SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO
Value Creation Through Strategic Mine Planning and Cutoff Grade Optimization
K. Dagdelen, Colorado School of Mines, Golden, CO
K. Kawahata, Colorado School of Mines, Golden, CO
®
The OptiPit software program is developed based on expertise
gained at the Colorado School of Mines (CSM) using Mixed Integer
Linear Programming (MILP) techniques. This program has been
developed to satisfy the need in the mining industry for a multi-time
period schedule and cutoff grade optimization tool that handles large
scale open pit and underground mining operations involving many
dumps, stockpiles, complex processing options and blending
requirements. The current software (or earlier development versions)
has been beta tested and used on various large scale projects within
Placer Dome Inc., Newmont Mining Corporation, and Phelps Dodge
Corporation since 2003. Through the use of this software, these
companies experienced additional value creation by optimizing mine
sequences, cutoff grades, material process flows and stockpiles under
complex operational and processing constraints. This paper will
present simple case study results to demonstrate the power of OptiPit
® three constraints; mining, processing and refining constraints. The
when used as a cutoff grade optimization tool. Furthermore, the paper
will show, by example, how significant the difference in the Net Present
Value (NPV) of a given project can be, depending on whether results
®
are obtained by way of cutoff grade optimization using OptiPit , or by
using traditional breakeven cutoff grade approach.
Introduction
There has not been commercially available software in the mining
industry that optimizes cutoff grades as a multiple time period problem
for complex mining operations with multiple mines, complex
sequencing requirements, and multiple process streams. Considerable
efforts have been spent during the last 20 years at the CSM in
developing and implementing MILP models that optimize production
schedules and cutoff grades to maximize the NPV of complex mining
operations. However, these models have been very site specific in
their development and implementation. As a result, most complex
mining projects are developed by using manual (or heuristic)
sequencing, cutoff grade determination and scheduling techniques,
imbedded within commercially available software programs, that
cannot guarantee that the planned mining strategy is optimum. Based
on many years of experience obtained at the CSM, a new software
®
program, OptiPit is developed as a production scheduling and cutoff
grade optimization tool to universally handle any complex mining
operations. The software is developed based on experiences gained
from research and project work at the CSM, which can be summarized
as follows:
Initial research on development of large scale production
scheduling by using the Linear Programming (LP) and the Integer
Programming (IP) model and their solution algorithm was carried out
by Dagdelen (1985), based on the work done by Johnson (1968) at the
University of California at Berkeley. Application of Lane’s cutoff grade
optimization algorithm to a gold deposit was described in Dagdelen
(1992) and the actual algorithm was given in Dagdelen (1993). The
MILP approach as a schedule and cutoff grade optimizer was initially
proposed by Dagdelen (1996). The concept of the MILP approach is
demonstrated and discussed in Urbaez and Dagdelen (1999), and
successfully applied to a large scale gold mine operation with complex
process flows at Newmont Mining Corporation’s Nevada operations
(Hoerger, Bachmann, Criss and Shortridge 1999, Hoerger, Hoffman
and Seymour 1999). Akaike (1999) worked on implementation of the IP
model to large iron ore and gold project, and Akaike (1999) and
Ramazan (2001) worked on the development of the Fundamental Tree
1 Copyright © 2007 by SME
Preprint 07-085
algorithm. Bernabe (2001) performed comparative analysis of
schedules obtained by using commercially available pushback design
techniques and by using the program developed at the CSM. The
® ®
development of OptiPit started in early 2003. The use of OptiPit for
cutoff grade optimization on large scale mining operations involving
complex metallurgical process options were discussed in Dagdelen
and Kawahata (2005). Kawahata (2006) worked on improving the
solution time for MILP problems by way of the Lagrangian relaxation
technique.
To maximize the project’s NPV, it is widely accepted to use the
dynamic cutoff grades, rather than using the constant, breakeven
cutoff grade. Lane (1964) proposed a heuristic approach to determine
the optimum cutoff grade policy to maximize the project’s NPV under
concept is to use a cutoff grade higher than breakeven cutoff grades
during the early years of the project to have higher cash flows to
improve the NPV, by taking the ‘time value of money’ into account. To
maximize the NPV, cutoff grade calculations have to include the fixed
costs associated with not receiving the future cash flows quicker due to
the cutoff grade decision taken now. Since these fixed costs are
always positive, cutoff grades are calculated to be higher than the
breakeven cutoff grade. Consequently, higher cutoff grades are used
during the earlier years of the project. The economic benefits of this
approach reflected in the NPV of a project is further discussed by Lane
(1988), Dagdelen (1992), and Whittle and Wharton (1995).
There are many shortcomings to Lane’s cutoff grade optimization
approach:
1) The algorithm is limited to cutoff grade optimization involving
a single process and a single commodity, and cannot be
used to optimize cutoff grades for operations producing ore
for multiple processes.
2) The algorithm assumes that the life of mine extraction
sequence is known, and optimizes the cutoff grades for this
predetermined sequence. In real life, the mining sequence
cannot be determined without knowing the cutoff grades, and
of course within this algorithm, cutoff grades can not be
determined without knowing the mining sequence. As such,
implementation of the algorithm is iterative and by trial and
error.
3) The algorithm assumes that there are no blending
requirements related to processing of ore in a single plant.
4) The algorithm also does not take into account the economic
impact of stockpiling lower grade ore materials.
There have been many heuristic modifications to Lane’s algorithm
to overcome the shortcomings listed above. These heuristics still
cannot guarantee the optimality of the solution.
Unlike the heuristic algorithms, the underlying mathematical
®
solution approach in OptiPit software guarantees to optimize mine
sequence, cutoff grades, and process flows simultaneously for
complex mining environments.
Gold Mine Case Study
To demonstrate the impact of cutoff grade optimization on the
NPV of cash flows coming from a mining operation during the life of the
project, we will use a gold mine example as a case study given in
 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

