2. Computer Aided Mine Design Part III Cut-Off/Equipment Interactions ©Dr. B. C. Paul 2000 ©Dr. B. C. Paul Summer 2003

3. Where We Are At We Developed a Block Model of Our Deposit Geology We Developed a Block Model of Our Deposit Geology We Built Some Economics Assumptions Over the Model We Built Some Economics Assumptions Over the Model –Often Requires us to approximate a Break-Even COV We Determined Our Ultimate Pit at the Final Slope We Determined Our Ultimate Pit at the Final Slope –We used our knowledge of the minable reserve size to crudely calculate our mine size and rate We Determined Our Pit Sequences out to the Ultimate Pit at Working Slope We Determined Our Pit Sequences out to the Ultimate Pit at Working Slope We Made Practical Adjustments to the Computer Aided Pit Sequence We Made Practical Adjustments to the Computer Aided Pit Sequence

4. Size the Mine Equipment – Life – and COV It was necessary to make approximations on all of these things to get this far It was necessary to make approximations on all of these things to get this far –Example – When got Economic Block Model had to guess basic costs to find out which blocks had enough mineral to pay for processing Ie we applied a break-even COV Ie we applied a break-even COV The pit routines took only blocks that could also carry the stripping costs The pit routines took only blocks that could also carry the stripping costs –Example – Had to have some idea how things were going to be done to know costs for BECOV –Example – Had to have idea of mining rate to pick reasonable increments for staged pits in the sequence

5. Now Time to Refine and Finalize Break-Even COVs and SRs made sure that all material carried the direct costs of production Break-Even COVs and SRs made sure that all material carried the direct costs of production Costs are composed of Fixed and Direct Costs Costs are composed of Fixed and Direct Costs –Direct costs occur when mining is done and in proportion to amount done Our break-even parameters covered Our break-even parameters covered –Fixed costs occur for being there Foreman, taxes, purchase of equipment Foreman, taxes, purchase of equipment

6. What Break-Even Does Break-Even ensures that no action will be taken that costs more than it can earn Break-Even ensures that no action will be taken that costs more than it can earn Break-Even does not cover fixed costs Break-Even does not cover fixed costs –Subtle accounting mistake takes fixed costs and distribute them evenly to every ton mined Average Grade and Earnings above Strip must be great enough to cover the fixed costs Average Grade and Earnings above Strip must be great enough to cover the fixed costs

7. What a Cut-Off Grade Must Do Must make sure don’t loose money by mining (Break-Even) Must make sure don’t loose money by mining (Break-Even) Must make sure that the average grade of the ore mined is high enough to cover the fixed costs Must make sure that the average grade of the ore mined is high enough to cover the fixed costs Doing one does not ensure the other Doing one does not ensure the other –Ie must check both Cut-Offs and pick the higher of the two

8. BECOV Does Not Guarantee Maximized NPV Lane and Henning Showed COV should be adjusted through life of mine for maximum NPV Lane and Henning Showed COV should be adjusted through life of mine for maximum NPV Start with the Grade Tonnage Relationship for the next increment of “ore”? to be taken and then calculate the COV to use on that increment Start with the Grade Tonnage Relationship for the next increment of “ore”? to be taken and then calculate the COV to use on that increment – We know this because we have staged pits Best COV is one of six COVs to be calculated Best COV is one of six COVs to be calculated

9. Understanding What Comes Next Most delivery of market ready product requires purchase of equipment for several steps Most delivery of market ready product requires purchase of equipment for several steps –Mining Equipment to remove ore from the ground –Concentrator Equipment to pick out the pay mineral from other stuff Usually involves crushing the ore and putting it through a separator that learn about in 420 Mineral Processing Usually involves crushing the ore and putting it through a separator that learn about in 420 Mineral Processing –Refining Equipment Often the mineral is not what market wants Often the mineral is not what market wants –Can sell copper, not chalcopyrite Refining breaks down mineral to get specific target elements for market Refining breaks down mineral to get specific target elements for market –Market that Buys the Finished Product

