Copyright Datamine Corporate Limited

1
Strategic Mine Planning: Iron ore Case
Copyright 1983-2005 Datamine Corporate Limited
2

Hotteling
Mining Economics

Copyright 1983-2005 Datamine Corporate Limited
3
Iron Ore Multimine Problem
http://www.tradekey.com/kb-Iron-Ore-Fines/
WANTED:Iron ore 58% fines
Commodity: IRON ORE FINES ORIGIN: INDIA SPECIFICATIONS: Fe 58%
rejection -57% Al2O3 3% rejection -2% SiO2 6%, 57 US$/ton

Copyright 1983-2005 Datamine Corporate Limited
4
Current Iron Ore Solution
Single Cut-Off grade
Fix by Pit, Fix in Time
Individual Pit Shells
Lerch Grossman
Individual Independent
Pushback Shells
Multimine Optimization
LP using Xpac, Mine Max, Whittle MM, Comet
Max Global NPV???
Blending Targets just in the last process
Copyright 1983-2005 Datamine Corporate Limited
5
NPV Multimine Strength-weakness for the Iron Ore Project
Multimine Current Solution:
Constrained to main mine site
with small satellites ore bodies.
Input Pit sequence impact
results, giving preference to
pushbacks of the first mine,
after the second the third.
To find the optimal pit
sequences is necessary to play
with the pit permutations.






1 2 3
1 2 3
1 2 3
1 2 3
1 2 3
1 2 3
71!
850,478,588,567,862,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000
Copyright 1983-2005 Datamine Corporate Limited
6
Datamine Solution

ULTIMATE PIT
LG LARGE PIT
MR SMALL PIT
LP MULTIMINE PIT
TARGETS
NPVS
BLENDING WITH
TARGETS
PUSHBACK
GENERATOR
GT-CURVE

PUSH/BENCH
GT-CURVE
PIT/BENCH
LP MULTIMINE
SCHEDULE
TARGETS
SCHEDULER
STOCK PILE
The ultimate pit will generate a pit limit. With large pits, LG will
provide sufficient reserves for 40 years with a short processing time.
With small pits, Maximising Resources will provide a maximum limit.
The grade tonnage curves by bench and by pit will generate a global
reserves inventory. Studio will be used to create the grade-tonnage
curves which will become the input for JC-LP algorithm.
The LP algorithm will determine the optimal mix, suggesting tonnage,
periods, average grades by pit and by period. The algorithm targets
will be maximized for NPV given the product specification as a set of
constraints. As a sub-product for every constraint, the LP algorithm
will provide shadow prices plus reduced cost for every decision
variable. The
A Blended Sequence will be created using the blend targets defined by
pit and by period (from the LP algorithm).
Pushbacks will be generated using the Blending Sequence plus
operational constraints: sinking rate, minimum width, contiguity and
material tonnage.
Using the Pushbacks as input, grade-tonnage curves by bench and by
pushback will be generated. These curves will be a representation of
the operational reserve inventory.
Using the Pushback grade-tonnage curves the LP algorithm will
generate more operational optimization results. The results will
include targets by pushback and by year.
Using the LP targets, which list tonnages, blends, pushbacks and
periods, a final schedule will be generated using the Scheduler in
NPVS. This will be used in future designing stages, including
stockpile optimization.
Copyright 1983-2005 Datamine Corporate Limited
7
A proof-of-concept study at pilot scale to generate a multi-pit,
long-term production plan for CVRD Carajs which maximizes
the Net Present Value of CVRD's operation, while:
meeting the specification (product quality) targets;
respecting the available infrastructure facilities;
adhering to the maximum amount of waste removal;
meeting the total material movement targets; and
feasible according to CVRD's operating constraints.
Industrial Application 1: CVRD Pilot Project
Copyright 1983-2005 Datamine Corporate Limited
9
Grade stabilization in the two key-products (SFCJ and PFCJ)
considering unavoidable increase in SiO2 over time:
CVRD Terms of Reference
The acronym within brackets below each grade refers to the
specific variable name as defined and used by CVRD.

