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Extraction Planning Under Capacity Uncertainty at the

Chuquicamata Underground Mine
Lorenzo Reus, Mathias Belbèze, Hans Feddersen, Enrique Rubio

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Lorenzo Reus, Mathias Belbèze, Hans Feddersen, Enrique Rubio (2018) Extraction Planning Under Capacity Uncertainty
at the Chuquicamata Underground Mine. INFORMS Journal on Applied Analytics 48(6):543-555. https://doi.org/10.1287/
inte.2018.0961

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 INTERFACES
Vol. 48, No. 6, November–December 2018, pp. 543–555
http://pubsonline.informs.org/journal/inte/ ISSN 0092-2102 (print), ISSN 1526-551X (online)

Extraction Planning Under Capacity Uncertainty at the

Chuquicamata Underground Mine
Lorenzo Reus,a Mathias Belbèze,a Hans Feddersen,a Enrique Rubiob
a
Department of Engineering and Sciences, Adolfo Ibañez University, 7910000 Santiago, Chile; b REDCO Mining Consultants, 7690000
Santiago, Chile
Contact: lorenzo.reus@uai.cl, http://orcid.org/0000-0001-9171-7688 (LR); mbelbeze@alumnos.uai.cl (MB); hfeddersen@alumnos.uai.cl (HF);
erubio@redcoglobal.com (ER)

Received: March 16, 2017
Revised: May 17, 2017; June 2, 2017; October 3,
2017; January 17, 2018; April 30, 2018
Accepted: May 7, 2018
Published Online in Articles in Advance:
December 18, 2018
https://doi.org/10.1287/inte.2018.0961
Copyright: © 2018 INFORMS
Abstract. We propose an extraction schedule for the Chuquicamata underground copper
mine in Chile. The schedule maximizes profits while adhering to all operational and
geomechanical requirements involved in proper removal of the material. We include
extraction capacity uncertainties due to failure in equipment, specifically to the overland
conveyor, which we find to be the most critical component in the extraction process. First
we present the extraction plan based on a deterministic model, which does not assume
uncertainty in the extraction capacity and represents the solution that the mine can im-
plement without using the results of this study. Then we extend this model to a stochastic
setting by generating different scenarios for capacity values in subsequent periods. We
construct a multistage model that handles economic downside risk arising from this
uncertainty by penalizing plans that deviate from an ex ante profit target in one or more
scenarios. Simulation results show that a stochastic-based solution can achieve the same
expected profits as the deterministic-based solution. However, the earnings of the stochastic-
based solution average 5% more for scenarios in which earnings are below the 10th percentile.
If we choose a target 2% below the expected profit obtained by the deterministic-based
solution, this average increases from 5% to 9%.

History: This paper was refereed.

Funding: The research described in this paper is supported by Fondo de Fomento al Desarrollo
Cientı́fico y Tecnológico [IT16M100006] and Fondo Nacional de Desarrollo Cientı́fico y Tecnológico
[11170012].

Keywords: underground mine extraction scheduling • operational uncertainty management • stochastic programming applications •
long-term mine planning

Chile produces approximately 34% of the world’s copper
and possesses the largest open-pit copper mine, Chu-
quicamata. Currently the pit is so large that material
processing has become highly complex and expensive
because extraction must be performed in deeper areas.
Open-pit mines frequently move underground when the
amount of extracted waste becomes too high to manage
(Newman et al. 2010). Therefore, despite attempts at
increasing the efficiency of extraction from the current
mine, Chuquicamata’s board of directors has considered
transitioning from open-pit to underground extraction.
Various underground mining extraction methods are
available, which differ depending on the geological
structure of the mine and the grade of the ore. Newman
et al. (2010) classify underground extraction methods
into three types: (1) unsupported methods, such as room
and pillar or sublevel stoping, which are designed for
flat, thin, and homogeneous deposits; (2) supported
methods; and (3) caving methods, such as longwall
mining, sublevel caving, and block caving, which break
the rock into smaller pieces. In the case of Chuquicamata,
for example, the best extraction method is block caving
(Figure 1) because the blocks contain relatively low-
grade copper (0.8%), and hence, massive-scale mate-
rial removal is necessary. Moreover, block-sequencing
models for underground mining share certain aspects
with open-pit models. Both usually maximize the net
present value (NPV) subject to precedence and resource
constraints. See Espinoza et al. (2013) and Lambert et al.
(2014) for several block-sequencing formulations for
open-pit mines.
Naturally, the decision to implement underground
extraction at Chuquicamata is not one to be taken lightly;
this would require a substantial monetary investment;
Newman et al. (2013) analyze factors such as cutoff
grades and mining rates in the transition from open-pit
to underground extraction. In addition, as Olavarrı́a et al.
(2006) point out, underground extraction would present
challenges at Chuquicamata in geological terms, meeting
infrastructure needs, and attaining production goals. For
example, one of the difficulties encountered in caving
is controlling the material that drops to the extraction

