OPTIMAL LONG TERM PLANNING AT EL TENIENTE MINE

Authors:

Octavio Araneda Oss

Sergio Gaete Becerra
Francisco de la Huerta
Luis Zenteno Yelpi
Codelco Chile, Divisin El Teniente
Rancagua, Chile

ABSTRACT

El Teniente Mine is the worlds largest underground copper Mine, and exploits a giant
porphyry copper deposit. Since 1906 more than 1100 Mton have been mined out. The
current daily production is close to 100.000 tpd, and is generated by the extraction of 7
mining sectors, at three different levels.

The planning process of this complex operation has to deal with a high stress
environment with mining induced seismicity, subsidence between adjacent sectors and
the management of hard primary rock.

This paper describes the implementation and validation in El Teniente of a new long term
planning model, based on linear programming. The model was used in the formulation of
the long term plan of El Teniente Mine. It shows the main results, including several runs,
at different copper prices, the integration of Mine and Plant, and a discussion about the
benefits obtained with the use of this tool.
 INTRODUCTION

El Teniente Mine is located 80 km southeast of Santiago and 60 km northeast of

Rancagua City in Central Chile. Figure 1 shows the location of all Codelco Chile
Divisions and El Teniente Mine.

Fig 1 El Teniente Mine location

The mine is owned by Codelco-Chile and 1.100 million tons of ore have been mined out
during almost 100 years of mining[1]. Its production has been mainly obtained by block-
caving method with grizzlymen (secondary ore exploitation). In 1982, a mechanized
panel caving method was introduced, with LHD equipment, in order to mine the primary
ore. A currently production of 100.000 tonnes/day is achieved, with a projected
production of 130.000 tonnes/day by year 2005, which would mean 450 Kt of fine
copper yearly.

El Teniente is one of the largest known deposits of porphyry copper in the world. The
main rock types of the deposit are: Andesite (73 per cent), Diorite (12 per cent), Dacite
(nine per cent) and Breccia (six per cent). Its resources accounts for over 12 Billion tons
of ore, with an average grade of 0,63 % of copper. The current 25 year mining plan
includes 1,2 Billon tons of ore, with an average copper grade of 1.09 %.
 THE MINE PLANNING PROBLEM

The business directive to the mine is to maximize the net present value through the
exploitation of the large amounts of ore resources contained in the orebody. In order to
achieve that, the mine planning process have to decide what is the best mining strategy so
as to create the maximum value.

The first thing that has to be taken into account in order to understand the underground
mining planning process, is the mining method. Conceptually the panel caving is a
sequential method under a continuous process of development undercuting of the base
of the rock extraction of the caved material and closure of the depleted area, which is
carried out through the life of a Panel, as shown in Figure 1.

Undercuting

Extraction
Development

Figure 1 Panel caving method

The maximum capacity of a single panel section depends on three factors mainly, the
height of the column, the undercuting and development rate, and the extraction rate.
Under the conditions of El Teniente Mine, with block heights between 140 240 (m) and
front face lengths between 100 800 (m), the maximum capacity of a single panel moves
between 7.000 to 45.000 tpd. Another important fact to know is that the production
ramp-up of a panel caving operation since the starting of the panel is relatively long,
taking between 2 to 8 years to reach the maximum capacity.

According to that and given the size of El Tenientes orebody, the Mine has to be mined
using several panel caving sectors, each of them having one or two faces of advance. At
present the mine has 7 sectors at three different levels, given a total production of
126.000 tpd. Figures 3 and 4 show the area distribution of the 7 mining sectors that
accounts for the production of year 2003.
 Figure 3 Mining sectors level Teniente 4, year 2003

Fig 4 Mining sectors level Teniente Sub5 Sub6, year 2003

The planning process, has to deal with the definition of:

Reserves to be depleted in each sector

The production level of each sector, the starting up time, and the interaction with
other sectors

The optimal mix of sectors in time

The allocation of mineral from different sectors to the transport systems and
process plants

The processing plants production strategy (capacity, recovery)

Investments decisions in infrastructure and in capacity expansions

That complex planning process has a huge potential of value creation, and has had a big
evolution since the last 20 years.

EVOLUTION OF THE MINE PLANNING CRITERIA

Until the 80s decade, the strategy was oriented towards production. The main effort was
to maintain or expand the production capacity of the facilities, extending the life of the
mining. The profit was addressed using marginal costs and cutoff grades.

