Planning and Design of Surface Mines

Robert Laurich, Editor

5.4 Optimum Production Scheduling
Ernest L. ohnet
!he ob"ecti#e of production scheduling is to ma$imi%e the net present #alue and return on in#estment that
can be deri#ed from the e$traction, concentration, and sale of some commodit& from an ore deposit. !he
method and se'uence of e$traction, and the cutoff grade and production strateg& (ill be affected b& the
follo(ing primar& factors)
*. Location and distribution of the ore in respect to topograph& and ele#ation+
,. Mineral t&pes, ph&sical characteristics, and grade-tonnage distribution+
.. Direct operating e$penses associated (ith mining, processing, and con#erting the commodit& into
a salable form+
4. /nitial and replacement capital costs needed to commence and maintain the operation+
5. /ndirect costs such as ta$es and ro&alties+
0. 1ommodit& reco#er& factors and #alue+
2. Mar3et and capital constraints+
4. Political and en#ironmental considerations.
!he procedure used to establish the optimal mining schedule can be di#ided into three stages. !he first
defines the e$traction order or mining se'uence, the second defines a cutoff grade strateg& that #aries
through time and (ill be optimal for a gi#en set of production parameters, and the third defines (hich
combination of production rates of the mine, mill, and refiner& (ill be optimal, (ithin the limits placed b&
logistical, financial, mar3eting, and other constraints.
/n order to de#elop an optimum production schedule, a se'uence or e$traction order inside of the so5
called ultimate pit must first be determined. !he e$traction se'uence depends on t(o subsets of
parameters. !he first deals (ith the strip ratio associated (ith reco#ering the ore, the grade of that ore,
and the ph&sical location of that ore in respect to a#ailabilit& through time.
!he second subset of parameters consists of costs associated (ith starting and maintaining the (hole
operation. Direct operating costs can be used to define a brea3e#en cutoff grade and strip ratio, but the
ob"ecti#e of mine planning is to de#ise a strateg& that (ill optimi%e the total in#estment. Operating at
brea3e#en cutoffs and strip ratios is onl& optimal for the final phase at the end of the mine life.
efore the mine production planning commences, a great deal of (or3 has alread& been completed in
e$ploration and modeling the deposit. 6rom this (or3, a number of tentati#e assumptions ha#e been
made, including the most probable mining method and hence, the bench height, t&pe, and appro$imate
si%e of the loading e'uipment and the mining selecti#it&. Other test (or3 and assumptions (ill also ha#e
been made regarding the t&pe of process needed to reco#er the commodit&. !hese parameters (ill be
used to estimate the most probable range of mining and processing costs.
!he design of the mining phases can be accomplished b& rough manual appro$imation after re#ie( of the
bench plans and cross sections, or anal&ticall& b& computer techni'ues. Each method has ad#antages
and disad#antages as applied b& an e$perienced engineer, but the method chosen is determined b& the
accurac& re'uirements and a#ailable funding. /f the stud& ob"ecti#e is #er& preliminar&, (ith little basic
data a#ailable, then manual methods can be "ustified. /f the stud& is to be a sound basis for in#estment
and de#elopment of the mine, and a great deal of information has been collected, then a #er& thorough
computer anal&sis is (arranted.
1omputer designed phases can be determined b& feeding the data de#eloped and stored in a computer
bloc3 model into a set of programs that can be used to calculate an economic phase limit. !he ob"ecti#e is
to de#elop three dimensional e'ual profit potential surfaces throughout the mineral deposit. Each surface
has to be sufficientl& spaced apart to allo( ade'uate room for mining the slices bet(een the surfaces.
Since the distance bet(een e'ual profit potential surfaces (ill #ar&, some manual ad"ustments (ill be
re'uired, as (ell as the addition of haul roads out of a phase and if re'uired, access left for the ne$t
phase. See Fig. 5.4.1.

6igure 5.4.*
Manual methods depend on ha#ing an e$perienced engineer re#ie( the bench plans and cross sections
through the deposit to #isuall& pic3 out the higher grade targets that ha#e reasonable strip ratios. 6or
e$ample, it (ould be incorrect to first target high grade areas for mining ha#ing #er& high strip ratios that
reduce the net #alue of the reco#ered ore belo( the net #alue of medium grade ore in another area (ith
much less stripping. !he manual method is onl& a first step estimate and, therefore, it (ill not be as
accurate as a computeri%ed techni'ue.