Dagdelen (1992). Although, the McLaughlin case study example as Since there is only one processing option, i.e., an autoclave mill,
provided here does not include any complexities related to phase and the ore will be sent to a crusher and processed at the autoclave mill,
bench sequencing, it has features that demonstrate the complexity of and the waste is sent to a waste dump. Material flows of this operation
real life optimization when there are multiple process options. are shown in Figure 1.
The McLaughlin gold deposit, located in Northern California, USA,
was discovered in the early 1980’s and developed as an open pit mine
feeding refractory ores to a 3000 tons/day autoclave process. The Dump
mining rate has varied between 20K tons/day to 40K tons/day. The
mine initially utilized one O&K hydraulic excavator, three Cat 992
loaders and 8 Cat 777 trucks, and operated between 1985 and 1995.
Table 1 shows the grade tonnage distribution within the ultimate pit
limit, and Table 2 shows economic and operational parameters. The
grade tonnage distribution is assumed to be homogeneous throughout Mine Cr Autoclave
the deposit.
Table 1. The grade tonnage distribution of the gold deposit case study.
Interval From To midpoint Ktons 1.05M
(oz/ton) (oz/ton) (oz/ton) tons/yr
1 0.000 0.020 0.010 70,000 Figure 1. Case1 material flow.
2 0.020 0.025 0.023 7,257
3 0.025 0.030 0.028 6,319 The economic breakeven cutoff grade (gbreakeven) which can be used
4 0.030 0.035 0.033 5,591 to differentiate between ore and waste is determined by equating the
5 0.035 0.040 0.038 4,598 value at the mill to the value at the dump. If there is no additional
6 0.040 0.045 0.043 4,277 dumping cost, it can be expressed as:
7 0.045 0.050 0.048 3,465
8 0.050 0.055 0.053 2,428 Valuemill ($ / ton) = ( P − s ) × g × y − m − c
9
10
0.055
0.060
0.060
0.065
0.058
0.063
2,307
1,747
Valuedump ($ / ton) = −m [1]
11 0.065 0.070 0.068 1,640
where
12 0.070 0.075 0.073 1,485
13 0.075 0.080 0.078 1,227 P: price of gold
14 0.080 0.090 0.085 1,799 s: sales and refining costs
15 0.090 0.100 0.095 1,799 g: grade of the material
16 0.100 0.110 0.105 371 y: recovery
17 0.110 0.120 0.115 371 m: mining cost
18 0.120 0.130 0.125 371 c: process cost
19 0.130 0.140 0.135 371
20 0.140 0.150 0.145 371 and, at the breakeven cutoff grade,
21 0.150 0.160 0.155 371
22 0.160 0.170 0.165 371 ( P − s) × g breakeven × y − m − c = −m
23 0.170 0.180 0.175 371
24 0.180 0.190 0.185 371 therefore
25 0.190 0.200 0.195 371
c
26 0.2 0.358 0.279 5864
g breakeven = [2]
Total 125,513 ( P − s) × y
Table 2. The economic and operational parameters.
Thus, the breakeven cutoff grade at the mill for this case can be
Price (P) 600 $/oz calculated as:
Sales Cost (s) 5 $/oz
Process Cost (c) 19 $/ton ore 19
g breakeven = = 0.035 oz / ton
Recovery (y) 0.9
(600 − 5) × 0.9
Mining Cost (m) 1.2 $/ton
Fixed Cost (fa) 8.35M $/year By using this breakeven cutoff grade, all the material above 0.035
Mining Capacity (M) Unlimited oz/ton is sent to the process, and the others are sent to the waste
Processing Capacity (C) 1.05M tons dump. Therefore, ore tons in this deposit is a total of tons of materials
Discount Rate (d) 15 % between grade intervals 5 and 26, (=36,346 ktons). The average grade
of the ore (gavg.ore) is calculated by taking a weighted average of tons
The following discussions will focus on determining the project’s and average grades of these materials (=0.102 oz/ton). And all the
operating cash flows for two distinct scenarios. The first scenario will materials below the breakeven cutoff grade are waste materials
assume the mine will feed refractory ore only to the autoclave process. (=89,167ktons). The strip ratio is calculated as follows:
The second scenario will assume that the material can be potentially
processed in four distinct ways: 89,167
SR = = 2.45
Process 1: Run-of-mine leach (ROM Lch) 36,346
Process 2: Crushed ore leach (Cr Lch)
Process 3: Flotation circuit feeding concentrates to autoclave mill To operate the mill with full capacities, yearly ore tons (Qc) are
(Flot to Auto) 1.05 Mtons/yr, the determination of the yearly mining capacity (Qm) and
Process 4: Direct feed to autoclave mill (Direct Auto) the yearly gold production (Qr) are presented as follows:

