Financial analysis of the impact of increasing mining rate in underground mining, using simulation and mixed integer programming

A Salama

doi:10.17159/2411-9717/2017/v117n4a8

Abstract

This paper challenges the traditional notion that mine planners need to plan production so as to incur the lowest mining cost. For a given mine configuration, a mine that increases its mining rate will incur increased mining costs. In an environment in which operations are fixated on cost reduction, a proposal that increases costs will not be readily accepted. Such a proposal requires financial justification-the increase in costs might be recuperated by the additional production. This paper evaluates the net present value (NPV) across a range of copper prices for two underground orebodies located at different depths, using a production rate of 300 kt per quarter and a scenario that introduces additional equipment and costs for 450 kt per quarter. The evaluation was based on the changes of NPV for the orebody located at a shallow depth compared with the orebody at a greater depth. Discrete event simulation combined with mixed integer programming was used for analysis. Unlike traditional sensitivity analysis, this study re-optimizes the mine plan for each commodity price at each production rate. The results show that, for the low mining rate at the final copper price, an NPV of A$1530.64 million is achieved, whereas an NPV of A$1537.59 million is achieved at a higher mining rate. Even though pushing mining rates beyond traditional limits may increase mining costs, this option may be beneficial at certain commodity prices, particularly when prices are elevated.

Highlights

This paper challenges the traditional notion that mine planners need to plan production so as to incur the lowest mining cost
This paper evaluates the net present value (NPV) across a range of copper prices for two underground orebodies located at different depths, using a production rate of 300 kt per quarter and a scenario that introduces additional equipment and costs for 450 kt per quarter
They suggest that a mining rate that can be altered during the life of the mine by reconfiguring the number of pieces of equipment, even if mining costs increase, should be explored as a means to further maximize the value of the mine plan

Summary

Table I

Stoping conditions at this depth within the western orebody are considered reasonable, with stresses that can be well managed using standard bolting practices for both the roof and the sidewalls. To determine whether the production capacity of 450 kt from each orebody was feasible and to calculate an appropriate corresponding operating cost, the number of LHD units needed to achieve this volume was required This information allowed the calculation of the discounted cash flows generated by each stope across all ten copper prices, which in turn enabled production scheduling optimization to achieve the optimal NPV. Because the eastern orebody is located at depth in a highly stressed environment, the additional ground support and other features required to maintain an open sequencing regime is calculated to increase mining costs to A$84 per ton. These operating costs (OPEX) include all mining activities (for example, development, drilling/blasting, backfilling) within each orebody and the activities needed to haul the ore to the surface for processing

Table II

Findings

Table III