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Application of Whittle Four-D to Risk Management

in Pit Optimisation
T Tulp1

ABSTRACT
Nine case studies are presented to illustrate how risks can be: minimised
or quantified during pit optimisation, utilising Whittle Four-D software.
Each case study covers a specific problem that has been encountered from
a wide variety of pit optimisations.
Case A: Maximising profits when the tenement owner is paid a royalty
on tonnes processed.
Case B: Allocating product prices, rather than a single commodity
price during optimisation.
Case C: Quantifying processing costs that are affected by penalty
elements in the ore.
Case D: Exploration expenditures below current pits can be quantified
through the use of simulation techniques.
Case E: Alternative strategies can be quantified when pits are restricted
by tenement boundaries.
Case F: Relocation of mine infrastructure that requires large capital
expenditures, can be simulated by allocating costs to an area during
optimisation.
Case G: Evaluating alternative corporate strategies during pit
optimisation.
Case H: Sensitivity analysis for price, processing cost and mining cost.
Case I: Quantifying the advantages of using additional mining capacity
during the early periods of mining.

INTRODUCTION
Whittle Four-D consists of a suite of programs to optimise and
analyse open cut mines. The optimisation uses the
Lerchs-Grossmann algorithm, and the analysis takes time, mining
and processing costs and the entire mining cycle into
consideration.
Thoughtful application of the software can substantially assist
in the analysis of risk factors associated with financial and
management decisions related to open cut mining.
Several case studies will be presented aimed at addressing
various applications of 'pit optimisation' and its uses in
identifying and simulating risk factors.
Four-D is a modular set of programs that are used to set up
inputs (FDUT, FDED, FDST), optirnise (FDOP), check (FDPR)
and analyse (FDAN) the results from an ore model.
The optimisation process requires the following to be
available:

1. Tom Tulp Geological Services, 100 Westview St,


Scarborough WA 6019.

4th Large Open Pit Mining Conference

1.

A block model, generated from a general mining package,


which contains:
regular block sizes;
waste and 'air' tonnes for each block;
identification names for each ore or waste type;
tonnes and metal units for each 'ore parcel'; and
adjustment factors for mining and processing costs.

2.

A financial model, which is generally set out in a


spreadsheet and contains:
price of the metal unit;
costs per tonne, for waste mining and ore mining and
processing, at the reference block;
cost adjustments, which vary from the 'unit costs' for
each rock type; and
positional cost adjustment for waste mining and
processing.

3.

Slope angles and directions required to maintain the


geotechnical integrity of the pit.
Pit optimisation and design is an iterative process that may
require many runs to learn the impact of each decision-making
step. Forward planning, to define the problems or scenarios, and
subsequent implementation of each of the program modules, has
to be carefully considered in order to achieve the maximum
benefit. Within the model and parameter files used by Four-D,
there are many criteria that can be applied to control the
optimisation and analysis.

Classifying the orebody


Forethought in classifying the 'ore types' during the modelling
stage allows control of the optirnisation and subsequent analysis.
Four-D can handle 25 combinations of processing methods and
'ore types'. The following guide lines could be used to assist in
classifying the 'orebody' into 'ore types'.
Irregular metallurgical recoveries can be simulated by dividing
the orebody into types that have differing recoveries.
Penalty elements that affect reagent consumption or affect the
price can be used to distinguish the ore types.
Statutory requirements for measured, indicated and inferred
categories can be used.
Ore habits, such as oxidised/sulphide or vein/disseminated are
properties that can affect the metallurgical recoveries and
subsequent block values.
Each 'ore' or 'rock' type may have different mining
characteristics that may uniquely affect the mining or processing
costs.
Product price for an ore/rock type (such as iron ore) can also be
used to categorise the ore types.

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CASEA:
An old mining claim is located within the proposed pit boundary

and agreements are in place to pay a tonnage royalty for all


tonnes milled from the claim.
The risk in' establishing this agreement early, without further
negotiations at the pit optimisation stage could result in the loss
of revenue to the company and original tenement owner.
Processing costs are based on all costs associated with 'ore',
consequently the area beneath the old claim has a higher

processing cost than the 'ore' outside the old tenement area. Since
the 'ore' under the old claim is more expensive, the pit may be
shallower, with less ore being mined and profits to the tenement
owner and the company will consequently be less.
By uniquely identifying the 'ore' beneath the claim, royalty
rates can be changed during optimisation and the differing profits
can be itemised (refer Figure 1). This will identify the optimum
royalty for the pit so that both the company and the tenement
owner will make the maximum profit.

