Ninth AusIMM Open Pit Operators' Conference 2016

Paper Number: 38

Use of robust design methodology for the production

scale definition in open pit mining
C J Poblete, M A González, J A Romero, D L Fuentes, O Abdrashitova
1. Industry Process Consultant, Dassault Systemes Chile S.A., Marchant Pereira 221, Piso 7, Providencia
7500531 Santiago, Chile. Email: Cristian.POBLETE@3ds.com

2. GAL GEOVIA Senior Manager, Dassault Systemes Chile S.A., Marchant Pereira 221, Piso 7, Providencia
7500531 Santiago, Chile. Email: MariaAngelica.GONZALEZ@3ds.com

3. Intern, Dassault Systemes Chile S.A., Marchant Pereira 221, Piso 7, Providencia 7500531 Santiago,
Chile. Email: Joaquin.ROMERO.intern@3ds.com

4. Intern, Dassault Systemes Chile S.A., Marchant Pereira 221, Piso 7, Providencia 7500531 Santiago,
Chile. Email: Daniel.FUENTES.intern@3ds.com

5. MAusIMM, Senior Consultant, Strategic Mine Planning, Dassault Systèmes Australia Pty Ltd, Level 8, 190
St Georges Terrace, Perth WA 6000, Australia. Email: Olga.ABDRASHITOVA@3ds.com

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ABSTRACT
Robustness can be defined as the ability of a system to resist change without adapting its initial stable
configuration. Robust design methodology, which is widely accepted in the manufacturing industry, allows
the establishment of robustness and reliability metrics in scenario analysis.
In the mining industry, a mine can be considered as a system with design parameters such as processing
plant and mining capacities. Traditionally, a limited number of scenario iterations are performed in an attempt
to determine optimal capacity values. An important strategic decision such as process plant capacity in
particular is made during the very early stages of a mining study, often based on a low level of information.
Lack of time and tools to run and analyse a larger number of possible scenarios for different design
parameter combinations are usually the main reasons for not performing a full analysis. In addition, the
uncertainty of other mining study input parameters creates more risk in decision-making.
With advances in technology, it is now possible to automate the process of generating several thousands of
scenarios in an affordable and timely manner. This allows performing the results analysis and assessing
robustness and reliability criteria within a reasonable timeframe. It is possible to generate a surface of results
based on the net present value (NPV) for each scenario. This surface will reflect the efficiency level of the
capture of the economic rent for each production scale. In addition, each scenario can be tested under
diverse conditions of volatility of other external variables such as prices, costs or recoveries for example.
This paper aims to establish a methodology that applies robustness criteria to determine the best scenario
on several surfaces of value, which is then assessed with real data from a mining project. Obtained results
demonstrate the advantages of using the proposed methodology in dealing with the abovementioned
multidimensional problems. It allows better decision making on key design parameters and better control of
the risks of a strategic mine plan.

INTRODUCTION
The aim of mine planning is to maximise the economic rent of a natural resource through its exploitation in
accordance with company guidelines. Since access to the resource is limited, it is necessary to develop a
production plan that allows sustainable exploitation on a scale that maximises the economic rent. This
production plan is based on a set of strategic design parameters defined in accordance with company’s
objectives.
Minnitt (2007), in his paper Frontiers of usefulness: The economics of exhaustible resources, describes the
theory of Harold Hotelling in addressing production scales from the mineral economics point of view.
Strategic design parameters such as production scales ultimately define the optimal production-possibility
frontier. Therefore, they are also bottlenecks that coexist with the project during its life. The definition of
production scales as mine and plant capacities or cut-off grades are strategic decisions which, in many
cases, are considered as static inputs for sensitivity analysis of scenarios (Kear, 2006).
This paper demonstrates the methodology of evaluating all production possibilities in different scales and the
selection of a robust scenario with a production scale that maximises the NPV of the project. Prior to
describing the methodology, a few relevant concepts are explained below.

Debottlenecking
When a process optimisation is required, engineers usually search for restrictions that limit the throughput of
that process in order to maximise its efficiency. At this stage the bottlenecks are found. In general,
production of a mineral resource is limited by processing capacity – although in bulk commodities, production
can be limited by mining or selling capacity. Typically, the first bottleneck is related to plant capacity (Cairns,
1986).Ore definition is derived from the calculation of marginal value and from a cut-off grade strategy that
maximises the value attributable to the production program.
Therefore, mine planners should select a plant capacity that can process available ore at least at the
marginal cut-off grade. Along with this, it is necessary to choose a mine capacity that maximises plant
utilisation with consideration of an optimised cut-off grade strategy.
For mines currently in operation, many of the strategic parameters are already defined. In this case the
process of debottlenecking is generally addressed with a univariate approach, for example, through
expansions of mining or processing capacity while other strategic parameters remain constant.

