Mine Planning

Lecture 8B/Tutorial T8:

Lane’s Approach- CoG Optimization
 Copyright @ 2015 Mining Education Australia
This slide presentation was created by Assoc Prof Waqar Asad
(WASM).
Updated by Professor Emmanuel Chanda (Uni Adelaide)

The moral right of the author has been asserted.

The presentation forms part of the Theory of Cutoff Grades and Cutoff Grade Policy in Mine
Planning, an MEA course.
All rights reserved. The presentation is licensed to MEA for educational purposed in MEA courses
only.

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 Cutoff Grade Policy

• Background
• Inputs to cutoff grade calculation
• Cutoff grade calculation techniques
– Breakeven analysis
– Optimal cutoff grade policy
• Lane’s approach
– Difference between breakeven and optimal cutoff grade analysis

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 Lane’s Approach – algorithm

• Step 1: calculate limiting economic cutoff grades, initial V = 0

• Step 2: calculate balancing cutoff grades
• Step 3: calculate optimum cutoff grade
• Step 4: calculate quantity of ore (𝑞𝑜), quantity of waste (𝑞𝑤),
average grade of ore (𝑔),
ҧ and stripping ratio (𝑆𝑅)

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 Lane’s Approach – Cutoff Grade Policy

• Step 5: calculate 𝑄𝑚𝑡 , 𝑄𝑐𝑡 , and 𝑄𝑟𝑡

• Step 6: calculate cash flow for year 𝑡, 𝐶𝐹𝑡
• Step 7: calculate life of operation (𝑇)
• Step 8: calculate 𝑛𝑒𝑤 𝑉
– Check for convergence of V, if converged go to next step, otherwise, go to
step 1 and recalculate limiting economic cutoff grades using new value of V

• Step 9: upgrade grade-tonnage curve, go to step 1 for next year

calculations.

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 Cutoff Grade Policy – Year 1

Step 1: Limiting Economic Cutoff Grades

2
𝑔𝑚 = = 0.10 𝑔/𝑡
25 − 5 1.00

300 + 0.15(0)
2+
𝑔𝑐 = 50 = 0.40 𝑔/𝑡
25 − 5 1.00

2
𝑔𝑟 = = 0.16 𝑔/𝑡
300 + 0.15(0)
25 − 5 + 1.00
40

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 Cutoff Grade Policy – Year 1
Step 2: Balancing Cutoff Grades

Ratio mc, mr, and cr

Quantity of Quantity of Average Grade
Ratio mc Ratio mr Ratio cr
Ore (tonnes) Waste (tonnes) (grams per tonne)
𝒈𝒍
𝒒𝒐(𝒈𝒍) 𝒒𝒘(𝒈𝒍) ഥ
𝒈 mc(𝒈𝒍) 𝒎𝒓(𝒈𝒍) 𝒄𝒓(𝒈𝒍)

0.0 1000 0 0.50 1.00 0.500 0.500

0.1 900 100 0.55 0.90 0.495 0.550
0.2 800 200 0.60 0.80 0.480 0.600
0.3 700 300 0.65 0.70 0.455 0.650
0.4 600 400 0.70 0.60 0.420 0.700
0.5 500 500 0.75 0.50 0.375 0.750
0.6 400 600 0.80 0.40 0.320 0.800
0.7 300 700 0.85 0.30 0.255 0.850
0.8 200 800 0.90 0.20 0.180 0.900
0.9 100 900 0.95 0.10 0.095 0.950

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 Cutoff Grade Policy – Year 1
𝐶 Step 2: Balancing Cutoff Grades
− 𝑚𝑐(𝑔)
𝑔𝑚𝑐 = 𝑀 +𝑔
𝑚𝑐 𝑔ƴ − 𝑚𝑐(𝑔)
𝑔ƴ − 𝑔
𝒈 𝒒
0.50 − 0.60 (grams per tonne) (tonnes) 𝒎𝒄(𝒈)
𝑔𝑚𝑐 = + 0.40 = 0.50 𝑔/𝑡 𝐶 50
0.40 − 0.60 = = 0.50 0.0 100 1.00
𝑀 100
0.60 − 0.40 0.1 100 0.90
0.2 100 0.80
300.00
vm(g) 0.3 100 0.70
vc(g)
0.4 100 0.60
200.00
vc 0.5 100 0.50
100.00 vm 0.6 100 0.40
gmc
0.7 100 0.30
0.00
0.00 0.20 0.40 0.60 0.80 1.00 0.8 100 0.20
g
0.9 100 0.10
-100.00