Determination of Operating Cash Flows Based on Breakeven Qm ( Mtons) = Qc × ( SR + 1)

Cutoff Grades for the Autoclave Process
Qm ( Mtons) = 1.05 × (2.45 + 1) = 3.62
2 Copyright © 2007 by SME
 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

Qr ( koz ) = Qc × g avg .ore × y × 1000 Table 4. Yearly schedules with the optimum cutoff grades provided by
®
OptiPit (Case2).
Qr ( koz ) = 1.05 × 0.102 × 0.9 × 1000 = 96.3 Mining COG Avg Processing Refininig Profits
Year (Mtons) (oz/ton) Ore Grade (Mtons) (koz) ($M)
Then, yearly profits are calculated as follows: (Qm) (oz/ton) (Qc) (Qr)
1 18.4 0.160 0.261 1.05 246.6 96.5
Profits ($M) = ( P − s ) × Qr − Q × c − Q × m
2 16.9 0.150 0.253 1.05 239.1 93.9
c m 3 16.1 0.140 0.248 1.05 234.4 92.0
1000
4 14.7 0.120 0.238 1.05 224.9 87.9
Profits ($M) = (600 − 5) × 96.3 − 1.05 × 19 − 3.62 × 1.2 = 33.0 5 14.1 0.110 0.233 1.05 220.2 85.8
1000 6 13.6 0.100 0.228 1.05 215.5 83.6
7 11.0 0.094 0.202 1.05 190.9 72.1
where
8 8.2 0.070 0.171 1.05 161.6 58.0
m = $1.2/ton 9 6.8 0.060 0.152 1.05 143.6 49.3
c = $19/ton 10 5.5 0.050 0.133 1.05 125.7 39.7
Total 125.3 10.5 2002.5 758.8
If the deposit is mined with these yearly rates by using the (NPV@15%)
breakeven cutoff grades throughout the mine life, it generates the cash
$ 414.4
flows given in Table 3 with a resulting NPV of $218.5M. The yearly
schedules are also summarized in Table 3, and this will be referred as
limited by
Case1. 10M
ROM crusher
Dump tons/yr
Table 3. Yearly ore and waste schedules by using the breakeven Leach
cutoff grades (Case1). Cr
Mining COG Avg Processing Refininig Profits 1 Leach
oc
Year (Mtons) (oz/ton) Ore Grade (Mtons) (koz) ($M) Pr o c2
Pr
(Qm) (oz/ton) (Qc) (Qr)
CIL
1 3.6 0.035 0.102 1.05 96.3 33.0
2 3.6 0.035 0.102 1.05 96.3 33.0 Mine Proc 3
Flot. 80%
Cr
3 3.6 0.035 0.102 1.05 96.3 33.0
2Mtons/yr 20%
4 3.6 0.035 0.102 1.05 96.3 33.0
5 3.6 0.035 0.102 1.05 96.3 33.0 Pr
oc
5M 4
6 3.6 0.035 0.102 1.05 96.3 33.0 tons/yr
7 3.6 0.035 0.102 1.05 96.3 33.0 Autoclave
8 3.6 0.035 0.102 1.05 96.3 33.0
1.05M
9 3.6 0.035 0.102 1.05 96.3 33.0 tons/yr
10 3.6 0.035 0.102 1.05 96.3 33.0
11 to 34 3.6 0.035 0.102 1.05 96.3 33.0 Figure 2. Material flow diagram for the hypothetical scenario involving
35 3.4 0.035 0.102 1.00 91.7 31.4 multiple processes at the McLaughlin mine.
Total 125.8 36.7 3,365.9 1,154.2 Table 5. Process economic parameters and recoveries for the multiple
(NPV@15%) process option.
$218.5 Processes Proc. Cost Recoveries
Determination of Operating Cash Flows Based on Optimized ($/ton)
Cutoff Grades for the Autoclave Process
®
For the base case discussed as Case1, OptiPit modeled the 1: ROM Lch 0.9 0.075
problem, and provided the optimum cutoff grade strategy. By
optimizing the cutoff grades, the NPV of $414.4M is generated, which 2: Cr Lch 3.0 0.25
is a significant improvement compared to Case1 ($414.4M - $218.5M =
$196M, or 90% improvement). Yearly schedules are summarized in 3: Flot to Autoclave 10.25 0.66
Table 4 and will be referred as Case2.
4: Direct Autoclave 19.0 0.90
Determination of Operating Cash Flows Based on Breakeven
Cutoff Grades for the Multiple Processing Options Breakeven cutoff grades for the multiple process case are
Now, let us evaluate the project as having three additional calculated by modifying equation [1] and [2]. These calculations are
processing options for the gold ores being mined in the pit. Material shown as follows:
flows with the additional processes are shown in Figure 2. Breakeven cutoff grade between Dump and ROM Lch (Proc1): gproc1
Ore material can be sent to the ROM Lch (Proc1), or can be
crushed and be sent to the Cr Lch (Proc2), or sent to the flotation Value dump ($ / ton) = Value proc1 ($ / ton)
circuit feeding concentrates to the autoclave mill (Proc3), or sent to the
autoclave mill directly (Proc4). The run of mine leach capacity is limited − 1.2 = (600 − 5) × g proc 2 × 0.075 − 1.2 − 0.9
to be 10M tons/yr; the crusher capacity is limited to be 5M tons/yr; the
autoclave mill capacity is limited to be 1.05M tons/yr and the flotation Therefore,
capacity is limited to be 2M tons/yr. Economic parameters and
recoveries for each process are shown in Table 5. 0.9
g proc1 = = 0.020 oz / ton
(600 − 5) × 0.075
Breakeven cutoff grade between ROM Lch (Proc1) and Cr Lch (Proc2):
gproc2
3 Copyright © 2007 by SME
 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