543
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
544
Figure 1. General Diagram Showing Block Caving for Underground Mining
Notes. The ore breaks with the blast and inevitably produces a sinkhole. The collapse of the resulting debris can be delayed with proper blasting
techniques. The ore then goes through rock funnels and drops into different drawpoints. As the final step, conveyors move the ore to the
processing plant.
points, the so-called drawpoints. If caving is not done
properly, enormous masses of noncopper material can
fall on top of the ore, making extraction less efficient
and more expensive. There are specific constraints
when developing a production schedule. For example,
O’Sullivan and Newman (2014) include backfilling
constraints to stabilize the structure in their extraction
plan for an underground zinc mine; the same authors
enhance this underground mining model in O’Sullivan
and Newman (2015). Carlyle and Eaves (2001) solve a
large-scale mixed-integer programming problem for
scheduling platinum and palladium extraction for Still-
water Mining Company. They maximize profits and
provide drilling, expansion, and production plans for
various scenarios predicted via resource and grade pro-
jections. Sarin and West-Hansen (2005) use Benders de-
composition to derive extraction schedules for coal mines.
The Chuquicamata Underground Mine Planning project
(CUMP) consists of extracting 2.3 billion tons of ore
using the block caving method in three stages. This
study focuses on the first stage, which is to extract some
500 million (MM) tons from 20 ore bodies, named
blocks, over a 16-year horizon. CUMP is currently in
the development stage; extraction is planned to start in
2019. This paper focuses on CUMP’s mine extraction
planning (i.e., the design of the block caving schedule).
Mine planning consists of determining which and how
many blocks to cave during each period. Such planning
is complex because multiple specifications regarding
the extraction process must be considered when de-
termining the best possible extraction sequence.
Determining the layout and extraction method is
crucial in mine planning; as a result, much research has
been done in these areas. For example, Qinglin et al.
(1996) use neural networks to select the most suitable
Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS
mining method. Brazil and Thomas (2007) present
a network formulation—specifically, a variant of the
Steiner problem—to determine the infrastructure and
the best connections between ramps, declines, and shafts.
The layout and extraction method for the proposed mine
is defined in CUMP. Note that extraction planning is
concerned with more than the design of a daily schedule:
it is also necessary to reschedule the extraction sequence
as new information becomes available or as disruptions
occur. Plans should include contingencies for such
events, because otherwise profitability or other goals
declared before extraction may not be met. It is es-
sential to control for these possibilities when looking
for financing.
In terms of handling schedules under uncertainty,
previous research discusses economic and geological
risks, for example, errors in estimating parameters for
extraction profitability, such as the reserve grade and
future ore prices. The first models consider grade un-
certainty in terms of the average and variance of esti-
mates for areas within a deposit. For example, Dowd
(1994) performs a geostatistical simulation based on
a Gaussian distribution over a point grid representing
different locations in a gold mine reserve. Boucher and
Dimitrakopoulos (2012) design an efficient algorithm
that simulates spatial geological uncertainty for cor-
related metals in multielement deposits. Montiel and
Dimitrakopoulos (2015) develop a scheduling plan for
multipit mining complexes by combining the extrac-
tion, processing, and transportation stages. They ana-
lyze how perturbations applied during the extraction
stage affect the plan downstream.
By contrast, this work focuses on the operational risk
of CUMP (i.e., the economic and extraction variability
that results from equipment and infrastructure failures
Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS
in block caving). Working in collaboration with REDCO
Mining Consultants, we develop an extraction plan
capable of handling operational risk and rescheduling
in response to dynamic changes in extraction capac-
ity while simultaneously being aware of the profits
attained. Specifically, our main goal is to manage the
profit fluctuations caused by operational disruptions.
Mine Planning Model and Operational
Capacity of CUMP
Model Setup
The 20 blocks considered in the first stage of CUMP
have an average footprint size (amount of space on
a surface) of 13,700 m2 , and extraction can begin in any
of them. However, for operational reasons, once ex-
traction has begun in a block, a certain sequence must
then be followed. Only blocks adjacent to those that
have already been manipulated can be opened. Spe-
cifically, approximately 4% of a block must be extracted
before starting with an adjacent block; this ensures
sufficient space for setup and operations. Each block can
be viewed as a column with particular grading levels at
different heights (regions). The grade and size of each
region and the number of regions per block vary from
block to block (see details in Table A.1 in the appendix).
The discretization of each region in each block is not
arbitrary. The use of fewer regions makes the problem
easier to solve but delivers less accurate profit estimates.
Consequently, we aggregate until the grade difference
between adjacent regions is 0.01% or less. There is also
a precedence relationship between regions; to remove
ore from a certain region, one must cave all the material
below it.
There is a time-dependent capacity constraint for
each block’s setup and workability. Initially, working
space is very limited. As the block is extracted, the size
Figure 2. Cumulative Proportions that Can Be Extracted After Opening Select Blocks in the First Stage of CUMP
Notes. Less than 10% of a block can be removed when it is first opened, and less than 40% can be removed through its third year. The rate of
increase in the AC is highest in a block’s fourth open year and declines afterward.
545
of the material dropping toward the drawpoint de-
creases, thus facilitating extraction of the material and
allowing more to be removed per time unit. Eventually,
however, the drawpoints close, and block capacity
decreases accordingly. We henceforth call this capacity
the active capacity (AC). In terms of the optimization
model used for planning (see appendix), an AC is as-
sociated with each block after it has been opened; that is,
the draw rate depends on the “age” of the block. The sum
of the ACs across the lifetime of the block is such that all
material can be removed from it only if the material is
extracted at a certain pace (i.e., at the potential AC for
each year). When an active block ages by one year, the
AC value is changed to a predetermined value, regardless
of how much material is removed in previous years.
The AC behavior for a select group of blocks from the
20 considered in the first stage of CUMP is depicted in
Figure 2.
Because of concerns regarding possible dilution and
geomechanical stability, blocks cannot be reopened
after they have been shut down. That is, once no material
has been extracted for some time, additional ore cannot
can be obtained from that block. We set a minimum
extraction level of 0.4 MM tons per year to keep a block
active; otherwise, the block is shut down. When a block
is opened, at least 20% of the block must be extracted
until the end of the 16-year horizon. If this condition is
met, the block is considered to be broken, and hence
mining at deeper levels can take place in the second
and third stages of CUMP. In this deposit, the amount
of metal that can be recovered from the processed ore
is approximately 85%.
With regard to financing, the fixed cost for opening
each block varies depending on its size. This includes
the cost of opening the tunnels and installing the in-
frastructure, as well as other tasks. Operational cost
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
546 Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS

covers caving, recovering material from blocks, and
moving this material to the processing plant. There is
also a per-ton processing cost at the ore-processing
plant. We use a fixed copper price listed on future
exchange markets and a smelting cost of 10% of the
fixed copper price. We do not include the capital ex-
penditure during development (before extraction) be-
cause it is a sunk cost.
Operational Capacity Risk in CUMP
To incorporate the effects of equipment failure, we
simulate simultaneous changes in the production capac-
ities of the equipment, such as load, haul, and dump
(LHD) machines, crushers, conveyors, and infrastructure
such as drawpoints. Each component affects overall
capacity differently because of how each is distributed
(Figure 3). We account for changes in the nominal
capacity of each component, the real deployment time,
and failure and maintenance rates. We incorporate
uncertainty during the ramp-up period; that is, we vary
the amount of time needed to reach full capacity levels.
Overall system simulations yield one key outcome:
the main bottleneck is the amount of material that the
overland conveyor can move from the deposit to the ore-
processing plant. This is an expected outcome because
the capital expenditure budget typically overestimates
upstream equipment needs, because they are cheaper
compared with downstream items such as the cost of
an ore-processing plant. It is not technically feasible
to add another overland conveyor to alleviate this
bottleneck. Moreover, the ore-processing plant also re-
ceives ore from other deposits, which limits the amount
of material that can be removed in CUMP.
The simulation result enables us to consolidate op-
erational uncertainty into a parameter called the over-
land conveyor capacity (OCC), which we consider
uncertain in the event of operational disruptions. To
determine OCC values from the beginning to the end of
the 16-year period, we perform the following steps:
1. Plan the duration of the ramp-up period, according
to a uniform distribution ranging from five to eight years.
Note that the expected ramp-up period is approximately
six years.
2. Determine the expected production capacity of each
component for each year as a percentage of its nominal
capacity. To do this, we assume that when the ramp-up
period ends, the capacity of every component is on av-
erage 85% and is 25% at year 1. Then, we interpolate
between these two years to get the expected capacity for
the remaining years, in proportion to the OCC values
obtained in the average case, which considers a ramp-up
period of six years. As an example, if the ramp-up period
is five years, then the expected capacity at each year is
25%, 40%, 55%, 70%, and 85% (and remains at 85% until
the end of the horizon).