-200.00

-300.00

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 Cutoff Grade Policy – Year 1
Step 2: Balancing Cutoff Grades
𝑅
− 𝑚𝑟(𝑔)
𝑔𝑚𝑟 = 𝑀 +𝑔
𝑚𝑟 𝑔ƴ − 𝑚𝑟(𝑔)
𝑔ƴ − 𝑔 𝒈 𝒒 𝒎𝒓(𝒈)
𝑅 40 (grams per tonne) (tonnes)
= = 0.40
0.40 − 0.42 𝑀 100 0.0 100 0.500
𝑔𝑚𝑟 = + 0.40 = 0.445 𝑔/𝑡
0.375 − 0.42 0.1 100 0.495
0.5 − 0.4
0.2 100 0.480
300.00
vm(g) 0.3 100 0.455
vr(g)
200.00 0.4 100 0.420
vr
0.5 100 0.375
100.00 gmr
vm 0.6 100 0.320
0.7 100 0.255
0.00
0.00 0.20 0.40 0.60 0.80 1.00 0.8 100 0.180
g
-100.00 0.9 100 0.095

-200.00

-300.00

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 Cutoff Grade Policy – Year 1
𝑅
− 𝑐𝑟(𝑔)
Step 2: Balancing Cutoff Grades
𝑔𝑐𝑟 = 𝐶 +𝑔
𝑐𝑟 𝑔ƴ − 𝑐𝑟(𝑔)
𝑔ƴ − 𝑔
𝒈 𝒒 𝒄𝒓(𝒈)
(grams per tonne) (tonnes)
𝑅 40
0.80 − 0.75 = 50 = 0.80
𝑔𝑐𝑟 = + 0.50 = 0.60 𝑔/𝑡 𝐶
0.0 100 0.50
0.85 − 0.75
0.7 − 0.5 0.1 100 0.55
0.2 100 0.60
0.3 100 0.65
300.00 vc(g)
vr(g) 0.4 100 0.70
250.00
vr 0.5 100 0.75
200.00
0.6 100 0.80
150.00
0.7 100 0.85
vc
100.00
0.8 100 0.90
gcr
50.00 0.9 100 0.95
0.00
0.00 0.20 0.40 0.60 0.80 1.00
-50.00 g

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 Cutoff Grade Policy – Year 1
Step 3-4: 𝐺, 𝑞𝑜, 𝑞𝑤, and 𝑔ҧ

𝐺𝑚𝑐 = 𝑚
෥ 0.10,0.40,0.50 = 0.40
𝑮 𝒒
𝐺𝑚𝑟 = 𝑚
෥ 0.10,0.16,0.445 = 0.16 (grams per tonne) (tonnes)

𝐺𝑐𝑟 = 𝑚
෥ 0.40,0.16,0.60 = 0.40 0.0 – 0.1 100
0.1 – 0.2 100
𝐺=𝑚
෥ 0.40,0.16,0.40 = 𝟎. 𝟒𝟎 𝒈/𝒕
0.2 – 0.3 100

𝑞𝑜 = 600 tonnes 0.3 – 0.4 100

𝑞𝑤 = 400 tonnes 0.4 – 0.5 100
𝑆𝑅 = 400 ÷ 600 = 0.67
0.5 – 0.6 100
0.6 – 0.7 100
0.4 + 0.5 0.5 + 0.6 0.6 + 0.7
× 100 + × 100 + × 100 + 0.7 – 0.8 100
2 2 2
0.7 + 0.8 0.8 + 0.9 0.9 + 1.0
× 100 + × 100 + × 100 0.8 – 0.9 100
𝑔ҧ = 2 2 2 = 0.70 𝑔/𝑡
600
0.9 – 1.0 100

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 Cutoff Grade Policy – Year 1
Step 5-8: 𝑄𝑚𝑡 , 𝑄𝑐𝑡 , 𝑄𝑟𝑡 , 𝐶𝐹𝑡 , 𝑇, and 𝑛𝑒𝑤 𝑉

600
𝑄𝑚1 = 100 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑐1 = 100 = 60 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑟1 = 60 × 0.70 × 1.00 = 42.00 𝑔𝑟𝑎𝑚𝑠
600 + 400

Infeasible: processing and refining capacities violated

400
𝑄𝑐1 = 50 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑚1 = 50 1 + = 83.33 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑟1 = 50 × 0.70 × 1.00 = 35.00 𝑔𝑟𝑎𝑚𝑠
600

𝐶𝐹1 = 25 − 5 35.00 − 2 × 50 − 1 × 83.33 − 300 × 1 = $216.67

600 216.67 1 + 0.15 12 − 1

𝑇= = 12 𝑦𝑒𝑎𝑟𝑠 𝑉= = $1174.60
50 0.15 1 + 0.15 12

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 Cutoff Grade Policy – Year 1