The cutoff grade between these two processes is calculated as year mined tons as shown in Table 7. By limiting the annual mining
®
follows: capacity to be 20M tons/yr, OptiPit can generate another strategic
option with smoothed mining tons. Yearly schedules are summarized
Value proc1 ($ / ton) = Value proc 2 ($ / ton) in Table 8, and will be referred as Case 5. As shown in Table 8, mining
tons, process tons, cutoff grades are completely rescheduled, and the
( P − s ) × g proc 2 × y proc1 − m − c proc1 optimum mine planning is generated under a new set of constraints.
Under the limited mining capacity, cutoff grades are adjusted to utilize
the processes under new constraints. Notice that with these new cutoff
= ( P − s ) × g proc 2 × y proc 2 − m − c proc 2
grades, the crusher, the autoclave mill, and the flotation circuit are all
operated in full capacity while the annual mining capacity is limited to
where
be 20M tons/yr. The NPV of this smoothed mining tons option is
gproc2: breakeven cutoff grade between ROM Lch (Proc1) and Cr $614.5M. The NPV difference of Case5 compared to Case4 is small
Lch (Proc2) ($625.2M - $614.5M = $10.7M, or -1.7% difference) demonstrating that
yproc1: recovery at ROM Lch (Proc1) practical mine planning can be generated. Figure 3 shows material
yproc2: recovery at Cr Lch (Proc2) movements, and Figure 4 shows cutoff grades for each process option
cproc1: process cost at ROM Lch (Proc1) for this case.
cproc2: process cost at Cr Lch (Proc2)
To answer the questions as to what mining capacity is appropriate
therefore, the breakeven cutoff grade between ROM Lch (Proc1) and for the operation, an analysis of annual mining capacity vs. the
Cr Lch (Proc2) is calculated as follows: resulting NPV can be carried out as part of the strategic mine planning.
®
OptiPit can effectively be used to generate optimized schedules for
c proc 2 − c proc1 various mining capacity options. By evaluating the economic impact of
g proc 2 = these options, one can provide a sound basis for strategic decisions.
( P − s) × ( y proc 2 − y proc1 ) Figure 5 shows the annual mining capacity vs. resulting NPV. Note that
(3 − 0.9) they do not include capital costs. In reality, capital costs are subtracted
g proc 2 = = 0.020 oz / ton from NPV’s in each scenario, and find the peak NPV to determine the
(600 − 5) × (0.25 − 0.075) optimum mining capacity. Based on these results, discussion of the
size of the capital expenditure can be addressed.
Similarly,
Breakeven cutoff grade between Cr Lch (Proc2) and Flot to Auto
M ate rials M ove m e nt (Cas e 5)
(Proc3): gproc3

(10.25 − 3.00)
g proc3 = = 0.030 oz / ton 20.00
(600 − 5) × (0.66 − 0.25) 18.00
16.00
Breakeven cutoff grade between Flot to Auto (Proc3) and Direct Auto
(Proc4): gproc4 14.00
12.00 Dum p
(19 − 10.25)
Mtons

