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SME Annual Meeting

March 1-3, 1999, Denver, Colorado

Preprint 99-36
NEVADA PLANNING AT NEWMONT GOLD COMPANY
S. Hoerger,
Newmont Gold Co.
Denver, CO
L. Hoffman,
Newmont Gold Co.
Denver, CO
F. Seymour
Newmont Gold Co.
Denver, CO
Operations began. The potential efficiency gains from this tool
were greatly increased. However, the larger Nevada wide model
presented more scaling complications. Furthermore, there were
different planning methods and tools as well as inconsistent cost
information between the sites. A review of the Nevada Planning
functions was undertaken. Mine planning methods and tools
were standardized. A Nevada planning group was formed and
was given the responsibility for examining Nevada wide
scenarios and maintaining a consistent cost database. By the
Spring of 1998 the cost and constraint data had been cleaned up
and production runs on the optimizer were underway.

ABSTRACT
Newmont has a large integrated operation in Northern Nevada
with numerous mines, stockpiles, and processing facilities.
There are over ninety defined metallurgical ore types and over
sixty defined gold recovery process options.
To take better advantage of the available synergies, a complete
Nevada wide mine plan and process model along with a mixed
Integer and Linear Programming optimization tool has been
developed and implemented. This system is maintained and
operated by a Nevada Planning Group. Standard in-house
planning software tools and methods have been implemented at
all mine sites. While increasing the effectiveness of planning in
Nevada, these changes have allowed a significant reduction in
overall Mine Engineering staff.

NEWMONT OBJECTIVE
Newmonts objective with Nevada Operations is to mine,
route, and process material so as to make the most efficient use
of capital equipment over the life of the mines. This amounts to
managing Nevada Operations for cash flow and translates into
making decisions that maximize the Net Present Value. Mining
decisions include the timing of open pit layback and
underground stope development, capital expenditures, and
mining rates. Material routing decisions are based on cost vs.
recovery tradeoffs and are subject to capacity and blending
constraints. Processing decisions include the timing of plant
startup and shutdown, capital expenditures, ore processing rates
and other operating parameters.

HISTORY
In late 1995, Newmont recognized the need for an expanded
planning function to help optimize the simultaneous mining of
multiple pits and processing of ores through multiple plants
along the Carlin Trend. Dr. Kadri Dagdelen, Assistant Professor
of Mine Engineering from the Colorado School of Mines, and
Mr. Edgar Urbaez, Graduate Student, were hired to help develop
a Mixed Integer and Linear Programming solution. By the end
of the summer in 1996, the mathematical formulation had been
developed and small scale tests were successfully run using a
spreadsheet based linear program solver from LINDO.

The tool has been developed to assist the Nevada planning


organization with making these types of decisions.

However, difficulties were encountered scaling up the


problem. To remedy this, a MicroSoft Access Database was
designed with over 100 tables to hold the deposit model,
production and sequencing constraints, and financial
information.
Also, Dr. Thomas Knowles, Professor of
Operations Research from the Illinois Institute of Technology
was hired to help tune the problem formulation and take full
advantage of the LINDO system. By the Spring of 1997 full
scale tests for Carlin had been run.

A key challenge is to keep the mathematical model to a


solvable size and maintain a realistic representation of the
problem.
The following sections describe the Objective
Function, Variables, Cost Coefficients, Constraints, and Integer
Programming.

On May 5, 1997, Newmont merged with Santa Fe Pacific


Gold and the process of integrating the combined Nevada

For a given scenario, the objective is to select the flows of


materials from Mine Sources to Plant Processes, Mine Sources

THE MODEL

Objective Function

Copyright 1999 by SME

to Stockpiles, and Stockpiles to Plant Processes that maximize


NPV while meeting production targets and constraints. This is
set up as a linear combination of the material flow variables and
is shown at the end of the Cost Coefficients section.

EXPIT. The cost of hauling material from pit daylight to


processing plant or dump. This is a function of Source and
Process only.
PROCESS. The cost of processing the material as well as
metallurgical recovery of the gold. This is a function of Process
and material Increment only.

Variables
The LP variables all represent material tonnage flows and can
be divided into the following three classes X, Y, and Z.

STOCKPILE. The cost of hauling material from daylight to


stockpile area. This is a function of Source and Stockpile Area
only.

X = Mine Source to Process Plant tons by time period


Y = Mine Source to Stockpile tons by time period
Z = Stockpile to Process Plant tons by time period

RECLAIM. The cost of rehandling stockpile material and


hauling it to the processing plant. This is a function of Stockpile
Area and Process only.

