Optimal production scale of open pit mining operations with uncertain metal supply and long-term stockpiles

An open pit mining operation consists of various stages, and the calculation of the production capacities of these stages depends upon the available supply of ore (mineralized material of economic value) and waste material. Cutoff grade is the criterion that specifies the amount of ore and waste. The material with grade equal to or higher than the cutoff grade is classified as ore. The material with grade less than the cutoff grade is considered waste. While this explains the link between cutoff grade theory and the calculation of production capacities, the majority of optimization models for finding production capacities riot only disregards this relationship but also ignores expected variations and uncertainty in metal content or the available supply of ore and waste material. An extension to an established theory of cutoff grade is proposed herein to determine the optimal production capacities based on a stochastic framework relying on multiple grade-tonnage curves derived from a set of simulated orebody realizations. The proposed model (i) maximizes the net present value of cash flows over the life of an operation; (ii) offsets the initial investment in developing the constituent stages of an operation: and (iii) explores the impact of creating a long-term stockpile on the designed operational capacities. Application on an actual copper deposit demonstrates the benefits of the proposed model. (C) 2011 Elsevier Ltd. All rights reserved.