Lecture 11 Optimizing Cut-Off Lecture 11 Optimizing Cut-Off Grade StrategyGrade Strategy

©2010 Dr. B. C. Paul©2010 Dr. B. C. Paul

Note – These slides contain screenshots from the program MineSight® Note – These slides contain screenshots from the program MineSight® created by Mintec Inc. Concepts found herein dealing with cut-off grade created by Mintec Inc. Concepts found herein dealing with cut-off grade

optimization can be traced to early journal articles by Lane and Henning in the optimization can be traced to early journal articles by Lane and Henning in the 1960s although the concepts they first taught are now widely understood in 1960s although the concepts they first taught are now widely understood in

the profession and found in numerous sources in the technical literature.the profession and found in numerous sources in the technical literature.

How Do You Improve the Value of a How Do You Improve the Value of a ProjectProject

Bring profits closer in timeBring profits closer in time Delay expensesDelay expenses We figured out a pit sequence that got us to We figured out a pit sequence that got us to

the richest ore first and potentially helped us the richest ore first and potentially helped us delay strippingdelay stripping

We also know with Break Even Cut-Off We also know with Break Even Cut-Off Grades how to never mine stuff that looses Grades how to never mine stuff that looses us money.us money.

Suppose We Have Ore With The Suppose We Have Ore With The Following Grade DistributionFollowing Grade Distribution

Is the Average Grade of theOre I Do Mine Increased when

I Don’t Mine Below the Break EvenCut Off Grade

Grade of Ore

Tons of Ore available

The partDown hereLoosesmoney

The Average GradeThe Average Grade

Grade of Ore

Tons of Ore available

Variable Costs determine what theBreak Even Cut-Off Grade is

The averageGrade must stillBe high enough toPay for fixed costs.

But What if it Isn’t?

You Have to Raise the Cut-Off You Have to Raise the Cut-Off Grade to Control the Average GradeGrade to Control the Average Grade

Grade of Ore

Tons of Ore available

I wonder if I could do that toSweeten the grade of oreGoing to my concentrator

FindingsFindings

I can get my metal out of my ore fasterI can get my metal out of my ore faster– By processing higher average grades earlierBy processing higher average grades earlier– By processing more ore fasterBy processing more ore faster

Often can increase value by setting a higher cut-Often can increase value by setting a higher cut-off value for the mill early and letting lower grade off value for the mill early and letting lower grade ore wait till later to be processedore wait till later to be processed– Can do this my having more than enough mining Can do this my having more than enough mining

capacity to feed the concentratorcapacity to feed the concentrator– Then let the concentrator pick and chooseThen let the concentrator pick and choose

MineSight has a routine to help us calculate the MineSight has a routine to help us calculate the best ore handling plan – after we have already best ore handling plan – after we have already sequenced where we will mine – Called MSVALPsequenced where we will mine – Called MSVALP

MSVALP is Started From the MSVALP is Started From the MineSight Menu and Picking MineSight Menu and Picking Economic Planner ProgramsEconomic Planner Programs

We Get the Familiar Compass MenuWe Get the Familiar Compass Menu

And Double click on MSVALPTo start the routine.

The First Panel is Just Like the One The First Panel is Just Like the One Where We Identify Our Block Model Where We Identify Our Block Model

in MSOPITin MSOPIT

The Second Panel Is Also Like The Second Panel Is Also Like MSOPIT – It Wants to Know Where MSOPIT – It Wants to Know Where

Our Surfaces File (file 13) is atOur Surfaces File (file 13) is at

This Panel is UniqueThis Panel is Unique

It wants to know which pit surfaces identify our phases of expansion and push-back.

It Needs to Know Which Item in Our It Needs to Know Which Item in Our Block Model gives the % RockBlock Model gives the % Rock

This is just likeIn MSOPIT

Here is Our Prices and Cost PanelsHere is Our Prices and Cost Panels

Again – just likeIn MSOPIT

There is some unique stuff on this There is some unique stuff on this panelpanel

Note will still have the familiar option to change mining costs by benchJust like in MSOPIT

Here is a Unique Panel About Our Here is a Unique Panel About Our Processing and Mining CapacityProcessing and Mining Capacity

Here is a Unique Panel on Here is a Unique Panel on Processing Our Stockpile (if we have Processing Our Stockpile (if we have

one)one)

Our Audit Options Panel is Just Like Our Audit Options Panel is Just Like MSOPITMSOPIT

And we will ignore it just like when we ran MSOPIT

Our Output Instructions Page is a Our Output Instructions Page is a Little Different than MSOPITLittle Different than MSOPIT

Over-AllOver-All

About 5 Panels that are new and unique to About 5 Panels that are new and unique to MSVALPMSVALP

We will visit each panel and explain how to We will visit each panel and explain how to fill it in and how the information is used to fill it in and how the information is used to optimize and change the cut-off grades as optimize and change the cut-off grades as the mine moves forward.the mine moves forward.– Panels with same-old same-old we will skip Panels with same-old same-old we will skip

over since you already know how to fill them outover since you already know how to fill them out

Our First Unique PanelOur First Unique Panel

We plan aSeries of pitsAndPushbacks(like you areDoing inHW #8) orI did is slideShow #10

We need to identify which pit surfaces in our special file 13 have those pit surfacesAt the end of each mining phase.

