Many mines combine open-pit with underground mining, and often the

underground mine is an extension of the pit. * looks at some of the

challenges associated with this, and some methods with which to determine
the cut-over point from open pit to underground mining and the implications
these have on project value
As open pit mines deepen they often become burdened with excessive waste
stripping needs. Transitioning to underground mining is sometimes
considered a strategy to maximise both the value of the project and resource
recovery. In these cases appropriately managing the interaction between
open pit and the underground is key to the ongoing success of the project.
From a practical point of view, planning for the transition requires a long
lead-time as the implications on the ultimate pit and the underground design
can be significant. This means that determination of the cut-over point and
strategy should be thoroughly examined prior to the commencement of
construction. Economically, there are significant value opportunities and risks
associated with the success of this planning.
Sequential mining
In sequential mining the economic mineralisation is continuous over depths
that could be economically extracted by open pit and underground methods.
The open pit and underground operations are competing for the same
resource. Transitioning to underground becomes a viable option because of
the increasing strip ratio encountered at depth in the open pit as shown in
the diagram below. While underground mining has higher ore mining costs
than open pit mining, the costs typically increase by less as a function of
depth, as opposed to the In determining the optimal transition point the
following issues need to be evaluated:
a) Availability of feed - often, the open pit will have a greater productive
capacity than an underground mine due to the viability of lower grade
material and faster vertical advance rates
b) Feed grade - if the underground access is from within the pit, the higher
grade underground material is deferred until the completion of the open pit
c) Resource utilisation impact - there will be a lower marginal cut-off grade
used in the open pit than that used underground. This means that the open
pit is able to economically extract a greater portion of the resource in a given
area.
A variant of this case is where the orebody is first mined using underground,
then by open pit. In this case underground mining should occur much earlier
than open-pit mining of the same area; the additional mining costs
associated with underground mining and waste stripping (i.e. double
counting), rather than a single cost, needs to be compensated by a large
discounting benefit of underground mining earlier. This strategy is currently
being used by several large base and precious metals mines in Australia. The
strategy is largely driven by the increase in commodity prices over recent
years. The increase in commodity prices has made larger open pits
economically more attractive.

Parallel mining
In the parallel mining method scenario there is an opportunity to mine both
open-pit and underground operations simultaneously, for distinct
independent deposits or areas where the orebody under an open pit can be
accessed from the surface. Parallel mining has its own challenges which
include:
a) Sequencing complexity the mining of higher grade underground material
may be brought forward in the schedule
b) Access costs these costs are likely higher than if the underground was
mined after the open pit, due to longer shafts or declines
c) Process capacity this is planned on the basis that the open pit mining
capacity may
lead to a shortfall of ore supply if the open pit is exhausted and the
underground mine is the only ore source
d) Management the operational complexities associated with managing two
mining fleets and two mining cultures include the potential blending of high
and low grade ore sources which will affect the optimisation of processing
performance. There are typically three approaches to determining the cutover point.
Biggest economic pit
A common approach to determining open pit to underground cut-over is to
focus on the
economic size of the open pit. Consideration of underground mining is
secondary and is based on the remaining resource outside this pit. This is the
simplest approach. It can be determined using any one of a number of
commercially available pit optimisation software packages. The pit will
terminate at the point that the marginal cost of waste stripping outweighs
the marginal revenue generated by additional ore processing.
Incremental undiscounted cash flow
The marginal profit derived from the pit associated with depth decreases
with depth. Given that underground mining profits are less dependent on
depth there will likely be a shallower point where the marginal profit of the
underground exceeds that of the open pit. Using this method the cut-over
point is the depth at which the marginal profit from the open-pit is equal to
the marginal profit from the underground. This is usually shallower than the
largest economic pit method. This method can also be achieved undertaken
using commercially available software.
Automated scenario analysis
The methods mentioned above do not account for discounting. As the
underground mine operates at a higher cut-off grade than the open pit, it will
deliver a higher grade and normally higher cashflow for the same
throughput. Therefore there is likely a discounted cashflow benefit from
generating this cashflow early which may elevate the optimal transition
point. The only way to test this is to complete schedules (which include
open-pit and underground mining) and derive an NPV for each potential
transition point. Depending on the complexities of the mine deriving a new

schedule for each transition point can be very time consuming, and to test a
reasonable number of transition points in a reasonable time, automated
optimising scheduling software should be used. The software should be able
to handle both underground and open-pit mine scheduling simultaneously,
and should be able to develop an optimised schedule for each transition
point. In this way each schedule generated reflects the best possible
schedule for a given transition point. Using this kind of software a suite of
transition points can be evaluated, and their results compared so that the
point that offers the highest value can be chosen.
Transition sensitivity
There are a range of parameters (price, production rate, open-pit and
underground mining cost, and open pit cut-off grade) that can be tested to
identify the sensitivity of the optimal transition point. Snowden has
undertaken some case studies on the sensitivity of the transition point using
its Evaluator software; these are presented in the charts above. In the case
study, factors such as price, production rate, and open-pit and underground
mining costs where shown not to materially affect the transition point
decision. It was found that the only parameters the affect the transition point
decision were the cut-off grades of the open pit and the underground. The
typical approaches to consider in the open pit to underground transition
point optimisation problem can lead to appreciably sub-optimal solutions.
When considering discounting, the optimal transition point elevates
significantly as does the achieved value. It is rarely practical to analyse every
possible transition point. Only in simple examples, such as the one
demonstrated here, is an enumeration of transition points feasible. In most
cases it is sufficient to consider a range of possible transition points within
the largest economic pit. Schedules and cash flows developed for each
option can be compared to find the best alternative.
The effort of generating open pit and underground schedules for all likely
transition
points at all likely processing rates (and by inference cut-off grades) can be
costly and time consuming. This often means that as a consequence, the
problem is not thoroughly explored and therefore the result may be suboptimal. By applying modern automated optimisation software solutions to
this problem, the effort can be significantly reduced and the likelihood of
developing an optimal result in a palatable time frame at an acceptable cost
is dramatically increased. IM