Improve the Collahuasi business case through an open pit underground transition

project

1. Andrs Solar Droguett.
Master in Mining Engineering, Ca. Minera Doa Ins de Collahuasi, aasolar@collahuasi.cl

ABSTRACT

One of the main characteristics of the Collahuasi mine is the lack of a clearly defined limit in pit
depth. Due to this, year after year, new information is added to a database, the block model definition
is improved, and the Whittle optimization software package produces a deeper final pit. In order to
exploit deep ore resources, an underground mine is an option, due to the behaviour of the rock type
present at the Collahuasi mine. Two different methodologies are currently being used, mining the final
open pit follow by the exploitation of an underground mine and an integer linear programming model
that addresses the timing of the transition from open pit to underground mining to provide a transition
design and NPV. The implementation the afore-mentioned methods are expected to increase profit due
to the extraction of deep ore resources using underground mining methods, increasing competitiveness
with the open pit model and reducing pit depth.
 INTRODUCTION.

Doa Ins de Collahuasi is a mining company is located in the first region of Chile, approximately 185
km south east of the city of Iquique, 4400 meters above sea level. The shareholders are Xstrata,
Angloamerican plc and a Japanese consortium led by Mitsui & Co. The most important mines are:
Rosario, Ujina and Huinquintipa, which produce copper concentrate and cathodes.

In a mining company, the main assets are the in situ and stock ore deposits. A cut off grade defines the
destination of each block. This cut off grade is calculated considering economic parameters such as
the price of copper and molybdenum, production and supply costs. The price of commodities is related
with market conditions, so company management is focused on mine costs.

Mine costs are directly related to mining methods. Open pit operations have lower mining costs and
higher productivity than any other mining method. As open pits become deeper, the ore waste ratio
and costs increase and each block results in almost no profit. In this case, an underground mining
method could be an option, because despite high mining cost, this method leaves the waste in situ.

The open pit underground transition option, becomes an important stage of any ore body where ore
resources are not fully defined, improving the business case, by reducing costs and increasing ore
reserves for the open pit and underground long term plan. Some related problems, such as the location
of waste dumps, acid rock drainage and environmental impacts are minimized.

In order to match the high productivity associated with open pit mining, the underground caving
method is the most suitable.

The main issue for the transition project is computing the transition depth. This depth defines the end
of open pit operations and the beginning of underground mining operations. This is both a technical
and strategic decision, because mine equipment will need to be changed and large scale infrastructure
implemented, such as the access ramps, access and ventilation shafts that are needed to operate an
underground mine.

This paper summarizes two different ways to compute the transition depth at the Rosario mine.
 OPEN PIT UNDERGROUND TRANSITION DESIGN METHODS.

The transition depth is the most important design factor for an open pit - underground transition. We
present two different ways to compute this depth. The first one uses current mine design software to
define the final pit and the underground mine, such as Whittle and Gems PCBC. The second one uses
an integer linear optimization program.

Methodology N1: Sequential design.

The sequential design computes the long-term final pit using Whittle and considers the economic
parameters based on the terms of reference provided by shareholders technical reviewers.

First, a pit list is computed and the final pit is chosen. Then, a block caving underground mine is
placed below the final pit to mine the ore resources left by open pit.

A Gems PCBC-Footprint finder is used to identify the optimal elevation where a production level
should be located and to consider Laubscher type mixing and vertical discounting accounts for time
taken to mine tall draw columns (Diering et al, 2010).

Finally, the NPV of the block caving mine must be discounted over time to consider the extraction of
the open pit.

Methodology N2: Integer linear programming.

This method uses an integer linear optimization model. The model use binary decisions variables,
which define how to mine each stratum of the block model. This decision is made after considering a
simultaneous comparison of the economic value of each stratum between the open pit and
underground mine. The goal function is to maximize the NPV of the overall transition project, by
considering all the investment costs such as concentrator plant and underground infrastructure.

Rock increments for the open pit and underground mine are required by the optimization model.

Figure 1. Rock increment representation.

The nested pits are computed by Whittle and then each level of the block model is associated with a
pit bottom, which is projected for the slope angle to generate a cone. The difference between each
cone defines the open pit increments. For an underground mine, each level is related to a cylinder that
acts as an underground increment. Both methods follow the direction of the mineralization. For each
stratum, a profit cut-off grade curve is computed which provides more decision making flexibility.

After running the model and computing the transition level, the areas that the model decides to mine
using open pit or underground methods are evaluated using traditional methodology, to compute the
exact value. The final underground NPV considers the time difference between the two mines.
 ROSARIO TRANSITION PROJECT - DESIGN AND ECONOMIC PARAMETERS.

The geotechnical parameter that defines the slope angle for the final pit is an angle of 30, which is
constant for all the walls. In order to compute the open pit and underground values, economic
parameters based on benchmarking studies were used. (CODELCO CHILE, Divisin Codelco Norte.
,2009).
The open pit production rate is estimated at 160 ktpd and 100 ktpd for underground production.
Additional investments for the underground mine are also considered, such as draw points, ramps and
shafts. An additional discount rate of 10% is used.