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This optimisation style does not recognise that modifying design parameters of two or more critical
processes of the operation’s value chain could generate a significant increase in NPV. An alternative
approach is described below.

Robust Design
In the manufacturing industry the concept of robust design is defined as reducing variation in a product
without eliminating the causes of the variation. In other words, it refers to making the product or process
insensitive to variation. This variation (sometimes called noise) can come from a number of uncertain or
randomly varying factors (Maurer and Lau, 2000). Robust design is a set of engineering methods widely
successful in reducing sensitivity to such noise factors. One widely known means to accomplish greater
robustness is through parameter design. Effective parameter design requires coordination of two activities -
estimating sensitivity to noise factors and searching the space of design variables to seek reduced sensitivity
(Frey and Li, 2004).
A robust design method used in this paper is design of experiments (DOE). This method allows the changing
of all design variables simultaneously in a structured, “designed experiment.” It takes into account
interactions, averaging and nonlinear effects which are ignored by a traditional approach of varying one
design parameter at a time.
The way to address the mine production scale definition problem is the assessment of the performance of an
output measure such as NPV, subject to modification of two or more design (control) parameters and noise
variables (Unal & Dean, 1990). Multiple scenarios are evaluated and sensitivity analysis of design
parameters to external noise variables such as prices, costs or others is performed. Scenarios less sensitive
to external variables are then identified.

Besides statistical results for sensitivity of each design point to noise variables, it is important to ensure
stability and feasibility of the production plan in relation to unexpected variations in design parameters. This
can be estimated by the curvature degree of the concavity in the analysed region, either for univariate or
multivariate analysis, as shown in Figure 1.

Process Automation
A robust design method can be encoded as an automatic procedure for sending inputs to the engineering
system. Each set of inputs sent to a system represents a simulated experiment within a robust design
method (Frey and Li, 2004).
To assess the robustness of mine planning scenarios it is necessary to know the behavior of an output
measure such as NPV in relation to design variables and its sensitivity to external variables (such as prices,
costs, recoveries). By automation of calculations and mine plan evaluation processes, it is possible to
generate thousands of scenarios which allow assessing the robustness of different configurations of
production scales. For this paper, this has been achieved in an affordable computational time (a few hours)
using automated workflows with SIMULIA IsightTM software (to set up a DOE procedure) and GEOVIA
WhittleTM software as an engineering system for evaluation of each strategic plan.

Hill of Value
The Hill of Value methodology is described by Hall (2003) in his paper How mining companies improve share
price by destroying shareholder value, in which a value surface associated with two design variables such as
mine capacities and cut-off grades is represented (Figure 2).
To optimise the strategic decisions of a company, it is proposed to seek out the optimal value on that
surface. The purpose of this representation is to illustrate the production options according to cut-off grade
levels and to demonstrate that an increment in production rates does not necessarily mean an increase in
value by itself.
A value surface representing the results of different plant capacities versus mine capacities was also created
in order to find the levels of efficiency in plant utilisation.
As a complement to the exercise developed by Hall, this paper uses automation of the execution of each
scenario with commercial, standardised mine planning tools, so that the results are reliable, reproducible and
feasible to be operationalised. The execution of thousands of scenarios and plans allows the effective
measurement of sensitivity to external uncertain variables such as prices, costs etc, which makes it possible
to assess the robustness of strategic definitions for each point on the surface.

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METHODOLOGY
This paper proposes a methodology to define robust and optimal production scales as a six step workflow
illustrated in Figure 3 and described below.

1. Strategic definitions and capital expenses

Before the start of any type of experiment and subsequent analysis, it is necessary to define strategic
parameters. For example, in an open pit precious metals project, a process plant is assumed to be a
bottleneck of the system. Key strategic inputs that define production scale include processing capacity,
mining rate and cut-off grade.
These definitions are strategic because they define the level of investment, life of mine and the reserve
exploitation through time.
Defined variables to be evaluated in each strategic plan as well as their working ranges are declared. In
addition, the cost involved in incremental increase of each parameter and their respective restrictions are
indicated.

2. Pushback selection and optimisation

Based on a given set of inputs (such as resource block model, relevant economic and technical parameters)
pit optimisation is performed (using a standard pit optimisation software) and a range of pit shells is created
for the purpose of final pit and pit stages selection.
Pit stages (also called pushbacks or cutbacks in strategic planning) are defined within the selected final pit
shell using a base case scenario and a scheduling algorithm.
Selected pushbacks need to be practically mineable and take into account operational restrictions such as
minimum mining width and vertical rate of advance.