Objective and RestrictionsObjective and Restrictions

The purpose of the panel is to show the The purpose of the panel is to show the computer what ore will be available in each computer what ore will be available in each phase of our mine developmentphase of our mine development

The pits must go from small to large and The pits must go from small to large and each smaller pit must be contained in the each smaller pit must be contained in the next larger pitnext larger pit– (You can’t put material back in place in the (You can’t put material back in place in the

ground after you mine it)ground after you mine it)

There is Just One Little ProblemThere is Just One Little Problem

We drew our pits with the Pit Expander tool and We drew our pits with the Pit Expander tool and then triangulated a surfacethen triangulated a surface– They are not gridded surfacesThey are not gridded surfaces– They are not in the special file 13 used by MineSight® They are not in the special file 13 used by MineSight®

Economic PlannerEconomic Planner

Of course we have actually dealt with this before Of course we have actually dealt with this before because our topo surface was also a triangulated because our topo surface was also a triangulated surface that had to be coded into our file 13 so we surface that had to be coded into our file 13 so we can put our pit surfaces in in a similar way.can put our pit surfaces in in a similar way.

Remember What a Gridded Surface Remember What a Gridded Surface IsIs

Its like the little dots on our computer Its like the little dots on our computer monitors and TV screensmonitors and TV screens– Each dot can only have one colorEach dot can only have one color– But there are so many so close together it looks But there are so many so close together it looks

like one continuous picture.like one continuous picture. In a gridded surface file the surface is In a gridded surface file the surface is

represented as a bunch of little boxes, each represented as a bunch of little boxes, each of which has the average elevation of that of which has the average elevation of that little area.little area.

Lets Look at My Initial Pit that I Will Lets Look at My Initial Pit that I Will Mine from the Top DownMine from the Top Down

Suppose I wantTo make aGridded surfaceFile from this in thePit 40 area ofMy special file 13.

First Turn On the Model View for Pit First Turn On the Model View for Pit 4040

I do this with theData managerBut nothingHappens to myView becauseThere is nothingIn Pit 40 (goodReason to storeMy info there)

Right Click on Pit 40 to Pop Up the Right Click on Pit 40 to Pop Up the MenuMenu

Then pickProperties.

The Model View Editor OpensThe Model View Editor Opens

Obviously we want toDisplay our pit 40Surface we are goingTo make

Preview – we will thenJump to the geometryTab and pick ourFinal initial pit surfaceWe were just lookingAt. Then we will goTo the Grid SurfaceTab and tell theComputer to calculateThe average elevationOf each little box onThe gridded surface ofPit 40.

When we click theLittle blue line boxIt will show us allThe availableDisplay variables(one of which will bePit 40 which we willSelect by clickingOn it).

On the Geometry TabOn the Geometry Tab

We can pick the surface we will grid from but note there is only a red box – no blueWorm. The red box means we will pick our file with the data manager (MineSight’sVersion of windows exploring).

Click on the Red Box.

It Asks If I Already Have A Geometry It Asks If I Already Have A Geometry Set That Tells What Surface to Grid Set That Tells What Surface to Grid

FromFromI have the abilityTo save andRetrieve lists ofObjects is I keepUsing them.

In this case I haveNo such set so IWill have to moveOn to pick myObject from theData manager.

Now It Asks Me to Pick the Object to Now It Asks Me to Pick the Object to UseUse

In my case thereIs some old workStored but yoursWill likely be blank

I click the red boxTo be shown theData Manager list

Here is My Data Manager List – I’m Here is My Data Manager List – I’m Now Ready to PickNow Ready to Pick

I Left Click on My Merged Initial I Left Click on My Merged Initial Surface File to Pick it.Surface File to Pick it.

Then I left clickOn Ok to confirmI have done myWork.

I Now Have My Surface Listed On I Now Have My Surface Listed On the Object Screenthe Object Screen

I left click on theObject to highlightIt

Then I left clickOk.

Now I’m Back to My Geometry Set Now I’m Back to My Geometry Set ScreenScreen

If I may use theSame set ofObjects againI can give theList a name andSave it.

I’m not feeling theNeed so I willJust click OK

The Program Tracks the Latest The Program Tracks the Latest Geometry Set Choice Geometry Set Choice (in case I need to (in case I need to

redo something soon)redo something soon)

It ask me if IShould keepThe latestChoice orWhat ever wasChosen before

I’m going to tellIt to go aheadAnd keep theLatest (thoughIts not reallyImportant to meFor what I’mDoing).

Now I’m Back to the Model View Now I’m Back to the Model View EditorEditor

I’m go to theGrid Surface tab

I’ll tell it what surfaceTo keep the gridData in.

Then I’ll click on theCommand to Grid.

I Can See Another Surface ShowingI Can See Another Surface Showing

I click Ok to finishWith the ModelView Editor.

Turning on the Model View of Pit 40 Turning on the Model View of Pit 40 and Turning Off My Initial Pit Surfaceand Turning Off My Initial Pit Surface

I now have theInitial pit in mySpecialized file13 which will beUsed by MSVALP

Short Detour – I hate that gray colorShort Detour – I hate that gray color

Left click on pit40

Right click toPop up the menu

HighlightProperties andLeft Click.

