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MMG Las Bambas Cut-Off Grade Report - Eng
MMG Las Bambas Cut-Off Grade Report - Eng
2 EXECUTIVE SUMMARY 5
3 INTRODUCTION 8
8 CUT-OFF STRATEGIES 29
9 NSR CALCULATION 31
LIST OF TABLES
Table 1 Cut-Off Grades 2015 Summary 5
Table 2 Cut-Off Grades 2010 Summary 5
Table 3 Metal Prices and Exchange Rates 10
Table 4 Comparison of the Cost Estimation Method 11
Table 5 Major Cost Drivers - Mining 11
Table 6 Major Cost Drivers – Processing 12
Table 7 Composition of Mining Operating Costs 12
MMG | 150909_MMG Las Bambas Cut-Off Grade Report_eng.docx Page 2 of 35
Table 8 Ore Differential Costs 13
Table 9 Ore Rehandling Costs 13
Table 10 Composition of Processing Operating Costs 14
Tabla 11 Sustaining Capital Costs 14
Table 12 Selling Costs 15
Table 13 General and Administrative Costs 15
Table 14 Fixed & Variable Cost Allocations 16
Table 15 Recovery Model for Copper at Ferrobamba 18
Table 16 Recovery Model for Copper at Chalcobamba 18
Table 17 Recovery Model for Copper at Chalcobamba 18
Table 18 Recoveries by GMU for Ferrobamba 18
Table 19 Recoveries by GMU for Chalcobamba 18
Table 20 Recoveries by GMU for Chalcobamba 18
Table 21 Recoveries by GMU for Sulfobamba 19
Table 22 Concentrate grades by GMU for Ferrobamba 19
Table 23 Concentrate grades by GMU for Chalcobamba 19
Table 24 Concentrate grades by GMU for Chalcobamba 19
Table 25 Concentrate grades by GMU for Sulfobamba 19
Table 26 Criteria for Pit Limit Analysis 21
Table 27 BCOGinpit Calculation for Ferrobamba 22
Table 28 BCOGinpit Calculation for Chalcobamba 22
Table 29 BCOGinpit Calculation for Sulfobamba 22
Table 30 RCOGinpit Calculation for Ferrobamba 23
Table 31 RCOGinpit Calculation for Chalcobamba 23
Table 32 RCOGinpit Calculation for Sulfobamba 24
Table 33 MCOGinpit Calculation for Ferrobamba 25
Table 34 MCOGinpit Calculation for Chalcobamba 25
Table 35 MCOGinpit Calculation for Sulfobamba 25
Table 36 TCOGinpit Calculation for Ferrobamba 26
Table 37 TCOGinpit Calculation for Chalcobamba 26
Table 38 TCOGinpit Calculation for Sulfobamba 27
Table 39 SCOGinpit Calculation for Las Bambas Complex 27
Table 40 Historical Cut-Off Grades for Ferrobamba 28
Table 41 Historical Cut-Off Grades for Chalcobamba 28
Table 42 Historical Cut-Off Grades for Sulfobamba 28
Table 43 Selling Cost of Metals 31
Table 44 Reference Block for the NSR Calculation 32
Table 45 NSR Calculation 32
LIST OF FIGURES
Figure 1 Ferrobamba Tonnage–Grade Curve 29
Figure 2 Chalcobamba Tonnage–Grade Curve 30
Figure 3 Sulfobamba Tonnage–Grade Curve 30
APPENDICES
Appendix 1 DOCUMENTS AND ADDITIONAL INFORMATION 35
Concentrator Plant
Juliano Villanueva Manager
Las Bambas
We, the undersigned, have contributed to the determination and validation of Las Bambas Cut-Off estimates
and strategies presented in this report. Having reviewed this report, we conclude that the information
summarised herein is suitable and reasonable for use in estimating Ore Reserves and Mineral Resource that
will be publicly disclosed.
