Choosing the Optimum Underground Mine Layout with Regard to Metal Price Uncertainty Using Expected Utility Theory

Abstract

Metal price is one of the most important parameters in the calculation of cut- off grade. The cut- off grade has the main role in determination of mine layout. Mine layout actuates mineable reserve, mine life and economic profitability. Not considering the uncertainty in metal prices can lead to a non-optimal layout. In this paper optimum underground mine layout is determined by expected utility theory with regard to metal price uncertainty. With the proposed approach metal price uncertainty is modeled by Monte Carlo simulation technique and decision maker will be gained probability of underground mine layouts. The utility function of underground mine layouts is defined and by the probability of them, expected utility is determined. Underground mine layout with the maximum expected utility is the optimum layout. Application of this approach in a hypothetical gold mine, in addition to considering metal price uncertainty, leads to 14% more mineable reserve and 18% higher net present value than normal design.