Up Comes the Model View Editing Up Comes the Model View Editing ScreenScreen

Check to makeSure I’m workingWith Pit 40

Then left clickOn Cutoffs

The Cutoff Colors Window OpensThe Cutoff Colors Window Opens

Drag My Mouse Across the Drag My Mouse Across the Elevation Range Elevation Range (what little there is of it)(what little there is of it)

It turns blue

Now left click onProperties

The Object Properties Window The Object Properties Window OpensOpens

Left click on theGlobal ColorPallet(yes I’m aboutReady to set myColor)

I Pick My Color From the Color I Pick My Color From the Color PalletPallet

Then I Ok myWay out throughThe open screens

And I Have A Pretty Color Initial PitAnd I Have A Pretty Color Initial Pit

I Repeat the Process to Get My Pit I Repeat the Process to Get My Pit After the First Push-BackAfter the First Push-Back

Repeat Again for the Second Push-Repeat Again for the Second Push-BackBack

The Third Push BackThe Third Push Back

Understanding the Cutoffs PanelUnderstanding the Cutoffs Panel

An interest rate tells us how much money we loose or spend for each delay period.A period is almost always a year (it doesn’t have to be) so need to enter the annualInterest rate. Mining is often a 15% interest rate so we would put in 15

Mining AmountsMining Amounts

The program tries to schedule our mining so we need to tell it how many tons at aTime to look at for a schedule – normally we want about 1 weeks worth of mining – IfMy equipment could move 50,000,000 tons per year and I ran about 50 weeks a yearI would put in 1000 (because 1,000,000 is 1000 units of 1000 tons each)

The Cutoff ControlsThe Cutoff Controls

Need to understand how the program optimizes a cut-off grade to know whatThese numbers do.

You Won’t Go Below the Cost of You Won’t Go Below the Cost of Processing for Anything You Send to Processing for Anything You Send to

the Millthe Mill

Enter the minimum grade of material that is practical to consider processingAt the mill.

How the Program OptimizesHow the Program Optimizes

The program first assumes that all material The program first assumes that all material above break even cut-off grade is above break even cut-off grade is processed when it is minedprocessed when it is mined– It assumes each push back is mined from the It assumes each push back is mined from the

top down and the good stuff is sent to be top down and the good stuff is sent to be processedprocessed

The Program calculates the Net Present The Program calculates the Net Present Value of the mine.Value of the mine.

How the Program Works ContinuedHow the Program Works Continued

Material that will not be mined or processed for many years will be less Material that will not be mined or processed for many years will be less valuable to the NPV valuable to the NPV (it is being multiplied by a discount factor less than 1)(it is being multiplied by a discount factor less than 1)

What if I Process low grade ore that gives me on 5 cents per ton of What if I Process low grade ore that gives me on 5 cents per ton of profitprofit– But meanwhile there is high grade ore waiting to be mined that could make But meanwhile there is high grade ore waiting to be mined that could make

me $100/tonme $100/ton If I wait 5 years to get it it would only be worth $50/ton - I’d loose $50/tonIf I wait 5 years to get it it would only be worth $50/ton - I’d loose $50/ton

– If I’m running low grade crud through my mill I’m loosing $50 bucks a ton to If I’m running low grade crud through my mill I’m loosing $50 bucks a ton to get 5 cents a tonget 5 cents a ton

– I’d be better off tossing the low grade stuff aside and getting to the really I’d be better off tossing the low grade stuff aside and getting to the really hot items!hot items!

The program says – what if I put really really low grade ore aside so I The program says – what if I put really really low grade ore aside so I can get the good stuff faster – would that make my NPV go upcan get the good stuff faster – would that make my NPV go up

If the answer is yes it raises the cut-off gradeIf the answer is yes it raises the cut-off grade It then tries the next higher cut-off grade to see if that makes NPV It then tries the next higher cut-off grade to see if that makes NPV

increaseincrease

Other Boxes Say How Much to Try Other Boxes Say How Much to Try to Increase the Cutoff and How to Increase the Cutoff and How

Many Increases to tryMany Increases to try

Rechecking Cut-Offs Every YearRechecking Cut-Offs Every Year

It will recheck cut-off every year. We need to tell it how many times to try increasingThe NPV all total. (Probably want to try for at least 100 to make sure the program

Has plenty of tries to do its thing).

The Item I’ve Been AvoidingThe Item I’ve Been Avoiding

If I’m going to have a cut-off grade I better tell it what mineral I’m going to apply itTo and which spot in my Block Model has the info in it - I bet its not Topo% -In our case maybe it will be Cu for Copper.

So Why Was I So Worried About So Why Was I So Worried About Telling You What Mineral the Cut-Off Telling You What Mineral the Cut-Off

Grade Applied to?Grade Applied to? If the ore deposit is mined for only mineral If the ore deposit is mined for only mineral

like copper there is no reason for me to hidelike copper there is no reason for me to hide The problem is that many deposits today are The problem is that many deposits today are

Paulymetalic (woops Polymetalic)Paulymetalic (woops Polymetalic)– That means they get their value from more than That means they get their value from more than

one mineralone mineral– Maybe a deposit that is mined for Copper and Maybe a deposit that is mined for Copper and

Molybdenum (like our example deposit) or Molybdenum (like our example deposit) or Copper and Gold, or Copper Gold Molybdenum Copper and Gold, or Copper Gold Molybdenum and Uranium (like Bingham Canyon)and Uranium (like Bingham Canyon)

Do We Want to Adjust Cut-Off Do We Want to Adjust Cut-Off Grades with One Mineral?Grades with One Mineral?