Nan Wang
Group Manager Mining
Technical Services – MMG
As Competent Person, as defined under JORC Code, I have read and reviewed this Las Bambas Cut-Off
Report and find that the Cut-Off estimate and strategy presented herein are suitable and reasonable for use
in determining Ore Reserves and Mineral Resources that will be publicly disclosed.
The purpose of this report is to present the supporting information to the cut-off grade calculations, and the
methodology used to determine the cut-off grades to be used in the Ore Reserves and Mineral Resources
estimation, as well as the Life of Asset Planning (LoA Planning) that will be performed during 2015.
Table 1 summarizes the Cut-Off Grades that must be applied in Las Bambas during the Ore Reserves and
Mineral Resources estimation exercise for 2015 as well as the LoA Planning.
NSR Stocks US$/t 7.36 7.36 7.36 7.36 7.36 7.36 7.39 7.39 7.39 7.39 7.39 7.39 7.39 7.39 7.39 7.39 7.39 7.39
NSR
Breakeven US$/t 7.92 7.92 7.92 7.92 7.92 7.92 7.66 7.66 7.66 7.66 7.66 7.66 7.66 7.66 7.57 7.57 7.57 7.57
Where:
BCOGinpit = Open Pit Break Even Cut Off Grade
RCOGinpit = Open Pit Mineral Resource Cut Off Grade. The assumptions for metal prices is more generous than BCOG inpit.
MCOGinpit = Open Pit Mill Cut Off Grade
SCOGinpit = Open Pit Stockpile Cut Off Grade
TCOGinpit = Open Pit All In Cut Off Grade
NSR BCOinpit = Open Pit Break Even Cut Off based on NSR
NSR RCOinpit = Open Pit Resource Cut Off based on NSR
NSR MCOinpit = Open Pit Mill Cut Off based on NSR
NSR MCOinpit = Open Pit Stockpile Cut Off based on NSR
NSR TCOinpit = Open Pit All In Cut Off based on NSR
CuERS V = Equivalent Copper Grade in Reserve
CuERS C = Equivalent Copper Grade in Resource
PC = Processing Cost, includes all process sustaining capital
DC = Differential Costs associated with mining material as ore instead of waste, includes portion of Mining sustaining capital
TMC = Total Mining Cost, includes all mining sustaining capital
RC= Rehandling Cost, includes a portion of mining sustaining capital.
GA = General & Administrative Cost
REC = Planned recovery of metal near COG grade
MP = Selling Price of Metal
Factor = 2204.62
SC = Selling Cost
SCCu = Selling Cost Cu
SCMo= Selling Cost Mo
SCAg= Selling Cost Ag
SCAu =Selling Cost Au
Table 1 summarizes the calculation for 2015 following the corporate guidance from the Group Technical
Services MMG.
Table 2 summarizes the calculation developed on September 2010 as part of the Feasibility Study update;
this calculation has been used in subsequent years and formed the basis for the 2013 Ore Reserves and
Mineral Resources estimation process.
Table 2 shows Las Bambas applied only three cut-off grades originally: 1) Marginal Cut-Off grade (MCOG) –
to determine the ore material able to cover processing costs, processing sustaining capital, an incremental
cost of mining a tonne of material as ore instead of waste, and G&A costs; 2) Breakeven Cut-Off Grade
(BCOG) – formulated in the same way as the MCOG but adding mining costs and mining sustaining capital
costs, and; 3) Cut-Off Grade for broken Stocks (SCOG) – with the purpose of constraining the mineral
inventory that should be stockpiled in accord to the operational strategy adopted (maximize NPV) and taking
into account the rehandling costs and processing costs, including processing sustaining capital costs. The
calculations show that each ore type processed was assigned a specific cut-off, mainly because each ore type
has its own processing recovery. However, Las Bambas has been applying a single cut-off grade of 0.20%Cu
(total Copper contained) for all ore types and in all three open pits. This strategy had been intentionally
targeted to not exceed the nominal tailings dam capacity while processing mostly higher-grade ore. In 2015,
estimates for each ore type will be constrained by respective cut-off grades during the Ore Reserves and
Mineral Resources estimation process, as well as the development of mining plans.