g proc 4 = = 0.061 oz / ton 10.00

(600 − 5) × (0.90 − 0.66) 8.00
Direct A uto (P ro c4)
Based on these calculations, grade interval 1 (0 – 0.020 oz/ton) is 6.00
treated as waste, grade intervals 2 and 3 (0.020 – 0.030 oz/ton) are 4.00
Flo t to A uto
treated as crushed leach ore (Proc2), grade intervals between 4 and 9 2.00 (P ro c3)
(0.030 – 0.060 oz/ton) are treated as flotation ore (Proc3), and all the
0.00
materials above grade interval 10 (greater than 0.060 oz/ton) are Cr Lch (P ro c2)
1 2 3 4 5 6 7 8
treated as direct feed ore to the autoclave mill (Proc4).
Ye ar ROM Lch (P ro c1)
By using these breakeven cutoff grades, the NPV of $341.2M is
generated. Yearly schedules for this case are summarized in Table 6, Figure 3. Material movement for Case5 (Smoothed mining tons).
and this will be referred as Case3.
Determination of Operating Cash Flows Based on Optimized Cutoff Grade s (Cas e 5)
Cutoff Grades for the Multiple Process Options 0.220 Direct A uto clave
®
The OptiPit program is used to optimize the cutoff grade strategy (P ro c4)
0.200
for the McLaughlin mine with the multiple process options. By using the
® 0.180
cash flows generated from the optimized cutoff grades by OptiPit , the
Cutoff grades (Au oz/ton)

NPV of $625.2M is generated from the cash flows summarized in 0.160

Table 7. This will be referred as Case4. This is a significant 0.140
improvement compared to the breakeven cutoff grade schedule 0.120 Flo t to A uto
presented in Table 6 as Case3 ($625.2M - $341.2M = $284.0M, or 0.100 (P ro c3)
83.2% improvement). Notice that by dynamically adjusting the cutoff
0.080
grades during the life of the project, the crusher, the autoclave, and the
flotation circuit are now operated with full capacities for most of the 0.060
years. This demonstrates that if the process option and the cutoff 0.040
grades are strategically evaluated and chosen, significant additional 0.020
economic benefits can be created for the project. 0.000 R OM Lch (P ro c1) Cr Lch (P ro c2)

Determination of Operating Cash Flows Based on Optimized 1 2 3 4 5 6 7 8

Ye ar
Cutoff Grades for the Multiple Process Options and More Realistic
Mining Rates Figure 4: Cutoff grades for Case5 (Smoothed mining tons).
Although significant values are created in Case4, it may not be
practical from a mining viewpoint due to the large fluctuation in year by
4 Copyright © 2007 by SME
 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

NPV vs Mining Capacities Cutoff Grades (Case6)

0.200
630
Direct A uto
620 (P ro c4)

Cutoff grades (Au oz/ton)

610 0.150
NPV ($M)

Flo t to A uto
600 NPV($M) (P ro c3)
Stk
590 0.100

580

570 0.050 Stk

15 20 25 30 35 40 45 50
Mining Capacities (Mtons) C rLch
0.000 R OM Lch (P ro c1) Stk (P ro c2)

Figure 5: Various mining capacities and resulting NPV of operating 1 2 3 4 5 6

Ye ar
cash flows (no capital costs).
Figure 7. Cutoff grades for Case6 (Stockpile option).
Determination of Operating Cash Flows Based on Optimized
Cutoff Grades for the Multiple Processes with Option to Stockpile
ROM Lch Proce s s e d M ate rials
It may be interesting to evaluate a case where the option to
stockpile the low grade material to be processed later during the mine 3.50
life may exist . With a stockpile, marginal materials between the
3.00
optimum cutoff grade and the breakeven cutoff grade are sent to the
stockpile when it is mined, and rehandled in later years as long as the 2.50
stockpiling and rehandling costs are paid off on a discounted value
basis. Therefore, completely new mine sequences and cutoff grade
Mtons 2.00
strategy have to be determined when a stockpile is available. Also, the
1.50
stockpile managements need to be determined. Fro m Stk
1.00 Fro m M ine
As Case6, stockpile option with 30M ton annual mining capacity
®
scenario is evaluated in OptiPit , and the NPV of $645.8M is generated. 0.50
This option further adds the value to the project compared to the no
stockpile option discussed in Case5 ($645.8 - $614.5M = $31.3M, or 0.00
1 2 3 4 5 6 7 8 9 10 11
5% improvement). Yearly mining reports are summarized in Table 9
and stockpile rehandled reports are summarized in Table 10. Based on Ye ar
these reports, process reports are summarized in Table 11. With new
cutoff grades, the crusher, the autoclave mill, and the flotation circuit Figure 8. Processed materials at the ROM Lch process (Case6).
are operated with full capacities. Mined materials are presented in
Figure 6, and the cutoff grades for each process and a stockpile are Cr Lch Proce s s e d M ate rials
presented in Figure 7. Based on these results, the process reports for
2.50
the run of mine leach, crushed leach, and the autoclave mill are
generated and presented in Figure 8 to 10.
2.00
Similar to Case5, the sensitivity of the mining capacities to the
resulting NPV is analyzed by changing annual mining capacity in each
1.50
run. These options are presented in Figure 11 by comparing with no
Mtons

stockpile option to determine the capital size and the operational

scenarios. 1.00
Fro m Stk
Fro m M ine
M ine d M ate rials (Cas e 6) 0.50
Dum p
30.00
Stk 0.00
Direct Auto (Proc4) 1 2 3 4 5 6 7 8 9 10 11
25.00
Flot to Auto (Proc3) Ye ar
20.00 Cr Lch (Proc2)
ROM Lch (Proc1) Figure 9. Processed materials at the Cr Lch process (Case6).
Mtons