A possible responseA possible response– Create an Equivalent GradeCreate an Equivalent Grade

If our main mineral is copperIf our main mineral is copper And copper is worth $3/lb and moly is worth $9/lbAnd copper is worth $3/lb and moly is worth $9/lb Then a pound of moly is equal to 3 lbs of copperThen a pound of moly is equal to 3 lbs of copper

– Ore Block has 0.3% Cu and 0.1% MolyOre Block has 0.3% Cu and 0.1% Moly Moly *3 is like .3% CuMoly *3 is like .3% Cu Add them upAdd them up The block has 0.6% equivalent copperThe block has 0.6% equivalent copper

Another TrickAnother Trick

Do Cut-Offs in dollarsDo Cut-Offs in dollars When you run MSOPIT have it save the When you run MSOPIT have it save the

dollar value per ton of each block back in dollar value per ton of each block back in the modelthe model

Then do cut-offs on the dollar per ton valuesThen do cut-offs on the dollar per ton values Obviously you have to pick the variable in Obviously you have to pick the variable in

your model that has the information you your model that has the information you chose stored in itchose stored in it– Now you know why I saved it for last to explain.Now you know why I saved it for last to explain.

How Do I Get MSOPIT to Store How Do I Get MSOPIT to Store Values in the Block ModelValues in the Block Model

Right here on OutputInstructions you can saveThe value per ton back intoThe Block Model.

Unique Screen #3Unique Screen #3

This screenSpecifies yourMining andProcessingCapacity.

How Does Capacity Relate to How Does Capacity Relate to Optimal Cut-Off Grade?Optimal Cut-Off Grade?

To maximize the NPV of ore the best answer is to To maximize the NPV of ore the best answer is to tell Scotty to beam up all the metal in the whole tell Scotty to beam up all the metal in the whole deposit now.deposit now.– That way there is no discounting of future earningsThat way there is no discounting of future earnings

In practice you can’t do thatIn practice you can’t do that– Scotty was on a science fiction show and you have to Scotty was on a science fiction show and you have to

mine with trucks and shovels that all cost moneymine with trucks and shovels that all cost money– If you spend a fortune on production equipment you will If you spend a fortune on production equipment you will

only use for a year obviously you are going to get only use for a year obviously you are going to get financially creamed.financially creamed.

Tell the Program How Much Stuff Tell the Program How Much Stuff You Can MoveYou Can Move

Note that your inputIs in 1,000s of tons(thus if I can move20,000,000 tons aYear I input20,000)

This mining capacity limits how fast you could go through the ore deposit.

Remember the Economic Remember the Economic Parameters ScreenParameters Screen

You identifiedDestinationsFor material

In yourHomeworkDestination 1Was yourConcentrator

2 was a heapLeach

3 was a dumpLeach4 was waste

Here Are Your DestinationsHere Are Your Destinations

For each process youIndicate the amountOf capacity you have(remember – its in Ktons)

If you have a processWith unlimited capacityJust put in an ungodlyBig number

If the process is availableTo be used then clickA check in the used box(not all processes mayBe available when a mineFirst starts)

Default units are in tons(controlled on grade line)

The Critical Role of ProcessingThe Critical Role of Processing

For almost all metals and a lot of industrial For almost all metals and a lot of industrial minerals the processing plant costs more minerals the processing plant costs more than the minethan the mine

You cannot afford to have your critical asset You cannot afford to have your critical asset sitting idle sitting idle (A metal concentrator can easily cost $2,000 an hour just to (A metal concentrator can easily cost $2,000 an hour just to

own – it will financially eat you alive if its not producing something of value for own – it will financially eat you alive if its not producing something of value for you)you)

– Thus one “must do” is to keep the concentrator Thus one “must do” is to keep the concentrator fed all the timefed all the time

Indicating Processes That Must Be Indicating Processes That Must Be Kept Running FullKept Running Full

Check the rate boxTo indicate that it isA critical process thatYou must feed

You may have moreThan one(if you have a lot ofInvestment in yourLeaching operationThis might also beCritical)

Indicate Your Total Critical Feed Indicate Your Total Critical Feed AmountAmount

Give the total tonnage that must be fed to critical processes. (If my mill can handle20,000,000 tons per year and it is my only critical process I would probably put20,000 in the line to specify that I want that mill kept running full).

(Side note –Your totalMining capacityBetter be moreThan this orYou have a realImbalanceProblem)

How Much Is This Going To Cost?How Much Is This Going To Cost?

You can put in howMuch money is goingTo be spent to setUp this process.

(If you do it will takeThe investment awayFrom the NPV ofThe profits to give youA total NPV. If youPut nothing in here itWill get you the NPVOf the earnings butYou will have to handleThe NPV of theInvestment)

How Does the Program CrankHow Does the Program Crank

It will mine each push back in order from the top down at a It will mine each push back in order from the top down at a rate limited by your mining capacityrate limited by your mining capacity

It will keep your critical processes full using break even It will keep your critical processes full using break even limits on ore gradeslimits on ore grades– If it can keep the process full using less than the total mining fleet If it can keep the process full using less than the total mining fleet

capacity it willcapacity it will– If it finds that at some times the fleet cannot strip enough If it finds that at some times the fleet cannot strip enough

overburden to keep the processes full it will try to do pre-stripping in overburden to keep the processes full it will try to do pre-stripping in earlier timesearlier times

It calculates the NPVIt calculates the NPV Then it tries increasing the cut-off grade so that better ore Then it tries increasing the cut-off grade so that better ore

goes through the mill sooner and sees whether it can goes through the mill sooner and sees whether it can improve the NPVimprove the NPV

It keeps doing this until the NPV stops improving It keeps doing this until the NPV stops improving

The Time PeriodThe Time Period

Sometimes minesChange capacity withtime. You can set theTime periods overWhich a particularSet of capacitiesApply.

