( all values in $billion)
Level 1 (see above) 105 117 98 61
Level 2 98 106 86 48
Level 3 87 95 72 33
Level 4 77 82 57 17
Level 5 66# 68 41 0

# is given by: 105 – (1.104 – 1) x (18.0 x 2.85 + 30 + 3), and similarly for other values.

This table shows how the longer haulage distance to surface will reduce the profitability
at deeper levels.

To find the optimal cut-off grade on each level, it is necessary to start with a study of the
deepest level.

The table shows that in the future when someone has to decide the cut-off grade of level
5, it is necessary to choose a cut-off grade of 1.5% Cu.

To find the optimal cut-off grade for level 4, it is necessary to add the value of level 5
because the lifetime of block 4 will increase from 4 to 6 years if all the ore with 1.5% Cu
or more will be mined and similarly for other cut-offs.

The capital value of level 4 & 5 when mining of level 4 starts is:

Value with cut-off grade @ 2.0% Cu: 77 +66 x 1.15-4 =$115 billion
Value with cut-off grade @ 1.5% Cu: 82 +68 x 1.15-6 =$111 billion

Page 28
It is apparent that only ore with 2.0% Cu should be mined from level 4 for profit
maximisation. Similar conclusions can be made for block 1-3.

The table below shows the total net present capital value assuming the same cut-off grade
all the lifetime.

NET PRESENT CAPITAL VALUE OF THE WHOLE DEPOSIT AT CONSTANT

MINE PRODUATION

CUT-OFF GRADE (%Cu)

(no initial investment 2.0 1.5 1.0 0.5
included)
( all values in $billion)
Level 1 (see above) 105 117 98 61
Level 2 56 46 32 15
Level 3 28 18 8 2
Level 4 14 7 2 0
Level 5 7# 2 0 0
TOTAL 210 190 140 78

# given by: $66 billion x 0.107, where 0.107 is the single value factor for 15%
and 16 years. ( mining of level 5 starts after 4 x 4 = 16 years).

The above table shows that a use of 2.0% Cu cut-off grade will yield the highest value for
the deposit.

Conclusions:

The conclusions that can be made from this example are:

 the size of the ore reserve is critical

 It is important to know if there are any bottlenecks.
 If a lower cut-off grade is used to increase the life of the mine a cut-off grade of
1.0% should be used.
o If a bottleneck makes such an increase impossible, only ore with 2.0% Cu
should be mined.
o When only one level remains or if only one level is considered a cut-off
grade of 1.5% should be used. It has been mentioned that the two
alternatives: constant lifetime and constant production are extreme
alternatives, it would be necessary in practice to check the effect of other
alternatives.

Such a study shows that a combination of increased mine production and increased
sinking rate will, if possible, be the most profitable way to increase the value of this
mine.

Page 29
Optimal number of ore-passes in a steeply dipping mine

Consider a steeply dipping ore-body mined by sublevel caving with an extent of

1000metres on strike and a width of 50 metres. A new haulage system is designed for
vertical heights of 150 metres. The total ore reserve is 22.5 million tonnes taking into
account ore losses and dilution. Production is rates at 3 mtpy and a lifetime of 7.5 years.
Mining equipment in use comprises LHDs and mining by means of drifts and cross-cuts
dumping into ore-passes located 25 metres in the foot wall followed by hauling on a main
level to the shaft.

Find the optimal number of ore-passes between 4, 6, 8, and 10 ore-passes per level. N.b.
each ore-pass serves an area on either side of it (scale drawing will indicate the haul
distances)

Number of ore-passes
4 6 8 12
Average haul distance for LHD single way (metres)
 In crosscut 25 25 25 25
 In drift 63 42 31 21
 To ore-pass 25 25 25 25
 total 123 92 81 71

Haulage cost for LHD

MU/ton 1.0 0.95 0.9 0.85
Million Mu 3.0 2.85 2.7 2.55
Investment in ore-passes at 0.3Million MU/pass
Million MU 1.2 1.8 2.4 3.6
Annual capital cost (10%, 7.5 years)
Million MU 0.24 0.36 0.48 0.72
Total annual capital and transportation costs
Million MU/year 3.24 3.21 3.18 3.27

i.e. 8 ore-passes would yield the lowest cost.

Ultimate pit depth

A decision to deepen an open pit would normally result in increased waste rock or low-
grade material removal. Waste rock removal often precedes mining of corresponding ore
below it. Investment in waste removal needs to be paid back through higher internal rate
of return from future incomes.

Waste removal pushes up operating costs up to a limit that the operation can no longer
sustain. This is the ideal ultimate pit depth.