Figure 3. Top-View Distribution of the 20 Blocks

Notes. The infrastructure distribution layout for a single block is shown at the bottom. Material is collected at one of the 136 drawpoints, and
LHD machines move it to a plate feeder. The material is then reduced by crushers and carried by the sacrificial conveyor, which supports heavy
loads of dropped material, to the overland conveyor. On average, each block has three LHD machines, eight ore passes, and two crushers. Note
that blocks 1 and 5, 2 and 6, 3 and 7, and 4 and 8 each share a sacrificial conveyor. Thus, if one conveyor fails, it simultaneously affects two blocks.
Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
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3. Obtain the capacity by applying a uniform dis-
tribution to each component using the expected value
determined in the previous step. Specifically, if the
expected capacity is x%, then the uniform distribution
is between x% − 10% and x% + 10%.
4. Determine the OCC values by running the sim-
ulation on the overall system for each year using the
capacity values generated in the previous step. Figure 4
and Table 1 show OCC simulation examples and sta-
tistics, respectively.
Benchmark Solution and
Dynamic Scheduling
Chuquicamata does not provide any prior scheduling
methodology for CUMP. Hence, we first need to design
a benchmark solution to measure our solutions’ po-
tential gains for the company. We define a solution as an
extraction plan that can be rescheduled over time as
new OCC information arrives. The schedule of the
Benchmark solution is determined by a deterministic
model (see appendix) and uses the mean value of the
OCC at every year.
We test this solution with an iterative procedure.
Before explaining how this procedure works, we must
first specify, for each year t, what decisions (variables)
are made before the OCC at t is known and what
decisions are made afterward. We define decisions of
the first type as prior decisions, which determine the
blocks to be opened and the blocks to remain active. We
define decisions of the second type as recourse de-
cisions, which can be adjusted according to the real-
ized outcome. In this problem, the amount of material
extracted at year t is a recourse variable, because it can
be adjusted depending on the actual capacity of the
overland conveyor during year t. Clearly, all variables
defined for years beyond t are recourse variables. The
procedure for testing any solution consists of executing
the following loop for each year t:
Figure 4. The Expected OCC and Two Variant OCC Paths
Illustrate the Extent of the Possible Differences Between
Them
Note. In the “Optimistic OCC” path, the ramp-up period lasts only
five years, whereas in the “Pessimistic OCC” path, the ramp-up period
lasts seven years.
547
1. Solve the model (from year t to the end of the
16-year horizon) with the OCC values assumed by the
solution. Capture and fix the prior variables obtained at
t for this and following iterations.
2. Solve the model (from year t to the end of the
16-year horizon) with the realized OCC outcome at t
and the fixed values of the prior at step 1. Capture and
fix the recourse variables obtained at t.
We design a second solution called Perfect, which
plans using a perfect OCC forecast. Although this
solution is impossible to achieve, it helps to measure
the economic gap between a plan without operational
uncertainty (Benchmark) and the best possible solution
(Perfect). In stochastic programming, the Benchmark
solution is commonly known as the expected value
problem, whereas the Perfect solution is known as the
perfect information or wait-and-see problem.
Simulation Results
We first analyze the deterministic model’s schedule
for the first year, which corresponds to the ex ante
schedule of the Benchmark solution. Table A.2 in the
appendix presents the details of this schedule. The
optimal solution has an NPV of 3,374 (for confidenti-
ality reasons, we do not reveal profit units) and a total
extraction of 455 MM tons, which is 94% of the de-
posit’s material. Even though the OCC is lower in the
first three years, discounted flows are weighted toward
the beginning of the horizon, with 67% of the NPV
attained in the first half of the extraction plan (14 years
total). This does not happen with nondiscounted flows,
meaning profit is forward-leaning because of the time
discount (10%) rather than because of higher grades at
deeper regions of the block.
The OCC capacity is met in most years, indicating
that OCC changes can affect the extraction plan. An
optimal solution does not necessarily use the entire
OCC capacity in all periods. One might be tempted to
use the slack to open new blocks and avoid more time-
discount penalization; but if blocks are opened too
early, the OCC can limit the desired extraction levels of
all active blocks, which cannot be recovered in sub-
sequent years because the AC constraints limit the pace
of extraction, depending on the age of the block.
We then run 100 simulations, following the iterative
procedure, to determine the ex post performance of the
Benchmark and Perfect solutions. The NPV and pro-
duction results from the simulations are shown in Table 2.
We agree to measure the downside risk of each solution
with conditional value-at-risk (CVaR), which is a risk
measure extensively used in the field of finance. For
continuous distributions, the α-CVaR is the average of
losses greater than the αth percentile, called α-VaR.
Note that CVaR is generally measured with respect to
losses, so higher CVaR means higher downside risk.
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
548 Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS

Table 1. Statistics of 100 OCC Paths for Each Period in MM Tons

Year

1 2 3 4 5 6 7 8 ≥9

Mean 3.8 7.3 18.8 31.7 38.3 44.2 45.0 46.6 47.8
Standard deviation 0.8 1.9 10.3 9.6 8.2 4.8 5.0 4.6 3.7
Standard deviation/mean 20% 30% 60% 30% 20% 10% 10% 10% 10%
10th percentile 2.2 4.4 7.8 18.0 27.2 37.4 37.9 40.9 42.8
Median 3.9 7.7 21.5 30.9 39.2 44.4 46.0 47.9 48.2
90th percentile 4.6 9.6 29.4 43.6 48.3 51.1 51.2 51.2 51.2
Skew −1.2 −0.5 0.5 0.0 −0.2 −0.2 −0.6 −0.9 −1.1
Kurtosis 1.1 −0.6 −0.5 −1.0 −1.0 −0.9 −0.1 0.3 1.5

Notes. We omit years beyond year 9 because their statistical values are almost the same as those of year 9. Distributions are almost symmetrical,
and most are platykurtic (i.e., the kurtosis shown is the deviation from that of the normal distribution), which we expect because OCC values are
derived from uniform distributions. We use these OCC paths in the iterative procedure explained in the Benchmark Solution and Dynamic
Scheduling section to test every planning solution.