3. Generation of multiple mining plans

Firstly, a range of mine and plant capacities are specified as design variables for DOE and NPV is defined as
an output value to measure the response to change.
An automatic procedure then sends inputs to strategic scheduling software to produce a preliminary mine
plan for each set of mine and plant capacities from DOE based on inputs defined in step two. At this stage, a
schedule optimisation algorithm that considers mineral to be processed at a marginal cut-off grade is used.
This stage defines required levels of mine material movement to meet plant capacities and also finds a range
of plant capacities that maximise the value. Once this range is known, the discrete selection of plant
capacities is carried out.
Additionally, each generated scenario is evaluated by applying “noise variables”, i.e. a range of uncertain
parameters such as price, costs or other inputs. This paper demonstrates an example by selecting a specific
range of prices for DOE. As a result, apart from creating an isosurface of value based on a range of mining
and processing rates for a single price, a number of surfaces are created for a range of different prices.
Based on that, an average NPV result can be calculated for a pessimistic scenario (using the results average
of the worst prices below the base price), optimistic scenario (results average above the base price) and the
base price scenario. The variation of processing rate for each price scenario is the key to measure it’s
robustness to the price change, allowing to select an optimal and robust processing rate value.
Secondly, scenarios at fixed processing rate but varying cut-off grades and mining rates are evaluated. This
implies generating sequences considering that a minor portion of mineral captures marginal benefit, in order
to optimise the sequence and to prioritise the extraction of high-grade ore. When assessing all generated
scenarios for each cut-off grade by considering variable commodity price, it is possible to establish an
average NPV which can be compared. In this exercise, each scenario is compared with the average value
that considers the base price at a cut-off grade equal to the marginal cut-off grade, which allows to verify the
cut-off grade behavior at different prices and at different mine capacities.

4. Creating isosurfaces of value

With the economic evaluation of each point, the most relevant economic indicators such as NPV are
obtained for each scenario. Based on these points, a three dimensional surface is shaped using an
approximation function by an interpolation of the solution space. This is done for each noise level. After

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calculating different statistical averages it is possible to obtain results and the variability associated with each
position control or design point.

5. Evaluation of robustness
Once the behavior of cut-off grades at different prices is known, it is visualised in the value surface with
respect to cut-off grades and to mining capacity at a constant plant capacity. This permits assessment of the
conditions of lower spatial variability on the surface in order to choose a stable region - a procedure that
once again implies a robust selection.

6. Post-optimisation and mine plan creation

Finally, the mine plan is re-run using strategic scheduling software based on selected optimised parameters,
in order to verify the feasibility of the scenario. Pushback selection is also reviewed at this stage. The final
product is an optimised mining sequence at a constant cut-off grade. Cut-off grade optimisation can also be
performed as the next step.

RESULTS
In order to assess the proposed method, an exercise has been implemented with real data from a copper
deposit. For pit stages selection, a directional pit shells methodology described in the paper Impact of the
starting point and of the direction of open pit exploitation on the mining plan (Poblete et al, 2016) has been
used to generate pit shell candidates. Optimised practical pushbacks taking into account mining width and
vertical advance rate restrictions have been defined using GEOVIA Whittle TM strategic scheduling software.
A base copper price at 2.56 US$/pound was considered and a sensitivity up to 25% above and below the
base price at 5% increments, giving ten additional prices at which each scenario is evaluated.
Mining rate was specified within 100 Mt – 200 Mt range at a step of 10 Mt, processing rate within 18 Mt – 22
Mt at a step of 1 Mt, copper cut-off grade within 0% - 1.5% range at a step of 0.1%. Thus a total number of
possible input combinations was 16 000, with 9680 feasible solutions evaluated in 15 hours.
Evaluation of the results for each scenario was performed based on the relative NPV obtained as an average
of the plans at the base price, with different production scales at the marginal cut-off grade.
In order to generate the value surfaces, sets of pessimistic and optimistic scenarios were produced, in which
pessimistic scenarios consider the average of the plans for the five prices lower than the base price and
optimistic scenarios consider the average of the plans for the five prices greater than the base price. The
purpose of this is to observe the behavior of the value surface at prices other than the base price, with the
aim to choose an optimal level that is invariant with respect to price. A comparison of isosurfaces between
base price and pessimistic price scenarios is shown in Figure 5. From each graph it can be observed that
both the pessimistic price scenario and base price scenario have almost the same optimal and robust region
at a mining rate between 160 Mt and 170 Mt per year.
Next, the evaluation of cut-off grades (for a constant plant capacity) with different prices is also considered
with respect to the average value of the scenarios assessed at base price at the marginal cut-off grade. This
exercise allows to visualise the mobility of the marginal cut-off grade according to the price and verifies the
stability of the optimal cut-off grade, as shown in Figure 5. It can be observed that optimising the cut-off
grade for a specific plant has remained stable for each price, in the average of different mine capacity
scenarios.
Once the optimal cut-off grade for an established plant capacity is known, its location can be visualised on
the value surface with the cut-off grade and the mine capacity. On this surface a configuration that satisfies
the criteria of robustness and maximising the value for pessimistic, optimistic and base scenarios is selected,
as shown in Figure 6.
For each isosurface, the optimum cut-off at the most robust NPV region is around 1.0% in equivalent copper
grade. The selected configuration is proven to be robust despite price variations, primarily because both
surfaces have a similar shape, so different NPVs over price result in a higher average at the same mining
rate and cut-off grade region.
When the optimal configuration subject to all the described criteria is selected, a definition of production
scales is found. This is the baseline to generate a plan and, thus, to implement a strategy of optimised cut-off
grade for all periods, such as proposed by Lane (1988).