1omputeri%ed pit limit determinations can be made using the ,5D Lerchs57rossman method, or three5
dimensional techni'ues, such as the floating cone or the .5D orgmann pit design method. !he results of
the last t(o s&stems are nearl& the same, the difference being that the floating cone is a computeri%ed
trial5and5error method (hile the orgmann is an anal&tical method.
!he strateg& used in de#eloping the computeri%ed pit phases is to use higher costs or lo(er commodit&
prices in the initial phase and then, for each successi#e phase, lo(er costs or higher commodit& prices
are used. !he net effect of this strateg& is that the initial phase (ill ha#e a high brea3e#en cutoff grade
and high net #alue per ton of ore mined, and each follo(ing phase (ill ha#e a lo(er cutoff grade and net
#alue per ton of ore.
!he accurac& of the estimated costs, reco#eries, and commodit& price parameters need onl& be
reasonabl& precise, since the& are onl& used to determine the location of the ores (ith the relati#e highest
to lo(est net #alues.
1ost estimates needed for determining the e$traction se'uence can be bro3en do(n into three distinct
ma"or categories) 8*9 costs per ton of material mined+ 8,9 costs per ton of ore treated+ and 8.9 costs per
pound of commodit& produced.
!he costs per ton of material mined include the direct mining costs per ton for the drilling, blasting,
loading, hauling, ancillar& e'uipment, and mine general and administrati#e functions. !he cost per ton of
the capital and replacement e$penditures for mine mobile e'uipment related to the total material mined is
also included because the ma"or mobile mining e'uipment is consumed in appro$imate direct proportion
to the amount of material handled b& the e'uipment, unli3e the ma"or initial capital cost components of the
plant and infrastructure. !he plant components that are replaced or repaired are usuall& included in the
operating maintenance costs per ton of ore, and are not related to the total tonnage mo#ed in the mine.
!he depreciation cost to co#er mobile surface mine e'uipment purchase and replacement (ill usuall& be
in the range of :;.*5 to :;.,5 per ton of material mined. !he magnitude of the cost (ill depend on the
si%e, t&pe, and anticipated life of the e'uipment, the mine production le#el, the haulage distances, and the
(or3 schedule.
!he most important reason for including mine mobile e'uipment depreciation is that the method of
producing three5dimensional e'ual profit surfaces in the ore deposit must consider all rele#ant costs per
ton of material mined. /f the e'uipment depreciation (ere not included, then the cost per ton of material
mined (ill be understated and the phase design (ill tend to mo#e out into higher stripping ratio areas.
!his (ould not matter if the relati#e strip ratios (ere e'ual in all directions around the pit perimeter, but
this is rarel& so. /n most mineral deposits, there (ill be areas of high and lo( strip ratios, so mo#ing too
far out into a high strip ratio area (ill lo(er the net #alue of the phase, and the .5D surface generated (ill
no longer be of e'ual #alue.
!he significance of this costing philosoph& can be reali%ed in mining operations (here the direct operating
costs per ton of material are lo( relati#e to the mine e'uipment depreciation costs per ton of material.
<s an e$ample, compare t(o surface mining operations, one located in the Philippines, the other in
<las3a. !he net #alue of a mining increment in each of the pit (alls is compared.
Philippines Alaska
Direct mining cost-ton of material :;.,5 :;.4;
7ross #alue-ton of ore f.o.b. mine :..;; :..;;
/ndicated brea3e#en strip ratio *,5* = **)* ..255*= ,.25)*
if :;.,;-ton of material is added for mobile mine e'uipment depreciation) brea3e#en
strip ratio
5.02)* ,.;;)*
> change 44> ,2>
/n summar&, the net #alue of the ore in an incremental slice has to be sufficient to carr& all direct operating
costs and the initial and replacement e$penditures for mobile mine e'uipment. /f the mine e'uipment
depreciation is not included, areas (ith a much higher brea3e#en strip ratio (ill be incorporated into the
mine phase, resulting in an o#erstatement of the net #alue of ore deri#ed from those high strip ratio areas
in the phase.
!he second cost collection area is the cost per ton of ore treated and includes e$penditures applied to the
ore once it has left the mine area. !hese costs are not related to the total 'uantit& of material remo#ed
from the surface mine, but onl& applicable to the ore tonnage to be treated. Direct costs applied (ould be)
*. E$tra costs associated (ith transporting the ore to treatment facilities+
,. 1rushing and grinding costs+
.. 1oncentrating cost+ and
4. O#erhead costs to co#er site and head office administrati#e and general e$penditures as (ell as
mar3eting, sales, and propert& management costs.