Schematically this is represented by time period as follows:


Mine Sources

(X)

Schematically these cost coefficient components can be


represented as follows:

Process Plants

INPIT
(Y)

EXPIT

PROCESS

(Z)

Stockpiles

STOCKPILE

Finally we add the PRICE and the time value of money


DISCOUNT factors which are a function of the time Period.
With these coefficients defined, it is possible to calculate the Net
Present Value as the following linear function of the variables
X, Y, and Z:

To set up the Linear Program problem formulation, these


variables are indexed into six dimensions.
The name,
description, and approximate size of each dimension for
Newmonts Nevada operations follow:
Dimension

Size

Description

Source

50

independent pit, layback,


or UG mine
subdivision of source into
sequence (annual plans)
subdivision of sequence into
homogeneous units (Same
metallurgical properties and
processing costs)
metallurgical process including
waste dumps
time period (usually years)
stockpile area

Sequence

Increment

20

Destination

60

Period
Stockpile

20
8

RECLAIM

NPV = X * MineToProcessCoefficient +
Y * MineToStockpileCoefficient +
Z * StockpileToProcessCoefficient
Where:
MineToProcessCoefficient = ( - INPIT - EXPIT PROCESS +
(GRADE * RECOVERY * PRICE) ) * DISCOUNT
MineToStockpileCoefficient = ( - INPIT - STOCKPILE) *
DISCOUNT
StockpileToProcessCoefficient = ( - RECLAIM PROCESS +
(GRADE * RECOVERY * PRICE) ) * DISCOUNT

For a full rectangular dense model, the total number of


variables would be 50*5*20*60*20*8 = 48,000,000. It is not
practical to solve an LP formulation of this size. Therefore, the
Access database is used to trim unlikely combinations until the
problem size is on the order of 100,000 variables. Examples of
variables that are trimmed include mining the last mine
sequences in the early time periods and routing barren material
to a roaster or autoclave process.

This represents the Linear Program Objective Function


Constraints
Constraints are posed in the traditional LP formulation as a
linear function of the variables X, Y, and Z. These minimum
and maximum constraints include:






Cost Coefficients
The cost coefficients have been divided into components that
represent only two of the variable dimensions at a time. This
keeps cost data entry and management to a reasonable level.
The cost model uses the following five components:

Mining rates
Processing rates
Metallurgical blending limits (CO3/SS ratio etc.)
Cash flow generation rates
Gold production generation rates

Integer Programming
INPIT. The cost of mining material and bringing it to daylight.
This is a function of Source and Sequence only.

Discrete events such as plant startup or plant shutdown are


represented as Integer Programming components of the model.
Integer variables are used with fixed costs as coefficients in the

Copyright 1999 by SME

objective function and with maximum processing capacities as


coefficients in the constraint equations.

solution may reroute material clear across Nevada because of a


one penny per ton savings. In practice this may not be the best
choice and parameters may need to be adjusted accordingly.
When an unexpected flow of material is indicated, the constraint
and economic cause is tracked down and verified. This is a time
consuming process that can take days. However, it is essential
to have confidence in the results prior to making any
recommendations or taking any action. Often one set of results
will lead to another set of runs.

Mine sequencing constraints (an earlier sequence must be


completely mined out before the next sequence can begin
mining) are also represented as Integer Programming
components of the model.
More than a few Integer Programming variables quickly lead
to prohibitive execution times. Therefore, they must be used
sparingly. Accordingly, in many cases, the timing of plant
startup and shutdown as well as mining rates are fixed for a
given scenario. Depending on the scenario, the fixed costs may
be treated as rigidly fixed and excluded from the analysis or may
be apportioned across the facilities nominal tonnage rate and
included in a variable cost. Integer variables and fixed/variable
cost handling are managed through the Access Database.

Communicate Results. Once promising scenarios have been


identified, results will be transferred to a spreadsheet to perform
detailed non-linear accounting computations and to produce
summary reports and graphs. These results will form the basis
for management decisions and requests for more what-if
analyses. Throughout the planning process, the Nevada Planning
Group will be communicating with site mine and processing
engineers as key constraints are identified.

THE OPTIMIZER IN PRACTICE


A multidisciplinary Nevada Planning Group including
representatives from Management, Metallurgy, Mine Planning,
and Accounting are responsible for the operation of the
optimization tool and for the interpretation and presentation of
its results. The seven step process of running a scenario and the
approximate time involved is as follows:

INTEGRATION OF NEVADA PLANNING


To take full advantage of the synergies available as a result of
the merger between Newmont and Santa Fe, it was clear that an
integration of the entire planning process was required. Thus,
the review of the Mine Planning functions throughout Nevada
was undertaken. The optimizer as it has come to be known is
only one component of the solution and the planning
organization has been realigned in order to take full advantage
of this tool.

Gather information. Determine the scenario to be run and


gather the necessary mine plans, costs, and constraints. This
involves a lot of communications with Site Management,
Mining Engineering, Plant Metallurgists, and Accounting. The
time required for this step ranges from a few minutes for a minor
variation on an existing scenario to several days for a
significantly new scenario. Depending on the scenarios being
analyzed, some costs may be treated as variable costs or fixed
costs.

Nevada Planning Group


As a result of this review, the Nevada Planning Group was
formed. It is comprised of representatives from Nevada
Management, Metallurgy, Mine Engineering, and Accounting.
This multi disciplinary team is responsible for assembling cost
information from all of Nevada and insuring that it is consistent.
There is a lot of interaction between this group and
Management, Site Long Term Planning Engineers, Site Chief
Engineers, Site Plant Superintendents, and Site Accounting from
the three sites, Carlin, Twin Creeks, and Lone Tree.