Following MMG guidelines, the 2015 Cut-Off grade nomenclature has been changed. As such, Las Bambas
will refer to break-even (cut-off) grade, denoting that at the moment of mining this grade material, the
revenues obtained will just cover for the costs to producing it.
Furthermore, the contribution of copper to the total value of a tonne of ore is approximately 96%, with the
other 4% coming collectively from Molybdenum, Gold and Silver. This is the reason why Las Bambas decided
to express cut-off grades based on CuEq. Nevertheless, noting the importance of understanding and
demonstrating the full impact of costs incurred across the whole production chain, Las Bambas generated
NSR calculations and has applied it in the block model in order to assign a reference value to each block.
This NSR cut-off value is equal to all site-based costs and other costs considered, as per MMG guidelines
being applied.
To estimate Ore Reserves, Las Bambas will use the BCOGinpit, which is equivalent to the Marginal COG of
2010, but with different considerations pertaining to operating costs included. Unlike previous years where
the Mineral Resource was also reported using a cut-off grade of 0.20% Cu, in the 2015 Mineral Resource Las
Bambas will use a distinct cut-off grade depending on the ore type; this cut-off grade will be the RCOGinpit.
Of note, the slight reduction observed in almost all 2015 cut-off grades when compared to 2010 is mainly
explained by the increase in selling price for Copper. Although operating costs have seen an increase in the
2015 calculations, the negative effect of such upward move in OPEX was mainly offset by the higher copper
price. Las Bambas will undertake further work to fully assess the impact of the 2015 cost and price update to
Ore Reserves, Mineral Resources and overall value (NPV) of the project, since it is possible that an increase in
the Ore Reserves may arise from these changes, but without an equivalent impact to the NPV.
This is due to the NPV being more dependent upon how and when an Ore Reserve is extracted and
processed, rather than the amount of material in the Ore Reserve itself (i.e. typical trade-offs between
maximum NPV and maximum reserve / mine life).
Las Bambas cut-off grade strategy during in 2015 will be defined and implemented in accord to MMG
Corporate guidelines. As a result, it will be necessary to evaluate a number of scenarios in the pursuit for the
optimal Ore Reserve and maximum NPV.
The inputs for the cut-off grade calculations will be explained in the following sections of this Report.
Las Bambas will be an operation constrained by processing capacity (51.1Mtpa) and it is assumed this
restriction will be maintained throughout the life of the mine. However, additional scenarios in which
processing capacity reaches up to 70Mtpa have been preliminary investigated. These assessments need to
be refined including detailed Opex and Capex estimations to allow for robust financial modelling and
adequate determination of its viability. The decision to increase current throughput (processing capacity) will
also need to be aligned with MMG investment strategy.
The application of Cut-Off grades for Ore Reserves and Mineral Resources estimation, and mine planning
process will aim at maximising the profitability of the operation. It is anticipated that in the early life of the
mine, the cut-off grades will rise so that the mill feed will be higher-grade ore, which are expected to have
better recoveries than those from medium and / or low-grade ore. In order to achieve a strategy to
maximise profitability and return on capital, there will be a balanced approach to flexibility in raising cut-offs
during these years and imposing limits to such changes, given that elevating the cut-off grade beyond
optimum position can lead to loss of value through mining and processing. To prevent this risk during cut-off
grade optimisation, Las Bambas will take into account the mining sequence and processing throughput and
recovery.
Given the strategy above, raising the cut-off grades early in the LOM will definitely lead Las Bambas into
generating run-of-mine (ROM) stockpiles of medium and low-grade ores, as it is also the intention not to
reduce life of mine by leaving low-grade ore out of final pit limit. The ore from these ROM stockpiles will
have to be rehandled in the last years of life of mine (ideally) or in the years when it will not be possible to
supply the mill exclusively with in-pit material.