In our case, however, higher CVaR means lower down-
side risk because NPV is a measure of profits. Intuitively,
we want to measure how low profits are on average for
simulation runs in which profit attains its worst values. We
apply proposition 8 from Rockafellar and Uryasev (2002)
to estimate the CVaR in a discrete setting.
Three findings are worth noting. First, the ex post
NPV mean from the Benchmark solution (3,166) is 6.1%
below the a priori NPV forecast before running the
simulations (3,374). Moreover, 71% of the cases have an
NPV below 3,374. The latter results are expected because
constraints, such as the ones involving the AC, can
bound extraction, even when the OCC deviates posi-
tively from its mean. In terms of tonnage, however, this
gap is only 1%, which indicates that more (or less) ex-
traction does not necessarily mean more (or less) profit.
Second, the volatility and left tail of the NPV, al-
though large in economic terms, are small compared
with OCC volatility. The volatility–mean ratio for the
Benchmark solution is only 256/3,166 = 8%, whereas
the same ratio for the OCC is greater than 20% for the
ramp-up period (see Table 1). That is, the left tail of the
NPV distribution is insensitive to variation in the OCC.
Third, the gaps between the Benchmark and Perfect
solutions, for the mean NPV and 10%-CVaR, are 4.5%
and 12%, respectively. This performance difference
involves a considerable amount of money. Thus, we
deem it necessary to seek other solutions in an attempt
to reduce the CVaR gap.
Stochastic Programming Solutions
The next step is to search for plans that consider un-
certainty in rescheduling. The Benchmark solution
assumes only the mean value (a single outcome) for the
OCC value. Thus, we next determine the prior variables
by allowing for different possible future outcomes for
the OCC. In this way the planning process considers
OCC uncertainties, which can influence the decisions
made at every rescheduling instance. A straightforward
method of doing the latter is to apply stochastic
programming (SP). One of the advantages of this
approach is that it allows us to work with several types
of distributions for the uncertain variable. Stochastic
programming has been successfully used in open-pit
planning to handle grade uncertainty as in, for example,
Ramazan and Dimitrakopoulos (2007) and Boland
et al. (2008).
In an SP solution, instead of taking the expected
value OCC, we generate a discrete number of equi-
probable outcomes (scenarios) for the OCC values for
year t and subsequent years. We define a one-period SP
as one in which we only generate OCC outcomes for
year t. Analogously, we define an n-period SP as one
in which we generate OCC outcomes for years t to
t + n − 1. Hence, the Benchmark solution can be con-
sidered as the 0-period SP. We work with a tree structure
to link the OCC outcomes from years t to year t + n − 1
and a fan structure from year t + n, as we explain in
Figure 5. Note that from years t + n to the end of the
16-year period, we use the expected OCC values. Tree
structure is commonly used in long-term planning ap-
plications; for further explanation and implementation
methods, see Bae et al. (2014) or Reus and Mulvey (2015).
We expect to attain better solutions by increasing the
Table 2. Results for the Benchmark and Perfect Solutions,
Which We Obtained from 100 Simulation Runs
Benchmark Perfect Gap (%)
Mean NPV 3,166 3,314 4.5
NPV standard deviation 256 181 −41.4
10%-CVaR NPV 2,652 3,014 12.0
Mean tonnage 450 458 1.7
10%-CVaR tonnage 403 435 7.4
Notes. For confidentiality reasons, we do not reveal profit metrics.
The tonnage of extracted material is given in MM tons. In the 100
simulations we ran, the 10%-CVaR is approximately (or matches, in
the absence of repeated NPV) the NPV average of the 10 lowest NPV
values over the 100 simulations. This also applies to the tonnage.
Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS
number of periods and outcomes, because we can
measure OCC uncertainty more accurately. The draw-
back is that the size of the model (variables and
constraints) increases exponentially, even with a fan
structure after year t + n. An n-period and m-outcome
tree has mn scenarios.
To manage ex post NPV risk, we modify the objective
function to include downside risk in the model. One
option is to maximize the best mean-CVaR compro-
mise of the NPV. However, mine planners prefer so-
lutions that can guarantee that they will exceed the
promised NPV when raising capital. Thus, we propose
a utility function that is used in long-term financial
planning and that depends explicitly on the NPV target
(goal) desired. The function works as follows: if the
NPV in a scenario ends above this target (denoted by G
in the model), then the utility is positive and linearly
related to the surplus. The reward rate (slope) of this
relationship is defined by the user. However, if the
NPV ends below G, then the utility becomes negative;
the resulting shortage is also linearly related to the
utility measure. The penalization rate is larger than the
reward rate; thus, we look for solutions that exceed G
instead of accepting a mix of surplus and shortage
scenarios. An example of this function is presented in
the first chapter of Birge and Louveaux (2011). We
show the formulation of this objective function on
a one-period SP model in the appendix. Even though
this utility function measures risk differently than the
CVaR does, we expect an indirect increase in the
CVaR in the simulation results. The reason is that this
utility function also avoids extractions that could end
Figure 5. Example Illustrating a Two-Period Fan Structure
Notes. There are two equiprobable outcomes of OCC at each period,
giving a total of four scenarios (s). Outcomes at period 2 (OCC2) are
independent of those at period 1 (OCC1); hence, each scenario is
equiprobable with a probability of 0.25. In this example, the values
of the outcomes from the first two periods are the 10th and 90th
percentiles of the OCC sampling shown in Table 1. After the second
period, OCC is estimated with its mean value. Decisions taken
before the outcomes of OCC must respect nonanticipativity
constraints. Consider, for example, node N; decisions taken at
node N must be the same for scenarios 1 and 2. This constraint
applies to the other nodes in periods 1 and 2.
549
badly. A more direct measure for this utility function
would be, for example, the fraction of simulations with
the NPV ultimately exceeding the goal. However, such
goal-dependent measures cannot be estimated in Bench-
mark and Perfect solutions. Therefore, we continue to
measure CVaR to compare the risk between solutions. We
note that the gap between the optimal value of the Perfect
solution and an SP solution is known as the expected
value of perfect information. The gap between an SP
solution’s optimal value and the Benchmark solution
is known as the value of the stochastic solution.
One way to adjust the plan’s risk profile is to change
the reward and penalization rates in the utility func-
tion. The best results for the planners are obtained
when the penalization term is four times the reward
rate (more details are shown in Table A.3 in the ap-
pendix). With this setting, we then adjust the plan’s risk
profile by changing the outcomes within the tree or by
changing the target. We select the number of periods
and scenarios, depending on how close we come to the
goal and whether the Perfect solution’s CVaR gap can
be reduced using a bigger tree.
Simulation results in Table 3 and Figure 6 show the
improvements made by some of the SP solutions. For
the remainder of this paper the label “SPx ” represents
the SP solution with an NPV target of x. SP3,200 yields the
same NPV average (3,165) as the Benchmark solution
(3,166) but with a lower risk; the CVaR with the
Benchmark solution is 2,785/2,652 − 1 = 5% higher, and
the gap with the Perfect solution is reduced to 1 − 2,785/
3,014 = 7.6%. The SP3,100 solution achieves the a priori
target, as seen from the fact that the ex post mean (3,095)
is very close to 3,100. This 2% decrease in mean value is
compensated by a greater risk reduction. The CVaR with
the Benchmark solution is 2,902/2,652 − 1 = 9.4%
higher and is only 1 − 2,902/3,014 = 3.7% away from
the bound obtained by the Perfect solution.
To explain the performance differences between SP
and Benchmark solutions, Table A.4 in the appendix
shows the extraction schedule made by SP3,100 for year
1. We can compare this plan to the schedule set by the
Benchmark solution (Table A.2) because both plans are
constructed with the same prior information. During
the first year, SP3,100 extracts from only one block,
whereas the Benchmark solution starts with three
blocks. In the end, SP3,100 opens one fewer block and
takes one more year. SP3,100 delays the opening of most
blocks because it assumes lower OCC outcomes for the
first three years. If actual OCCs are below expectations
in the future, the risk of opening prematurely is to
extract only the minimum tonnage from a block to keep
it active. As we state above, such a situation is irre-
versible because the AC constraints do not allow
subsequent recovery of material that could not be
extracted earlier. Under these circumstances the
mine may ultimately extract below expectations. This
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
550 Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS

schedule difference also explains the tonnage differ- Table 3. Simulation Results for the SP Solutions
ence seen in Table 3 between the Benchmark solution
SP3,200 SP3,100
and the SP3,100 . The Benchmark solution extracts
Benchmark 2P-4Sc 3P-8Sc Perfect
450 MM tons on average; however, in the worst-case
scenarios, it averages 403 MM tons. SP3,100 ends with Mean NPV 3,166 3,165 3,095 3,314
NPV standard deviation 256 171 81 181
less average tonnage (445 MM tons) but has 23 MM
10%-CVaR NPV 2,652 2,785 2,902 3,014
more tons in the worst-case scenarios (426 MM). Mean tonnage 450 454 445 458
We use AMPL as a modeling language and CPLEX 10%-CVaR tonnage 403 421 426 435
12.6.0 to solve the optimization models. Initially we run NPV ≥ G (%) NA 65 70 NA
and test the solutions for the mine planners at REDCO Notes. The labels “xP-ySc“ refer to the scenario settings, where x
until no more changes are required and the solutions denotes the number of periods and y denotes the number of scenarios.
give sensible results. Afterward we focus on teaching “NPV ≥ G (%)” accounts for the fraction of times the NPV ends above
the goal. The scenarios we used for SP3,100 are more pessimistic than
the mine planners how to work with the tool; for ex-
those for SP3,200 (i.e., they have lower OCC percentiles). We did not
ample, we teach them what to change when they want construct Benchmark and Perfect solutions considering a goal G.
to modify an input. The tool also allows them to gen- Hence, the measure NPV ≥ G is not applicable (NA).
erate the OCC values for different operational settings,
run the iterative procedure, and show the output—that
extraction plans that perform beyond our client’s ex-
is, the dynamic schedule and performance results. The
pectations. There are four key advantages to imple-
extraction plans given by this decision support system
menting our tool. First, the tool includes a simulation
are strategic, so the only employees working with it
process that can assess the mine’s operational capacity
are mine planners. The company uses AMPL and
given its layout and equipment properties. Mine plan-
CPLEX for other projects, so the tool can be implemented
ners are now able to simulate new values for the OCC on
seamlessly in the mine facilities. The output is generated
the basis of other settings. Second, solutions include a
in a spreadsheet, and an external interface displays
contingency plan for when disruptions occur. This is
the schedules for the planners.
achieved simply by rerunning the optimization models
as new information arrives. Third, the SP plans effec-
Conclusion tively offer different mean-risk profiles from which
This consulting project delivers a powerful decision- a profit target can be chosen beforehand. Fourth, the
making tool that yields enormous economic and oper- quality of any plan can be guaranteed by measuring its
ational benefits for Chuquicamata. By improving the performance against that of the schedule made with
methodology on a step-by-step basis, we develop perfect information.

Figure 6. Cumulative NPV over Time for Three Benchmark Simulations and Three Simulations of the SP3,100 Plan

Notes. To choose the simulations plotted, we rank (from worst to best) the NPV obtained in the 100 simulations at the end of our study period
and take simulations in positions 5, 50, and 95. SP3,100 reduces NPV differences between these simulations both at the end of the horizon and over
time. SP3,100 solutions perform better in terms of reducing downside risk. The difference between the cumulative NPV from average solutions
(Benchmark-50 and SP-50) over time is lower than that between Benchmark-5 and SP-5.
Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS 551



For confidentiality reasons, we cannot disclose which Wbk ≥ Xbrt b ∈ @, t ∈ 7, (A.6)
solution mine planners preferred. We can say, however, k∈7:k≤t r∈5b

that this tool plays a primary role in determining the nb1 Xb1t ≥ nWbt b ∈ @, t ∈ 7, (A.7)
 
extraction plan at a strategic level. It is critical to un- r∈5b nbr Xbrk
b ∈ @, b′ ∈ !b , t ∈ 7,
k∈7:k≤t
Wb′ t ≤  (A.8)
derstanding the pace at which to open blocks to attain the q r∈5b nbr


desired NPV mean-risk compromise. Xbrt ≤ 1 b ∈ @, r ∈ 5b , (A.9)

t∈7
Appendix. Models and Supplementary Data Ybrt ≤ Xbrk b ∈ @, r ∈ 5b , t ∈ 7, (A.10)
Deterministic Model Indices and Sets k∈7:k≤t

t∈7 Periods of time (years) Xbrt ≤ Yb,r−1,t b ∈ @, r ∈ 5b : r > 1, t ∈ 7, (A.11)

b ∈ @ Blocks Ybr,t−1 ≤ Ybrt b ∈ @, r ∈ 5b , t ∈ 7 : t > 1, (A.12)


r ∈ 5b Regions (heights) of each block b Xbrt ≤ |5b |Zbt b ∈ @, t ∈ 7, (A.13)
a ∈ !b Blocks that are preceded by block b r∈5b