15.00 ®
The Scheduling and Cutoff Grade Optimization Using OptiPit
10.00 ®
The OptiPit software is developed using knowledge and
experience gained from various research and consultant work done at
5.00
the CSM to optimize mine schedules and cutoff grades under complex
operational constraints. The mathematical programming approach
0.00 ®
1 2 3 4 5 6
underlying OptiPit is MILP and has been published previously. The
approach is very powerful and provides complete flexibility in modeling
Ye ar complex operating environments that we see in many large scale
mining operations.
Figure 6. Mined materials for Case6 (Stockpile option).

5 Copyright © 2007 by SME

 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

Conclusions
Autoclave Proce s s e d M ate rials
1.20 With advances in hardware and software technologies, and the
development of mathematical optimization techniques similar to one
®
1.00 implemented in OptiPit software, it is now possible to perform
optimization and strategic mine planning analysis for complex mining
®
0.80 projects quickly. Through the use of tools like OptiPit one may be able
to evaluate many different options and determine mining strategies that
Mtons

0.60 significantly improve the NPV of a given project. It is anticipated that

more and more mining engineers will take advantage of these tools
0.40 Fro m Stk and use them in coming years in optimizing mine plans that will give
Fro m M ine the highest NPV for their project under practical operating constraints.
0.20
References
0.00 ®
1 2 3 4 5 6 7 8 9 10 11 Anonym., 2006, “OptiPit User Manual”, OptiTech Engineering
Solutions LLC, Golden, Colorado
Ye ar
Akaike, A., 1999, “Strategic Planning of Long Term Production
Figure 10. Processed materials at the Autoclave Mill (Case6). Schedule using 4D Network Relaxation Method”, Ph.D.
Dissertation, Colorado School of Mines, Golden, Colorado
NPV vs Mining Capacities Bernabe, D., 2001, “Comparative Analysis of Open Pit Mine
Scheduling Techniques for Strategic Mine Planning of a Copper
Mine in Southern Peru”, MSc Thesis, Colorado School of Mines,
660
Golden, Colorado
650
640 Dagdelen, K., 1985, “Optimum Multi-Period Open Pit Mine Production
630 Scheduling”, Ph.D. Dissertation, Colorado School of Mines,
NPV ($M)

620 No stk Golden, Colorado

610
600 W ith stk rd
Dagdelen, K., 1992, “Cutoff grade optimization”, 23 APCOM, pp. 157-
590 165
580
Dagdelen, K., 1993, “An NPV Maximization Algorithm for Open Pit
570 th
Mine Design”, 24 APCOM, pp. 257-263
560
15 20 25 30 35 40 45 50 Dagdelen, K., 1996, “Formulation of Open Pit Scheduling Problem
Mining Capacities (Mtons) Including Sequencing as MILP”, Internal Report, Mining
Engineering Department, Colorado School of Mines, Golden,
Colorado
Figure 11. Various mining capacities and resulting NPV of operating
cash flows (no capital costs) for no stockpile and with stockpile options. Dagdelen, K., 2004, “Open Pit Optimisation – Strategies for Improving
® Economics of Mining Projects through Mine Planning”, Orebody
The OptiPit software uses an intuitive graphical user interface to
® Modeling and Strategic Mine Planning, Perth, Western Australia,
define project parameters (See OptiPit user manual). Once the data is
Australia, pp. 21-24
prepared, it provides the opportunity to analyze many different
scenarios very quickly, as discussed here (see Figure 12). Based on Dagdelen, K. and Kawahata, K., 2005, “Cutoff Grade Optimization
these results, management can determine the most appropriate under Complex Operational Constraints for Open Pit Mines”,
strategic mining and processing options for a given project. SME Annual Meeting, Salt Lake City, Utah (Presentation)
®
Optimization in OptiPit for a simple deposit like the one presented in
these case studies takes only several seconds in currently available Hoerger, S., Bachmann, J., Criss, K. and Shortridge, E., 1999, “Long
PCs. However, the run time increases if a large scale detail model is term mine and process scheduling at Newmont’s Nevada
th
considered. The majority of complex models are solved to the operations”, 28 APCOM, pp. 739-747
®
optimality or near optimality using OptiPit program within 3 to 5 hours. Hoerger, S., Hoffman, L. and Seymour, F., 1999, “Mine Planning at
Newmont’s Nevada Operations”, Mining Engineering, vol. 51,
NPV Comparison by Case October, pp. 26-30
Johnson, T. B., 1968, “Optimum Open-Pit Mine Production Scheduling”,
700 Ph.D. Dissertation, Operations Research Department, University
600
of California Berkeley, Berkeley, California