In a hypothetical scenario where during a period the mill capacity is not fully utilised with ore above the
BCOGinpit cut-off sourced straight from mine, and having spare mining capacity and no ore available in ROM
stockpiles, Las Bambas could apply the MCOGinpit cut-off to identify additional ore from the mine that allows
topping up off the mill capacity (i.e. ‘next best ore’ approach to maximise asset utilisation). This is more likely
to occur in the later years of mine life, as in early years it is highly unlikely that BCOGinpit material would be in
shortage. Moreover, employing this approach when there are BCOG inpit and SCOGinpit materials would affect
profitability (i.e. feeding the mill with low-grade ore and displacing higher grade material).
The topography of Las Bambas open pits and principally that of Ferrobamba, poses a challenge to designing
locations for low-grade ROM stockpiles, which will be required to hold material for 15 to 20 years. The more
adequate areas are often far from the primary crusher, increasing rehandling costs, therefore reducing
profitability or making it not viable. Conversely, an alternative approach would leave these low-grade
materials outside the final pit limits until metal prices become more favourable and can be included in the
Ore Reserve. At present, Las Bambas has successfully included these low-grade materials in Ore Reserves
and in life-of-mine schedules.
In summary, this report identifies and deliberates on elements that are essential for estimating Ore Reserves
and Mineral Resources, consequently impacting on operational strategy for Las Bambas LoA and the MMG
Integrated Business Plan as a whole.
Between Chalcobamba and Sulfobamba open pits it is planned to install a primary crusher that will allow ore
supply to the Mill Plant from these two open pits. Chalcobamba open pit is scheduled to start in 2020 and
Sulfobamba in 2023. The configuration of these two open pits means the ore will be hauled from the pits to a
point to 3 Km from Chalcobamba and to 7 Km from Sulfobamba. The high cost of mining an ore tonne for
these open pits is a reflection of this configuration. The hauling cost for waste tonnes for these pits is less
than for ore tonnes due to the planned waste dumps to be located close to the pits.
In general, the mineral will be reduced to acceptable size by the primary crushers explained above, then they
will be sent to the Mill through overland conveyors where they will be processed to obtain Copper and
Molybdenum concentrates. Tails will be deposited in the tailings dam located downstream near the Mill
Plant. The copper concentrate contains gold and silver and will be transported 710Km to Matarani port.
Copper concentrate will be transported by truck a distance of 380Km and then by train 330 Km to Matarani
Port. Molybdenum concentrate will be transported by truck from Las Bambas up to Matarani Port. Due to this
transportation configuration, the selling costs of payable metals have increased compared to 2010, when a
pipeline was considered for the transportation.
Processing capacity at Las Bambas is the limiting factor in the production of payable metal. While the mining
rate ranges from 300Ktpd up to 450Ktpd over the life of the mine, the Mill throughput is 140Ktpd or 51.1Mt
per year. The LoM plan includes 23 years of production plus 1 year of Pre-Stripping. Inferred Mineral
Resource is included in the plan, which represent 14% of all ore processable. The average copper grade sent
to the Mill is approximately 0.7%, at an average copper recovery of 82%. During the life of the mine,
stockpiles of low, medium and high-grade ore will be used for a strategic execution of LoM plan. As a result
of higher cut-off grades in the early stage of LoM to maximize the NPV, the stockpiled ore will be rehandled
in the last stage of LoM. For the ore stockpiled, the cut-off grade calculations considered an average
metallurgical recovery of 63% (10% loss by weathering, 0.04%Cu loss by minimum tailings grade influenced
by the degree of liberation and 0.04%Cu loss by CuSAc which is not recovered by flotation process). In the
2010 calculation it was considered that the stockpiled ore to be rehandled would have the same metallurgical
recovery as that produced directly by the mine and immediately processed.
