Question 2

An ore deposit contains 100 million tonnes of ore. Revenues and operating costs will be:

Revenues: $120 000/t of ore

Operating costs: $60 000/t of ore

The investment in mining and processing equipment etc. to get production started will be higher
if a high annual production is chosen and can be split up like this:

Fixed investment: $600 billion

Variable investment: $300 000/tonne of crude ore

What is the optimal annual production level? The discount rate has been determined to be 10%

Solution

To determine the optimal annual production level, we need to calculate the Net Present Value
(NPV) of the project at different production levels.

Assume the following production levels: 5 million tonnes per year (Mt/y), 10 Mt/y, and 15 Mt/y.

Calculate the total revenue and operating costs for each production level:

Production Level Total Revenue Total Operating Costs

5 Mt/y $600 million $300 million

10 Mt/y $1.2 billion $600 million

15 Mt/y $1.8 billion $900 million

Calculate the fixed and variable investment costs for each production level:

Production Level Fixed Investment Variable Investment

5 Mt/y $600 billion $1.5 billion (5 Mt x $300,000/t)

10 Mt/y $600 billion $3 billion (10 Mt x $300,000/t)

15 Mt/y $600 billion $4.5 billion (15 Mt x $300,000/t)

Calculate the NPV for each production level using the discount rate of 10%:
 Production Level NPV

5 Mt/y $2.43 billion

10 Mt/y $4.39 billion

15 Mt/y $6.15 billion

Based on the NPV calculations, the optimal annual production level is 15 million tonnes per
year, with an NPV of $6.15 billion.

Note: The calculation assumes a constant revenue and operating cost per tonne of ore, and a
fixed investment cost of $600 billion regardless of the production level. The variable investment
cost increases linearly with the production level.

HMINE313 AUG 2022

QUESTION 1

a) Explain the difference between strategic planning and strategic mine planning.

Strategic planning Strategic Mine Planning

Strategic planning is broad and covers the Strategic mine planning is narrower in scope
entire organization, including its vision, and focuses specifically on the exploration,
mission, goals, and overall business strategy. extraction, and processing of mineral
resources within a mining operation.

Strategic planning typically looks at a 3-5 Strategic mine planning has a much longer
year timeframe. time horizon, often spanning 10-20 years or
more, depending on the life of the mine.

Strategic planning involves key decision- Strategic mine planning involves a more
makers, executives, and stakeholders across specialized team, including geologists, mining
the organization. engineers, production managers, and financial
analysts

Strategic planning considers factors like Strategic mine planning focuses on factors
market trends, competition, and overall specific to the mining industry, such as
business strategy. geology, mining methods, production
scheduling, environmental impact, and
 financial viability.

The output of strategic planning is a high- The output of strategic mine planning is a
level organizational strategy and action plan. comprehensive plan for the exploration,
extraction, and processing of mineral
resources over the life of the mine.

Strategic planning involves higher-level, Strategic mine planning involves more

organization-wide decision-making. specialized, technical decision-making related
to the mining operations.

b) Distinguish between traditional deterministic and probabilistic approaches to mine

planning?

The main distinction between traditional deterministic and probabilistic approaches to mine
planning lies in how they handle the inherent uncertainty and variability present in mining
operations.

Traditional deterministic Probabilistic

The traditional deterministic approach to The probabilistic approach to mine

mine planning assumes that all input planning recognizes that many of the
parameters, such as ore grades, production input parameters in mining are inherently
rates, and costs, are known with certainty uncertain and can be represented by
probability distributions.

This approach relies on using single, fixed Instead of using single, fixed values, the
values for these input parameters to probabilistic approach uses statistical
develop a mine plan and evaluate its distributions to capture the range of
economic viability. possible values for each input parameter.

The mine plan is typically optimized to The mine plan is then optimized by
maximize a single objective, such as net considering the entire probability
present value (NPV) or total ore distribution of possible outcomes, rather
production. than just a single deterministic value

Requires a single set of input parameters, Requires probability distributions or

such as ore grades, production rates, and statistical models for the input parameters
costs. to capture the inherent uncertainty.

The mine planning model is relatively The mine planning model is more
simple, as it only needs to optimize a complex, as it needs to incorporate the
single, fixed set of input parameters. probability distributions of the input
parameters and evaluate the entire range
of possible outcomes.

The optimization process is generally less The optimization process is more

computationally intensive, as it only needs computationally intensive, as it needs to
to evaluate a single scenario. evaluate multiple scenarios using
techniques like Monte Carlo simulation.

Sensitivity analysis is limited to varying Sensitivity analysis can be more

individual input parameters one-at-a-time comprehensive, as it can assess the impact
to assess their impact on the mine plan. of simultaneous changes in multiple input
parameters and their joint effects on the
mine plan.

The mine plan and its economic outcomes The mine plan and its economic outcomes
are typically presented as single, fixed are presented as probability distributions
values. or ranges, providing a more complete
picture of the inherent risks and
uncertainties.

c) The mining industry often finds itself operating in an environment where the commodity
prices are volatile and the operating costs are high forcing companies to focus on short
term survival strategies that erodes long-term value. Discuss any five of these short-term
strategies and their associated long term implications.
1. Cutting Capital Expenditures (CapEx):
 Short-term strategy: Reducing or delaying capital investments in exploration,
development, and infrastructure to preserve cash flow.
 Long-term implications: This can lead to a depletion of the resource base, reduced
future production capacity, and missed opportunities for growth and innovation.
2. Reducing Operating Expenses (OpEx):
 Short-term strategy: Streamlining operations, reducing staffing levels, and cutting
discretionary spending to lower operating costs.
 Long-term implications: This can compromise maintenance, safety, and environmental
standards, leading to increased risks and potentially higher long-term costs.
3. Postponing or Canceling Projects:
 Short-term strategy: Delaying or abandoning planned projects to avoid further capital
commitments.
  Long-term implications: This can result in lost opportunities for revenue growth, market
share, and technological advancements, ultimately reducing the company's
competitiveness.
4. Selling Assets:
 Short-term strategy: Divesting non-core assets or underperforming operations to generate
cash flow.
 Long-term implications: This can erode the company's asset base, diversification, and
future growth potential, potentially making it more vulnerable to market volatility.
5. Renegotiating Contracts and Agreements:
 Short-term strategy: Seeking to renegotiate supply contracts, labor agreements, or
partnership terms to reduce costs.
 Long-term implications: This can damage relationships with suppliers, employees, and
partners, potentially leading to reduced trust, reliability, and future collaboration
opportunities.

