Mastering Open Pit Optimization

By now, most people are likely familiar with the concept of mine optimization, particularly when it comes to selecting the optimal final pit contour for open-pit mining operations. For those who believe this process is optional, we recommend taking a closer look at this article. Here, we’ll outline the necessity of this process, the consequences of neglecting it, and share valuable tips and insights available through the K-MINE software suite. We provide tools for skilled engineers, enhance knowledge across multiple areas to improve decision-making, and help make the future more predictable.

Any company striving to increase profits, control cash flows, and secure its long-term success cannot do so without building reliable, long-term financial models. For mining companies, the foundation of such financial forecasting lies in strategic planning—creating a financial assessment of a mining operation’s entire lifecycle. But what forms the basis of this process? Naturally, the extraction of mining material over the course of deposit development. It’s essential to account for as many factors as possible without getting bogged down in unnecessary details. Excessive granularity can hinder the strategic planning process, especially as input data constantly changes. So, what exactly needs to be considered?

1. Initial investment to begin operations. This includes capital expenditures for purchasing (or reactivating) equipment, contractor agreements, dewatering the site, constructing a processing plant, and establishing infrastructure. Essentially, all significant upfront costs required to get operations underway.
2. Operational cost assessment. It’s crucial to strike the right balance here—neither overestimating nor underestimating costs. This is often the most influential factor. Once costs are determined, they should be compared to similar companies operating in the region. Such data is often available in open sources.
3. Depreciation and equipment replacement. For existing equipment and operations where the Life of Mine (LoM) exceeds 15 years, it’s essential to plan for depreciation expenses and potential replacement of high-value equipment during the project’s lifespan.
4. Taxes. Tax rates can vary significantly depending on the country of operation.
5. Other considerations. In certain regions, additional costs should be factored in for risks like theft, security measures, and increased expenses due to harsh operating conditions, among others.

In this article, we will focus primarily on the second point: obtaining the optimal final pit contour—how to identify it from the many possibilities and design it effectively while accounting for as many influencing factors as possible. The outcome of this stage, as part of strategic planning, directly impacts a company’s overall profitability, the deposit’s lifecycle, periodic cash flows, and much more.?

Now let’s dive directly into the optimization process. To start, what is it exactly? For example, let’s say we have a deposit.

The first question before beginning any work is: How profitable is it to develop?

Second: To what depth should it be mined?

Third: What will the production volumes be?

It’s a good sign when there are many such questions because they form the basis for building a mining strategy. Approaches to deposit optimization are specifically designed to determine the total volume of material to be extracted over all production periods. Other considerations will depend largely on the size of the pit.

So, what is optimization? From a software perspective, optimization refers to identifying the ultimate final pit contour based on a set of user-defined criteria. These criteria are determined by the user’s experience and intuition. Generally, the process of finding the ultimate pit involves evaluating each block in a block model to decide whether it will be included in the mined space. To achieve this, various approaches and mathematical algorithms have been developed, but the Lerchs-Grossmann algorithm is the most widely used. This is because it covers the broadest range of possibilities and excludes the fewest factors, delivering the most accurate results.

What does this algorithm provide? It calculates the profitability of each block, which is then linked together through stable resulting angles. The blocks that collectively yield a positive outcome are included in the final result. The most common method for generating a range of options is to use a price adjustment coefficient for the final product.

A simplified demonstration of the Lerchs-Grossmann algorithm in action. In the K-MINE software, within the Pit Optimizer module, an improved Pseudo Flow algorithm is implemented. This algorithm is based on the Lerchs-Grossmann method but has been enhanced and accelerated.

Regarding the frequency of performing mineral deposit optimization, it is recommended to carry out this process at least once a year, with updates and refinements to economic indicators and any other parameters that may have changed. Additionally, if any key participant in the optimization process undergoes significant changes, immediate re-optimization is advised, along with prompt adjustments to mining operations, if the circumstances require it. Failing to do so could result in a significant deterioration of the company’s economic position. This approach ensures you remain informed and prepared for the challenges posed by changing market supply and demand.

In summary, what do we have? Strategic mine planning is the first stage of the planning process. Its primary objective is to determine the optimal strategy for pit development. Based on the company’s goals, the following outcomes should be achieved:

• Maximization of NPV (Net Present Value)
• Maximization of the mine’s lifespan
• Maximization of recoverable reserves
• Minimization of capital investments
• Minimization of the payback period
• Maximization of final product quality
• Minimization of final product costs

Of course, achieving a balance between these parameters is essential.