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CONCLUSIONS
This paper has addressed the application of a methodology for selecting production scale that considers the
efficiency in the capture of the economic rent.
For this, the selection of the cut-off grade and of the mine capacity is crucial (McCarthy, 2010). This
efficiency is measured with respect to the present value obtained from multiple plans, which form a value
surface based on mine and plant capacities and the cut-off grades. Several value surfaces are created in
order to account for price volatility. Subsequently, basic statistics are calculated for each design point, which
is necessary to assess the effect of a price variation on every strategic design parameter combination or
design point.
A value surface visually demonstrates that traditional methods for key strategic parameters definition may
lead to suboptimal decisions. The incorporation of robust design methodology in the selection of production
scales adds a qualitative value to the strategic definition and assists with proactive planning of risk
management strategies.

REFERENCES
Cairns, R D, 1986. A model of exhaustible resource exploitation with Ricandian rent. Journal of Environmental
Economics and Management, 313-324.
Frey, D and Li, X, 2004. Evaluating robust design methods using a model of interactions in complex systems,
Massachusetts Institute of Technology. Paper presented at the 2004 Engineering Systems Symposium.
Hall, B E, 2003. How mining companies improve share price by destroying shareholder value. In Proceedings CIM
Mining Conference and Exhibition , 1-17.
Kear, R M, 2006. Strategic and tactical mine planning components. Journal of the South African Institute Of Mining and
Metallurgy, V106(2),93.
Lane, K F, 1988. The economic definition of ore: cut-off grades in theory and practice. Mining Journal Books.
Maurer, K and Lau, S, 2000. Robust Design. Industrial Engineering 361. Retrieved from
http://www.public.iastate.edu/~vardeman/IE361/s00mini/maurer.htm
McCarthy, P L, 2010. Setting plant capacity. Mineral Processing and Extractive Metallurgy, 119(4), 184-190. Retrieved
from AMC Reference Library.
Minnitt, R C A, 2007. Frontiers of usefulness: The economics of exhaustible resources. Journal of the South African
Institute of Mining and Metallurgy, 107(8), 539.
Poblete, C, González, M, Romero, J and Fuentes, D, 2016. Impact of the starting point and of the direction of open pit
exploitation on the mining plan, paper presented to the conference MININ2016.
Unal, R and Dean, E, 1990. Taguchi approach to design optimization for quality and cost: an overview. (N T Report, Ed)
Retrieved from Nasa Technical Report Server: http://ntrs.nasa.gov/search.jsp?R=20040121019
Wu, CFJ, and Hamada, M, 2000. Experiments: Planning, Analysis, and Parameter Design Optimization, Wiley & Sons,
Inc, NY.

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FIGURE CAPTIONS

FIG 1 – Diagram of robustness selection

FIG 2 – Finding and Climbing the Hill of Value, from Hall 2003 (McCarthy, 2010)

FIG 3 – Workflow of the methodology of selection of optimal production scale

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FIG 4 – NPV isosurfaces by mining and processing rates for pessimistic and base price scenarios

FIG 5 – Cut-off grades at values relative to average at different prices

FIG 6 – NPV isosurface by mining rates and cut-off grades for pessimistic and base price scenarios