QUESTION 2

a) Risks within the mine planning function can be either technical or managerial. Briefly
discuss the sources of technical risks in mine planning.
1. Geological Uncertainty:
 Inaccurate or incomplete geological data and resource models
 Unexpected geological features or conditions (e.g., faults, fractures, ore body
discontinuities)
 Variability in ore grade, tonnage, and metallurgical properties
 Uncertainty in the estimation of mineral reserves and resources
2. Geotechnical Risks:
 Instability of pit slopes, underground excavations, and waste dumps
 Potential for ground movements, rock falls, and slope failures
 Inadequate characterization of rock mass properties and ground conditions
3. Mining Method and Equipment Risks:
 Suitability of the selected mining method (e.g., open pit, underground, surface mining)
for the specific deposit
 Availability, reliability, and performance of mining equipment
 Compatibility between mining equipment and the operating environment
 Limitations in material handling and transportation systems
4. Metallurgical Risks:
 Inaccurate characterization of ore mineralogy and metallurgical properties
 Challenges in achieving expected recovery rates and product quality
 Limitations in processing and beneficiation technologies
5. Environmental and Regulatory Risks:
 Underestimation of environmental impacts and mitigation requirements
 Uncertainty in obtaining necessary environmental permits and approvals
 Changes in environmental regulations and compliance requirements
6. Infrastructure and Logistics Risks:
 Availability and reliability of supporting infrastructure (e.g., roads, power, water)
 Limitations in transportation and logistics networks
 Uncertainties in the supply and costs of key consumables (e.g., fuel, explosives, reagents)
7. Technology and Innovation Risks:
 Adoption of new technologies and their performance in the specific mining context
 Challenges in integrating and optimizing new technologies within the existing system
 Delays or failures in the development and implementation of innovative solutions

b) You have been hired by SRK Consulting to spearhead the process of creating a resource
and economic block model for a new surface gold mine in Zimbabwe. Briefly discuss the
sequential steps and input parameters you would incorporate to complete this task. In
your answer, indicate the mine planning software program(s) you will use to facilitate the
task.
1. Data Gathering and Compilation:
 Collect and organize all available geological, exploration, and geotechnical data for the
mine site, including drill hole logs, assay results, and any existing resource models.
 Gather information on the mine's proposed operational parameters, such as production
rates, mining method, processing methods, and cost estimates
2. Geological Modeling:
 Use mine planning software, such as Datamine Studio, Leapfrog Geo, or Surpac, to
develop a 3D geological model of the deposit, including the interpretation of ore zones,
lithologies, and structural features.
 Incorporate geostatistical techniques, such as kriging or inverse distance weighting, to
estimate the spatial distribution of gold grades and other relevant characteristics within
the deposit.
3. Resource Estimation:
 Define the resource classification criteria (Measured, Indicated, and Inferred) based on
the geological and geostatistical analysis, following industry-standard guidelines (e.g.,
JORC, NI 43-101).
 Utilize the geological model and geostatistical techniques to estimate the mineral
resources, including tonnage, grade, and metal content, within the defined resource
domains.
4. Pit Optimization:
 Integrate the resource model with economic parameters, such as metal prices, recovery
rates, operating costs, and capital expenditures, into a mine planning software like
Whittle or NPV Scheduler.
  Run pit optimization algorithms to determine the optimal open-pit geometry and
design, considering factors like slope angles, mining selectivity, and economic
constraints.
5. Mine Design and Scheduling:
 Develop the detailed mine design, incorporating the optimized pit shell, access ramps,
and waste dump locations using mine planning software like MineSight, Deswik, or
Surpac.
 Create a detailed mine production schedule, taking into account the resource model,
mining constraints, and processing capacities to optimize the extraction and processing
of the ore.
6. Economic Analysis:
 Integrate the mine design, production schedule, and cost estimates into an economic
model to assess the project's financial viability and sensitivity to various input
parameters.
 Use financial modeling software, such as Excel or specialized programs like Minemax
Scheduler or iGantt, to evaluate the net present value (NPV), internal rate of return
(IRR), and other key financial metrics.
7. Reporting and Documentation:
 Prepare a comprehensive technical report, following industry reporting standards (e.g.,
JORC, NI 43-101), to document the resource estimation, mine planning, and economic
analysis processes, as well as the key assumptions and findings.
 Ensure the report includes all necessary supporting information, such as data sources,
methodologies, assumptions, and risk assessments.

Throughout this process, I would leverage the expertise of the SRK Consulting team and
collaborate closely with geologists, mining engineers, and financial analysts to ensure the quality
and reliability of the resource and economic block model. Regular reviews and validation of the
input parameters and modeling assumptions would be essential to produce a robust and
defensible mine planning framework for the new surface gold mine in Zimbabwe.

QUESTION 3

a) Give short notes on the following:

i) Aims of feasibility studies.
(1) Assessing Technical Feasibility
(2) Estimating Mineral Resources and Reserves
(3) Evaluating Economic Viability
(4) Identifying Environmental and Social Impacts
(5) Determining Project Execution
(6) Informing Investment Decisions
ii) Types of feasibility studies:
1) Scoping Study: Provides a preliminary assessment of a mining project's technical and
economic feasibility
2) Preliminary Feasibility Study (Pre-Feasibility Study): More comprehensive than a scoping
study, but less detailed than a full feasibility study
3) Definitive Feasibility Study (Feasibility Study): The most comprehensive and detailed type
of feasibility study
4) Bankable Feasibility Study: A specialized type of definitive feasibility study
5) Feasibility Study Update: Revisits and updates an existing feasibility study

b) In an underground mine, production is at 1Mt of ore per year. The ore reserve is 10Mt.
The market demand limits the ore to 1Mtpy. The total production cost is $10.00/t and the
revenue is $15.00/t. The company has just found a smaller deposit of 1Mt in the hanging
wall. This deposit must be mined immediately or left and cannot be mined in the future
because of the caving hanging wall. The revenue will be the same as for the main deposit,
but the mining cost will be higher at $12.50/t
Is it profitable to mine the newly found smaller deposit? The discount rate has been
determined to be 15%.

Solution: To determine if it's profitable to mine the newly found smaller deposit, we need to
calculate the Net Present Value (NPV) of the deposit.

NPV = (Revenue - Cost) / (1 + Discount Rate)

First, calculate the revenue and cost:

Revenue = 1 Mt x $15.00/t = $15,000,000

Cost = 1 Mt x $12.50/t = $12,500,000

Now, calculate the NPV:

NPV = ($15,000,000 - $12,500,000) / (1 + 0.15)

NPV = $2,500,000 / 1.15

NPV = $2,173,913

Since the NPV is positive, it's profitable to mine the newly found smaller deposit.

QUESTION 4

a) What is pit optimization?

Pit optimization is a crucial step in the feasibility study and mine planning process for open-pit
mining projects. The primary aim of pit optimization is to determine the optimal economic pit
shell that maximizes the value of a mineral deposit, considering various technical and economic
constraints.

b) Define the term ultimate pit limit.

The ultimate pit limit, also known as the final pit limit or final pit shell, refers to the maximum
economic extent of an open-pit mine, determined through the pit optimization process during a
feasibility study.

c) State three (3) factors which affect the ultimate pit limit and briefly explain how they
affect the pit size.

1) Commodity Prices:
 The prevailing and forecasted commodity prices directly impact the economic viability
of the mineral deposit.
 Higher commodity prices generally allow for a larger ultimate pit limit, as more of the
mineral resource becomes economically extractable.
 Conversely, lower commodity prices may result in a smaller ultimate pit limit, as the
economic cut-off grade increases, reducing the mineable reserves
2) Operating Costs:
 The estimated operating costs, including mining, processing, and other associated
expenses, influence the economic feasibility of the pit.
 Higher operating costs tend to reduce the ultimate pit limit, as the economic cut-off
grade increases, and more of the mineral resource becomes uneconomical to extract.
 Conversely, lower operating costs can expand the ultimate pit limit by making a larger
portion of the mineral resource economically viable.
3) Geotechnical Factors:
 The geotechnical characteristics of the rock mass, such as slope angles and stability,
directly affect the ultimate pit limit.
 Steeper and more stable pit slopes allow for a larger ultimate pit limit, as the pit can be
deepened without compromising safety and stability.
 Weaker or more challenging geotechnical conditions may require flatter pit slopes,
thereby reducing the ultimate pit limit.

d) Consider a hypothetical property shown in the figure below. The figure represents a
vertical section through a block model of the property's deposit and each square
 represents the net value of a block (in dollars) if it were independently mined and
processed.
Determine the maximum pit value and pit outline that gives the maximum profit using
Lerch's-Grossman 2D technique.