Step 1: Limiting Economic Cutoff Grades

2
𝑔𝑚 = = 0.10 𝑔/𝑡
25 − 5 1.00

300 + 0.15(1174.60)
2+
𝑔𝑐 = 50 = 0.576 𝑔/𝑡
25 − 5 1.00

2
𝑔𝑟 = = 0.247 𝑔/𝑡
300 + 0.15(1174.60)
25 − 5 + 1.00
40

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 Cutoff Grade Policy – Year 1
Step 3-4: 𝐺, 𝑞𝑜, 𝑞𝑤, and 𝑔ҧ

𝐺𝑚𝑐 = 𝑚
෥ 0.10,0.576,0.50 = 0.50
𝑮 𝒒
𝐺𝑚𝑟 = 𝑚
෥ 0.10,0.247,0.445 = 0.247 (grams per tonne) (tonnes)

𝐺𝑐𝑟 = 𝑚
෥ 0.576,0.247,0.60 = 0.576 0.0 – 0.1 100
0.1 – 0.2 100
𝐺=𝑚
෥ 0.50,0.247,0.576 = 𝟎. 𝟓𝟎 𝒈/𝒕
0.2 – 0.3 100

𝑞𝑜 = 500 tonnes 0.3 – 0.4 100

𝑞𝑤 = 500 tonnes 0.4 – 0.5 100
𝑆𝑅 = 500 ÷ 500 = 1.00
0.5 – 0.6 100
0.6 – 0.7 100
0.5 + 0.6 0.6 + 0.7
× 100 + × 100 + 0.7 – 0.8 100
2 2
0.7 + 0.8 0.8 + 0.9 0.9 + 1.0
× 100 + × 100 + × 100 0.8 – 0.9 100
𝑔ҧ = 2 2 2 = 0.75 𝑔/𝑡
500
0.9 – 1.0 100

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 Cutoff Grade Policy – Year 1
Step 5-8: 𝑄𝑚𝑡 , 𝑄𝑐𝑡 , 𝑄𝑟𝑡 , 𝐶𝐹𝑡 , 𝑇, and 𝑛𝑒𝑤 𝑉

500
𝑄𝑚1 = 100 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑐1 = 100 = 50 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑟1 = 50 × 0.75 × 1.00 = 37.50 𝑔𝑟𝑎𝑚𝑠
500 + 500

𝐶𝐹1 = 25 − 5 37.50 − 2 × 50 − 1 × 100.00 − 300 × 1 = $250.00

500 250.00 1 + 0.15 12 − 1

𝑇= = 10 𝑦𝑒𝑎𝑟𝑠 𝑉= = $1254.70
50 0.15 1 + 0.15 12

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 Cutoff Grade Policy – Year 1

Step 1: Limiting Economic Cutoff Grades

2
𝑔𝑚 = = 0.10 𝑔/𝑡
25 − 5 1.00

300 + 0.15(1254.70)
2+
𝑔𝑐 = 50 = 0.588 𝑔/𝑡
25 − 5 1.00

2
𝑔𝑟 = = 0.257 𝑔/𝑡
300 + 0.15(1254.70)
25 − 5 + 1.00
40

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 Cutoff Grade Policy – Year 1
Step 3-4: 𝐺, 𝑞𝑜, 𝑞𝑤, and 𝑔ҧ

𝐺𝑚𝑐 = 𝑚
෥ 0.10,0.588,0.50 = 0.50
𝑮 𝒒
𝐺𝑚𝑟 = 𝑚
෥ 0.10,0.257,0.445 = 0.257 (grams per tonne) (tonnes)

𝐺𝑐𝑟 = 𝑚
෥ 0.588,0.257,0.60 = 0.588 0.0 – 0.1 100
0.1 – 0.2 100
𝐺=𝑚
෥ 0.50,0.257,0.588 = 𝟎. 𝟓𝟎 𝒈/𝒕
0.2 – 0.3 100

𝑞𝑜 = 500 tonnes 0.3 – 0.4 100

𝑞𝑤 = 500 tonnes 0.4 – 0.5 100
𝑆𝑅 = 500 ÷ 500 = 1.00
0.5 – 0.6 100
0.6 – 0.7 100
0.5 + 0.6 0.6 + 0.7
× 100 + × 100 + 0.7 – 0.8 100
2 2
0.7 + 0.8 0.8 + 0.9 0.9 + 1.0
× 100 + × 100 + × 100 0.8 – 0.9 100
𝑔ҧ = 2 2 2 = 0.75 𝑔/𝑡
500
0.9 – 1.0 100

