Keith Whitchurch, Pt SMG Consultants

Deposit Evaluation Techniques

OCTOBER 09
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Company Logo
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What questions are being asked?

• What sort of deposits is it?

• Simple
• Complex
• Single seam
• Multi seam obvious base
• Multi seam no obvious base

OCTOBER 09
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Company Logo
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What questions are being asked?

• How big is the reserve?

• How should it be mined?
• What order should it be mined in?
• HOW DO I MAKE THE MOST MONEY?

OCTOBER 09
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Deposit Evaluation Techniques

• Strip Ratio
• Cash Margin Ranking
• Lerch Grossman Pit Optimiser
• Next Generation Technologies

OCTOBER 09
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Company Logo
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Simple Example Deposit

OB Depth 30m OB Depth 60m OB Depth 30m

Coal Thickness 5m Coal Thickness 5m Coal Thickness 5m
Coal Ash 2% Coal Ash 2% Coal Ash 15%
Coal Density 1.30 T/bcm Coal Density 1.30 T/bcm Coal Density 1.40 T/bcm
Coal Energy 5600Kcal Coal Energy 5600kcal Coal Energy 4600kcal
OCTOBER 09
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Strip Ratio Company Logo
here

Strip _ Ratio 
 Overburden _ Volume
 (Coal _ Volume * Coal _ Density )

OB Depth 30m OB Depth 60m OB Depth 30m

Coal Thickness 5m Coal Thickness 5m Coal Thickness 5m
Coal Ash 2% Coal Ash 2% Coal Ash 15%
Coal Density 1.30 T/bcm Coal Density 1.30 T/bcm Coal Density 1.35 T/bcm
Strip Ratio = 30/(5*1.30) Strip Ratio = 60/(5*1.30) Strip Ratio = 30/(5*1.40)
= 4.6bcm/t = 9.2bcm/t = 4.3bcm/t

OCTOBER 09
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Company Logo
Strip Ratio here

• Easy but very simplistic

• No Account of Coal Quality
• No account of costs
• No Account of Revenue
• Complex in multi Seam Steep Dip
• Difficult to account for Pit Batters

OCTOBER 09
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Cash Margin Ranking here

• Cash Margin = Revenue - Costs

• Accounts for complexity of variables (e.g.
additional trucks with depth; variations in
quality)
• In our example
• Sale Value for 5600 kcal coal = $US16
• Sale Value for 4600 kcal Coal = $US10
• Waste Mining Cost $1.50/bcm
• Coal Mining including overheads $2.50/t
OCTOBER 09
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Simple Example Deposit Company Logo
here
Cash _ M arg in   Coal _ Volume * Coal _ Density * Coal _ Sale _ Pr ice   Coal _ Mining _ Cost Waste _ Mining _ Cost

OB Depth 30m OB Depth 60m OB Depth 30m

Coal Thickness 5m Coal Thickness 5m Coal Thickness 5m
Coal Ash 2% Coal Ash 2% Coal Ash 10%
Coal Density 1.30 T/bcm Coal Density 1.30 T/bcm Coal Density 1.40 T/bcm
Coal Energy 5600Kcal Coal Energy 5600kcal Coal Energy 4600kcal
Sale Value = 5*1.30*16 Sale Value = 5*1.30*16 Sale Value = 5*1.30*10
= $104 = $104 = $65
Costs = 30 *1.50 + 5*1.30*2.50 Costs = 60 *1.50 + 5*1.30*2.50 Costs = 30 *1.50 + 5*1.30*2.50
= $61.25 = $106.25 = $61.25
Cash Margin = 104 – 61.25 Cash Margin = 104 – 106.25 Cash Margin = 65 – 61.25
= $42.75 = -$2.25 = $3.75 OCTOBER 09
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Company Logo
Cash Margin Ranking here

• Cash Margin = Revenue - Costs

• Accounts for
• Complexity of variables
• Variations in quality
• Variations in Costs

• What about complex analysis (base for

multi-seam? ; limit of highwalls in steep
dip?)
OCTOBER 09
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Lerch Grossman Pit Optimiser here

• Algorithm created in
the 1960s
• Common in Metals
• Used in Complex
Coal – Indonesia
• KPC
• Adaro

OCTOBER 09
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• Fill deposit with valued 3D blocks.

• Costs vary with depth etc
• Revenue varies with grade &
yield (recovery) etc

OCTOBER 09
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Simple geology one seam

Topography

Ore

OCTOBER 09
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Simple geology

Topography

Ore
Cost $3/block
Revenue $20/block

OCTOBER 09
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Optimisation Theory Company Logo
here

Air blocks

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$3 -$3 $17 -$3 -$3 -$3 -$3 -$3 -$3
-$3 -$3 -$3 $17 -$3 -$3 -$3 -$3 -$3
-$3 -$3 -$3 -$3 $17 -$3 -$3 -$3 -$3
-$3 -$3 -$3 -$3 -$3 $17 -$3 -$3 -$3
-$3 -$3 -$3 -$3 -$3 -$3 $17 -$3 -$3
-$3 -$3 -$3 -$3 -$3 -$3 -$3 $17 -$3
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 $17
Block profit
Waste mining cost = - $3
OCTOBER 09
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Step 1: Sum the cells vertically

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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Maximum value vertical pit

Value = 14+11+8+5+2=$40
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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Bigger pit has less value

Value = 14+11+8+5+2-1=$39
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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here

Smaller pit has less value

Value = 14+11+8+5=$38
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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But pit is not vertical it is inclined.