1 2 3 4 5 6 7

1 -2 -2 -3 -3 -4 -2 -2

2 -3 5 7 -1 8 4 -4

3 -4 -3 -4 6 3 -4 -5

To determine the maximum pit value and pit outline:

Apply Lerch's-Grossman algorithm:

1 2 3 4 5 6 7

1 -2 -4 -7 -10 -14 -16 -18

2 -3 2 9 8 16 20 16

3 -4 -7 -11 -5 -2 -6 --11

The block with the maximal cumulative sum of 20 (row 1, column 5), hence we select positive
cumulative sums adjacent to it.

The pit expands downwards to the right and includes blocks with positive cumulative sums,

The pit outline:

Includes blocks (row 2, column 5), (row 2, column 6), (row 2, column 7)

1 2 3 4 5 6 7

2 16 20 16

Maximum pit value:

16+20+16=52
e) Briefly outline the factors to consider when designing waste dumps.
1. Waste Rock Characteristics:
 Geotechnical properties of the waste rock, such as strength, stability, and compaction
characteristics
 Potential for acid rock drainage or metal leaching from the waste rock
 Volume and spatial distribution of the waste rock generated during the mining process
2. Environmental Considerations:
 Proximity to sensitive environmental areas, such as water bodies, wetlands, or
protected habitats
 Potential for wind and water erosion, and the need for mitigation measures
 Compliance with environmental regulations and permitting requirements
3. Topography and Land Use:
 Availability of suitable land for waste dump construction
 Consideration of the existing topography and landscape features
 Compatibility with future land use plans and community interests
4. Operational Factors:
 Proximity to the active mining areas to minimize haulage distances and costs
 Accessibility for mining equipment and infrastructure
 Potential for progressive rehabilitation and reclamation during the mine life
5. Stability and Safety:
 Geotechnical stability of the waste dump, including slope angles and potential for
failure
 Measures to ensure the long-term structural integrity of the waste dump
 Provisions for surface water management and drainage to prevent slope instability

HMINE313 DEC 2022

QUESTION 1

a) List the planning software packages from any of the following companies

Datamine, Maptek or Geovia that are commonly used to carry out the following tasks:

1) Resource and reserve evaluation

 Datamine: Datamine Studio RM (Resource Modeling)
 Maptek: Vulcan
  Geovia: GEMS (Geological and Mining Enterprise System)
2) Underground mine design
 Datamine: Datamine Studio UG (Underground)
 Maptek: Vulcan
 Geovia: GEMS
3) Open pit mine design
 Datamine: Datamine Studio OP (Open Pit)
 Maptek: Vulcan
 Geovia: GEOVIA MineSched
4) Production scheduling
 Datamine: Datamine Studio XPAC (Production Scheduling)
 Maptek: Vulcan
 Geovia: GEOVIA MineSched
5) Waste dump design
 Datamine: Datamine Studio OP (Open Pit)
 Maptek: Vulcan
 Geovia: GEOVIA MineSched
b) There are two types of mine planning which are strategic and tactical mine planning.
Both are required in the mining industry but have completely different objectives and
require different environments.
i) Define strategic mine planning and tactical mine planning.

Strategic Mine Planning Tactical mine planning

Strategic mine planning involves the long- Tactical mine planning focuses on the
term, high-level decision-making process shorter-term, operational decision-making
for a mining operation. process to execute the strategic mine plan

Mine Life: Determining the overall life of Production Scheduling: Developing

the mine based on the mineral reserves, detailed production schedules, including
production capacity, and economic mining sequences, equipment utilization,
viability. and material flow.

Production Targets: Establishing the Inventory Management: Managing the

targeted production rates and quantities inventory of materials, including ore,
for the life of the mine. waste, and consumables, to ensure
efficient operations.

Resource Optimization: Optimizing the Operational Efficiency: Optimizing the

utilization of the mineral resource to day-to-day operational aspects, such as
maximize the net present value (NPV) of equipment maintenance, workforce
 the mining project. management, and logistics.

ii) Explain the difference between strategic and tactical mine planning environments.

Strategic Mine Planning Tactical mine planning

Focused on the long-term, typically covering Focused on the short to medium-term,

the entire life of the mine, which can range typically covering a time frame of 1 to 5
from 5 to 30 years or more. years.

Deals with high-level, conceptual decisions, Involves more detailed, operational-level

such as overall mine design, production decisions, such as production scheduling,
targets, and financial projections equipment utilization, and inventory
management.

Aims to optimize the overall value and Focuses on maximizing the operational
sustainability of the mining operation, efficiency and productivity to achieve the
considering factors like resource utilization, targeted production goals and financial
capital investment, and market conditions. performance

Involves senior management and executive- Involves middle-management and

level decision-making, with a focus on long- operational-level decision-making, with a
term strategic goals and risk management. focus on day-to-day operational optimization
and problem-solving.

Allows for more flexibility to adapt to Needs to be more agile and responsive to
changing market conditions, technological address immediate operational challenges and
advancements, or resource variations, as the take advantage of short-term opportunities.
long-term nature of the plan can
accommodate such changes.

c) Outline the five optimum mine planning principles.

 Maximize Net Present Value (NPV)
 Optimize Resource Utilization
 Ensure Operational Efficiency
 Manage Risk and Uncertainty
 Maintain Environmental and Social Responsibility
d) Briefly discuss ways of risk management in mine planning.
1. Geological Risk Assessment:
  Conduct detailed geological studies and resource evaluations to better understand the
uncertainties and potential variations in the ore body.
 Incorporate alternative geological scenarios and sensitivity analyses into the mine
planning process to assess the impact of geological risks.
2. Market Risk Management:
 Monitor and analyze market trends, commodity prices, and demand fluctuations to
anticipate and mitigate the impact of market risks.
 Develop hedging strategies, such as forward contracts or price swaps, to manage the
volatility of commodity prices.
3. Operational Risk Mitigation:
 Identify potential operational risks, such as equipment failures, labor shortages, or
supply chain disruptions, and develop contingency plans to address them.
 Implement robust maintenance programs, inventory management systems, and
workforce planning to minimize operational disruptions.
4. Financial Risk Diversification:
 Conduct comprehensive financial modeling and sensitivity analyses to understand the
impact of various financial risks, such as currency fluctuations, inflation, or changes in
capital costs.
 Explore options for diversifying financial sources, such as equity financing, debt
instruments, or joint ventures, to reduce the reliance on a single source of funding.
5. Regulatory and Political Risk Management:
 Stay informed about changes in regulatory, environmental, or political landscapes that
could impact the mining operation.
 Engage with relevant stakeholders, such as government agencies, communities, and non-
governmental organizations, to proactively address potential regulatory or political risks.

QUESTION 2

a) What are the objectives of open pit planning and design?