$140 - , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
Optimum profit/or company
anti claim own.r.

$120
$1.50
$100

~~

E~
._
c:

..

$80

.!!12
U:I
_0

Ill:

C: ...
'Q- $60

'l:

$40

............................................................................................................................. $.O.~ ........

Differing 'Ore Types' used to control


ore costs during optimisation and

$20

an~ysis

$O..L..-+----1----f-----t----f----t-----+----lH4'l;OO
9803929
9724384
9753150
9783404
9791652
9797985
9813714
9848445

Company Profit

1--

Profits for various Royalty Rates]

FIG 1 - Case A: company vs claim profiL

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APPLICAnON OF WHITTI...E FOUR-D I PIT OPTIMISATION

CASED:

CaseB

Whittle Four-D allows only one price to be used during


optimisation and analysis with gross value of a block being
calculated by using the standard formula:

Ore Block

Value = Metal

* Recovery * Price

Fine
Low

$O.40/Unlt

Grade
Ore
type

Ore A

OreB

OreC

0.50
10%

0.50
4%

0040

0040

10%

4%

0045

0.48

0.36

0.38

0.938

1.000

0.750

0.792

Ore 0

High
OreE

Dust was lost from the system and no processing methods were
allowed. The rest of the products had a 100 per cent metallurgical
recovery.
To allow for the various product prices, recovery fractions
associated with the process method were adjusted to reflect the
price ratio associated with each product.
Value = Metal

* Recovery (= Price Ratio) * Price

This method valued the block correctly during optimisation


and allowed further analysis from the results file.
Obviously the recovered metal units reported in the analysis as
processed units were incorrect, and would have to be adjusted.

Dust
Low

High

4th Large Open Pit Mining Conference

$O.SO/Unlt

FIG 2 - Case B: ore block classification.

Ore blocks were classified (refer Figure 2) as 'high' or 'low'


grade by classifying on percentage Fe content and penalty
elements, such as P Si etc. present. Percentages of 'coarse', 'fme'
and 'dust' were then applied to subdivide the total block tonnes
into 'product type' tonnes. This classified the 'ore' tonnes into
'products types' and reflected the contract prices.
The following categories were set up:

Price
$/unit
RoYalty
Final
price
Price
ratio

Grade

Product
Price

46% as a 'coarse' product,


52% as a 'fme' product,
2% as a 'dust' product.
Contract payments are made for;
'coarse' at $0.50/unit
'fme' at$OAO/unit
Royalties rates are;
'high grade' at 10%
'low grade' at 4%

High

low

High
Grade

Royalty

Iron ore and coal often have contract rates set for different
products produced from the processing of the 'ore'. The example
comes from the iron ore industry where the ore is crushed and
screened, producing both a coarse and fme product.
Mined 'ore' was processed and resulted in the following
tonnages:

Coarse
Low

Grade

Classltlcallon

OreE

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CASE C:
Gold-eopper mineralisation is common and can have
metallurgical problems. Copper minerals react preferentially with
cyanide instead of gold, consequently affecting the cost of
processing (refer Figure 3).
Optimisation of this type of deposit using a single 'ore type'
increases the risk of including gold mineralisation which has a
high copper content and is uneconomic.

Four-D allows 25 'ore'-'processing' combinations to be


individually considered during optimisation and analysis.
Correct classification of the 'ore' should be based on the
copper content, which allows accurate allocations of the
processing costs to be applied.
Ore Type
Ore A
OreB
OreC
OreE
OreF
OreG
OreH
Ore I
OreJ
OreK

CuContent
100 ppm Cu
200ppmCu
300ppmCu
400 ppm Cu
500ppmCu
800 ppm Cu
1200ppmCu
2000ppmCu
2500ppmCu
5000ppmCu

Process Price
$12.30/t
$12.51/t
$12.94/t
$13.36/t
$13.79/t
$14.64/t
$16.13/t
$18.68/t
$25.76/t
$33.11/t

$35.00 . , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1

$30.00

Cl
C

'iij $25.00
III
11

Cost ofProcess(ng increases as Copper


content of'Ore' increases

~
Q,
1ii
0$20.00

.............