The smallest selective mining unit (SMU) has been established as 10 x 10 x 15m. There is still no recovery and
dilution studies in the mining process. Neither have there been studies to determine the presence of
deleterious metals affecting the NSR and/or cut-off grades.
Las Bambas is using metallurgical recoveries for the copper based on recovery models provided by the
Metallurgy Group at Las Bambas and Geoff Senior. These models still need to be refined with more
information from drilling and metallurgical tests. For other metals las Bambas is using flat recoveries for all
ore types provided by the Metallurgy Group at Las Bambas.
The operating costs used in the cut-off grade calculations come from projections made in 2015v3.7 LoM
Plan; but will only be considered from 2016 onwards, because 2015 will be almost all Pre-Stripping.
The metal prices and exchange rates used for Las Bambas are presented in Table 3.
Cost projections made in the financial model LOM2015 v3.7 are detailed month by month for the first three
years and then annually from 2018 onwards.
Table 4 summarizes the various sources of cost estimates available to produce the best estimate of operating
costs for the cut-off calculation.
Feasibility
Cost LOM 2015
Units Study –
Component V3.7
MinePlan V8K
Mining Cost (US$/t mined)
Processing Cost (US$/t processed)
G&A Cost (US$/t processed)
Other (US$/t rehandled)
Tables 5 and 6 summarize the major Cost Drivers for the mining and processing operating costs respectively.
(1)
The contribution to the mining cost of diesel consumption is considerable because of the number of trucks that will be traveling
during the LoM, addition to the long route to the Huancarane waste dump in Ferrobamba. Hydraulic Shovels also contribute to this
consumption.
(2)
Consumption of truck tires has been considered to occur every 4,500 hours, considering this life plus the hauling routes that will have
Las Bambas, the influence on the mining cost results in 0.13 US $/t mined.
(3)
The explosives also influence the mining cost because the amount of material to be mined (2.8B tons mined through the LOM).
(1)
The people that prepared this report had no access to the detail on the total expenditure amount of each reagent in order to
determine the influence of each one in the processing cost, however, is noteworthy that the largest contribution to the processing cost
comes from the lime consumption.
(2)
The energy consumption of Mill Plant at Las Bambas contributes 1.96 US$/t to the processing cost.
(1)
Mining cost do not includes costs associated with maintenance of stockpiles, loading and hauling during the ore rehandling from
these stockpiles; these costs are considered as ore rehandling costs which will add to processing costs in the cu-off grade calculations.
*
Feasibility Study Update (September, 2010).
Table 9 details the ore rehandling costs used in the cut-off grade calculations.
Table 10 details the Processing costs used in the cut-off grade calculations.
(1)
All costs that make up the processing operating cost have increased respect to the Feasibility Study, except item Filter Plant. Preparers
of Report found no details on how these costs were estimated at those dates. The items that highlight the increase are: Primary crusher,
Milling, Tailing Thickening and Moly Plant.
(2)
Feasibility Study was considered transport the concentrate from Las Bambas through a Pipeline to the Port, now it is considered to use
trucks a certain distance and then by train to the Matarani Port.
*
Feasibility Study Update (September, 2010).
(1) (3)
Capital costs in 2015 were not included, because these are already being spent, considering it as sunk costs and therefore excluded
from the cut-off grade calculations.
(2)
No expense in this category was included because the costs that are related to process improvements are non-recurring and when
they occur are as a project to improve the operation; these costs are not necessary to maintain the capacities, so they are excluded from
cut-off grade calculations.
*
Feasibility Study Update (September, 2010)
It is necessary to asses from now on if there would be any changes in the corporate expenses of Las Bambas
if the tonnage drops drastically or in the hypothetical scenario that considers the suspension of the project. If
there are changes, these costs should be excluded from cut-off grade calculations.