!he third cost categor& is the e$penditures incurred per unit of salable commodit&8ies9 produced. !his
(ould co#er the sums spent for concentrate handling and transportation, smelting, and refining, and an&
ro&alties or ta$es that relate to gross re#enues rather than profits.
/n addition, a certain amount could be inserted into this categor& to ensure a minimum profit per pound of
salable product.
/n order to determine the 'uantit& of salable product, reco#eries ha#e to be estimated for the
concentrating, smelting, and refining processes. Reco#eries should be based on pilot plant results or on
reco#eries obtained at mines (ith similar ores and processes.
7ross re#enues are determined from the 'uantit& of salable commodit& produced multiplied b& a specified
commodit& price.
!here are specific reasons for including some costs and e$cluding others in the determination of the
mining limits. !he best manner to "ustif& the inclusion or e$clusion of a cost parameter is to first ans(er
the 'uestion of (hat factors are reasonabl& 3no(n or un3no(n. !he 'uantit& of minable ore reser#es, the
strip ratio, and the associated cost per ton of ore for capital are not 3no(n at the commencement of the
design. Reasonable estimates can be made as to)
*. Mining cost per ton of material+
,. Mining e'uipment depreciation or cost of the mining e'uipment consumed per ton of material
mined+
.. Ore treatment costs+
4. 7eneral o#erhead costs per ton of ore+
5. <nticipated reco#eries+
0. Direct charges per pound of salable product+
2. 1ommodit& price+ and
4. Minimum profit e$pected per pound of commodit& produced.
?sing these estimated factors, a brea3e#en cutoff grade can be determined and the final pit limits and
total minable ore reser#es determined for the brea3e#en cutoff grade. 6rom these basic parameters,
optimi%ation routines can be applied in order to determine the best e$traction se'uence.
Table 5.4.1 illustrates an e$ample of t&pical base economic parameters used to determine phase
increments in a copper mine. /f the #alues (ere used (ithout modification, the ultimate pit limits (ould be
determined. Since the ob"ecti#e is to define internal phases of higher net #alue, either an artificial cost is
added to the cost per unit of salable product or the commodit& #alue is lo(ered.
/n selecting the economic parameters go#erning the si%e of the first phase, the ob"ecti#e is to establish a
phase that contains sufficient ore reser#es for about a fi#e5&ear period. !his inter#al (ould correspond to
the pa&bac3 period and, therefore, it is important to locate the ore (ith the highest net #alue during the
initial mining se'uence.
6or e$ample, to tr& to design the initial phase, an artificial cost of :;.5; per pound of copper could be
added or subtracted from the commodit& price so that the ore cutoff (ould be raised to ;.4;> and onl&
material abo#e this cutoff (ould be classified as ore and generate funds to pa& for the remo#al of (aste.
!he ob"ecti#e (ill be to generate a series of phases spaced sufficientl& apart for practical mining,
commencing (ith an initial phase that roughl& corresponds to the pa&bac3 period, follo(ed b& a series of
progressi#el& larger phases out to the ultimate pit boundar&. !he #ariations in costs and the number of
phases are determined b& combining "udgment (ith a trial5and5error method. One computeri%ed
techni'ue that can pro#ide guidance in selecting the #arious phases and economic parameters is the ,5D
Lerchs57rossman method. & selecting a fe( t&pical sections through the ore deposit, relati#el&
ine$pensi#e ,5D pit limits can be determined for #arious economic parameters. !hese results can then be
used to set the #ariable costs needed to determine the pit limits using .5D computer techni'ues.
!he preceding discussion has described the method used to define the internal pit phases. !his is the first
stage in defining the optimum production and cutoff grade strateg&. !he second step is the determination
of the optimum cutoff grade strateg& to be used from one phase to the ne$t, for a defined trial production
rate. Onl& cutoff grades e'ual to, or less than, the cutoff grade for a particular phase can be used for
determining the optimum cutoff grade. /f an attempt is made to use a higher cutoff grade, the ph&sical
shape of the phase (ill no longer be #alid since the pit (all location depended on re#enues from a
specified amount of ore that (ill no longer be a#ailable. !hat is, pre#ious lo( grade ore bloc3s (ill no( be
(aste (ith negati#e re#enues.