'-0',"""

L~_;_~_:;_t_:.c_a_t_io_n_O_{_'o_re_TY_'P_e_S_'_ba_s_.e_d_o_n_c
__
u-J

.. ..

.....

$15.00

$10.00

..L--+.------t---f---+---t---+------j---+---+---t100

200

300

400

500

800

1200

2000

2S00

SOOO

Copper content (ppm)

Cost of processi~l

FIG 3 - Case C: processing costs based on Cu content.

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APPLICAnON OF WHITILE FOUR-D IN PIT OPTIMISAnON

CASED:
Exploration risks below eXlstmg pits can be minimised by
applying simulation techniques.
Extrapolation of the 'orebody' below the current pit using the
re-blocking facility in Four-D can quickly add ore zones below
the CWTent orebody, which have similar plunge/dip characteristics
and similar tonnage and metal distributions as the known
mineralisation. Refer to Figures 4'and 5.
Optimisation of the simulated orebody will allow:
Identification of limits for the future expansion of the cWTent
pit.
Definition of the maximum perimeter of mining, to allow
rational relocation of surface infrastructure.
Preliminary identification of the surface-underground
interface.
With the aid of sensitivity analysis the minimum and maximum
extent of the exploration target can be estimated.
Using this type of approach to exploration, drilling targets can
be defmed and exploration can be staged to allow the minimum
risk of capital expenditure.

Simulating
exploration targets

Ropresenfatlve
secI10n 01 the
'erOllcx!'(

~Icotod

Extondlng the bIodc modoI


lo*nJkJle
explOronon 'orgets
01 dOplh.

FIG

5 - Case D: simulating exploration targets.

----------------------------------

ss

:.

l__

49

.c~

i.

Data Extracted via FDUT

T_O_Po_'_m_o_de_1o_c_cu_p_le_d.bY old

~---.
"---

43

--.

--

""'l"Io-_ _ ,.,... __

----~~

'ij37

'8
21

... 31
~

-~-~J.

~/~

.,.x:X--

iD

.:25

-----

~19

_____/

r
\

13

f---

J
_ __ ~

1:'~

-CRepresentative Zone forJ


Extrapolation

~
'[ Bu-e-o-rM--;;dcll-im-it;d

~I

PI~

bY~la-C~k-o-r-d-ataJ

due to limited drlIl: g inrormation.

1=-----"---+---+1-- -

--t---- - - t- -- - -

1000

SQO

-+-. 1500

---j

_. - - - - -

2000

Tonnes Ore & Metal units


(Thousandsl

FIG 4 . Case D: depth distribution of tonnes and metal.

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TTULP

CASEE:
Being able to optimise selected regions within the total model has
great advantages when there are several alternatives to a decision.
Each alternative can be evaluated, thereby defining the risk
factors, and a logical course of action can be implemented.
When pit perimeters encroach or extend beyond defined
boundaries, such as tenements or townships, Four-D can be made
to work within selected regions of the total model. This situation
can occur when the orebody is parallel to the boundary which
constrain the pit perimeter and consequently limits the depth
extension of the pit (refer Figure 6).
Using the reblocking facility a set of high cost blocks can be
included in the model. This will restrict the limits of the
optimisation, and financial difference can then be quantified
(refer Figure 7).
When the company is well informed before negotiations
commence, financial risks can be defined and can be used to limit
final settlements.

FIG 6 - Case E: pit optimisation with and without


restictions at the Tenement boundary.

$16 1--------;=::::===============~T------T5

IOptimisation without restrictions

$14

__ . __
.
Diffuence in opuating profit could be used to negotiate
rthu mining on the adjacent tenement

~ .............

'

$12

11
::I

..

$10

>1/1

DIg

~i

ii_
$8

"'"

s.-

$6

$4

$2

11

13

15

17

19

21

Pit Shell Number


- - Unrestricted Pit Discounted Cash
Unrestricted Pit Mill Tonnes

--- Restricted Pit Discounted Cash Flow


-0--

Restricted Pit Mill Tonnes

--------------------

FIG 7 - Case E: optimisation confined by tenements.