For the optimization model, the profit for each stratum is computed as indicated in the equation 1.
(Newman et al, 2008).

!"#$%& = !"#"$%" !"#$# = !!!! ((!" + !")!)

Equation 1. Profit estimation for each stratum.

Where;
Cu Price P US/lb
Cu Grade G %
Stratum tonnage T ton
Factor f lb/ton
Mine Cost Cm US/t
Processing Cost Cp US/t

The NPV is computed by adding the discounted profits of the strata which are mined in each period as
indicated in the equation 2. (Newman et al, 2008).

1 1 1
!"# = !,! ![!"]{!} ! + !,! ![!"]{!} ! !,! !"_!"#$%&'$"&! !
(1+!) (1+!) (1+!)
Equation 2. NPV estimation.

Where,

Discount rate r %
Profit for mine stratum {i} using open pit method P[OP]{i} US$
Profit for mine stratum {i} using underground method P[UG]{i US$
Development investment to enter the stratum {i}
UG_investement{i} US$
through the shaft and production level.
 TRANSITION PROJECT RESULTS.

The results using the traditional methodology are as follows:

Final Pit
Pit bottom Ore [Mt] Waste [Mt] LOM [years]
3790 2,172 9,495 37
Table 1. Open pit results using the traditional transition methodology.

Footprint elevation
FP elevation Ore [Mt] Cu grade %
3490 662 0.99%
Table 2. Underground mine results using the traditional transition methodology.

3790
3490

Figure 2. Transition design using the traditional transition methodology.

Results using the optimization model are as follows:

Final Pit
Pit bottom Ore [Mt] Waste [Mt] LOM [years]
3865 1,547 4,956 27
Table 3. Open pit results using the optimization model methodology.

Footprint elevation
FP elevation Ore [Mt] Cu grade %
3565 884 0.94%
Table 4. Underground mine results using the optimization model methodology.

3865

3565

Figure 3. Transition design using the optimization model methodology.
 CONCLUSIONS AND FINAL REMARKS

The transition method allows for continuity of ore resource extraction, generating a new business case,
which improves the original project that only considers exploitation using the open pit mining method.
Nevertheless, there are differences between operational results, such as transition design and the time
required to develop the project.

These mining projects are evaluated using the NPV as an economic parameter, and are compared with
the current Collahuasi business case. An improvement of 1% in NPV is shown by both methods.

A main issue in open pit mines with large ore bodies, is planning larger pushbacks as ore goes
deeper, producing an increase of the waste/ore rate, and generating problems in hauling estimation,
geotechnical wall stability and waste dumps disposal. The profit associated with the exploitation of
these final pushbacks included inside the final pit defined by Whittle is almost zero.

The optimization model proposes a final pit less deep than the traditional methodology, as the solution
to the optimization model doesnt mine the last pushbacks of the pit but immediately includes an
underground mine. If the value of the ore at the bottom of the final pit obtained using the traditional
methodology and the value of the same ore mined with the underground mine proposed by the
optimization model are compared, it found that there is an increment of 40% for the underground
method. So the deeper ore provides a better profit performance with an underground mine. The main
reasons for this improvement are that an underground mine only mines the ore blocks (no waste
movement), and this gain is discounted less because is mined earlier.

In the transition project, the value is not the only important factor, when the decision is made to carry
out the transition is also important. The underground infrastructure, like access ramps or shafts take a
long time to prepare and if this time-gap between the decision to make the transition and the beginning
of underground production is not taken into account, it will generate a loss of value for the project.

However, according to the optimization model results, the benefits produced by the underground
method compete with those produced by the final pushbacks of the open pit; in fact, the profit is
higher and improves the value of the project. Therefore, considering a shallower final pit, a block
caving mine placed below the pit and the possibility of making the transition decision in a timely
fashion, will produce better profits and performance, which is reflected by, improved NPV and
increased ore reserves. The results do not only have an economic impact; but other operational
problems are also minimized.
 ACKNOWLEDGEMENTS

The author wish to acknowledge Ca. Minera Doa Ins de Collahuasi for supporting this research
project. The author would also like to thank Alexandra Newman for helping us with the optimization
model. And all the colleagues who helped in the preparation of this project by sharing their
experience, new ideas and innovating point of views.

REFERENCES

CODELCO CHILE, Divisin Codelco Norte. (2009). Estudio de prefactibilidad, Proyecto mina
Chuquicamata subterrnea, Criterios especficos de diseo. Retrieved from Codelco Chile website:
http://www.codelco.cl/prontus_codelco/site/artic/20110706/asocfile/20110706150616/
criterios_espec__ficos_de_dise__o_rev_p.pdf

Diering, T., Richter, O., & Villa, D. (2008). Block Cave Production Scheduling Using PCBC.
MassMin 2008 .

Newman A., Rubio E. and Yano C. (2008). Optimizing the Transition from Surface to Underground
Mining. Presentation in Workshop on Operations research in Mining,Via del Mar, Chile.