Page 30
The ultimate pit depth must be obtained early as it determines the size of the ore reserve
and ultimately maximum crude ore production and mine life. It is also the base for waste
removal for different push backs.

Methods of optimizing the ultimate pit depth:

There are several incl.:

 stopping mining when stripping ratio gets too high or similar to previous
experience in a similar mine
 stopping mining when the net profit from an additional bench approaches zero
(net profit method)
 calculation of NPV for different ultimate depths (capital value method)
 Lerch-Grosman Algorithm
 Computer methods e.g. floating cone

Stripping ration method;

It is not based on economic consideration. It examines the incremental stripping ratio.

However the final depth is depended upon the width of the orebody and the final slope
angle. The weakness of the method is in:

 Ore grades can differ over the ore-body and influence economics
 Interest rate costs can be high as stripping can occur many years prior to mining
ore
 Value of ore can differ.

Its strengths are:

 Takes into account different ore grades in various portions
 Interest rate factors by taking into account timing of strippingf
 Considers value of the ore

Net profit method:

Procedure:
Establish the ultimate pit depth and design of a hypothetical deposit:

The deposit is steeply dipping with a length of 1000m and a width of 50-250m.

 Study each cross section and establish the ultimate depth in the section
 Even out the preliminary depths taking note of the final slope in all directions
 Finally connect the final depths to establish the whole pit layout (incl. Haul roads)

Page 31
 One Section through the ore body showing Cu%

Surface baseline
0.50 1.00 0.50 0.50 1.00
1.00 0.50 0.50 1.50 0.50   100m
1.50 0.50 0.50 1.00 2.00
200m 1.00 0.50 0.50 1.50 0.50
1.50 0.50 0.50 1.00 2.00
300m 0.50 0.50 1.00 0.50 1.50
0.50 1.00 0.50 0.50 1.00
400m 1.50 0.50 0.50 1.00 2.00
1.50 0.50 0.50 1.00
500m 0.50 1.00 0.50

This can be deepened by push backs each of 50m as

shown below (with Pi =respective push back)

P1   P2 P3 P4 P5 P6

0.50 1.00 0.50 0.50 1.00        

1.00 0.50 0.50 1.50 0.50   100m      

1.50 0.50 0.50 1.00 2.00      

200m 1.00 0.50 0.50 1.50 0.50    

1.50 0.50 0.50 1.00 2.00    

300m 0.50 0.50 1.00 0.50 1.50  

Page 32
 0.50 1.00 0.50 0.50 1.00  

400m 1.50 0.50 0.50 1.00 2.00

1.50 0.50 0.50 1.00

500m 0.50 1.00 0.50

Calculation of the value of each tonne of rock for various copper grades based on:

Copper price Mu 2 500/tonne

Mining cost Mu 2/tonne of rock
Processing cost Mu 4/tonne of refined copper
Recovery 90%
N.B. in practice mining cost will increase with depth (this example simplifies the
position)
Rock values are:

%Cu Rock value, MU/tonne of rock

0 = 2
0.5%x 90% x (2 500 -850) -4 - =
0.5 2 +1
1.0%x 90% x (2 500 -850) -4 - =
1 2 +9
1.5%x 90% x (2 500 -850) -4 - =
1.5 2 +16
2.0%x 90% x (2 500 -850) -4 - =
2 2 +24

Rock values in each bench:

P1 P2 P3 P4 P5 P6

1.00 9.00 1.00 1.00 9.00 -2 -2 -2 -2 -2 -2 -2

9.00 1.00 1.00 16.00 1.00 -2 -2 -2 -2 -2 -2

16.00 1.00 1.00 9.00 24.00 -2 -2 -2 -2 -2

200m 9.00 1.00 1.00 16.00 1.00 -2 -2 -2 -2

Page 33
 16.00 1.00 1.00 9.00 24.00 -2 -2 -2

300m 1.00 1.00 9.00 1.00 16.00 -2 -2

1.00 9.00 1.00 1.00 9.00 -2

400m 16.00 1.00 9.00 24.00 2.00

16.00 1.00 1.00 9.00

500m 1.00 9.00 1.00

References:

1. SME Mining Engineering Handbook, 2nd Edition, H.L. Hartman

2. Surface Mining, 2nd Edition, B.A. Kennedy
3. Crawford J. T., Hustrulid W. A., Eds. Open Pit Mine Planning and Design, 1979
Publs. Society of Mining Engineers of AIME
4. Wright E. A., Open Pit Mine Design Models, 1990. Trans Tech Publications
5. Hazelrigg G. A., Systems engineering: An Approach to Information-based
Design, 1996. Prentice Hall International Series in Industrial and Systems
Engineering

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