Since the early 90s the main focus has been competitiveness, turning the efforts to costs
reduction and increasing the capital revenue. Maximizing the present value of the net
benefits was explicitly stated as the corporate mission. The reserve selection criteria is
the opportunity cost [2] [3] and since year 2001 it was extended to integrate mine and
concentrator (PIMC)[4].

Since 2000 the main focus in planning is value creation . The economical principles used
were extended to include risk and sustainability. The planning scope was enlarged to
consider the whole resources available. The objective is to maximize the net present
values constrained to a predefined risk level. These issues have increased dramatically
the amount of alternatives to evaluate.

To accomplish this increasing demand, the selection among plans is formulated as an

optimization problem, and solved by a mathematical model [5]. Mining is modeled as a
multi-period capacitated network , the objective function is the present value of the net
benefits. The problem is solved using a mixed programming approach.

The model includes several sectors and processing facilities as a whole. It also allows to
use constrains on capacities and flows, that can be used, for example, to model
environmental regulations or exploitation policies.
 OPTIMIZING MODEL: APPLICATION CASES

El Teniente yearly develops 25 years plans. We present a comparison between the 2002
plans built with the former methodology (DET2) and the new optimizing model (DET1).

The 2002 plan included 18 mining sectors. The model requires the network process and
the global capacities and constrains, additionally for each sector it requires costs,
capacities and the block model. The general parameters used are shown in table 1.

Table I General Parameters used in Planning

Copper Price Molibdenum Price Discount Rate Planning Horizon

(US$/lb) (US$/Kg) (%) (years)

0,98 6,6 10 25

The maximum production profile is the same in both cases (Figure 5), this is controlled
by the plant capacity.

PRODUCTION PROFILE

140.000
135.000
Tpd 130.000
125.000
120.000
115.000
110.000
105.000
100.000
95.000
90.000
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 5 Total production level

In the new model (DET1) total copper grades are 2% greater than DET2 in average,
moving the best grades to the first years of the plan.

1,25
DET1 DET2
1,20
1,15
1,10
%CuT

1,05
1,00
0,95
0,90
0,85
0,80
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 6 Comparison between copper grades

The net present values obtained with DET1 are 10% greater than the NPV obtained with
DET2. The increment is mainly due to the increasing in the grades of the first years, this
is explained by the global optimization used by the new model compared with the
individual optimization used in DET2.

In the next paragraph we present the results for the sectors representing 70% of the
production during the first 10 years. In both methodologies the costs are the same, then
the focus will be on the analysis on the grades and tonnages produced.

The grade increment is explained by two factors,

1) Better mixing for individual sectors , trough the better extraction sequences
2) Better global mixing, comparing blocks in different sectors

The next figures show that individual grades obtained with DET1 for sectors Esmeralda,
Pilar, Reservas Norte and Diablo Regimiento are better than the ones obtained with
DET2.
 1,60
1,50
1,40
DET 1 DET 2
1,30
%CuT

1,20
1,10
1,00
0,90
0,80
0,70
0,60
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 7 Esmeralda Mine grades

1,80
DET 1 DET 2

1,60

1,40
%CuT

1,20

1,00

0,80
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 8 Pilar Mine grades

1,80

DET1 DET2
1,60

1,40
% CuT

1,20

1,00

0,80

0,60
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 9 Reservas Norte Mine grades

 1,20

DET1 DET2

1,00
%CuT

0,80

0,60
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 10 Diablo-Regimiento Mine grade

The global mixing grade is increased by decreasing the production of Esmeralda and
Reservas Norte and increasing the production of Pilar and Diablo Regimiento during the
firsts 10 years.

50.000
45.000
40.000
35.000
toneladas por da

30.000
25.000
20.000
15.000
10.000
DET1 DET2
5.000
0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 11 Esmeralda Mine production profile

 30.000
DET 1 DET 2
toneladas por da 25.000

20.000

15.000

10.000

5.000

0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 12 Pilar Mine production profile

50.000

45.000 DET1 DET2

40.000

35.000
toneladas por da

30.000

25.000

20.000

15.000

10.000

5.000

0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 13 Reservas Norte Mine production profile

 50.000

45.000 DET1 DET2

40.000

35.000
toneladas por da

30.000

25.000

20.000

15.000

10.000

5.000

0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Figure 14 Diablo-Regimiento production profile

CONSTRAINS EFFECT

The model can include three general types of constrains: operational and rock mechanics
constraints, capacity constraints and quality constraints. The idea of this section is to
analyze the cost of some constrains used in the present mine planning process.