nbr Xbrt ≥ n(Zbt + Zb,t+1 − 1) b ∈ @, t ∈ 7, (A.14)
Data r∈5b


pt Market price of copper in year t ($ per ton) Zbk ≤ |7|[1 − (Zbt − Zb,t−1 )] b ∈ @, t ∈ 7 : t > 2. (A.15)
ct Smelting cost in year t ($ per ton) k∈7:k≤t−2
ft Operational cost of extracted material in year t ($ per ton)
lt Ore-processing plant cost of extracted material in year
Function (A.1) maximizes the net present value of the entire
t ($ per ton)
mine plan, which is decomposed into ore extraction profits
d Discount rate for NPV calculation (%)
and block opening costs. Constraints (A.2) correspond to
ib Investment needed for the opening of block b ($)
the overland conveyor capacity in each year. Constraints
OCCt Mean overland conveyor capacity in year t (tons) (A.3) limit the extraction capacity according to the active
acbt Active capacity of block b after t years from its opening area of each block. The limit depends on how long the block
(tons) has been open. To allow extraction in future stages of
nbr Amount of material in block b in region r (tons) CUMP, constraints (A.1) ensure that once a block has been
gbr Average copper grade of block b in region r (%) opened, at least e is removed from it. Constraints (A.5) allow
m Metallurgical recovery (%) each block to be opened only once. Constraints (A.6) pre-
e Minimum extraction of a block over the 16-year time vent material extraction from a block if the block has not
horizon if opened (%) previously been opened. Constraints (A.7) ensure that the
n Minimum extraction to consider a block active each minimum extraction requirement is met when a block is
year (tons) opened. Constraints (A.8) require that new blocks adjacent to
q Minimum extraction to open an adjacent block (%) block b be opened only if q has been removed from block b.
Constraints (A.9) make sure that the total fraction of material
Variables removed from each block and region is no greater than 1.
Xbrt Fraction extracted from block b at region r in year t, Constraints (A.10) state that if the total fraction of material
0 ≤ Xbrt ≤ 1 removed from a specific region is not 1, then extraction is not
Ybrt Equal to 1 if region r of block b is completely extracted complete. Constraints (A.11) establish the precedence re-
by year t, 0 otherwise lationships between the regions in each block. Constraints
Zbt Equal to 1 if the minimum amount of material is (A.12) enforces that if a region is completely extracted by t, then
extracted from block b in year t, 0 otherwise it is also completely extracted afterward. Constraints (A.13)
Wbt Equal to 1 if block b is opened in year t, 0 otherwise ensure that if no material has been removed from a block in
a given year, then no extraction from that block is possible.
Model
Constraints (A.14) guarantee minimal extraction if a block is
active, unless it becomes closed in the next year (Zb,t+1  0). In



([(pt − ct )(gbr m) − ft − lt ]nbr )Xbrt this way, complete removal is possible when the amount left is
max
t∈7 b∈@ r∈5b (1 + d)t less than the minimum requirement. Constraints (A.15) forbid


ib Wbt reopening: if a block is active in t but not in t − 1, then it cannot
− (A.1) have been active previously.
t∈7 b∈@ (1 + d)
t

s.t.


One-Period SP Model
nbr Xbrt ≤ OCCt t ∈ 7, (A.2)
We present the model formulation for the one-period sto-
b∈@ r∈5b


chastic programming model when the rescheduling process
nbr Xbrt ≤ acb,t−k+1 Wbk b ∈ @, t ∈ 7, (A.3)
is performed at time t∗  1 and when determining prior
r∈5b k∈7:k≤t




variables (i.e., before knowing the value of OCCt∗ ).
nbr Xbrt ≥ e nbr Wbt b ∈ @, (A.4)
r∈5b t∈7 r∈5 t∈7

b

Wbt ≤ 1 b ∈ @, (A.5) Additional Set

t∈7 s ∈ 6 Scenarios at time t∗
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
552 Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS

Additional Parameters nbr Xbrts ≤ acb,t−k+1 Wbks b ∈ @, t ∈ 7, s ∈ 6,
OCCt∗ s Overland conveyor capacity in year t∗ in scenario s r∈5b



k∈7:k≤t



(tons) nbr Xbrts ≥ e nbr Wbts b ∈ @, s ∈ 6,
G Target (goal) for the NPV ($) t∈7 r∈5b

b r∈5 t∈7
w Reward when the NPV ends above G Wbts ≤ 1 b ∈ @, s ∈ 6,
ρ Penalization when the NPV ends below G
t∈7


Wbks ≥ Xbrts b ∈ @, t ∈ 7, s ∈ 6,
k∈7:k≤t r∈5b
Prior Variables
n Xb1ts ≥ nWbts b ∈ @, t ∈ 7, s ∈ 6,
Zbt∗ s Equal to 1 if the minimal amount of material is extracted  b1 
from block b in year t∗ in scenario s, 0 otherwise k∈7:k≤t r∈5b nbr Xbrks
Wb′ ts ≤  b ∈ @, b′ ∈ !b , t ∈ 7, s ∈ 6,
Wbt∗ s Equal to 1 if block b is opened in year t∗ in scenario s, q r∈5b nbr


0 otherwise Xbrts ≤ 1 b ∈ @, r ∈ 5b , s ∈ 6,


t∈7
Recourse Variables Ybrts ≤ Xbrks b ∈ @, r ∈ 5b , t ∈ 7, s ∈ 6,
Zbts Equal to 1 if the minimal amount of material is k∈7:k≤t

extracted from block b in year t > t∗ in scenario s, Xbrts ≤ Yb,r−1,t,s b ∈ @, r ∈ 5b : r > 1, t ∈ 7, s ∈ 6,

0 otherwise Ybr,t−1,s ≤ Ybrts b ∈ @, r ∈ 5b , t ∈ 7 : t > 1, s ∈ 6,


Wbts Equal to 1 if block b is opened in year t > t∗ in sce- Xbrts ≤ |5b |Zbts b ∈ @, t ∈ 7, s ∈ 6,
nario s, 0 otherwise r∈5b


Xbrts Fraction extracted from block b at region r in year t in nbr Xbrts ≥ n(Zbts + Zb,t+1,s − 1) b ∈ @, t ∈ 7, s ∈ 6,
scenario s r∈5b


Ybrts Equal to 1 if region r of block b is completely extracted Zbks ≤ |7|[1 − (Zbts − Zb,t−1,s )] b ∈ @, t ∈ 7, s ∈ 6.
by year t in scenario s, 0 otherwise k∈7:k≤t−2
NPVs NPV in scenario s
DEV +s NPV surplus with respect to goal G in scenario s, Function (A.16) maximizes the expected value of the utility
DEV +s ≥ 0 function. In each scenario, this function is either the product
− of the surplus and the reward rate (when NPVs is greater than
DEV s NPV shortage with respect to goal G in scenario s,
DEV s− ≥ 0 G) or the product of the shortage and the penalization rate.
Constraints (A.17) are the definition of the NPV, and Con-
Model straints (A.18) define the meaning of surplus or shortage.
Constraints (A.19) define the capacity depending on the OCC
1
outcome at each year at each scenario. Note that because this
max (wDEV +s − ρDEV s− ), (A.16)
|6| s∈6 is a one-period model, OCCts  OCCt : t > t∗ , with OCCt being
s.t. the mean (expected) value used in the deterministic model.
Constraints (A.20) and (A.21) are the nonanticipativity con-