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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Assume a 45o slope

Value is $-3+14+11-6-3=$13
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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Assume a 45o slope

Value is $-3 +14 –3 =$8
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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Optimisation Theory Company Logo
here

Assume a 45o slope

Value is $-3+14+11+8-9-6-3=$12
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

OCTOBER 09
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here

Optimum pit has maximum value

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
$8 -$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
$13 -$3
-$6
-$3 -$3 -$3
-$6 $14 -$6
-$3 -$3 -$3 -$3 -$3
-$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

$12 OCTOBER 09
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here

Optimum pit has maximum value

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6
-$9
-$6 $14 -$6
-$9 $11 $11
-$6 -$6 -$6 -$6 -$6
-$9 -$9 -$9 -$9 -$9
A smaller pit is less profitable
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18
-$21
-$18 $2 $2
-$21 -$1 -$1
$2 $2 $2 -$18 -$18
-$1 -$1 -$1 -$1 -$21
A bigger pit is less profitable.
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
$8$8 -$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
$13
$13
-$3
-$6
-$3 -$3 -$3
-$6 $14 -$6
-$3 -$3 -$3 -$3 -$3
-$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

$12 OCTOBER 09
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here

$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6
-$9
-$6 $14 -$6
-$9 $11 $11
-$6 -$6 -$6 -$6 -$6
-$9 -$9 -$9 -$9 -$9
Optimum pit is maximum
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18
-$21
-$18 $2 $2
-$21 -$1 -$1
$2 $2 $2 -$18 -$18
-$1 -$1 -$1 -$1 -$21
value pit
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
$8$8 -$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
$13
$13
-$3
-$6
-$3 -$3 -$3
-$6 $14 -$6
-$3 -$3 -$3 -$3 -$3
-$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

$12 OCTOBER 09
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$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
-$6
-$9
-$6 $14 -$6
-$9 $11 $11
-$6 -$6 -$6 -$6 -$6
-$9 -$9 -$9 -$9 -$9
Optimum pit is break even
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18
-$21
-$18 $2 $2
-$21 -$1 -$1
$2 $2 $2 -$18 -$18
-$1 -$1 -$1 -$1 -$21
at its limits
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
-$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3 -$3
$8$8 -$6 -$6 $14 -$6 -$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4
$0 $0 $0 $0 $0 $0 $0 $0 $0
$13
$13
-$3
-$6
-$3 -$3 -$3
-$6 $14 -$6
-$3 -$3 -$3 -$3 -$3
-$6 -$6 -$6 -$6 -$6
-$9 -$9 $11 $11 -$9 -$9 -$9 -$9 -$9
-$12 -$12 $8 $8 $8 -$12 -$12 -$12 -$12
-$15 -$15 $5 $5 $5 $5 -$15 -$15 -$15
-$18 -$18 $2 $2 $2 $2 $2 -$18 -$18
-$21 -$21 -$1 -$1 -$1 -$1 -$1 -$1 -$21
-$24 -$24 -$4 -$4 -$4 -$4 -$4 -$4 -$4

$12 OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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OCTOBER 09
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Sale price & strip ratio Company Logo
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Sale Price & strip ratio

7.00

6.00

5.00
Strip Ratio

4.00

3.00

2.00

1.00

0.00
$- $5.00 $10.00 $15.00 $20.00 $25.00

Sale Price

OCTOBER 09
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Sale price & pit size Company Logo
here

Sale Price & pit Size

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

-
$4 $6 $8 $10 $12 $14 $16 $18 $20 $22

Sale price

OCTOBER 09
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Understand geology Company Logo
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Sale Price & pit Size

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

-
$4 $6 $8 $10 $12 $14 $16 $18 $20 $22
$14
Sale price

OCTOBER 09
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Understand geology Company Logo
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$16
Sale Price & pit Size
70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

-
$4 $6 $8 $10 $12 $14 $16 $18 $20 $22
$14
Sale price

OCTOBER 09
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Company Logo
Pit Optimiser Block Ranking here

C5 -
C6 -
L6 -
U7 -
C7 -
C8 -
L8 -

OCTOBER 09
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OCTOBER 09
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Shortcoming of LG Optimiser Company Logo
here

oCannot consider Blending

oCannot consider Time
oCannot consider practicalities and effects of
spoil dumps

Next Generations Tools Exist to

This problem

OCTOBER 09
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Summary Company Logo
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oManual Method
 Essential first step – Really don’t answer the questions

oStrip ratio
 Simple , easy significant traps

oBlock Ranking
 Allows complex cost/revenue considerations – Difficult to handle complex geometry

oPit Optimisation
 Well proven tool for multi seam deposits – not a substitute but an aid for good
engineering

OCTOBER 09
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Company Logo
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oThank You

OCTOBER 09