Copyright 1983-2005 Datamine Corporate Limited
10
Solution Methodology
Multimine Global
Optmization
Grade-Tonnage
curves by Pit,
Bench &
Interval
Control
Variable
Results Table
Multi-correlation
Analysis
Blended Sequence
Optimization
Individual Pit
Schedules
Check Operational
Constraints
Sensitivity
Analysis
Shadow Prices
and Reduced
Costs Tables
Correlation analysis using Pearson's and
Euclidian Distance models to determine the
extent of the correlation between key variables
and to define the control variable(s) for the pilot
project.
Schedule optimization and parameterization to
determine grade-tonnage curves by bench, by
incremental pit and by key-variable interval,
generating a global reserves inventory for all the
pits.
Definition of the optimal mix/blend of ore and
average grades by pit and by period. The
resulting blended sequence is maximized for
NPV in a iterative fashion, according to product
specification and operational constraints.
Economic and operational analysis of the
multimine scheduling results. Identification of
critical constraints and parameters. Shadow
prices and reduced costs analysis on key-
variables and constraints to guide the operational
decision-making process.
Copyright 1983-2005 Datamine Corporate Limited
11
The results of the correlation analysis indicate that all key-
variables are strongly correlated, except P (in POVER and in
PSFT).
Multi-correlation Analysis
FEOVER SIOVER ALOVER MNOVER POVER FESFT SISFT ALSFT MNSFT PSFT
FEOVER 1.0 0.7 0.6 0.4 0.4 1.0 0.8 0.5 0.3 0.4
SIOVER 0.7 1.0 0.6 0.3 0.4 0.7 0.9 0.5 0.2 0.4
ALOVER 0.6 0.6 1.0 0.3 0.7 0.6 0.5 0.9 0.3 0.7
MNOVER 0.4 0.3 0.3 1.0 0.1 0.4 0.5 0.4 0.9 0.1
POVER 0.4 0.4 0.7 0.1 1.0 0.4 0.2 0.6 0.1 0.9
FESFT 1.0 0.7 0.6 0.4 0.4 1.0 0.8 0.5 0.3 0.4
SISFT 0.8 0.9 0.5 0.5 0.2 0.8 1.0 0.5 0.4 0.2
ALSFT 0.5 0.5 0.9 0.4 0.6 0.5 0.5 1.0 0.4 0.6
MNSFT 0.3 0.2 0.3 0.9 0.1 0.3 0.4 0.4 1.0 0.1
PSFT 0.4 0.4 0.7 0.1 0.9 0.4 0.2 0.6 0.1 1.0
0-0.4%
0.4%-0.5%
0.5%-0.7%
0.7%-1%
**. Correlation is significant at the 0.01 level (2-tailed).
Correlations
Copyright 1983-2005 Datamine Corporate Limited
12
Euclidian distance model analysis suggest a similar behavior
between SiO2, Al2O3 and Mn. This means that grade
stabilization of SiO2 will also control both Al2O3 and Mn.
P has not been used as a control variable, but it has been
measured and recorded in all scheduling runs.
Multi-correlation Analysis
SiO2
Control
Copyright 1983-2005 Datamine Corporate Limited
13
Global Optimization and Blended Schedule
N5 N4E
N4W
Year 1
Year 2
Year 3
Year 10
Global optimization and blended scheduling results by
incremental pit, by bench, by period and by key-variable
interval, generating an optimal schedule and the global
mineable reserves inventory for all the pits.
Copyright 1983-2005 Datamine Corporate Limited
14
Scheduling Results
The table illustrates the scheduling results obtained, in this
instance for SiO2 in the ore for Pit N5, Benches 5, 6 and 7.
Similar results were compiled for all benches of pits N4E, N4W
and N5, for all key-variables.
BENCH CUT PERIOD1 PERIOD2 PERIOD3 PERIOD4 PERIOD5 PERIOD6 PERIOD7 PERIOD8 PERIOD9 PERIOD10
SIO2%
PIT-N5 5 0.03 0 0 0 0 0 0 0 0 0 0
PIT-N5 5 0.50 0 0 0 0 0 0 0 0 0 0
PIT-N5 5 1.00 0 0 0 0 0 0 174000 0 0 0
PIT-N5 5 1.20 0 0 0 0 0 0 296250 0 0 0
PIT-N5 5 2.00 0 0 0 0 0 0 0 0 0 0
PIT-N5 5 3.00 0 0 0 0 0 0 0 2589211 0 0
PIT-N5 5 100.00 0 0 0 0 0 0 0 0 0 0