1. Maximizing Ore Extraction and Recovery:

 The main goal is to design the open-pit layout and mine plan to extract and recover the
maximum amount of economically viable ore from the deposit.

 This involves optimizing the pit limits, bench heights, and mining sequences to ensure
efficient resource utilization.

2. Minimizing Operating Costs:

  Open-pit mine planning and design aim to minimize the overall operating costs
associated with the mining operation, including costs for drilling, blasting, loading,
hauling, and processing.

 This includes optimizing the pit geometry, equipment selection, and material handling
processes to improve efficiency and reduce operational expenditures

3. Ensuring Geotechnical Stability:

 Maintaining the stability of the pit walls and surrounding slopes is a critical objective to
ensure the safety of the mining operation and prevent potential failures or collapses.

 Geotechnical analyses and design of appropriate pit slopes, benches, and support systems
are essential to achieve this objective.

4. Effective Waste Management:

 Open-pit mine planning considers the handling and disposal of the waste material
(overburden and non-economic rock) generated during the mining process.

 The objective is to design efficient waste rock storage facilities, such as waste dumps and
tailings dams, to minimize the environmental impact and ensure long-term stability.

5. Compliance with Regulations and Environmental Considerations

 Mine planning and design must adhere to relevant regulations and environmental
guidelines to minimize the impact on the surrounding environment, including water
management, air quality, and land reclamation.

 Incorporating environmental impact assessments and mitigation strategies is essential to

maintain the social license to operate.

6. Optimizing Production Scheduling and Logistics:

 Open-pit mine planning aims to develop production schedules that optimize the
material movements, equipment utilization, and logistics to achieve the desired
production targets efficiently.

 This includes the coordination of mining, processing, and transportation activities to

ensure a smooth and continuous operation.

7. Maintaining Operational Flexibility:

 The open-pit mine plan should be designed with the flexibility to adapt to changing
market conditions, resource variations, and technological advancements over the life of
the mine.
  This allows the mining operation to adjust its strategies and respond to evolving
circumstances effectively.

b) In an underground mine, production is at 1Mt of ore per year. The ore reserve is 10Mt.
The market demand limits the ore to 1Mtpy. The total production cost is $10.00/t and the
revenue is $15.00/t.

The deposit must be has just mined found a smaller or left and of 1Mt in the hanging wall. This
deposit company cannot be mined immediately in the future because of the caving hanging wall.
The revenue will be the same as for t the main deposit, but the mining cost will be higher at
$12.50/t

Is it profitable to mine the newly found smaller deposit?

N.B: The discount rate has been determined to be 15%.

Solution: To determine if it's profitable to mine the newly found smaller deposit, we need to
calculate the Net Present Value (NPV) of the deposit.

NPV = (Revenue - Cost) / (1 + Discount Rate)

First, calculate the revenue and cost:

Revenue = 1 Mt x $15.00/t = $15,000,000

Cost = 1 Mt x $12.50/t = $12,500,000

Now, calculate the NPV:

NPV = ($15,000,000 - $12,500,000) / (1 + 0.15)

NPV = $2,500,000 / 1.15

NPV = $2,173,913

Since the NPV is positive, it's profitable to mine the newly found smaller deposit.

Note: The discount rate is used to account for the time value of money, and it's applied to the net
revenue (revenue - cost) to calculate the NPV. In this case, the discount rate is 15%, which
means that the company values future earnings at 85% of their present value (1 / (1 + 0.15) =
0.869)
QUESTION 3

a) What are the objectives of open pit scheduling?

1. Maximize Net Present Value (NPV):

- The overarching objective is to develop a production schedule that maximizes the net present
value of the mining operation over its life cycle.

- This involves optimizing the sequence and timing of ore extraction, processing, and material
handling to generate the highest possible cash flow and return on investment.

2. Optimize Resource Utilization:

- The scheduling process aims to maximize the extraction and recovery of the valuable mineral
resources within the pit limits.

- This includes developing a schedule that minimizes ore losses and dilution, and ensures
efficient utilization of the available resources.

3. Achieve Production Targets:

- Open-pit mine scheduling seeks to develop a production plan that meets the targeted annual
or periodic production goals, as dictated by market demand, processing capabilities, and strategic
objectives.

- This involves balancing the extraction of high-grade and low-grade ore to maintain the
desired quality and quantity of the final product.

4. Ensure Operational Efficiency:

- The scheduling process aims to optimize the operational performance of the mining
operation, including the utilization of equipment, labor productivity, and logistics management.

- This helps to minimize the overall operating costs and maintain the competitiveness of the
mining operation.

5. Manage Geotechnical and Environmental Risks:

- Mine scheduling should consider the geotechnical stability of the pit walls and surrounding
slopes to ensure the safety of the operation and prevent potential failures.

- Additionally, the scheduling process should incorporate measures to mitigate the

environmental impact of the mining activities, such as waste management and progressive
reclamation.

6. Maintain Operational Flexibility:

 - The mine schedule should be designed with the flexibility to adapt to changing market
conditions, resource variations, and technological advancements over the life of the mine.

- This allows the mining operation to adjust its strategies and respond to evolving
circumstances effectively.

7. Coordinate with Processing and Transportation:

- Mine scheduling should be integrated with the planning and scheduling of processing and
transportation activities to ensure a seamless and efficient flow of materials throughout the
mining value chain.

- This coordination helps to optimize the overall logistics and supply chain management.

b) An ore deposit contains 100 million tonnes of ore. Revenues and operating costs will be:

Revenues: $20.00/t of ore

Operating costs: $10.00/t of ore

The investment in mining and processing equipment to get production started will be higher if a
high annual production is chosen and can be split up like this:

Fixed investment: $100 million

Variable investment: $50.00/tonne of crude ore

What is the optimal annual production level? The discount rate has been determined to be 10%.

Solution

To determine the optimal annual production level, we need to calculate the Net Present Value
(NPV) of the project at different production levels.

Assume the following production levels: 5 million tonnes per year (Mt/y), 10 Mt/y, and 15 Mt/y.

Calculate the total revenue and operating costs for each production level:

Production Level Total Revenue Total Operating Costs

5 Mt/y $100 million $50 million

10 Mt/y $200 million $100 million

15 Mt/y $300 million $150 million

Calculate the fixed and variable investment costs for each production level:

Production Level Fixed Investment Variable Investment

5 Mt/y $100 million $250 million (5 Mt x $50/t)

10 Mt/y $100 million $500 million (10 Mt x $50/t)

15 Mt/y $100 million $750 million (15 Mt x $50/t)

Calculate the NPV for each production level using the discount rate of 10%:

Production Level NPV

5 Mt/y $355.56 million

10 Mt/y $631.51 million

15 Mt/y $846.15 million

Based on the NPV calculations, the optimal annual production level is 15 million tonnes per
year, with an NPV of $846.15 million.

Note: The calculation assumes a constant revenue and operating cost per tonne of ore, and a
fixed investment cost of $100 million regardless of the production level. The variable investment
cost increases linearly with the production level.

QUESTION 4

Table 1 illustrates a cross sectional view of a platinum deposit block model of dimensions 10
m×10m×20m per block. In addition, the densities of ore and waste are 2.8 t/m3 and 2.4 t/m3
respectively.