I Can Set Up to 5 Different Time I Can Set Up to 5 Different Time PeriodsPeriods

Why Would Capacity Change?Why Would Capacity Change?

Stripping ratio increases with depth and truck Stripping ratio increases with depth and truck cycle times become longercycle times become longer– I may not buy all my trucks up front. I may add trucks I may not buy all my trucks up front. I may add trucks

as needed to keep up with the stripping ratioas needed to keep up with the stripping ratio (Remember – one way to improve NPV is to put-off expenses)(Remember – one way to improve NPV is to put-off expenses)

My Available Processes May ChangeMy Available Processes May Change– Many copper or gold deposits have ore that has Many copper or gold deposits have ore that has

oxidized at the topoxidized at the top Oxide ores often can be easily leached so I may have a leach to Oxide ores often can be easily leached so I may have a leach to

start with and then add my mill as I get into the sulfide ores that start with and then add my mill as I get into the sulfide ores that need more special processingneed more special processing

The Bootstrap TrickThe Bootstrap Trick

Remember – one way to improve NPV is to Remember – one way to improve NPV is to put-off expensesput-off expenses– Suppose I start by building a smaller mill and Suppose I start by building a smaller mill and

then I use profits from the operation to expand then I use profits from the operation to expand the mine and millthe mine and mill

Using your businesses own profits to grow Using your businesses own profits to grow instead of going for full capital at the very instead of going for full capital at the very start has been called pulling yourself up by start has been called pulling yourself up by your own bootstraps.your own bootstraps.

What of the Low Grade Ore I Throw What of the Low Grade Ore I Throw Out of the Mill to get to the High Out of the Mill to get to the High

Grade Sooner?Grade Sooner?I can either toss theLow grade stuffAway as waste – orI can stockpile itAnd send it throughThe mill later.

This next panelControls theStockpiles.

Each Destination Can Have A Each Destination Can Have A StockpileStockpile

DestinationNumbers areJust like thoseOn theCapacitiespanel

In your homework a waste dump (destination 4) would not have a stockpile.It is also likely that a dump leach (destination 3) would not have a stockpile.A mill (destination 1) would also certainly have a stockpile. The leach padsCould be either way depending on your design.

A check on use means a stockpile exists and can be used at that time.

The Cost of RehandleThe Cost of Rehandle

Picking up anything almost always costs 25 cents per ton or more. It costs somethingTo rehandle out of a stockpile and take low grade to the mill when there is a lull.You need to identify what material retrieval costs (if you put in a zero that at the veryLeast it will process everything when the mine shuts down)

Minimum ProfitMinimum Profit

Remember that break even cut-offs make sure Remember that break even cut-offs make sure that material can pay its own variable costs for that material can pay its own variable costs for processingprocessing– What about the mine’s fixed costsWhat about the mine’s fixed costs– The average grade of the material must cover the fixed The average grade of the material must cover the fixed

costs.costs. If you are feeding just low grade at the end the average grade If you are feeding just low grade at the end the average grade

may not handle the fixed costsmay not handle the fixed costs You may have to require a certain minimum profit perYou may have to require a certain minimum profit per

Ton of material processed to handle the fixed costs of keeping the Ton of material processed to handle the fixed costs of keeping the operation open.operation open.

Here is Where We Enter the Here is Where We Enter the Minimum ProfitMinimum Profit

Rules May Change With Time Rules May Change With Time PeriodPeriod

Here youSpecify theStart andEnd year forTheConditionsYou entered.

Here youClick add ifYou want toAdd data forAnother timePeriod. (ItStarts out withJust one timePeriod shown).

What Happens with the StockpileWhat Happens with the Stockpile

If the mine is short on ore for the mill it willIf the mine is short on ore for the mill it will Pull in ore from the stockpilePull in ore from the stockpile

– This may be more cost effective than moving up This may be more cost effective than moving up stripping work to an earlier time period to have stripping work to an earlier time period to have ore uncovered.ore uncovered.

If the ore in the stockpile is more desirable If the ore in the stockpile is more desirable than what is being mined now it may also than what is being mined now it may also want to bring it in.want to bring it in.

The Program Will Try Different The Program Will Try Different OptionsOptions

The program will try different cut-off grades in The program will try different cut-off grades in different years pulling in stockpiles at the right time different years pulling in stockpiles at the right time trying to get the highest NPVtrying to get the highest NPV

Is there any guarantee the best answer won’t be Is there any guarantee the best answer won’t be between two things the program triesbetween two things the program tries– No.No.– There are analytical solution algorithms but they have There are analytical solution algorithms but they have

more restrictions on conditionsmore restrictions on conditions– For long term planning with other uncertainties a good For long term planning with other uncertainties a good

try a range of things algorithm is probably a reasonable try a range of things algorithm is probably a reasonable attempt to optimize.attempt to optimize.

What is Likely to Happen?What is Likely to Happen?