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APPLICATION OF WHITTLE FOUR-D IN PIT OPTIMISATION

CaseF

CASEF:
Mills, railway lines and old tailings dams, are all major structures
that may have to be re-located to allow for pit expansions. They
all represent large expenditures of capital and have a spatial
relationship to the pit and orebody.
Utilising Four-D's capacity to link areas together as additional
'arcs' the appropriate areas can be linked to the 'orebody' model
making them an integral part of the model which is to be
optimised (refer Figure 8).
Costs to relocate each feature can then be added to a single
waste block by giving it a very high tonnage which represents the
relocation costs.

Capital .. pendln..
to r.locat. the M11

_'4""

:,~:~ -----:=r'-r"-oL1

10 ,.,cx:at. ",. MII

Tonnage = Cost / unit cost of mining waste


The optimisation will determine if proposed mining operations
generate enough cash to move the 'obstruction'. Four-D produces
many 'pit shells' which can be used to determine the timing and
staging of moving the structure. Period analysis of the results fIle
will also indicate when the expenditure is to occur and what the
operation's cash flow will be during the transition periods.

Opllmuml'lt

""'.~.

Diagram shows
the nested structure of the pit shells
generated from the optimlsation
of the block model.

FIG 8 - Case F: capital expenditure to relocate the Mill.

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TTULP

CASEG:
The Lerchs-Grossman algorithm produces a pit with the
maximum profit.
Corporate strategies and risks may incorporate alternative
objectives which do not demand a maximum profit from the
mining operation. To achieve the alternative objectives however
some of the optimum profit has to sacrificed.
During the analysis of an operation it is worthwhile to examine
and quantify these alternative strategies. Output from the Four-D
analysis module can easily be imported into a spreadsheet for
further evaluation of the project.

The following have been cited as alternative objectives:


Maintain a rate of return.
Keep production costs below a ceiling.
Maximise metal throughput.
Maximise tonnage throughput.
Maintain an economy of scale.
Maintain a metallurgical blend.
Minimise risk.
Graphic presentation of the required criteria can quickly
demonstrate the alternatives, refer to Figures 9,10 and 11.

3500 1--------~=======;---1

3000

~-'"T'600

.
500

~.

2500

400

.... If corporate objectives are to produce below


1000

300 c

$450/0% then optimum profit can be sacri.fU:ed


to obtain additional mill tonnes from a huger

'-P_it_S_he_u_-,.-

~
CL

_
200

500

..

100
4

10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73
Pit Shell Number
Optimum Value ($) ~ Cost $/oz

FIG 9 - Case G: optimum value and cost/oz.

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Perth, 5 - 9 September 1994

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AI'Pl.ICATIO . OF WHITTl.E 1'0 R-D I

300

------

-----------------

PIT OPTIMISATIO

600

250

~um pit produc~s gold b~low S40010Z


200

--- ..

400

=~
cC
C

~.
u

C
::I

::1150

0::1

~o

=~
::e-

300 ~

Significantly mor~ milllonnts can b~


achitv~d iflht production cost art to
b~low S45010z although optimum
profils would bt sacrifictd

100

()

200
50

100

7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73
Pit Shell Numbers
~

Mill Tonnes
L--

Cost per Ounce ($Ioz)

__

FIG 10 - Case G: mill tonnes and cost per ounce.

---------------------------------------------,

50

E
::I
E

"I. variation from the optimum

value can us.d to assist In denning


alternative corporat. objectives

0.8

1i

,g

..