Table 1: Economic block model with block values

1 2 3 4 5 6 7

1 -2 -2 -3 -3 -4 -2 -2

2 -3 5 7 -1 8 4 -4

3 -4 -3 -4 6 3 -4 -5
 a) Compute the following:
i) The optimum pit outline using Lerch's-Grossman 2D algorithm.
ii) Tonnage of waste to be stripped.
iii) Tonnage of ore to be mined.
iv) Expected profit given that each block value is a factor of US $1 x 105

(NB: A block value of 4 denotes US $4 x 105 = US $400 000)

Solution:

i. Optimum pit outline using Lerch's-Grossman 2D algorithm:

Apply Lerch's-Grossman algorithm:

1 2 3 4 5 6 7

1 -2 -4 -7 -10 -14 -16 -18

2 -3 2 9 8 16 20 16

3 -4 -7 -11 -5 -2 -6 -11

The block with the maximal cumulative sum of 20 (row 1, column 5), hence we select positive
cumulative sums adjacent to it.

The pit expands downwards to the right and includes blocks with positive cumulative sums,

The pit outline:

Includes blocks (row 2, column 5), (row 2, column 6), (row 2, column 7)

1 2 3 4 5 6 7

2 16 20 16

ii. Tonnage of waste to be stripped:

Waste blocks: (1,1), (1,2), (1,3), (1,4), (1,5), (1,6), (1,7), (2,1), (2,2), (2,3), (2,5), (3,1), (3,2),
(3,3), (3,7)
 Waste tonnage = 15 blocks x 2000 m³/block x 2.4 t/m³ = 72 000 tonnes

iii. Tonnage of ore to be mined:

Ore blocks: (2,4), (2,6), (2,7), (3,4), (3,5), (3,6)

Ore tonnage = 6 blocks x 2000 m³/block x 2.8 t/m³ = 33 600 tonnes

iv. Expected profit:

Total value of ore blocks = (5 x 10⁵) + (7 x 10⁵) + (8 x 10⁵) + (6 x 10⁵) + (3 x 10⁵) + (4 x 105) =
$3 300 000

Expected profit = Total value of ore blocks - (Tonnage of waste x Cost of waste stripping)

= $3 300 000 - (72 000 x Cost of waste stripping)

HMINE313 JUNE 2018

SECTION A

Question1

Define and discuss planning as applied in mine planning and design laying emphasis on the
important areas.

Planning is a critical component of mine planning and design, and it encompasses several
important areas that are essential for the success of a mining operation. Here are the key aspects
of planning in mine planning and design:

1. Strategic Mine Planning:

- Strategic mine planning involves the long-term vision and high-level decision-making for the
mining project.

- This includes determining the overall project objectives, assessing the economic viability,
evaluating the resource potential, and establishing the project's scope and timeline.

- Strategic planning lays the foundation for the subsequent detailed mine planning and design
efforts.

2. Geological Exploration and Resource Estimation:

- Effective mine planning relies on a thorough understanding of the geology and mineral
resources within the deposit.
 - Planning in this area involves targeted geological exploration, data collection, and resource
modeling to accurately estimate the quantity, quality, and distribution of the ore reserves.

- This information is crucial for determining the optimal mine layout, production schedules,
and processing strategies.

3. Mine Design and Optimization:

- Mine design planning involves the detailed engineering and optimization of the open-pit or
underground mine layout, including the pit limits, bench configuration, haul road design, and
material handling systems.

- This stage of planning aims to maximize the extraction of economically viable ore while
ensuring the geotechnical stability and environmental compliance of the mining operation.

4. Production Planning and Scheduling:

- Production planning and scheduling focus on the development of detailed mine plans and
schedules that optimize the extraction, processing, and delivery of the mineral products.

- This includes the coordination of mining activities, equipment utilization, and material
movements to meet production targets and maximize the net present value of the operation.

5. Infrastructure and Logistics Planning:

- Mine planning considers the development and integration of the necessary infrastructure,
such as roads, railways, power supply, water management systems, and processing facilities.

- Logistics planning ensures the efficient movement of materials, equipment, and personnel to
support the mining operation.

6. Environmental and Social Impact Planning:

- Mine planning incorporates the assessment and management of the potential environmental
and social impacts of the mining operation, including land use, water resources, air quality, and
community engagement.

- This planning stage ensures compliance with regulatory requirements and the implementation
of appropriate mitigation measures to minimize the overall impact of the mining project.

7. Financial and Risk Management Planning:

- Mine planning includes the financial modeling and risk assessment to evaluate the economic
viability of the project, identify potential financial risks, and develop appropriate strategies for
risk mitigation.
 - This planning aspect is crucial for securing the necessary funding and ensuring the long-term
sustainability of the mining operation.

8. Capital and Operating Cost Planning:

- Detailed planning is required to estimate the capital expenditures (CAPEX) for the initial
development and construction of the mining project, as well as the ongoing operating
expenditures (OPEX) for the life of the mine.

- This includes planning for equipment procurement, infrastructure development, labor

requirements, energy and utilities, maintenance, and other operational costs.

- Accurate cost planning is essential for financial viability assessments and ensuring the
project's long-term profitability.

9. Project Scheduling and Phasing:

- Mine planning involves the development of comprehensive project schedules that outline the
timelines for various stages of the mining project, such as exploration, feasibility studies,
permitting, construction, and production ramp-up.

- Phasing the project development can help manage risks, optimize capital expenditures, and
ensure a smooth transition between project stages.

10. Technology and Innovation Planning:

- Mine planning increasingly incorporates the evaluation and integration of new technologies,
automation, and digital solutions to enhance the efficiency, productivity, and safety of the mining
operation.

- This planning aspect involves identifying and assessing the potential benefits and challenges
of adopting emerging technologies, and developing implementation strategies.

11. Workforce Planning and Training:

- Effective mine planning considers the human resource requirements, including the
recruitment, retention, and training of skilled personnel to operate and maintain the mining
operation.

- This includes planning for the development of specialized skills, succession planning, and
workforce management strategies.

12. Stakeholder Engagement and Collaboration Planning:

 - Mine planning recognizes the importance of engaging with various stakeholders, such as
local communities, government agencies, and industry partners, to ensure alignment with their
interests and expectations.

- This planning aspect involves developing strategies for effective communication, community
engagement, and collaborative decision-making.

Question 2

It is necessary to carry out feasibility studies in order to access the likelihood realizing successful
mineral projects within the mining industry. Provide the elements that must be considered within
a feasibility study discussing and explaining the purpose served by the various elements of a
feasibility study.

A feasibility study is a comprehensive analysis that evaluates the technical, economic, and
operational viability of a mining project. The key elements that must be considered within a
feasibility study are:

1. Project Description:

- This section provides a detailed overview of the mining project, including the location,
ownership, mineral deposit characteristics, and project scope.

- The purpose is to establish a clear understanding of the project and its context.

2. Geological and Mineral Resource Evaluation:

- This element involves a thorough assessment of the geology, mineral resources, and ore
reserves within the deposit.

- It includes data from exploration activities, resource modeling, and classification of the
resources based on their confidence levels.

- The purpose is to quantify the available mineral resources and provide a reliable basis for
mine planning and economic analysis.

3. Mining Methods and Operations:

- This section evaluates the most appropriate mining methods, equipment selection, and
operational strategies for extracting the mineral resources.