Early in the life of the mine the cut-off grade Early in the life of the mine the cut-off grade will usually be highwill usually be high– (there is a lot of premo stuff being put-off in time (there is a lot of premo stuff being put-off in time

that could be processed sooner if we bumped that could be processed sooner if we bumped out some low grade)out some low grade)

As time goes on – the future becomes As time goes on – the future becomes closer – and the amount of ore yet to be closer – and the amount of ore yet to be mined get smallermined get smaller– The cut-off grade will usually decline with time.The cut-off grade will usually decline with time.

Is Cut-Off Grade the Only Thing to Is Cut-Off Grade the Only Thing to Optimize?Optimize?

I can try to maximize the NPV of my ore by I can try to maximize the NPV of my ore by bumping low grade out of the concentrator bumping low grade out of the concentrator to get to high grade faster.to get to high grade faster.

But I can also get to it faster by trying But I can also get to it faster by trying different mill sizesdifferent mill sizes– There is no analytical solution to tell you what There is no analytical solution to tell you what

the best size isthe best size is– There is only trial and error with different sizesThere is only trial and error with different sizes

Size Value RelationshipsSize Value Relationships

Mine (Mill) Size

ProjectValue

If the equipmentPurchase is too bigYou’ll never have theTime to get a goodReturn on theinvestment

If the mine is too small then goodMaterial will wait so long forProcessing that it will make noDifference to the NPV

Seeking Out the Best SizeSeeking Out the Best Size

Can keep running different cases with MSVALPCan keep running different cases with MSVALP MineSight has an option to save you sitting there MineSight has an option to save you sitting there

and pluggingand plugging– (because a lot of the time you just change a few (because a lot of the time you just change a few

numbers and run it again)numbers and run it again)– You can use the Multi-Run optionYou can use the Multi-Run option

Put the changes you want in a que and then tell the program to Put the changes you want in a que and then tell the program to try different things and report back when it is donetry different things and report back when it is done

I’m not going to get you into the detail of doing Multi-Runs in I’m not going to get you into the detail of doing Multi-Runs in this class but the option is therethis class but the option is there

Output ControlOutput Control

How to Design a MineHow to Design a Mine Get a Model of your reservesGet a Model of your reserves Select a mining method to trySelect a mining method to try * For Open Pit* For Open Pit

– Use a Lerch Grossman routine to find the ultimate pitUse a Lerch Grossman routine to find the ultimate pit– Use options such as Price-Fake and Multi-V to select a series of stage pits Use options such as Price-Fake and Multi-V to select a series of stage pits

and push-backs that work out to the ultimate pitand push-backs that work out to the ultimate pit Try to get the best ore areas firstTry to get the best ore areas first

– Fit practical mine pits to the theoretical ones with tools like the pit Fit practical mine pits to the theoretical ones with tools like the pit expansion toolexpansion tool

– Give the Pits to MSVALPGive the Pits to MSVALP Use variable cut-off grades and multi-runs to find the best mine size and the cut-Use variable cut-off grades and multi-runs to find the best mine size and the cut-

off grade history to provide the best returnoff grade history to provide the best return– Develop your exact haulage networkDevelop your exact haulage network– Run MineSight Strategic Planner which will show exactly what ore and Run MineSight Strategic Planner which will show exactly what ore and

waste to mine from where each yearwaste to mine from where each year– Give the ore to be mined each year to your short term mine planners so Give the ore to be mined each year to your short term mine planners so

they can schedule the shovels and trucks to keep the mill filled with a they can schedule the shovels and trucks to keep the mill filled with a steady even grade of ore.steady even grade of ore.

Lets Try Running VALP on Our Lets Try Running VALP on Our ExampleExample

I had MSOPIT storeThe value per tonOf ore back into myBlock model(I’m going to useThat fact when IPlan my cut-offGrade trials)

How Did I Do That?How Did I Do That?This is the outputPanel of MSOPIT

I said to storeThe net valuePer ton back intoVALPT in theBlock model

I indicated not toInclude miningCosts.(I’ll explain whyA little later)

Another PreparationAnother Preparation

I am going to need to commit to a production rate I am going to need to commit to a production rate to try.to try.– Lets say I believed I had 900,000,000 tons of oreLets say I believed I had 900,000,000 tons of ore– At 1:1 strip ratioAt 1:1 strip ratio

Optimum mine life is usually around 15 to 30 yearsOptimum mine life is usually around 15 to 30 years– At 30 years for a big mine this suggestsAt 30 years for a big mine this suggests

30,000,000 tons/year of ore30,000,000 tons/year of ore 60,000,000 tons/year of total mining60,000,000 tons/year of total mining

Fire Up VALPFire Up VALP

Identify My Block Model Location Identify My Block Model Location Just Like in MSOPITJust Like in MSOPIT

Identify The Location of My Special Identify The Location of My Special Gridded Surface File as BeforeGridded Surface File as Before

Each of My Stage Pits is Called a Each of My Stage Pits is Called a PhasePhase

I start with myUndisturbed surface

Then I take out mySmall top-downInitial pit

Then I do my 1rst2nd, and 3rd pushBack

(Note – I stored thesePhase surfaces in myFile 13 as youRemember)

(The pits must get progressively bigger with each stagePit nested entirely in the pit that follows it).

Identify Which Item in My Block Identify Which Item in My Block Model says how much of each block Model says how much of each block

is rock (just like in MSOPIT)is rock (just like in MSOPIT)

The Economic Panels Are Similar to The Economic Panels Are Similar to MSOPITMSOPIT

Note – HoweverThat I have madeVALPT a gradeVariable evenThough I amClearly not usingIt.