~==================::::;~_:J~~'_=_=_'~~~~.------_1_ 0.6 ~
l

il:
~

0.4

it-

or
exttnding tlte mint lift
can all bt qua"tifitd

-100

0.2

~~~~~~-H++++H_Hf+++++++++_~~~f+H+t_+-t++H_H+H++++++_J0

181

248

200

346

315

382

368

442

432

468

537

475

449

Production Costs ($Ioz)


Optimum Value

Mill Tonnes (t)

Recovered Gold

-<>-

Mine Life (Periods)

._------------------------- -

------- -----

FIG 11 - Case G: percentage variation from optimum value.

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TTULP

CASEH:

TABLE 1
. Sensitivity analysis for Case H.

Sensitivity analysis or 'What happens ifl', requires many


permutations of the 'base case' with variations in many of the
variables. Conventionally a Monte Carlo system would be used to
evaluate the many permutations that are possible.
An approximation can be achieved, however, through multiple
runs with the analysis module (FDAN) in Four-D.
Setting reasonable ranges for each of the three economic
variables (price. mining costs and process costs), multiple
valuations of a pit or pits, can be achieved (refer Table 1).
Similarly mining factors (dilution, recovery and rates) or milling
(recovery and rate) can be altered to simulate minimum and
maximum levels of achievement.
Results can be imported into spreadsheets for graphical
presentation (refer Figure 12) that will highlight the variability of
the anticipated results.

Cost M
CostP
-5%
Base
+5%
+100/0
+15%

$17.81
$18.75
$19.69
$20.63
$21.57

Price
$/oz

-5%
$1.19
Al
A2
A3
A4
A5

Base
$1.25
B1
B2
B3
B4
B5

+5%
$1.31

-100/0

-5%
$351.50

$333.00

C3
C4
C5

+10%
$1.37
D1
D2
D3
D4
D5

+15%
$1.44
El
E2
E3
E4
E5

Base
$370.00

+5%
$388.50

$407.00

Cl
C2

+100/0

16.,----------------------------------.
14

12

10

.................

...

/'

/..

..

MulJiple lIIIalysis /0' various pr/ca,

miJlln, IIIId

,ocasln, costs, wItltln /I sln,1L pit slldl CIIII be


. simply summarised usln, ~ frequency 0'
cumultl/ive frefUency dJstrlbulions.

o -'--~=--t--t_-+--+--r--+---+-_____1I_-+__-_+_-_____1--+__....J...O
o
500000O
100000oo
1500000O
200000OO
2500000O
300000OO
Operating Value (S)

--- % Frequency Wast Case

- - % Frequency Best Case

- - Cum. % Frequency Best Case -w-- Cum % Frequency Wast Case

'----------------------------------_._-FIG 12 - Case H: sensitivity analysis.

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Perth, 59 September 1994

4th Large Open Pit Mining Conference

APPLICATIO OF WHIT11..E FOUR-D IN PIT OPTIMISAnON

CASEI:

CONCLUSION

During analysis with Four-D, mining and milling rates are


mutually exclusive of each other when either one reaches its total
capacity.
This situation is often reached when a pre-strip is required on
an orebody. Additional mining capacity will be required to utilise
the latent mill capacity available during the initial periods. To
evaluate when and what additional capacity is required, a period
analysis of the results flle will rapidly indicate when the mill is at
full capacity and what 'normal mining rate' is required to
maintain that tJuoughput. The additional initial mining capacity
that is required can then be readily determined and evaluated
(refer Figure 13).
Simulating the mining fleet's capacity, through changing
mining rates and costs during analysis, minimises the financial
impact of having a mill running below capacity.

Thoughtful application of the Whittle Four-D software, can


quantify or simulate a variety of risk factors encountered during
pit optimisation.
Price, processing and mining costs can all be controlled during
optimisation with the correct classification of 'ore types' in the
block model. Large capital expenditures can be allocated to areas,
to simulate relocation of mine infrastructures. Simulation of ore
zones below current pits allows exploration targets to be defined
and quantified.
Boundaries confining the pit expansions can be used during
optimisation or used to define alternative strategies. Corporate
objectives and cost, orebody or mining sensitivities can be
quantified from the results of the optimisation.

8 -

---- ---

Additional J.Jm lonn..


_______.. mined dUring PI results In
Sl.2mll proOt for project

-J_.--------_.~--

--=::--<
/-

--------

$16

,.

$14

$12

$10 .:

"

S8

'/--

-<

-'" ./

../

.//

---........

/'

,
$6

....-

{ncreaslng tire mining rale tbulng PI malntllins tlte


.--

__ +
1

--

milling capacity to tlte maximum tlrereby increasing


tlte caslr flo .. tbulng tlte earl} periods of tlte mines life.

__-'---,

-,-

~
o

'-'-....."

$2

'"
""-,

--,_...L.

3
Period

.. .2

ii

~-

/----.<..

.,--"'''-/
~

o~-r::

so
5

Mining Rate set at 4m/perlod

Mining Rate Unlimited

Cumulative Opvalue for 4m tlperlod -

Opvalue for Unlimited mining rate

FIG I3 - Case I: additional mining rate.

4th Large Open Pit Mining Conference

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193

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