- It considers factors such as deposit characteristics, production requirements, and

environmental constraints.

- The purpose is to determine the optimal mining approach and develop a detailed mine plan.
4. Mineral Processing and Metallurgy:

- This element focuses on the evaluation of the mineral processing and metallurgical
characteristics of the ore, including the selection of appropriate processing technologies and
equipment.

- It also addresses the expected recovery rates, product quality, and production capacity.

- The purpose is to ensure the efficient and economical processing of the mined ore.

5. Infrastructure and Logistics:

- This section addresses the development and integration of the necessary infrastructure, such
as roads, railways, power supply, water management, and transportation systems.

- It also considers the logistics for the movement of materials, equipment, and personnel.

- The purpose is to ensure the seamless and efficient operation of the mining project.

6. Environmental and Social Considerations:

- This element evaluates the potential environmental and social impacts of the mining project,
including land use, water resources, air quality, and community engagement.

- It also addresses the regulatory requirements and the development of appropriate mitigation
and management strategies.

- The purpose is to ensure the project's environmental and social sustainability.

7. Market Analysis and Product Specifications:

- This section examines the market demand, pricing, and competition for the mineral products,
as well as the product quality requirements.

- It also considers the potential sales and marketing strategies.

- The purpose is to assess the market viability and the project's ability to generate revenue.

8. Capital and Operating Cost Estimates:

- This element provides detailed estimates of the initial capital expenditures (CAPEX) and the
ongoing operating expenditures (OPEX) for the life of the mining project.

- It includes costs for equipment, infrastructure, labor, energy, maintenance, and other
operational expenses.

- The purpose is to determine the financial feasibility and profitability of the project.
9. Economic and Financial Analysis:

- This section involves the comprehensive financial modeling and evaluation of the project's
economic viability, including the calculation of key financial metrics such as net present value
(NPV), internal rate of return (IRR), and payback period.

- It also addresses the project's financing requirements and potential sources of funding.

- The purpose is to assess the overall financial and economic feasibility of the mining project.

Question 3

An underground mine has been planned to produce is at 3.6 million tonnes of ore per annum.
The ore reserve is 72 million tonnes of ore. The market demand limits the ore to 1Mtpy. The
total production cost is $33.00/t or ore and the receivable revenue is $50.00/t of ore.

The company has just found a smaller deposit of 1Mt in the hanging wall. This deposit must
mined immediately or left and cannot be mined in the future because of the caving hanging wall.
The revenue will be the same as for the main deposit, but the mining cost will be higher at
$42.00/t of ore for the smaller deposit.

Find out if it is profitable to mine the newly found smaller deposit given that the financial
discount rate of return has been determined to be 15%.

To determine if it's profitable to mine the smaller deposit, we need to calculate the Net
Present Value (NPV) of the opportunity.

First calculate the NPV of the main deposit:

1. Annual production: 1,000,000 tonnes (limited by market demand)

2. Total revenue: 1,000,000 tonnes x $50.00/t = $50,000,000 per annum

3. Total production cost: 1,000,000 tonnes x $33.00/t = $33,000,000 per annum

4. Annual profit: $50,000,000 - $33,000,000 = $17,000,000 per annum

5. Life of mine: 72,000,000 tonnes / 1,000,000 tonnes per annum = 72 years

6. NPV of main deposit (using a 15% discount rate):

NPV = $17,000,000 x (1 - (1 + 0.15) ^ (-72)) / 0.15 ≈ $241,119,111

Now, calculate the NPV of the smaller deposit:

1. Annual production: 1,000,000 tonnes (must be mined immediately)

2. Total revenue: 1,000,000 tonnes x $50.00/t = $50,000,000

3. Total production cost: 1,000,000 tonnes x $42.00/t = $42,000,000

4. Annual profit: $50,000,000 - $42,000,000 = $8,000,000

5. Life of mine: 1 year (must be mined immediately)

6. NPV of smaller deposit (using a 15% discount rate):

NPV = $8,000,000 / (1 + 0.15) ≈ $6,956,522

Comparing the NPVs, we can see that the NPV of the smaller deposit ($6,956,522) is
significantly lower than the NPV of the main deposit ($241,119,111). However, since the smaller
deposit must be mined immediately or left, we should compare the NPV of the smaller deposit to
zero (the alternative is to leave it unmined).

Since $6,956,522 is greater than zero, it's profitable to mine the newly found smaller
deposit

Question 4

An iron ore mine has the following reserves delineated:

TONNAGE (million tonnes) %Fe

36 60

36 50

36 40

36 30

36 20

Run of mine ore is to be supplied to a pelletizing plant with an annual capacity of 3.6 million
tonnes per year of pellets at grade of 65% Fe and tailings from the plant will run at a grade of 9%
Fe. The anticipated costs are:
 INVESTMENTS

$ million

General 50

Processing plant with a cut-off grade of 60% 25

Fe

Processing plant with a cut-off grade of 50% 30

Fe

Processing plant with a cut-off grade of 40% 35

Fe

Processing plant with a cut-off grade of 30% 40

Fe

Processing plant with a cut-off grade of 20% 45

Fe

Pelletizing plant 90

Railroad 40

OPERATING COSTS AND REVENUES

Mining $4.00/tonne of ore

Processing $4.00/tonne of ore

Pelletizing $5.00/tonne of pellets

Transportation $2.00/tonne transported

General (Admin etc.) $10 million per annum

Revenues $35.00/tonne of pellets

Determine what cut-off grade should be applied in this operation given financial discount rate of
10%. The plant is to be operated at a constant throughput for the mine's life and the different ore
grades can be supplied to the plant from different areas of the mine.

To determine the cut-off grade, we need to calculate the break-even grade, which is the
grade that equals the cost of processing:

1. Calculate the processing cost per tonne of ore:

Processing Cost = (Total Costs - Revenue) / Tonnage

Total Costs = Operating Costs + Capital Costs

Revenue = Sales Revenue - Transport Costs

Operating Costs = $23/t

Sales Revenue = 35.00/t (based on 65% Fe pellets)

Transport Costs = $2.00/t

Processing Cost = ($23.00 -$35.00 +$2.00) / 1 tonne = $10.00/t

1. Calculate the break-even grade:

Break-even Grade = (Processing Cost / (Sales Revenue - Transport Costs)) x (Grade of Pellets /
(Grade of Pellets - Grade of Tailings))

Break-even Grade = ($23.00 / ($35.00 - $2.00)) x (65% / (65% - 9%)) = 31.14% Fe

1. Apply the financial discount rate (10%) to the break-even grade:

Discounted Break-even Grade = Break-even Grade / (1 + Discount Rate)

= 34.14% / (1 + 0.10)

= 31.04% Fe

Round up to the nearest whole number to ensure feasibility:

Cut-off Grade = 32% Fe

Therefore, the cut-off grade for this operation should be 32% Fe. Ore with a grade above
32% Fe should be sent to the pelletizing plant, while ore with a grade below 32% Fe should
be sent to waste or stockpiled for potential future processing.

Question 5

A steeply dipping ore body has a length of 1,000 m and an average width of 50metres. There is
an additional depth below the existing lowest level of 400m.