500 Kawahata, K., 2006, “A New Algorithm to Solve Large Scale Mine
Production Scheduling Problems by using the Lagrangian
NPV ($M)

400
NPV($M) Relaxation Method”, Ph.D. Dissertation, Colorado School of
300 Mines, Golden, Colorado
200 Lane, K. F., 1964, “Choosing the optimum cutoff grade”, Colorado
100 School of Mines Quarterly, Vol. 59, pp811 – 824
0 Lane, K. F., 1988, “The economic definition of ore – cutoff grades in
Case1 Case2 Case3 Case4 Case5 Case6 theory and practice”, Mining Journal Books Limited, London, UK
Single Process Multiple Process Ramazan, S., 2001, “Open Pit Mine Scheduling Based On
Cases
Fundamental Tree Algorithm”, Ph.D. Dissertation, Colorado
Figure 12. The comparison of the NPV of operating cash flows by School of Mines, Golden, Colorado
case.

6 Copyright © 2007 by SME

 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

Urbaez, E. and Dagdelen, K., 1999, “Implementation of Linear Whittle, J. and Wharton, C., 1995, “Optimizing Cutoffs Over Time”,
Programming Model for Optimum Open Pit Production 25th APCOM, pp. 261-265
Scheduling Problem”, Transaction, SME, Vol.297, pp1968 – 1974

Table 6. Yearly schedules by using the breakeven cutoff grades – Multiple Process Case 3.
Mining Cr Lch (Proc2) Flot to Autoclave (Proc3) Direct Autoclave (Proc4) Refininig Profits
Year (Mtons) COG Avg Processing COG Avg Processing COG Avg Processing (koz) ($M)
(oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons)
(oz/ton) (Qc2) (oz/ton) (Qc3) (oz/ton) (Qc4)
1 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
2 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
3 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
4 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
5 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
6 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
7 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
8 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
9 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
10 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
11 to 22 5.54 0.020 0.025 0.60 0.030 0.042 1.00 0.060 0.153 0.85 148.4 53.4
23 3.71 0.020 0.025 0.40 0.030 0.042 0.67 0.060 0.153 0.57 99.6 35.8
Total 125.5 13.6 22.7 19.3 3,364.4 1,211.4
(NPV@15%)
$341.2
®
Table 7. Yearly optimized schedules and the optimum cutoff grades obtained by OptiPit - Multiple Process Case 4.
Mining ROM Lch (Proc1) Cr Lch (Proc2) Flot to Autoclave (Proc3) Direct Autoclave (Proc4) Refininig Profits
Year (Mtons) COG Avg Processing COG Avg Processing COG Avg Processing COG Avg Processing (koz) ($M)
(oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons)
(oz/ton) (Qc1) (oz/ton) (Qc2) (oz/ton) (Qc3) (oz/ton) (Qc4)
1 33.91 0.020 0.036 10.00 0.062 0.078 2.35 0.099 0.209 2.00 0.200 0.279 0.65 511.9 215.0
2 25.25 0.020 0.033 6.17 0.049 0.062 2.35 0.080 0.162 2.00 0.200 0.279 0.65 428.7 179.4
3 19.30 0.020 0.029 3.54 0.039 0.050 2.35 0.066 0.125 2.00 0.200 0.279 0.65 365.3 151.1
4 14.96 0.020 0.025 1.62 0.030 0.041 2.55 0.057 0.094 1.75 0.200 0.279 0.70 313.5 128.2
5 13.46 0.020 0.023 0.95 0.026 0.037 2.43 0.050 0.084 1.91 0.190 0.274 0.67 294.7 118.8
6 10.57 0.020 0.029 2.02 0.040 0.066 2.00 0.150 0.254 0.65 250.4 97.4
7 8.05 0.020 0.027 1.23 0.035 0.054 1.60 0.090 0.208 0.73 202.0 76.5
Total 125.5 22.3 15.3 13.3 4.7 2366.5 966.4
(NPV@15%)
$625.2
®
Table 8: Yearly optimized schedules and the cutoff grades obtained by OptiPit - Smoothed Mining Tons Case 5
Mining ROM Lch (Proc1) Cr Lch (Proc2) Flot to Autoclave (Proc3) Direct Autoclave (Proc4) Refininig Profits
Year (Mtons) COG Avg Processing COG Avg Processing COG Avg Processing COG Avg Processing (koz) ($M)
(oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons) (oz/ton) Ore grade (Mtons)
(oz/ton) (Qc1) (oz/ton) (Qc2) (oz/ton) (Qc3) (oz/ton) (Qc4)
1 20.00 0.020 0.029 3.85 0.040 0.052 2.35 0.068 0.130 2.00 0.200 0.279 0.65 373.7 155.0
2 20.00 0.020 0.029 3.85 0.040 0.052 2.35 0.068 0.130 2.00 0.200 0.279 0.65 373.7 155.0
3 20.00 0.020 0.029 3.85 0.040 0.052 2.35 0.068 0.130 2.00 0.200 0.279 0.65 373.7 155.0
4 18.98 0.020 0.029 3.39 0.039 0.049 2.35 0.065 0.123 2.00 0.200 0.279 0.65 361.7 149.5
5 14.96 0.020 0.025 1.62 0.030 0.041 2.55 0.057 0.094 1.75 0.200 0.279 0.70 313.5 128.2
6 13.46 0.020 0.023 0.95 0.026 0.037 2.43 0.050 0.084 1.91 0.190 0.274 0.67 294.7 118.8
7 10.28 0.020 0.029 1.95 0.040 0.065 1.94 0.140 0.249 0.66 245.7 95.6
8 7.83 0.020 0.027 1.20 0.035 0.053 1.52 0.087 0.202 0.75 196.9 74.4
Total 125.5 17.5 17.5 15.1 5.4 2533.7 1,031.5
(NPV@15%)
$614.5
®
Table 9: Yearly material flow from the mine to different processes and stockpiles obtained by OptiPit - the Stockpile Option Case6
ROM Lch (Proc1) Cr Lch (Proc2) Flot to Auto Direct Auto Material Stockpiled
Mining (Proc3) (Proc4) Low Grade Stk Mid Grade Stk High Grade Stk Waste
Year (Mtons) COG Mining COG Mining COG Mining COG Mining COG Mining COG Mining COG Mining (Mtons)
(oz/ton) (Mtons) (oz/ton) (Mtons) (oz/ton) (Mtons) (oz/ton) (Mtons) (oz/ton) (Mtons) (oz/ton) (Mtons) (oz/ton) (Mtons)
1 30.00 0.020 3.24 0.045 2.35 0.092 2.00 0.200 0.65 0.030 3.49 0.065 1.54 16.73
2 30.00 0.020 1.73 0.040 2.35 0.092 2.00 0.200 0.65 0.025 4.03 0.055 2.51 16.73
3 30.00 0.020 1.73 0.035 2.12 0.092 2.00 0.200 0.65 0.025 2.85 0.045 3.92 16.73
4 13.91 0.035 0.51 0.080 0.81 0.200 0.65 0.020 2.12 0.040 2.06 7.76
5 13.91 0.030 0.62 0.070 0.68 0.200 0.65 0.020 1.50 0.035 2.28 0.090 0.42 7.76
6 7.69 0.030 0.34 0.065 0.19 0.150 0.47 0.020 0.83 0.035 1.15 0.075 0.41 4.29
Total 125.5 6.7 8.3 7.7 3.7 14.8 13.5 0.8 70.0