PIT-N5 6 0.03 0 0 0 0 0 0 0 0 0 0
PIT-N5 6 0.50 0 0 0 0 0 0 0 0 0 0
PIT-N5 6 1.00 963023.438 0 0 0 0 0 0 0 0 0
PIT-N5 6 1.20 0 0 0 0 0 0 1585453.13 0 0 0
PIT-N5 6 2.00 0 2870335.16 4345745.84 0 0 0 0 0 0 0
PIT-N5 6 3.00 0 0 0 0 0 0 4898994 0 0 0
PIT-N5 6 100.00 0 0 0 0 0 0 0 0 0 0
PIT-N5 7 0.03 0 0 0 0 0 0 0 0 0 0
PIT-N5 7 0.50 0 0 0 0 0 0 0 0 0 0
PIT-N5 7 1.00 1328039.13 0 0 0 0 0 0 0 0 0
PIT-N5 7 1.20 0 0 1774921.88 0 0 0 0 0 0 0
PIT-N5 7 2.00 0 0 0 13980915 0 0 0 0 0 0
PIT-N5 7 3.00 0 0 0 0 0 0 0 5817006 0 0
PIT-N5 7 100.00 0 0 0 0 0 0 0 0 0 0
TOTAL ORE
Copyright 1983-2005 Datamine Corporate Limited
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Scheduling Results: Surface Area Restrictions
The diagram on the left shows the initial surface topography in the N4E, N4W
and N5 pits, matching the 2010 pit limits established by CVRD (diagram on the
right). The pit road and area constraints provided by CVRD (to be mined out only
after 2010) are also marked on the diagram.
Initial Topo Active Area Final Pit Constraints (2010)
Area Constraints
Pit Road
Copyright 1983-2005 Datamine Corporate Limited
16
Scheduling Results: Scheduled Pit Surfaces for 2006
The diagram on the left shows the scheduled pit surfaces for 2006, that respect
both the area restrictions and the pit road.
Pit Surfaces for 2006
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
17
Scheduling Results: Scheduled Pit Surfaces for 2007
The diagram on the left shows the scheduled pit surfaces for 2007, that respect
both the area restrictions and the pit road.
Pit Surfaces for 2007
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
18
Scheduling Results: Scheduled Pit Surfaces for 2008
The diagram on the left shows the scheduled pit surfaces for 2008, that respect
both the area restrictions and the pit road.
Pit Surfaces for 2008
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
19
Scheduling Results: Scheduled Pit Surfaces for 2009
The diagram on the left shows the scheduled pit surfaces for 2009. The position
of the pit road has been clearly preserved eventhough extensive mining is taking
place near its location.
Pit Surfaces for 2009
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
20
Scheduling Results: Scheduled Pit Surfaces for 2010
The diagram on the left shows the scheduled pit surfaces for 2010. The position
of the pit road has been clearly preserved eventhough extensive mining is taking
place near its location.
Pit Surfaces for 2010
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
21
Scheduling Results: Scheduled Pit Surfaces for 2011
The diagram on the left shows the scheduled pit surfaces for 2011. The position
of the pit road has been preserved for one additional year (the constraint was
that the pit road had to be preserved at least until 2010).
Pit Surfaces for 2011
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
22
Scheduling Results: Scheduled Pit Surfaces for 2012
The diagram on the left shows the scheduled pit surfaces for 2012. The 2010 pit
road and area constraints do not apply any longer so mining is taking place
within the limits of all three mines.
Pit Surfaces for 2012
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
23
Scheduling Results: Scheduled Pit Surfaces for 2013
The diagram on the left shows the scheduled pit surfaces for 2013. The 2010 pit
road and area constraints do not apply any longer so mining is taking place