(1) (2)
These costs are charged entirely to Las Bambas, since that MMG has no more projects or operating mines in Peru so that you can
distribute it among them. Report preparers had no detail on what corporate cost MMG would not stop if Las Bambas would be
paralyzed, if these costs exist, it should be excluded from the cut-off grade calculations.
Variable Fix
Cost Component
% %
Mining Cost 72.64 27.36
Differential Cost 100.00 0.00
Processing Cost 88.76 11.24
Selling Costs 100.00 0.00
G&A Cost 0.00 100.00
(*1) Mine Unit Cost with Re-handling / Total Material Moved US$/t moved 1.70 1.70 In line 2015 Plan v M&A Scenario
(*3) 2015 G&A cost was estimated according to the support areas organizational structure and the needs for the normal development of the business. There is the possibility
to reduce the Community Relations costs, an scenario was run according to the future commitment. The unit cost for CR area will decrease to US$0.20/ t milled aprox.
*
Feasibility Study Update (September, 2010)
(1)
Copper Recoveries for 2015 come from the recovery model of each open pit and its average value per GMU was obtained from the
MineSight pit optimization software.
Furthermore, the contribution of copper to the total value of a tonne of ore is approximately 96%, with the
other 4% coming collectively from Molybdenum, Gold and Silver. This is the reason why Las Bambas decided
to express cut-off grades based on CuEq. Nevertheless, noting the importance of understanding and
demonstrating the full impact of costs incurred across the whole production chain, Las Bambas generated
NSR calculations and has applied it in the block model in order to assign a reference value to each block.
This NSR cut-off value is equal to all site-based costs and other costs considered, as per MMG guidelines
being applied.
Where:
This formula will be applied to metal prices considered both for Ore Reserves and Mineral Resources.
All cut-off grade calculations have been generated to apply to equivalent copper grades. In the following
sections, each calculation detailed.
At Ferrobamba, the crusher is immediately adjacent to the exit point of the final pit. The haulage distance for
ore is much shorter than that haulage route for waste to the waste dump. These differences in the haulage
distances to crusher and the waste dump generate differential costs which are charged to the processing cost
and are therefore considered when evaluating the destination of a material block.
A primary crusher is planned to be installed between the Chalcobamba and Sulfobamba pits that provides
ore to Mill plant. Due to this configuration, the ore will be hauled from these pits to a point 3 km from
Chalcobamba and 7 km from Sulfobamba. The cost of hauling waste for these pits is lower than for ore
because the waste dumps are planned to be located near these pits.
The following tables show the methodology and the values used for the BCOG inpit calculation for each
mineral type pit by pit.
NSR BCOinpit US$/t processed 8.29 8.29 8.29 8.29 8.29 8.29 8.29
These calculations of BCOGinpit will be applied to each mineral type for each open pit when determining the
Ore Reserves.
The following tables show the methodology and the values used for the RCOGinpit calculation for each mineral
type pit by pit.
Factor Unit Conversion Factors Used: lb/t processed 2204.62 2204.62 2204.62 2204.62 2204.62 2204.62 2204.6
NSR RCOinpit US$/t processed 8.29 8.29 8.29 8.29 8.29 8.29 8.29
These RCOGinpit calculations will be applied to each mineral type for all open pits when determining Mineral
Resources.
The costs used for this Cut-Off Grade are only the variable processing costs, the differential costs by hauling,
variable G&A and sales. Sustaining capital costs are not required for this calculation.
The applicability of this cut-off could occur in the hypothetical scenario where in a period the Mill capacity is
not filled with ore above the BCOGinpit cut-off from the mine exclusively, having excess mining capacity and
also if there were no ore in stockpiles. The MCOGinpit cut-off could be applied in order to find ore from mine
that allows Mill capacity to be filled. This is probably more likely to apply in the last years of mine life,
because in the early years is unlikely that do not exist BCOGinpit material and to apply it when there are
BCOGinpit and SCOGinpit materials could lower profitability by sending low-grade ore to Mill plant.