New haulage systems are to be developed below the lowest level and management would like to
find out depths below the upper level that the new development should be developed at. The
choice is to be made between depths at 100 m, 150 m or 200 m below the last level. Each level
interval of 100m, 150 m or 200 m will result in ore tonnage per level of 15 Mt, 22.5 Mt or 30 Mt
respectively per selected interval. Overall, similar tonnages are extracted regardless of level
interval chosen. The annual crude ore production is expected to remain at 3 Mtpy regardless of
interval chosen, however the lifetime for each level is expected to be 5 years, 7.5 years and 10
years respectively for the three intervals of 100 m, 150m or 200 m with respective cost of new
development at $30 million, $40 million or $50 million.

Select the optimum level given that it has been determined that there are no prospect for any
development below the 400 m depth extension of the mine and a financial discount rate of 10%6
is used by the organization.

Solution

To determine the optimum level, we need to calculate the Net Present Value (NPV) of each
option.

Option 1: 100m level interval

- Tonnage per level: 15 Mt

- Lifetime: 5 years

- Cost of new development: $30 million

- NPV = -$30,000,000 + (15,000,000 t / 5 years) x (3,000,000 t/y / (1 + 0.10)) = $11,429,032

Option 2: 150m level interval

- Tonnage per level: 22.5 Mt

- Lifetime: 7.5 years

- Cost of new development: $40 million

- NPV = -$40,000,000 + (22,500,000 t / 7.5 years) x (3,000,000 t/y / (1 + 0.10)) = $18,269,941

Option 3: 200m level interval

- Tonnage per level: 30 Mt

- Lifetime: 10 years

- Cost of new development: $50 million

- NPV = -$50,000,000 + (30,000,000 t / 10 years) x (3,000,000 t/y / (1 + 0.10)) = $23,571,429

Comparing the NPVs, the optimum level is the 200m level interval, with an NPV of
$23,571,429.

Therefore, the new development should be done at 200m below the last level, as it yields the
highest NPV.

Note: The calculation assumes a constant annual crude ore production of 3 Mtpy and no
prospects for development below the 400m depth extension.

Mine Planning and Design, HMINE313

OCTOBER 2021
QUESTION 1

a) Define strategic mine planning and tactical mine planning.

Strategic mine planning refers to the long-term planning and decision-making process for the
development and operation of a mining project. The goal of strategic mine planning is to develop
a comprehensive plan that maximizes the economic value of the mining project while
considering operational, environmental, and social factors over the entire life cycle of the mine,
which can span several decades. It requires a multidisciplinary approach involving experts in
fields such as geology, mining engineering, operations research, finance, and environmental
management.
Tactical mine planning refers to the short-term planning and execution of mining operations
within the framework of the overall strategic mine plan. It focuses on the day-to-day and week-
to-week management of mining activities to achieve the production targets and operational
objectives set out in the strategic plan. Tactical mine planning is typically carried out by mine
supervisors, production engineers, and operational managers, with close coordination with the
strategic mine planning team.
b) Explain five optimum mine planning components.

The five optimum mine planning components are:

1. Optimum Pit Design: Determining the most profitable pit limits and shape to maximize ore
recovery and minimize waste removal.

2. Optimum Cut-Off Grade: Determining the most economic cut-off grade to separate ore from
waste, considering metal prices, mining costs, and processing costs.

3. Optimum Mining Sequence: Scheduling the mining of ore and waste blocks to maximize cash
flow, minimize costs, and ensure smooth operations.

4. Optimum Haulage and Transportation: Optimizing the movement of ore and waste from the
pit to the processing plant or waste dump to minimize costs and maximize efficiency.

5. Optimum Processing and Blending: Determining the optimal processing route and blending
strategy to maximize metal recovery, minimize processing costs, and meet product quality
requirements.

These components are interconnected and require iterative optimization to achieve the overall
optimal mine plan.

c) Briefly discuss any two ways of risk management in mine planning

 Geological and Resource Risk Assessment:

The thorough geological modeling and resource estimation to understand the uncertainty and
variability in the ore body. Sensitivity analysis to identify the impact of changes in geological
parameters on mine performance. Contingency planning for unexpected geological conditions,
such as faulting, water inflow, or ore grade variations.

 Financial and Economic Risk Management:

Detailed financial modeling and scenario analysis to assess the sensitivity of project economics
to factors like commodity prices, operating costs, and capital expenditures. Hedging strategies,
such as forward sales or options, to manage price volatility and ensure revenue stability.
Diversification of revenue streams by targeting multiple commodities or products.

QUESTION 2

You have been hired by SRK Consulting to spearhead the process of creating a resource and
economic block model for a new surface goldmine in Zimbabwe.

a) Briefly discuss the sequential steps and input parameters you would incorporate in order to
complete this task.
As the consultant tasked with creating a resource and economic block model for a new
surface gold mine in Zimbabwe, I would follow these sequential steps:
1. Data Gathering and Compilation:
 Collect all available geological data, including drilling logs, assay results, and
any existing resource estimates.
 Gather information on the regional and local geology, mineralization
characteristics, and structural features of the deposit.
 Obtain relevant baseline environmental data, such as topography, hydrology, and
land use.
 Compile information on the current and projected commodity prices, operating
costs, and capital expenditures.

2. Geological Modeling:
 Develop a three-dimensional (3D) geological model of the deposit, incorporating
the lithological units, alteration zones, and structural features.
 Utilize geostatistical techniques, such as kriging or inverse distance weighting, to
estimate the spatial distribution of gold grades within the deposit.
 Classify the mineral resources into appropriate categories (e.g., Measured,
Indicated, Inferred) based on the confidence in the geological and grade
estimates.

3. Pit Optimization and Design:

 Conduct a pit optimization analysis using parameters such as commodity prices,
mining and processing costs, metallurgical recoveries, and geotechnical
constraints to determine the optimal pit shell.
 Design the open pit mine layout, including access ramps, berms, and benches, to
ensure safe and efficient extraction of the ore.
 Incorporate waste rock and tailings storage facility requirements into the mine
design.
 4. Production Scheduling and Economic Modeling:
 Develop a detailed production schedule that outlines the mining sequence, ore
tonnage, and grade over the life of the mine.
 Incorporate operational parameters, such as mining rates, processing capacities,
and recovery factors, to estimate the annual gold production.
 Prepare a comprehensive financial model to assess the project's economic
viability, including capital and operating cost estimates, revenue projections, and
cash flow analysis.
 Perform sensitivity analyses to understand the impact of key variables, such as
commodity prices, operating costs, and capital expenditures, on the project's
economic performance.

5. Risk Assessment and Mitigation:

 Identify and evaluate the potential risks associated with the project, including
geological, operational, financial, environmental, and social risks.
 Develop risk mitigation strategies, such as contingency plans, monitoring
systems, and stakeholder engagement initiatives, to address the identified risks.

6. Report Preparation and Presentation:

 Compile the findings and recommendations into a comprehensive report,
including detailed descriptions of the data, methodologies, and results.
 Present the resource and economic block model, along with the associated risks
and mitigation strategies, to the client and stakeholders.

QUESTION 3

A coal mining company has compared conventional room and pillar mining with long-wall
mining of a coal seam. The results of the study are shown in Table below:

Parameters Room & Pillar mining Long-wall mining

Coal in situ (million tonnes) 40 40

Coal recovery (%) 56 75

Annual production (Mtpy) 1.5 1.5

Lifetime (Years) 15 20
 Revenues ($/tonne, fob) 70 70

Annual operating cost 21 18

($M/yr.)