([( pt − ct )(gbr m) − ft − lt ]nbr )Xbrts straints applied to the prior variables. Planners must decide
NPVs 
t∈7,b∈@
(1 + d)t whether to open a block or keep it open, before knowing the
r∈5b value of OCCt∗ s . These prior variables (Zbt∗s and Wbt∗s ) seem to

ib Wbts
− s ∈ 6, (A.17) be dependent on the scenarios, but nonanticipativity constraints
t∈7 (1 + d)
t
force them to be equal for all scenarios. The recourse variables
b∈@
can adjust their value to accommodate at each scenario,
NPVs − G  DEV +s − DEV s− s ∈ 6, (A.18) depending on the OCCt∗ s value. The remaining constraints are



nbr Xbrts ≤ OCCts s ∈ 6, t ∈ 7, (A.19) explained in the deterministic model. The advantage of
b∈@ r∈5b indexing prior variables with respect to the scenarios is that
Wbt∗ s  Wbt∗ u b ∈ @, s, u ∈ 6, (A.20) constraints can be written in the same way regardless of
Zbt∗ s  Zbt∗ u b ∈ @, s, u ∈ 6, (A.21) whether they depend on t∗ and a prior variable.

Additional Data and Results

Table A.1. Each Entry Specifies the Tonnage (in MM Tons) and Grade (% Copper) of Each Region

Region

Block 1 2 3 4 5 6 Total Grade

1 17.4\.62 3.5\.57 — — — — 20.9 0.61

2 14.3\.60 — — — — — 14.3 0.60
3 16.2\.68 1.4\.65 — — — — 17.6 0.68
4 3.5\.72 2.0\.75 3.5\.79 4.7\.77 1.2\.72 — 14.9 0.76
5 1.4\.63 2.5\.65 2.4\.67 18.6\.68 — — 24.9 0.67
Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS 553

Table A.1. (Continued)

Region

Block 1 2 3 4 5 6 Total Grade

6 4.2\.74 3.6\.76 14.3\.78 6.9\.75 — — 29.0 0.76

7 1.2\.71 2.8\.73 4.0\.76 7.5\.79 6.9\.81 3.2\.9 25.6 0.79
8 1.5\.81 3.3\.88 17.6\.95 3.3\.92 — — 25.7 0.93
9 1.1\1.11 15.8\1.08 7.1\1.02 2.5\.95 — — 26.5 1.05
10 1.6\1.26 2.5\1.20 5.2\1.23 7.5\1.21 5.9\1.11 0.7\1.02 23.4 1.19
11 1.1\1.14 2.2\1.12 5.3\1.21 7.4\1.23 5.4\1.10 0.1\.97 21.5 1.18
12 1.2\1.18 2.3\1.15 4.8\1.19 7.4\1.22 5.6\1.09 0.4\.95 21.7 1.17
13 1.6\1.02 2.9\1.00 5.4\1.10 7.6\1.20 5.5\1.17 0.8\1.03 23.8 1.13
14 5.1\.93 4.9\.96 7.8\.98 7.7\.9 2.4\.81 — 27.9 0.93
15 1.5\.89 3.2\.87 11.6\.88 7.3\.81 2.9 \.76 — 26.5 0.85
16 1.2\.9 11.8\.85 7.5\.77 5.8\.62 — — 26.3 0.78
17 1.2\.83 6.9\.80 7.0\.76 7.5\.69 6.8\.63 — 29.4 0.72
18 1.3\.99 3.2\.93 8.9\.85 7.7\.8 6.8\.72 4.2\.67 32.1 0.80
19 1.4\.9 4.5\.82 6.0\.86 7.2\.83 5.1\.80 5.0\.78 29.2 0.82
20 1.0\.66 1.9\.6 3.1\.67 4.2\.69 4.4\.71 9.6\.73 24.2 0.70
Total 485.4 0.86

Notes. The last two columns display the amount of material and the average grade for each block. The grade is generally higher at the bottom of
each block. This is one of the reasons for moving to underground mining. However, the grade does not decrease monotonically toward the top.
Blocks 10, 11, and 12 have the highest average grades, and the grade decreases in adjacent blocks.

Table A.2. The Data Illustrate an Optimal Mine Planning Schedule Using the Expected OCC Values

Year
Total
Block 1 2 3 4 5 6 7 8 9 10 11 12 13 14 (MM Tons)

1 — — — — — — — — 2 4 16 44 69 86 18.0
2 — — — — — — — — — — — — — — 0.0
3 — — — — — — 2 13 24 36 63 92 100 17.6
4 — — — — — — — 4 10 23 37 60 92 100 14.9
5 — — — — — — — 6 16 25 47 76 100 — 24.8
6 — — — — — — 4 14 27 50 76 100 — — 29.0
7 — — — — — — 5 16 31 61 88 100 — — 25.6
8 — — 3 12 27 57 81 93 — — — — — — 24.0
9 — — 4 18 35 64 91 100 — — — — — — 26.5
10 7 18 40 72 97 100 — — — — — — — — 23.4
11 5 15 40 74 100 100 — — — — — — — — 21.5
12 5 16 38 72 98 100 — — — — — — — — 21.6
13 — — 7 19 42 74 97 100 — — — — — — 23.8
14 — — — 1 15 33 61 89 97 — — — — — 27.1
15 — — — — 6 18 33 61 89 100 — — — — 26.4
16 — — — — 5 14 25 49 77 78 — — — — 20.5
17 — — — — 4 14 275 35 60 83 — — — — 24.3
18 — — — — — 4 14 23 42 66 87 100 — — 32.1
19 — — — — — — 5 13 21 41 66 83 100 — 29.2
20 — — — — — — — 4 12 25 42 60 78 100 24.2
Total (MM tons) 3.8 7.0 18.8 31.7 38.2 38.9 44.8 46.4 47.7 47.8 47.5 45.4 26.5 10.0 454.5
OCCt (MM tons) 3.8 7.3 18.8 31.7 38.3 44.2 45.0 46.6 47.8 47.8 47.8 47.8 47.8 47.8 —
Cumulative NPV (%) 0 4 12 28 42 55 67 76 83 89 94 98 100 100 —
Cumulative flow (%) 0 2 8 20 32 44 56 66 74 83 91 96 99 100 —