The main result of strategic planning is a life cycle plan, which can be presented in several variations, such as: Minimal scenario,?Standard production mode, Maximum investment scenario

Without strategic planning, we may face unanswered questions such as:

• What happens if we mine more or less?
• What if the processing plant’s efficiency is increased or decreased?
• What if we stop overburden stripping now and reduce its overall volume?
• What will happen in 7 (N) years if we don’t start working on this area today?
• Where and when is the best place to position the excavator?
• How much overburden is required to extract the necessary amount of ore?
• What grade should be considered the minimum, and which ore with specific quality metrics should be stockpiled for “better times”?
• And much more… Ultimately, what will happen to our profits if…?

By answering all of these and other questions, it becomes possible to select the strategy for the company’s development. Working with an “implicit” plan means risking losses or missing out on opportunities.

We hope we’ve convinced readers that mineral deposit optimization is an essential part of operating successfully in today’s market conditions. Now, we can move on to the more technical aspects of this process. Pit Optimizer module in K-MINE software is designed to guide users through creating an optimization project step by step. Each stage can be verified, and intermediate results can be generated and reviewed.

Let’s now take a closer look at the sequence of tasks in the optimization process.

1. Adding the Block Model to the Project

To start the optimization process, you need a block model and a topographic base, which represents the current positions of the mining operations in the pit that requires optimization. If the pit is not yet developed, the topographic base should represent the site’s surface.

Both the block model and the surface area, presented as a mesh, must extend beyond the deposit boundaries to avoid unnecessarily restricting the optimizer’s capabilities.

As the first step, the block model must be constrained by the topographic mesh. Once this is complete, the block model can be added to the project.

Next, we define the rock types and properties to be used in the project and calculate the block model. This generates detailed information by horizons, grouped by rock types.

2. Adding Geotechnical Parameters to the Project

The goal of the next step is to determine the resulting pit slopes. These can be defined in several ways and can vary across different sections of the pit, significantly improving the accuracy of the results to reflect actual mining conditions.

Users can set these parameters using several methods:

• Azimuth-based (by vectors): Different slopes can be assigned based on specified azimuths.
• Mesh-based (by areas): Different slopes are assigned according to specific meshes. Within these meshes, individual zones can also be defined using the vector method.
• By Block Model properties: Slopes can be set based on block model fields or material class attributes. This is the most commonly used method. Geotechnical specialists can input specific values for particular blocks in the block model, which can then be applied here. Alternatively, different properties can be derived from the block model and assigned corresponding pit slope values.

3. Adding Economic Indicators

One of the most critical stages in creating a project is the economic evaluation of each block, which serves as the foundation for identifying the ultimate pit contour. The first step is to determine the price adjustment coefficients for the final product. It is recommended to use small increments (ranging from 0.1 to 0.01) within a range of 0.1 to 1.2 (10% to 120%). This ensures the resulting dataset is highly informative.

In the final product menu, the following parameters need to be configured:

• The name and price of the final product
• Content (only when measured in grams per ton)
• Processing costs
• Cut-off grade
• Recovery factor for extracting the final product from the raw ore

In cases where processing is not required, these fields can remain unchanged. Additionally, all parameters can be input as fixed values, formulas, or derived directly from the block model, enhancing scenario flexibility and simplifying its setup.

For scenarios where a block contains multiple valuable components, the process can be customized to account for sequential extraction of minerals from the raw ore.

To improve usability, there is an option to set a site excavation cost or completely exclude it from evaluation. This is particularly relevant when accounting for buildings or other structures located within the pit area.

Excavation and transportation costs are configured separately. Transportation costs can also be adjusted by horizons, increasing proportionally with transport distance.

In the calculation parameters, to determine the NPV (Net Present Value) and the deposit’s lifespan, it is necessary to specify the estimated annual production volume and the discount rate. Additionally, there is an option to set the desired marginal profit size for determining the ultimate pit contour.

Once this stage is complete, the calculations can begin, and the results can be reviewed.

4. Analysis and Selection of the Final Pit Contour

After a successful calculation, the results can be viewed in several formats:

Tabular Data

Tabular data can be displayed in multiple modes – Cumulative, Differential, and Incremental. The volume of data makes it easy to evaluate each option, and for more in-depth analysis, the results can be exported to Excel.

Charts

Charts, like tables, can be presented in three modes.