The following tables show the methodology and the values used for the MCOGinpit calculation for each
mineral type pit by pit.
NSR MCOinpit US$/t processed 5.34 5.34 5.34 5.34 5.34 5.34 5.34
The costs used for this Cut-off Grade calculation are all operating costs including fixed, variable and mining
and processing sustaining capital, G&A and selling costs.
The following tables show the methodology and the values used for the TCOGinpit calculation for each mineral
type pit by pit.
NSR TCOinpit US$/t processed 9.86 9.86 9.86 9.86 9.86 9.86 9.86
Establish a cut-off grade for these materials come up because when rehandling in order to process them
finally, there are costs associated with this activity have to be covered by such materials. In addition, there is a
possibility that after many years being exposed to the environment, metallurgical recovery is not the same as
if they were mined and processed immediately, as a result of physical and chemical changes. All these factors
have been considered when assessing what mineral types could be stockpiled to maximize the NPV.
The following tables show the methodology and the values used for the SCOGinpit calculation for each
mineral type pit by pit.
Marginal Cut-Off grade (Marginal COG) - to determinate the mineral able to pay processing costs,
processing sustaining capital, an incremental cost for mining a tonne of material as ore instead of
waste, and G&A costs;
Break-even Cut-Off Grade (Break-even COG) - was formulated in the same way that the Marginal
CoG, with the addition of the mining cost plus the mining sustaining capital cost;
CoG for Stocks (Stocks COG) - whose purpose was to restrict what ore should be stockpiled
strategically to maximize the NPV, taking into account the ore rehandling cost and the processing
cost including processing sustaining capital.
The following tables show that each type of ore processed had a different cut-off, mainly because each ore
type will have its own recovery. However, Las Bambas has been applying a unique cut-off grade of 0.20% Cu
for all ore types and all open pits. This strategy had been intentionally applied to not exceed the tailings dam
capacity by processing mostly high-grade ore. With 2015 estimates, each mineral type will be affected by its
own cut-off grade during the Ore Reserves and Mineral Resources estimation process, as well as the
development of mining plans.
These strategies will allow Las Bambas to maximize its NPV without losing years of life, because the low-
grade ore stockpiled will be rehandled during the last years of LoM, the cut-off grades calculated will be used
as necessary and at the appropriate time.
900,000 1.80
800,000 1.60
700,000 1.40
600,000 1.20
Tonnage (Kt)
500,000 1.00
400,000 0.80
300,000 0.60
200,000 0.40
100,000 0.20
0 0.00
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95
Tonnage 857,4 847,3 803,4 736,2 656,7 584,3 515,4 455,2 397,9 349,1 309,8 278,3 252,3 230,1 211,4 195,4 182,4 171,2 161,5 152,6
Grade 0.59 0.60 0.63 0.68 0.74 0.80 0.87 0.94 1.02 1.11 1.19 1.26 1.33 1.40 1.47 1.53 1.58 1.63 1.68 1.72
Figure 1 shows the tonnage of mineral for different cut-off grades of the most important open pit that will be
soon operated in the Las Bambas Complex; from it can be seen the sensitivity of the Ore Reserve to the cut-
off grades, a reduction in the cut-off of 0.20 to 0.15% Cu would add about 70Mt of low-grade ore.