Notes. The numbers indicate the cumulative amount of extracted material (%) from each block during each year. As expected, the plan starts with
blocks 10, 11, and 12, which are the highest-grade blocks. The column “Total (MM tons)” accounts for the total tonnage extracted from each block.
The row “Total (MM tons)” accounts for the total tonnage extracted each year. We see that extraction is bounded by the OCC capacity, especially
in the ramp-up period. The cumulative NPV and cumulative flow rows show the timing of the cash flows with and without a time discount,
respectively. Both grow faster during the ramp-up period. Discounted flows are weighted toward the beginning of the horizon (67% of the NPV
is attained in the first half of the extraction plan); however, the nondiscounted flows are not; that is, profit is forward-leaning because of the time
discount—not because higher grades are at the bottom of the block.
 Reus et al.: Extraction Planning Under Capacity Uncertainty at Underground Mine
554 Interfaces, 2018, vol. 48, no. 6, pp. 543–555, © 2018 INFORMS

Table A.3. The Data Show Results for Solutions SP3,200 and SP3,100 (Table 3) Using Different Values of the Penalization Term (ρ
in the One-Period SP Model) Applied to an NPV that Ends Below the Profit Goal (3,200 for SP3,200 and 3, 100 for SP3,100 )

SP3,200 SP3,100

ρ2 ρ4 ρ6 ρ8 ρ2 ρ4 ρ6 ρ8

Mean NPV 3,190 3,165 3,132 3,125 3,113 3,095 3,085 3,079
NPV standard deviation 211 171 160 153 102 81 75 73
10%-CVaR NPV 2,680 2,785 2,790 2,802 2,857 2,902 2,914 2,923
Mean tonnage 451 454 454 453 442 445 446 446
10%-CVaR tonnage 408 421 421 423 419 426 428 428
NPV ≥ G (%) 62 65 66 66 67 70 71 71

Notes. The reward rate (w in the one-period SP model) is fixed at 1. Planners prefer results in which ρ  4 in both solutions because they present
a significant improvement in terms of NPV standard deviation and 10%-CVaR NPV with respect to the results obtained when ρ  4. When ρ > 4,
these metrics show only a slight improvement considering the decrease in mean NPV.

Table A.4. The Data Show the Mine Planning Schedule of SP3,100 at t  1

Year
Total
Block 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 (MM tons)

1 — — — — — — — — — — — — — — — 0.0
2 — — — — — — — — — — — — — — — 0.0
3 — — — — — — — 14 25 37 56 85 93 — — 16.3
4 — — — — — — — — 4 10 23 37 60 92 100 14.9
5 — — — — — — — — 6 16 25 47 76 100 — 24.8
6 — — — — — — — 4 14 27 50 76 100 — — 29.0
7 — — — — — — — 5 16 31 61 88 100 — — 25.6
8 — — — — — 6 19 33 63 87 100 — — — — 25.7
9 — — — — 4 18 35 64 91 100 — — — — — 26.5
10 — — — 7 18 40 72 97 100 — — — — — — 23.4
11 — — 5 15 40 74 100 100 — — — — — — — 21.5
12 6 16 38 72 98 100 — — — — — — — — — 21.7
13 — 7 19 42 74 97 100 — — — — — — — — 23.8
14 — — 4 18 35 63 91 100 — — — — — — — 27.8
15 — — 6 18 33 61 89 100 — — — — — — — 26.4
16 — — — — 5 14 25 49 69 91 — — — — — 23.9
17 — — — — — 3 13 26 50 76 99 — — — — 29.0
18 — — — — — — 4 14 23 42 66 78 91 — — 29.3
19 — — — — — — — 5 13 21 41 66 83 100 — 29.2
20 — — — — — — — 4 12 25 42 60 78 100 — 24.2
Total (MM tons) 1.2 3.9 11.4 23.7 32.2 42.3 43.6 41.5 44.6 46.2 48.6 41.0 39.4 22.2 1.2 443.0

Notes. SP3,100 delays the opening of most blocks, compared with the Benchmark solution, which is equivalent to the solution shown in Table A.2.
Furthermore, it does not extract blocks 1 and 2, and extraction ends one year later. SP3,100 does not start with blocks 10 and 11, as the Benchmark solution
does. Because of the AC constraints, blocks 10 and 11 require extraction at a faster pace than block 12. We expect lower tonnage (443.0 MM tons) in this
solution than with the Benchmark solution (454.5 MM) because it assumes lower OCC outcomes for the first three years (SP3,100 is a three-period solution).

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Verification Letter
Augusto Aguayo, Engineering Principal of Underground
Mining Projects, CODELCO, 3580000 Antofagasta, Chile writes:
“We certify that the project assigned to REDCO Mining Con-
sultant in the contract 4501556272 was applied and considered
in the strategic long-term extraction planning schedule of
Chuquicamata underground mine, This project is currently in
the development stage, with extraction to begin in 2019.
“First, the tool helped in estimating the extraction capacity
of the mine and what decisions to make in the schedule to
avoid deviating from extraction goals. The schedule satisfies
all the requirements needed for the underground extrac-
tion of this particular deposit and successfully handles the
operational risk during the extraction phase. Strategically, the
different solutions that can be achieved by the tool allow to
555
choose different opening designs and different extraction rates.
One of the good features of the tool is that we can choose the
solution based on the desired average profit, and also measure
what the profit is under a stressed system. Another interesting
feature of the tool is its flexibility for allowing changes in the
input needed. It is very easy to re-run the OCC simulation if we
need to change some of its component characteristics and easy
to change the parameters of the optimization model. We know
how to tune parameters for deriving different solutions,
without the need to go through the model.
“We appreciate and enjoyed working with REDCO at
every stage of the process. We think this work makes an
important contribution to forthcoming extraction decisions and
brings substantial benefit in terms of profits.”
Lorenzo Reus is an assistant professor in the engineering
department at the Universidad Adolfo Ibañez. He received
a PhD in operations research and financial engineering from
Princeton University. His current research interests are asset
allocation strategies, financial risk management, and opti-
mization models for the mining and energy industry.
Mathias Belbèze currently works as a schedule analyst in
the air transport sector. He is a mining engineer with expe-
rience in mining consultant projects. He has worked in un-
derground mine extraction plans, specifically in the optimization
of the material handling process and in the simulation of oper-
ational disruptions.
Hans Feddersen currently works as a sales analyst in the
retail sector. He is an industrial engineer, with experience in
project evaluation and in operational optimization processes
for mining and agribusiness companies.
Enrique Rubio is the executive director of REDCO Mining
Consultants. Until 2011 he was an assistant professor in the
mining department at the Universidad de Chile. He holds
a degree in mining engineering from the University of Chile
and an MS and PhD in mining engineering from the University
of British Columbia. An expert in strategic and operational
extraction planning, he has worked with several companies
in the mining sector, such as Codelco, Gemcom, Placer Dome,
and Rio Tinto, among others.