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 Cutoff Grade Policy – Year 1
Step 5-8: 𝑄𝑚𝑡 , 𝑄𝑐𝑡 , 𝑄𝑟𝑡 , 𝐶𝐹𝑡 , 𝑇, and 𝑛𝑒𝑤 𝑉

500
𝑄𝑚1 = 100 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑐1 = 100 = 50 𝑡𝑜𝑛𝑛𝑒; 𝑄𝑟1 = 50 × 0.75 × 1.00 = 37.50 𝑔𝑟𝑎𝑚𝑠
500 + 500

𝐶𝐹1 = 25 − 5 37.50 − 2 × 50 − 1 × 100.00 − 300 × 1 = $250.00

500 250.00 1 + 0.15 12 − 1

𝑇= = 10 𝑦𝑒𝑎𝑟𝑠 𝑉= = $1254.70
50 0.15 1 + 0.15 12

NPV Converged @
𝐺 = 0.50 𝑔/𝑡, 𝑄𝑚1 = 100 𝑡𝑜𝑛𝑛𝑒, 𝑄𝑐1 = 50 𝑡𝑜𝑛𝑛𝑒, 𝑄𝑟1 = 37.50 𝑔𝑟𝑎𝑚𝑠, 𝐶𝐹1 = $250.00

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 Cutoff Grade Policy – Year 1
Step 9: Upgrade Grade Tonnage Curve

Grade Interval Quantity of material Quantity of Ore Quantity of Waste Average Grade
(grams per tonne) (tonnes) (tonnes) (tonnes) (grams per tonne)
𝒈𝒍
𝒒𝒐(𝒈𝒍) 𝒒𝒘(𝒈𝒍) ഥ
𝒈
gl – gu q
0.0 – 0.1 100 – 10 = 90 0.0 900.00 0.00 0.50

0.1 – 0.2 100 – 10 = 90 0.1 810.00 90.00 0.55

0.2 – 0.3 100 – 10 = 90 0.2 720.00 180.00 0.60

0.3 – 0.4 100 – 10 = 90 0.3 630.00 270.00 0.65

0.4 – 0.5 100 – 10 = 90 0.4 540.00 360.00 0.70

0.5 – 0.6 100 – 10 = 90 0.5 450.00 450.00 0.75

0.6 – 0.7 100 – 10 = 90 0.6 360.00 540.00 0.80

0.7 – 0.8 100 – 10 = 90 0.7 270.00 630.00 0.85

0.8 – 0.9 100 – 10 = 90 0.8 180.00 720.00 0.90

0.9 – 1.0 100 – 10 = 90 0.9 90.00 810.00 0.95

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 Lane’s Approach – Cutoff Grade Policy
Optimal Cutoff Grade Policy
Year 𝑮 Qm Qc Qr CF
(grams per tonne) (tonnes) (tonnes) (grams) ($)

1 0.50 100.00 50.00 37.50 250.00

2 0.50 100.00 50.00 37.50 250.00
3 0.50 100.00 50.00 37.50 250.00
4 0.50 100.00 50.00 37.50 250.00
5 0.50 100.00 50.00 37.50 250.00
6 0.50 100.00 50.00 37.50 250.00
7 0.50 100.00 50.00 37.50 250.00
8 0.49 097.20 50.00 37.10 245.60
9 0.46 093.00 50.00 36.60 238.20
10 0.44 088.70 50.00 35.90 229.50
11 0.41 021.00 12.50 08.80 054.70
Total 1000.00 512.50 381.00 2518.00

250.00((1 + 0.15) 7 − 1) 245.60 238.20 229.50 54.70

NPV = + + + + = $1257.80
(0.15)(1 + 0.15) 7 8 9
(1.15) (1.15) (1.15)10
(1.15)11

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 Difference – Breakeven and Optimal Policies

• Higher NPV
• Life of operation
• Dynamic cutoff grade
– Decline in NPV with depleting reserves, higher cutoff grade during early
years and lower cutoff grade during later years
– Stockpile – potential ore
• Increase in life of operation

• What if only processing plant limits the operation??

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 References
• Open pit mine planning and design (2nd Edition) by Hustrulid and Kuchta, Pages
526-555.
• Asad, MWA, Topal, E, (2011). Net present value maximization model for
optimum cutoff grade policy of open pit mining operations, Journal of the South
African Institute of Mining and Metallurgy, 111(11), Pages 741-750.
• Asad, MWA, (2007). Optimum cutoff grade policy for open pit mining operations
through net present value algorithm considering metal price and cost escalation,
Engineering Computations, 24(7), 723-736.
• Dagdelen, K., (1992). Cutoff grade optimization. Proceedings of the 23rd
International Symposium on Application of Computers and Operations Research
in Minerals Industry, 157-165.

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