350,000 1.60
1.40
300,000
1.20
250,000
Tonnage (Kt)
1.00
200,000
0.80
150,000
0.60
100,000
0.40
50,000 0.20
0 0.00
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95
Tonnage 368,6 340,6 302,0 265,2 234,2 207,3 183,2 161,9 144,9 127,6 113,2 99,43 86,93 77,67 69,72 63,21 56,91 51,84 47,46 43,44
Grade 0.46 0.49 0.55 0.61 0.66 0.72 0.78 0.84 0.89 0.95 1.02 1.08 1.16 1.22 1.28 1.34 1.40 1.46 1.52 1.57
1.80
100,000
1.60
1.40
80,000
1.20
Tonnage (Kt)
60,000 1.00
0.80
40,000
0.60
0.40
20,000
0.20
0 0.00
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95
Tonnage 106,6 88,14 79,24 69,15 59,98 51,84 46,27 41,92 37,94 35,18 33,42 31,30 29,62 27,65 26,05 24,54 23,61 21,25 19,68 18,84
Grade 0.52 0.63 0.69 0.77 0.86 0.96 1.04 1.12 1.19 1.26 1.30 1.35 1.39 1.45 1.49 1.54 1.57 1.65 1.72 1.75
Figures 2 and 3 show the tonnage of mineral for different cut-off grades of Chalcobamba and Sulfobamba
open pits respectively, both pits are sensitive to add ore between a cut-off of 0.20 and 0.15% Cu, with
Chalcobamba the more sensitive of the two.
Table 44 shows all costs associated with the sale of concentrates, which have been used to calculate the NSR.
*
Feasibility Study Update (September, 2010)
(1)
Costs for FPSL GMU
Taking a reference block from the block model of Ferrobamba open pit, the NSR was calculated for that
block, which has Cu, Mo, Au and Ag grades, in addition to GMU and recovery model for the copper and the
flat recoveries for the other metals, the metallurgical recoveries and grades that would have each metal in the
concentrates were considered. The following table shows the details of the selected block on which the NSR
calculations were performed.
Refining Charges 0.01 US$/lb 4.5 US$/oz 0.35 US$/oz 1.6 US$/lb
11 US$/t. conc 0.00 US$/t. conc 0.72 US$/t. conc 1,711 US$/t. conc
Total Deductions 304 US$/t. conc 0.00 US$/t. conc 0.72 US$/t. conc 1,982 US$/t. conc
Value After Deductions and Refining 2,330 US$/t. conc 0.0 US$/t. conc 42.5 US$/t. conc 9,886 US$/t. conc
If the NSR BCOinpit = 7.64 US $/t processed is applied to this block, the destination for this block will
be the Mill plant for its respective processing.
With this value of NSR, the total block value is calculated. Taking into account the mining costs incurred for
extracting this block, the result is shown below:
(2)
Profit per tonne = 31.44 US$/t
Mining Cost = 1.63 US$/t
Value per tonne = 29.81 US$/t
Value per Block = 470,353 US$
(2)
This value is obtained by subtracting to NSR, the processing cost (includes sustaining capex), G&A and ore differential costs.
- Costs for calculating cut-off grades are perhaps the most important inputs. Therefore it is necessary
that cost modelling is adequate. Conventional cost modelling usually involves excessive averaging and
unclear allocation of costs to tonnes produced as well as the distinction between fixed and variable
costs.
- It is recommended to undertake a study at Las Bambas into the use the activity-based costing (ABC
Costing) as this technique involves a more responsible and detailed cost modelling that reflects more
accurately the cause-effect relationship between activity costs and the cost drivers they are attributed
to. The objective would be to identify what percentage of the costs that have been considered variable
up to now, really are, otherwise they would be considered fixed and therefore should be charged to
the bottleneck (Processing capacity).
- The costs used for the cut-off grades calculations in Las Bambas operations come from a cash flow
model that does not distinguish expenditures for each open pit, thereby potentially undervaluing or
overvaluing either one.
- The recovery model for copper and the Feasibility Study recoveries considered in the cut-off grade
calculations are approximate only. As a result, Las Bambas needs to develop a metallurgical recovery
model applicable to each block in the block model, taking into account the GMU, solubility rate, metal
grades and other metallurgical variables. The information from recent drilling at the Ferrobamba zone
and the metallurgical test at Sulfobamba could be used for this aim. It is also necessary to develop a
recovery model for low-grade ore, which will be stockpiled in the stockpiles for 15 to 20 years.