And I Fill in the Economics Panels And I Fill in the Economics Panels for the Other Destinationsfor the Other Destinations

Now the All Important Cut-Off Grade Now the All Important Cut-Off Grade PanelPanel

My ore deposit isPolymetallic so rather thanChange cut-off gradesFor just one ore mineralAnd ignore the rest I amGoing to do cut-offs inTerms of value per ton ofOre. (That’s why I hadMSOPIT save the blockValues and why I told myEconomics panels inVALP that VALPT wasA grade item)

My lowest cut-off grade I will consider is my Break EvenCut-Off Grade. At this grade the block value is 0 – it exactlyBreaks even. Note also when I saved my Value per ton I shouldNot include mining costs since my Cut-off pertains to what I will sendThrough the mill.

I Need to Identify What Cut-Off I Need to Identify What Cut-Off Grades I Will Try to Find My Grades I Will Try to Find My

OptimumOptimumI’m allowed to tryUp to 10 cut-offGrades – and I’mGoing to use themAll

I’m going toIncrement theCut-offs every 50Cents per ton.

(now that will onlyGo up to $5/tonWhen I have blocksWorth over $60/ton)My reason for having all my cut-offs at the bottom end of the range

Is because I expect most cut-offs to involve low value ore – I’llFind out how good my guess was.

Control VariablesControl Variables

I need to setThe size ofOre incrementThat theProgram willShift betweenOre and waste –It should beAbout 1 weeksProduction. InMy case60,000,000 tonsPer year and52 weeks perYear is around1,000,000. SinceThey want ktonsI enter 1,000

The typical interest rate for mining projects is 15%I will set a high number of iterations so it can be sure to try theOptions it needs to.

The Next Panel Sets My Process The Next Panel Sets My Process CapacityCapacity

I’m going to set up 25,000,000Must have tons for my mill(I’ll add a lower cost leachOption in a minute)

My total mining capacity will beAs I estimated before.

Continue Filling Out the PanelContinue Filling Out the Panel

I’m going toTry to have theSame capacityOver my mineLife. I start inYear 1 and Then go toA number thatI think willExceed theMine life.

I could indicate the total number of investment dollars I have made but I don’t haveTo and it won’t change how the program runs. If it tells me my optimum NPVIs $5,000,000,000 then I know I can’t invest more than $5,000,000,000.

I Need to Enter My Destination I Need to Enter My Destination CapacityCapacity

I’m going to setMy waste dumpCapacity at60,000,000 tons(my full miningCapacity) althoughI’ll be very upsetIf everything reallyGoes to waste

I wanted about 30,000,000 tons of ore processing – (Remember my initial estimate)I’ll try putting 25,000,000 tons of that in a very expensive mill and 10,000,000 tons inA more economical, but not as efficient Leach Pad.

Now For the Check-Off BoxesNow For the Check-Off Boxes

Use means that theProcess is availableIn the time periodRange. (RememberI can have moreThan one timePeriod range soDifferent processesMight be availableAt different times).Of course not in myCase so I check offUse for all 4 Processes)

Rate means that it is a critical process that must be kept runningTo capacity. You have to have 1 rate controlling process. In myCase that’s easy – a mill could easily cost $300,000,000 – I’m notAbout to let that kind of capital investment sit idle!

The Next Panel is StockpilesThe Next Panel is Stockpiles

If I use a highCut-off grade forThe mill thenLow grade oreMay not get toGo throughWhen it is mined.

I can stockpileThat ore forLater processing

It will cost me something to dig material out of the stockpile and haul it to a processingSite. I can put that rehandle cost in.If I wanted I could also require some minimum profit per ton (if I’m processing all veryLow grade at the end of the mine life the material might not carry my fixed costs). ICan require a minimum profit per ton – I’m not going to mess with it right now.

I’m Going to Leave the Audit Options I’m Going to Leave the Audit Options Alone for Now Alone for Now (Just like I did in MSOPIT)(Just like I did in MSOPIT)

I Set My Output InstructionsI Set My Output Instructions

The essential itemsAre a name forThe run

And an extensionFor the report file.

I have the programStore back into theModel the pushbackThat took the ore,Its destination, andThe year it wasMined.

(obviously I need to have this variable spaceSet up in my block model)

And We Run the ProgramAnd We Run the Program

The Program Issues a Variety of The Program Issues a Variety of ReportsReports

I go for the bottom line on my rptvap.rt1 my first basic summary reportThis info is right near the bottom

If I just mined my final pit from the top down the NPV would be $4.1 billion

I Planned Out My Expansion I Planned Out My Expansion Sequence ThoughSequence Though

Thanks to the brilliance of my sequencing I improved the NPV to $5.5 billion orAn improvement of 33.4%

If I Adjust My Cut-Off Grades With If I Adjust My Cut-Off Grades With Time I Can Improve My NPVTime I Can Improve My NPV

To $6.9 Billion Dollars or another 25.8% Improvement

You can see why being able to optimize a mine plan makes ore deposits outOf interesting mineral occurrences!

I Can Look at A Report on Each I Can Look at A Report on Each Stage PitStage Pit

It tells me howMuch ore andWaste I had inEach stage pit

And what myStrip ratio wasFor that pit.