Enter information. The data must be entered into the Access


database. Mine plan information is loaded electronically from
grade tonnage results files. Cost and constraint information is
entered manually through forms built in Access. Validation that
the data has been correctly entered is critical. This step can take
from a few minutes for a minor variation of an existing scenario
to several days for a significantly new scenario. The complete
Access Database file for one Newmont Nevada scenario is about
70 megabytes.

Schematically, the interaction is as follows:

Carlin
Management
Mine Engineering
Plant Metallurgy
Accounting

Formulate LP problem. A macro is run in Access that creates


an ASCII file with the LP problem formulation for LINDO.
This includes the compact but complete LP formulation with all
defined variables, coefficients, constraints, and the objective
function. The macro takes about one hour to run.

Twin Creeks
Management
Mine Engineering
Plant Metallurgy
Accounting
Nevada
Planning
Group

Solve LP Problem. A typical problem contains about 100,000


variables, 400,000 coefficients, 20,000 constraints, and takes
about 3 hours to solve on a 400MHz Pentium II processor PC
with 128 Megabytes of RAM. LINDO lists the solution in
another ASCII file.

Lone Tree Complex


Management
Mine Engineering
Plant Metallurgy
Accounting

Report Results. The solution is imported back into the Access


database and a macro is run to report out results. The reports list
results by sources, stockpiles, and destinations with grades,
recoveries, and costs. The macro completes this task in about an
hour and a half.

Advantages of Centralized Planning Cost Database


For the results of the optimizer to be valid, the development of
a centralized planning cost database was essential. The
traditional cost data available from accounting is historical only

Verify Results. The results are reviewed and interpreted for


reasonableness. For example, the mathematically optimum

Copyright 1999 by SME

and often needs interpretation and modification when used for


planning purposes. Also, it was essential to have a consistent
planning approach to the treatment of overhead and fixed costs
between all of the sites.

through the combinations of cutoff grades, tonnages, processing


cost differences, recovery differences and fixed costs to suggest
an optimum. These decisions are being finalized as the paper is
being written.

This consistent centralized cost data is now available to site


Mining Engineers for site mine planning. This has eliminated a
duplicated independent effort at each site resulting in
Engineering manpower savings.

CONCLUSION
By developing a NPV maximizing mixed Linear and Integer
Programming tool and incorporating it into an integrated
planning process in Nevada, Newmont has been better able to
take advantage of the available synergies from the sites in
Northern Nevada. This has led to increased profitability in
Nevada as a whole which is particularly important in this period
of low gold prices.

Benefits of Integrated Planning


With efficient planning, many alternate scenarios are rapidly
analyzed in limited detail, and only the most viable ones are
selected for complete analysis. This approach has allowed
Newmont in Nevada to look for innovative cash generating
mining solutions with limited mine engineering resources.
An emphasis has been placed on consistent methodologies,
training, and extensive communications between the Nevada
Planning Group and the mine site groups. The same integrated
in-house modeling, mine planning, and ore control software is
now used at all of the Nevada Sites. The net result is that the
overall Mine Engineering staff has been reduced by over ten
percent while improving the value of the mine planning
solutions produced.
BENEFITS OF THE OPTIMIZER
The interaction between all of the mines and plants is complex
to the point that it is difficult to grasp many of the opportunities
that are present. The optimizer tool allows a systematic
approach to examining options. It has led to a number of
decisions that have significantly increased overall profitability in
Nevada. It has also eliminated seemingly promising scenarios
that were in fact unattractive.
One of the earliest synergies identified during Newmont /
Santa Fe merger planning was to treat high-grade Deep Star ore
originally destined for the Carlin roaster at the Twin Creeks
autoclave. The optimizer was used to confirm the benefits.
Given Deep Stars high grade, the increase in recovery for
treatment at the Twin Creeks autoclave compared to treatment at
the Carlin Trend roaster more than offset the higher
transportation cost of shipping the ore over 100 miles. In
addition, the ores high carbonate content improves the blending
at the autoclave, allowing more high-sulfide higher grade
material to be processed sooner. Switching the Deep Star
tonnage from the roaster to the autoclave postpones lower grade
tons at the autoclave and accelerates lower grade tons at the
roaster. These deferred autoclave tons are less profitable than
the accelerated roaster tons, further enhancing the benefit of this
switch. Since the merger, additional Carlin Trend ores have
been identified which can benefit from the Twin Creeks and
Lone Tree processing facilities.
The optimizer has been used to prioritize mine development.
As new mines and laybacks are contemplated, they are analyzed
to see if their grades are sufficiently high to compete for limited
processing capacity in existing facilities. If the new mine can
provide more profitable ores, the mines providing the displaced
lower profit ores become candidates for deferral.
The optimizer has also been used to plan facility shutdowns
and/or capacity reductions as the amount of oxide material
mined on the Carlin Trend decreases. The optimizer works

Copyright 1999 by SME