A smoothing constrain is used to obtain an extraction surface according to the operation

policy of regularity. In practice the constrain limits the difference in extraction between
heights of adjacent draw points. As any constrain, smoothing decreases the optimum
value.

The effect of using a 40m difference compared with the unconstrained case is shown
table II, and in Figure 15.

Table II Effect of regularity smoothing

Average Total
NPV
Escenario Grade Copper
% % Cu KTMF
Smoothing 40m -6 -0.02 -254
 SMOOTH CONSTRAINT EFFECTS
COPPER GRADE

0,06

Copper Grade Differences (% Cu)

0,05

0,04

0,03

0,02

0,01

0,00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

-0,01
Period (2004-2028)

Figure 15 Smoothing constrain effect

The environmental regulation limits the total emission of arsenic per year at the smelter.
Considering processing and quality requirements this results in a limit equal to 2000 ppm
of Arsenic concentration in copper concentrate.

The effect of the constrain compared with the unconstrained case are shown in table III
and in Figure 16.

Table III Effect of Arsenic constraint

Average Total
NPV
Escenario Grade Copper
% % Cu KTMF
Contaminant -1 -0.01 -10
 ARSENIC CONSTRAIN EFFECTS
As in CONCENTRATES

3000

2500
As in Concentrates(ppm )

2000

As unconstrained
1500
As constrained

1000

500

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Period (2004-2028)

Figure 16 Arsenic grade of Copper concentrates

PRICE VARIATION

The model was used to analyze the effect of copper price variations in the mining plan.
The base scenario had a price a 0.8 US$/pound the first year and a log term price of 0.85
US$/pound. The problem was to determine what should be the best mining strategy if the
price in the first year decreased to 0.75 US$/pound, the second year to 0.8 US$/pound
and since year 3 to 25 was kept on the long term price (0,85 US$/pound).

25 Year Long Term Planning

Annual Average Copper Grade

1,16

1,14

1,12

1,10

1,08

1,06

1,04

1,02

1,00
2004 2005 2006 2007 2008
P80_85 1,12 1,05 1,05 1,10 1,15
P70_85 1,08 1,08 1,05 1,10 1,15

Figure 17 Effect of copper price on average copper grades

The model decreases the grade in the first year and increases the grade the second year
compared to the base scenario, maintaining the grades the rest of the planning horizon.
The mining strategy suggested increases the NPV of the plan with the new price series in
comparison with the original plan.

The result is explained comparing the price difference with the discount rate. If the price
difference is greater than the discount rate, the grades are changed.

CONCLUSIONS

The optimizing model increases 10% the net present value of the plan. This is explained
by the simultaneous optimization producing better individual and global grades. The
model allows to explore multiple planning scenarios, giving more insight to the
generation of scenarios and finally producing better results.

The results obtained are a good guide to build the final plans. During the planning
process some of the increments may be slightly reduced due to operating conditions not
modeled.

The opportunity cost of the constrains can be estimated with the help of the model, and it
can give a guide to reduce the effects of the constrains in the net present value of
business. The cost of the constrains can be very high, and in the case of one of the
environmental restrictions it can account for over 10% of the future NPV .

The model can be a very useful tool to precise strategies in order to react at different
price scenarios.

In order to obtain sound results, it is mandatory to have high quality costs and process
information, and a well trained team of professionals with a good knowledge in mine
planning, economics, computer systems and mathematical optimization.

REFERENCES

1. W. Hustrulid, R. Bullock. Underground Mining Methods: Engineering Fundamentals

And International Case Studies. Littleton, Colo., USA, SME; Society for Mining,
Metallurgy, and Exploration. 2001.

2. K.F. Lane, The Economic Definition of Ore. Mining Journal Books, London, 1988.

3. F. de la Huerta, Aplicacion del Criterio de Costo De Oportunidad en la Planificacion

de Produccin de Minas Subterrneas. Universidad de Chile, Facultad de Ciencias
Fisicas y Matemticas, Departamento de Ingeniera de Minas. Memoria para optar al
ttulo de Ingeniero Civil de Minas. Santiago de Chile, Junio de 1994.
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Teniente. Seminario Internacional sobre Innovacin Tecnolgica en Minera. IIMCH,
Santiago, Chile, 8 al 10 de Mayo del 2002.

5. R. Epstein, F. Caro, J. Cataln, P. Santibez, A. Weintraub and S. Gaete,

Optimizing long term planning for underground copper mines, to be presented at
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