10. Looking at Next Task We are going to size our mining / concentrating and refining equipment We are going to size our mining / concentrating and refining equipment These things will determine how long it takes us to mine through stage pits These things will determine how long it takes us to mine through stage pits –Also interacts with our fixed costs and our cut-off grade Cut-Off grade determines how much of what we mine really goes to processing Cut-Off grade determines how much of what we mine really goes to processing –This too determines mine life

11. Possible Cut-Off Grades Lane assumes the objective is to make as much money as possible off the next increment but that the system has a bottleneck that limits how much it can handle Lane assumes the objective is to make as much money as possible off the next increment but that the system has a bottleneck that limits how much it can handle Could be mine is the limit - this gives BECOV Could be mine is the limit - this gives BECOV Could be concentrator is the limit - adds a penalty for feeding marginally profitable material into a finite capacity Could be concentrator is the limit - adds a penalty for feeding marginally profitable material into a finite capacity Could be refinery or market Could be refinery or market

12. Balancing Cut-Off Grades With aide of grade-tonnage chart can pick off grades where capacity from more than one system is fully used With aide of grade-tonnage chart can pick off grades where capacity from more than one system is fully used Could be mine and concentrator Could be mine and concentrator Could be mine and refinery or market Could be mine and refinery or market Could be concentrator and refinery or market Could be concentrator and refinery or market Could be all three Could be all three

13. The Pick Rules Lane uses rules about size of COVs to pick the optimum from the list Lane uses rules about size of COVs to pick the optimum from the list Process is based on an opportunity cost for mining low grade ore and putting off earnings of high grade into the future where discounting will minimize value Process is based on an opportunity cost for mining low grade ore and putting off earnings of high grade into the future where discounting will minimize value – If you were trying to get rich would you take a job at McDonalds for $5.50 an hour when you could have a job that paid $125,000/year salary?

14. The Process The pit is divided into push backs of ore that will be mined in each planning period (often one year) The pit is divided into push backs of ore that will be mined in each planning period (often one year) Optimum COV is selected for each planning period Optimum COV is selected for each planning period The NPV is calculated The NPV is calculated Because NPV is a factor in the COVs the process must be repeated Because NPV is a factor in the COVs the process must be repeated The process converges The process converges

15. What Lane-Henning Did Picked the COV for each pit stage Picked the COV for each pit stage This determined how long it took the equipment to mine through that pit This determined how long it took the equipment to mine through that pit –Collectively this set the mine life How Did we get the size of the mine fleet concentrator and refinery? How Did we get the size of the mine fleet concentrator and refinery? –We just made a guess We use repeated calculations to find the best actual size for the equipment We use repeated calculations to find the best actual size for the equipment –Each try the Lane Henning routine optimizes the COVs

16. Optimum Size Bang for the Buck (PVR) Size of Mine Economic Feasibility Line This Size Range is Economic This size is optimum

17. Added Work May also run scenarios with changes in markets or metal price to try to deal with risk May also run scenarios with changes in markets or metal price to try to deal with risk

18. What We Have This is Long Term Mine Plan This is Long Term Mine Plan –Know ultimate size of pit –Know the steps that will be followed to get there –Know what equipment will be used to get there and which rock will be handled as ore or waste Intermediate and Short Range mine plans start providing detail of which equipment is doing what where on what day Intermediate and Short Range mine plans start providing detail of which equipment is doing what where on what day –Won’t have lot of coverage on these topics in this class

19. Where Do We Go From Here Next parts of course look at specific operations in more detail Next parts of course look at specific operations in more detail Will examine how to design production blasting rounds (tends to emphasize quarry work) Will examine how to design production blasting rounds (tends to emphasize quarry work) Will look at Sizing and Selection of Common Load and Haul Equipment Will look at Sizing and Selection of Common Load and Haul Equipment –Trucks and Shovels