within the limits of all three mines.
Pit Surfaces for 2013
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
24
Scheduling Results: Scheduled Pit Surfaces for 2014
The diagram on the left shows the scheduled pit surfaces for 2014. The 2010 pit
road and area constraints do not apply any longer so mining is taking place
within the limits of all three mines.
Pit Surfaces for 2014
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
25
Scheduling Results: Scheduled Pit Surfaces for 2015
The diagram on the left shows the final scheduled pit surfaces for 2015.
Pit Surfaces for 2015
Area Constraints
Pit Road
Final Pit Constraints (2010)
Copyright 1983-2005 Datamine Corporate Limited
26
Scheduling Results: Ore and Waste Totals
The chart shows the yearly totals for ore and waste, as well as
the variation of the stripping ration between 2006 (period 1)
and 2016 (period 10). The expected results were achieved
and a more detailed consultancy project is recommended to
improve waste removal variations during and after period 6.
Copyright 1983-2005 Datamine Corporate Limited
27
Scheduling Results: Ore Production by Pit
The chart shows the contribution of each pit (N4W, N4E, N5)
to the total ore production from 2006 (period 1) to 2015 (period
10).
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
PERIOD1 PERIOD2 PERIOD3 PERIOD4 PERIOD5 PERIOD6 PERIOD7 PERIOD8 PERIOD9 PERIOD10
N4W
N4E
N5
Copyright 1983-2005 Datamine Corporate Limited
29
Scheduling Results: Key-Variable Grade Variation
The table shows the scheduling results for the grade variation
of the key-variables. The results match CVRD's stabilization
targets for the two key-products (SFCJ and PFCJ).
Copyright 1983-2005 Datamine Corporate Limited
31
Scheduling Results: Economic Analysis
The table shows the economic analysis of the scheduled
production. It considers the following parameters provided by
CVRD:
Sale contract of 0.55 US$/Ton unit Fe
Ore cost of 1.15 US$/Ton ore
Processing cost of 8.8 US$/Ton
Waste removal cost of 1.15 US$/Ton
Interest rate of 10%.
Copyright 1983-2005 Datamine Corporate Limited
32
Sensitivity Analysis: Shadow Prices
Allowable Allowable Shadow
Variable Name Increase Decrease Price
TON TON US$/TON
PER1 SIOVER 563.8 3435.9 64.6
PER2 SIOVER 1897.1 1258.0 13.2
PER3 SIOVER 461.8 649.1 10.3
PER4 SIOVER 468.8 565.1 38.6
PER5 SIOVER 3276.2 4206.6 42.1
PER6 SIOVER 6077.3 7020.6 47.2
PER7 SIOVER 8343.1 5664.9 47.8
PER8 SIOVER 5330.8 2575.7 32.7
PER9 SIOVER 10576.7 1545.2 0.7
PER10 SIOVER 4237.8 6938.5 44.5
PER1 ALOVER 4329.0 1037.7 -70.7
PER2 ALOVER 5198.9 2011.0 -46.2
PER3 ALOVER 922.9 590.8 -48.4
PER4 ALOVER 1585.2 1494.0 -58.4
PER5 ALOVER 5164.4 4022.3 -65.6
PER6 ALOVER 3533.1 4891.1 -71.8
PER7 ALOVER 16856.9 3714.0 -63.8
PER8 ALOVER 5330.5 6443.2 -65.3
PER1 MNSFT 191.3 1248.3 -56.8
PER2 MNSFT 341.1 601.3 -33.6
PER3 MNSFT 5760.9 2801.5 -44.4
PER4 MNSFT 1349.5 1968.6 -77.5
PER5 MNSFT 5021.5 3910.9 -78.1
PER6 MNSFT 4497.3 6298.6 -50.9
Shadow prices have
been calculated for
each key-variable in
each period.
This indicates the
allowances in mass for
each key-variable
without deviating from
the optimal solution.
It also provides
management with a
measure of the
economic impact of
relaxing constraints at
different scheduling
periods.
Copyright 1983-2005 Datamine Corporate Limited
33
Sensitivity Analysis: Reduced Costs
The table shows the