7 Copyright © 2007 by SME

 SME Annual Meeting
Feb. 25-Feb. 28, 2007, Denver, CO

Table 10: Yearly material flow rehandled from the stockpile and sent to different processes for Case6
Year Cr Lch Flot to Auto Direct Auto
(Proc2) (Proc3) (Proc4)
(Mtons) (Mtons) (Mtons)
1 0 0 0
2 0 0 0
3 0.23 0 0
4 1.84 1.19 0
5 1.73 1.32 0
6 2.01 1.81 0.18
7 2.35 2.00 0.65
8 2.35 2.00 0.65
9 2.35 2.00 0.65
10 0.70 2.00 0
11 0 1.10 0
Total 13.6 13.4 2.1
Table 11: Yearly material flow from the mine and stockpiles to different processes for Case 6
ROM Lch (Proc1) Cr Lch (Proc2) Flot to Auto (Proc3) Direct Auto (Proc4) Refininig Profits
Avg Processing Avg Processing Avg Processing Avg Processing (koz) ($M)
Year Ore grade (Mtons) Ore grade (Mtons) Ore grade (Mtons) Ore grade (Mtons)
(oz/ton) (Qc1) (oz/ton) (Qc2) (oz/ton) (Qc3) (oz/ton) (Qc4)
1 0.025 3.24 0.054 2.35 0.189 2.00 0.279 0.65 450.5 189.2
2 0.023 1.73 0.047 2.35 0.189 2.00 0.279 0.65 443.3 186.3
3 0.023 1.73 0.040 2.35 0.189 2.00 0.279 0.65 439.2 183.9
4 0.038 2.35 0.100 2.00 0.279 0.65 317.5 132.3
5 0.032 2.35 0.081 2.00 0.279 0.65 288.9 115.3
6 0.033 2.35 0.069 2.00 0.233 0.65 246.8 97.7
7 0.029 2.35 0.060 2.00 0.109 0.65 160.0 55.3
8 0.027 2.35 0.054 2.00 0.072 0.65 129.3 37.0
9 0.025 2.35 0.047 2.00 0.065 0.65 114.8 28.4
10 0.023 0.70 0.042 2.00 59.5 12.8
11 0.038 1.10 27.5 5.1
Total 6.7 21.9 21.1 5.9 2677.2 1,043.3
(NPV@15%)
$645.8

8 Copyright © 2007 by SME