/n the situation (here lo( grade roc3 has to be remo#ed from the pit to e$pose ore, a lo(er cutoff grade
can be used to determine if that lo( grade material should be processed. !his lo(er cutoff grade is called
the internal cutoff grade and is determined b& ignoring the mining cost in the brea3e#en cutoff grade
calculation.
!he optimum cutoff grade (ill usuall& start at a some(hat higher le#el than the brea3e#en cutoff grade
and (ill be reduced in time to e'ual the internal brea3e#en cutoff grade. !he higher the production le#el,
or for a marginal deposit, the less difference there (ill be bet(een the optimum and brea3e#en cutoff
grades.
!he optimum production le#el can be determined on a strictl& economic basis, but (ith large ore deposits,
other constraints such as mining logistics, mar3eting, and financing (ill pro#ide limits.
!he best strateg& can be determined graphicall& b& #ar&ing the production rate and cutoff grade for a
number of combinations. Figure 5.4.2 illustrates the results from t(el#e strategies) three production rates
and four cutoff grade alternati#es. 6or e$ample, if three pit phases (ere determined using brea3e#en
cutoff grades of ;.4;, ;.0;, and ;..;> copper, then four alternati#e cutoff grade strategies could be)
6igure 5.4.,.
1utoff grades used inside of each phase
<lternati#e ;.4; phase ;.0; phase ;..; phase
* ;.4 ;.0 ;..;
, ;.0 ;.0 ;..;
. ;.45 ;.45 ;..;
4 ;..; ;..; ;..;
!hese cutoff strategies can then be applied to each of the three alternati#e production rates.
< second, more rigorous method to determine the best mine-mill-refiner& production rate and cutoff
strateg& is to use the approach presented b& @.6. Lane. LaneAs method considers the constraints placed
on the operation b& the mine, mill, and refiner& 8or mar3et9. ?tili%ing the grade-tonnage cur#es for each of
the phases de#eloped in the pre#ious stage and combining this (ith the three categories of costs, plus a
fi$ed cost per &ear, the optimum cutoff grade strateg& on a net present #alue basis can then be
determined, for a gi#en set of production parameters of the mine, mill, and refiner& 8mar3et9. !his anal&sis
is more accurate than a graphic solution since the program (ill fluctuate the cutoff grades through time to
match the uni'ue ph&sical distribution of the ore in the #arious increments.
/n order to de#elop a practical e$traction se'uence using this method, a scheduling program has to be
first applied to the phases to define the progressi#e mining se'uence. !his allo(s the program to
recogni%e the internal stripping #ariations and permits the progressi#e remo#al of material from more than
one phase simultaneousl&+ it permits prestripping of an outer phase as ore is being dra(n from an internal
phase.
/n order to determine the optimum production capacities of the mine, mill, and refiner& that (ill ma$imi%e
the net present #alue, a trial5and5error method is used. /nitial capital costs estimates are subtracted from
the BPC to allo( ran3ing of the #arious production rate alternati#es.
LaneAs method allo(s the mine planner to readil& tr& more alternati#es and complete sensiti#it& anal&ses
on commodit& price, reco#eries, and other cost parameters.
!he preceding discussion has outlined the procedures that can be used to determine the optimum
production schedule and cutoff grade strateg&. !he completed anal&sis (ill ser#e to guide the engineer in
detailing the production schedule for both short and long range plans. /n cases (here the operation is in
e$istence, the same anal&sis can be completed so that fluctuations in commodit& #alues and costs can be
'uantified and the plan altered accordingl& to optimi%e the e$traction strateg&.
/t should be noted that in follo(ing through the procedures outlined, the basic pit design should be
completed first (ith fe( or no constraints. !he design can then be modified and the costs resulting from
constraints can then be 'uantified. 1onstraints ma& be the number of (or3ing faces needed for a
particular production rate, (aste dump locations, drainage routes, propert& boundaries, ore deli#er&
points, mar3et capacit&, en#ironmental constraints, and the a#ailabilit& of personnel, e'uipment, and
financing.
Designing the best and most practical production schedule for each uni'ue ore deposit is a comple$ tas3,
and onl& b& using a logical procedure that isolates and pro#ides a solution for one set of #ariables at a
time can a satisfactor& and optimum solution be determined.