results of the reduced
costs analysis for SiO2
in Pit N5.
Reduced costs can be
used as a decision-
making tool for
measuring the impact
of eventual deviations
from the optimum
schedule allowing
management to
choose which cut-off
interval has less
economic impact in a
particular scheduling
period.
Copyright 1983-2005 Datamine Corporate Limited
34
Industrial Case 2: MBR Project
HEM SIB RSIB CG IBLI MIAN Total
0.92 5.93 2.39 2.16 2.71 0.62 14.73
2.93 12.63 4.48 1.94 3.47 1.55 27.01
3.18 13.13 4.66 1.30 3.07 0.77 26.11
3.70 12.28 4.36 1.35 2.87 0.45 25.01
3.33 13.49 3.91 1.15 2.90 0.51 25.29
2.12 13.50 3.87 0.76 3.85 0.40 24.51
19.26 3.83 6.77 29.85
19.26 3.83 6.77 29.85
19.26 3.83 6.77 29.85
19.26 3.83 6.77 29.85
20.18 4.01 5.96 30.16
20.18 4.01 5.96 30.16
20.18 4.01 5.96 30.16
20.18 4.01 5.96 30.16
20.18 4.01 5.96 30.16
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
20.36 3.98 6.04 30.38
16.18 411.79 90.88 8.65 124.08 4.31
TOTAL
Copyright 1983-2005 Datamine Corporate Limited
36
Mine Sequencing - Traditional Method with NPVS
"helicopter mining";
Mining takes place simultaneously along the entire the pit area:
Copyright 1983-2005 Datamine Corporate Limited
38
Mine Sequencing - Solution Methodology for MBR
Ultimate Pit with
Blending Algorithm
(Initial Run)
Refine Schedule with
Adjustment Factor
(% Final Pit)
Year > 1 ?
or
Targets <> T ?
Generate
Pushbacks
Create
Schedule
Check
Targets<>T
Area Variable
set
A1+A1+A3<= NT
Generate
Mine
Plan
Si
No
No
Si
Copyright 1983-2005 Datamine Corporate Limited
39
PERIOD MASS
0
1
2
3
4
5
6
7
HEM SIB RSIB CG IBLI MIAN
VARIABLE
M
T
O
N
MBR
NPV
0
5
10
15
20
25
30
35
40
45
50
mbr npv
waste
ore
SAP GALIN
50.891 45.913
(*) 3Mt on Pilha Itabiritos
MBR Mine Sequence: Results for Year 1
Copyright 1983-2005 Datamine Corporate Limited
40
PERIOD MASS
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
HEM SIB RSIB CG IBLI MIAN
VARIABLE
M
T
O
N
MBR
NPV
0
10
20
30
40
50
60
mbr npv
waste
ore
SPAC GALLI
38.059 61.941
(*) 6Mt on Pilha Itabiritos
MBR Mine Sequence: Results for Year 2
Copyright 1983-2005 Datamine Corporate Limited
41
MBR Mine Sequence: Results for Year 3
Copyright 1983-2005 Datamine Corporate Limited
42
NPVS4 enhancements for Iron Ore
Blending Targets by Period

OES output, Mining Sequence in Block Model

Better Pushback Design.
Copyright 1983-2005 Datamine Corporate Limited
43
Conclusion, Remarks and Future Opportunities
The Multimine solution provides optimal scheduling results plus valuable
information for management decision.

The current Datamine capability is offered through consulting services
which apply the Multimine solution methodology.

As a future development this methodology will be incorporated into the
software products in the Datamine Solution Footprint.


The approach can be applied to other opportunities in the Market

1. Oil Sands
2. Base Metals


Copyright 1983-2005 Datamine Corporate Limited
44
Future Opportunities
Oil Sands Canada, 98 BiUS$ Investment

Not using NPV, using Real Options
Currently there is no mining scheduler software supporting RO
Opportunity to be the first supplier of Consulting and Software Implementation
using RO.


Operational Improvement in SouthAmerica
Codelcos Drill to Mill expansion requirements.
Phelps Dodge SAG Mill optimization.
Pelambres Increasing Work Index Problem.
Antamina, Yanacocha, Goldfields, SPCC outsorcing requeriments in Mine
Planning.