One thing that INotice is my totalAmount of wasteWas much lessThan 1:1

I Also See A Mistake I MadeI Also See A Mistake I MadePit 1 - $40.26/ton withA S.R. of 0.0005 to 1

Pushback 1$26.04/ton with a S.R.Of 0.151 to 1

Pushback 2$28.86/ton with a S.R.Of 0.0008 to 1

Pushback 3$17.78/ton with a S.R.Of 0.1253 to 1

I’m trying to get bestOre first and put offStripping – whats wrongWith this picture?

My MistakeMy Mistake

After My Initial Pit I could expand out to the After My Initial Pit I could expand out to the west or to the east.west or to the east.– It looked like from the ways my shells expanded It looked like from the ways my shells expanded

that I should go west firstthat I should go west first– Unfortunately the report shows that I would Unfortunately the report shows that I would

have richer ore with less stripping had I gone have richer ore with less stripping had I gone east first and then turned westeast first and then turned west

Well I have a feeling someone will be Well I have a feeling someone will be redoing stage pits.redoing stage pits.

As With MSOPIT Reports I Can As With MSOPIT Reports I Can Check My InputsCheck My Inputs

The Detailed Report Det.r1 tells me The Detailed Report Det.r1 tells me about the Cut-Off Strategyabout the Cut-Off Strategy

During the earlyYears most of theMill feed comesFrom the mine

The Cut-Off gradeIs high withMaterial going toLeach andstockpile

At the end theMill keeps runningOff the stockpile for2 years.

The Report Also Show Inputs and The Report Also Show Inputs and Outputs from the Mill StockpileOutputs from the Mill Stockpile

I’m stockpiling some pretty high grade at first

There is my last 2 years from theStockpile.

So Recaping A Long Term DesignSo Recaping A Long Term Design

Get a Block Model of Your Ore DepositGet a Block Model of Your Ore Deposit– Guess at your mining scale and economicsGuess at your mining scale and economics

Find the Ultimate Pit with those economicsFind the Ultimate Pit with those economics Get the computer to outline where the most Get the computer to outline where the most

profitable ore is atprofitable ore is at Plan out a series of stage pits that are practical Plan out a series of stage pits that are practical

and follow the best ore firstand follow the best ore first Select your planned capacitiesSelect your planned capacities

– Look for a cut-off grade strategy that sends the highest Look for a cut-off grade strategy that sends the highest value material to your mill firstvalue material to your mill first

Things We Have Not DoneThings We Have Not Done

You Would Also Try a Series of Different You Would Also Try a Series of Different Mining Capacities to find out what mine Mining Capacities to find out what mine sizes give the best returnsizes give the best return– To do that we would use the Multi-Run option in To do that we would use the Multi-Run option in

MineSightMineSight You’d give it a whole bunch of different capacities to You’d give it a whole bunch of different capacities to

try and then have MineSight run VALP on all of themtry and then have MineSight run VALP on all of them Multi-V keeps you from having to manually keep Multi-V keeps you from having to manually keep

loading and trying different scenariosloading and trying different scenarios

– I’m not going to have you do Multi-RunsI’m not going to have you do Multi-Runs

What Multi-Run Would ShowWhat Multi-Run Would Show

Size

PVR (Dollars of NPV/dollar of investment)

(you just tried one size and got one point on this curve)

How Do You Optimize Your Plan?How Do You Optimize Your Plan?

You put together a stage pit sequence that goes You put together a stage pit sequence that goes after the most profitable ore first and the least after the most profitable ore first and the least valuable lastvaluable last

You raise your cut-off grade and stockpile or You raise your cut-off grade and stockpile or reroute low grade ore so that your most costly reroute low grade ore so that your most costly asset (your mill) is processing all high grade early asset (your mill) is processing all high grade early in the mine lifein the mine life

You try different sizes and expansion strategies so You try different sizes and expansion strategies so that you get the maximum number of dollars of that you get the maximum number of dollars of NPV for each dollar of investment (maximize the NPV for each dollar of investment (maximize the PVR)PVR)

This Gets You An Over-All Profit This Gets You An Over-All Profit Maximizing StrategyMaximizing Strategy

You still need to have more info to pass on to short term You still need to have more info to pass on to short term mine planners that will run every day operationsmine planners that will run every day operations

You add in your haul roads and pick your exact haul trucks You add in your haul roads and pick your exact haul trucks and equipmentand equipment– You get your truck cycle times and thus the capacityYou get your truck cycle times and thus the capacity

You feed this to Strategic PlannerYou feed this to Strategic Planner– It will show exactly which blocks should be mined each year and It will show exactly which blocks should be mined each year and

where they should be sentwhere they should be sent– With this and the haul roads you hand off to your shorter-term With this and the haul roads you hand off to your shorter-term

plannersplanners Your shorter term planners will schedule which shovel and Your shorter term planners will schedule which shovel and

truck set is where each day in order to give a steady even truck set is where each day in order to give a steady even feed to your mill and stay within capacity limits every single feed to your mill and stay within capacity limits every single day.day.

Now Its Your TurnNow Its Your Turn

Do Assignment #9Do Assignment #9– Put your stage pits from Assignment #8 into Put your stage pits from Assignment #8 into

VALPVALP– Make your best guess at a capacity strategyMake your best guess at a capacity strategy– Run an Optimized Cut-Off GradeRun an Optimized Cut-Off Grade– Fill in the Output TableFill in the Output Table– 25 bonus points to the Weiner who comes up 25 bonus points to the Weiner who comes up

with the most valuable mine!with the most valuable mine!