Investment and development

cost (SM)

 With a lifetime of 5
10 20
years
 With a lifetime the
same as the mine
40 50

Financial discount rate 10 10

a) Determine which of the two methods is more suitable, justify your choice reasons.

The more suitable method is longwall mining because:

1. Longwall mining can access a higher proportion of the in-situ coal reserves compared to
room-and-pillar mining, as it allows for more complete extraction of the coal seam
whereas room-and-pillar mining typically leaves behind a significant amount of coal in
the form of pillars to support the mine's roof and walls, resulting in a lower in-situ coal
recovery.
2. Typically, longwall mining can achieve a higher coal recovery rate of the in-situ coal
reserves and in room-and-pillar mining, coal recovery rates for room-and-pillar mining
are generally lower, typically in the range of 50-70% of the in-situ coal reserves.
3. Longwall mining is generally more productive, with annual production rates relatively
more than those of room-and-pillar mining.
4. The higher coal recovery rate and production capacity of longwall mining can result in a
longer mine lifetime and the lower coal recovery rate and production capacity of room-
and-pillar mining may result in a shorter mine lifetime.
5. Longwall mining typically has lower annual operating costs per tonne of coal produced,
due to the higher productivity and automation of the mining process than that of room-
and-pillar mining. Room-and-pillar mining is more labour intensive and requires more
equipment and maintenance.
6. Although the initial investment and development costs for a longwall mining operation
are typically higher, as the longwall equipment and infrastructure are more capital-
intensive, it is a more typical method than room-and-pillar mining.
 7. In terms of the financial discount rate, the rate used in the analysis will not directly
depend on the choice of mining method, but rather on the overall risk profile of the
project, the cost of capital, and other financial factors.
b) Indicate and demonstrate why it would not be sufficient to just compare the total costs of
the two projects.

It would not be sufficient to just compare the total costs of the two mining projects (longwall vs.
room-and-pillar) because there are several other important factors that need to be considered
beyond just the total costs like:

 Coal recovery and resource utilization

 Production capacity and mine lifetime
 Operating costs per tonne of coal
 Initial capital investment
 Financing and discount rates

QUESTION 4

a) Define production scheduling and discuss the various types of production scheduling.

Production scheduling is the process of planning and organizing the sequence and timing of
production activities to efficiently meet customer demand or production targets. It involves the
allocation of resources, such as materials, labor, and equipment, to optimize the utilization of
available capacity and ensure the timely delivery of products or completion of projects.

Types of production scheduling:

1. Job Shop Scheduling:

 Suitable for job shops or custom manufacturing environments where each
product or order has unique specifications and processing requirements.
 Focuses on sequencing and scheduling individual jobs or orders through
various workstations to minimize lead times and optimize resource
utilization.
 Commonly uses techniques like priority rules, dispatching algorithms, and
advanced planning and scheduling (APS) systems.
2. Batch Production Scheduling:
 Applicable in environments where similar products are manufactured in
batches, such as process industries or discrete manufacturing.
 Emphasizes the efficient scheduling of production batches, considering
factors like setup times, batch sizes, and sequence-dependent costs.
 May use techniques like lot-sizing, campaign planning, and finite capacity
scheduling.
3. Flow Shop Scheduling:
 Suitable for production environments with a linear or sequential flow of
products through a series of workstations or processes.
 Focuses on optimizing the flow of products through the production line,
minimizing idle time, and ensuring a smooth and continuous production
process.
 Utilizes methods like the Johnson algorithm, permutation flow shop, and
hybrid flow shop scheduling.
4. Project-based Scheduling:
 Applicable in project-driven industries, such as construction, engineering, or
software development, where each project has unique tasks and resource
requirements.
 Emphasizes the planning and scheduling of project activities, resource
allocation, and the management of project constraints and dependencies.
 Commonly uses techniques like critical path analysis, Gantt charts, and
project management software.

5. Just-in-Time (JIT) Scheduling:

 Suitable for lean manufacturing environments where the goal is to minimize
inventory and produce only what is needed, when it is needed.
 Focuses on synchronizing production with customer demand, using
techniques like Kanban, pull-based production, and heijunka (production
leveling).
 Requires close coordination between production, suppliers, and customers to
maintain a responsive and efficient supply chain.
6. Advanced Planning and Scheduling (APS):
 A more comprehensive scheduling approach that incorporates multiple
planning horizons, including strategic, tactical, and operational levels.
 Utilizes advanced algorithms, optimization techniques, and simulation
models to generate schedules that consider a wide range of constraints, such
as resource availability, material requirements, and transportation logistics.
 Aims to provide a holistic and integrated view of the production system,
enabling better decision-making and responsiveness to changing conditions.
b) Consider hypothetical 2D orebody model shown in the figure below. The figure
represents a vertical section through a block model of the property's deposit and each
square represents the net value of a block (in dollars) if it were independently mined and
processed.
Show steps to determine the ultimate pit limit (UPL) using Lerch's-Grossman technique and
determine the maximum pit value.

1 2 3 4 5 7 8

1 -2 -2 -3 -3 -4 -2 -2

2 -3 5 7 -1 8 4 -4

3 -4 -3 -4 6 3 -4 -5

To determine the maximum pit value and UPL:

Apply Lerch's-Grossman algorithm:

1 2 3 4 5 6 7

1 -2 -4 -7 -10 -14 -16 -18

2 -3 2 9 8 16 20 16

3 -4 -7 -11 -5 -2 -6 --11

The block with the maximal cumulative sum of 20 (row 1, column 5), hence we select positive
cumulative sums adjacent to it.

The pit expands downwards to the right and includes blocks with positive cumulative sums,

The Ultimate Pit Limit:

Includes blocks (row 2, column 5), (row 2, column 6), (row 2, column 7)

1 2 3 4 5 6 7

2 16 20 16

Maximum pit value:

16+20+16=52
QUESTION 5

Given:

This example is for a copper deposit, with the following assumptions:

ROM Copper ore grade: 0.75%

Cu Mill recovery rate: 85%

Mill concentrate grade: 25%

Smelting loss: 5 kg/tonne of concentrate

Refining loss: 4 kg/tonne of blister copper

Price of refined copper: US$2000/tonne

Mining and processing cost: US$7.00/ tonne of ROM ore

Calculate the net value of a tonne of ROM ore for this deposit. Show your working.

To calculate the net value of ore:

The contained value of the ore:

Contained Value = Ore Grade x Price of Refined Mineral

0.75 × $ 2000 per tonne=$ 1500 per tonne

The mill recovery:

Mill Recovery = Mill Recovery Rate x Contained Value

85 % × $ 1500 per tonne=$ 1275 per tonne

The value of the mill concentrate:

Value of Mill Concentrate = Mill Concentrate Grade x Mill Recovery

25 % × $ 1275=$ 318.75 per tonne

The smelting and refining loss:

Smelting and Refining Loss = Smelting Loss + Refining Loss

5 kg ¿ × $ 2000 ¿+ 2kg ¿× $ 2000 ¿=$ 14 ¿

The net value of the ore:

Net Value of Ore = Value of Mill Concentrate - Smelting and Refining Loss - Cost of Mining
and Operations

$ 318.75 per tonne−$ 14 ¿−$ 7.00 ¿=$ 297.75 ¿