Resulting Meshes

Based on the generated block groups, users can create the required number of meshes, commonly referred to at this stage of planning as Nested Pit Shells.

The volume of data available for analyzing and selecting the ultimate contour is extensive and sufficient for making a decision. The approach taken for selection depends on the specific needs of each company—whether it’s maximizing short-term profit, maximizing extracted reserves, overall NPV, or other priorities.

For a more detailed and in-depth analysis, the following indicators can be used: Profit, Profit Factor, NPV, Margin, Volume of Ores in Processing, LoM, Quality, IRR, DPP, DCF, and many others. Like any other project, this one follows financial rules and analysis.

The next steps are additional to the process of determining the ultimate pit contour and are essential for strategic planning.

5. Pushbacks Creation

For detailed mine planning, specifically to determine the optimal amount of overburden and ore for each period, it is necessary to define pit development phases, known as Pushbacks. To maximize efficiency, these pushbacks are recommended for use in the Scheduling Module. There are two options for creating pushbacks: manual and automatic.

6. Creating the Scheduling Plan

For a preliminary evaluation of material extraction by periods, it is recommended to use scheduling in the Pit Optimizer module. It is structured to create panels based on the final contour shells and the horizons they intersect.

7. Sensitivity Analysis

Sensitivity analysis answers the question of how our income will change when one of the parameters in the optimization project is adjusted. By modifying the range of data fluctuations and observing how profit or NPV behaves, we draw conclusions and influence the outcome.

8. Evaluation of External Contours

To assess how well a given final contour mesh aligns with our optimized result or to compare the outcomes of multiple optimization projects, there is an option to add external contours to the optimization project. This feature is also useful for comparing a designed ultimate contour with the generated Pit Shell.

Additionally, as part of the results, detailed information for each of the added meshes is provided in tabular form for comparison.

Let’s return to the final pit contour. Suppose we have determined that the ultimate pit contour is the one where, in the cumulative data display mode, the NPV stops increasing. We select this contour and create a mesh, known as the Pit Shell. But what comes next? How do we turn this result into a full project that accounts for all communications, stability, and other conditions?

Of course, it is possible to manually draw horizon by horizon—a meticulous task that requires significant time. If changes are needed, the entire design would have to be redone. While effective, this approach is inflexible and impractical. To solve these challenges, K-MINE developed a solution called Dynamic Design which is the essential part of the Open Pit Design module.

The purpose of the Open Pit Design module is to enable the rapid creation of final pit contours, pushback phases, and regular drawings for various time periods. Through automated calculations, the time required is reduced several times over—and this is no exaggeration! Another important aspect of this process is that when a saved project is loaded, it is possible to make necessary adjustments and rebuild the project quickly.

The module is designed to work not only with pits but also with waste dumps. It allows pits to be designed either bottom-up or top-down. The minimum data required to build the project includes geotechnical data—specifically, a list of horizons with zones (if any) and the starting contour for construction. Everything else can be configured directly within the project.

Now, let’s go step by step: how do we turn “this” into “that”?

One of the key advantages of K-MINE is that all modules operate within a single environment, allowing us to use tasks from other modules when working on a comprehensive project. This is exactly what we will demonstrate next…

First, we need to obtain the intersection lines of the mesh with the horizons. We will do this using the Isoline Creation task.

Next, our isolines need to be smoothed for more accurate constructions.

After this, we need to select only the lines that will influence the final contour project. In our case, these are the lines that do not replicate the configuration of the previous horizon. We then refine their appearance to achieve smoothness, enhancing stability in specific areas of the pit.

Next, directly in the Open Pit Design module, we create a list of horizons with stability zones.

We decide how to construct the final pit contour—bottom-up or top-down. It’s important to remember that when building top-down, we won’t be able to capture the entire ore volume, meaning some ore within the ultimate contour will remain in the pit. On the other hand, if we build the pit bottom-up, we can capture the full ore volume, but this will require removing more overburden than suggested by the optimal Pit Shell.

To address these challenges, there are various approaches, but the final choice is left to the discretion of the designer performing the work—we won’t reveal all the tricks here.

Next, we add the base lines to the corresponding horizons and obtain the first result after the calculation.

The next step is to configure the road parameters for the pit and add the starting point, which in our case is located at the bottom of the pit since the construction is being done bottom-up.

A virtually unlimited number of roads can be added, depending on the needs of the specific project. We add turns, stop roads at specific points, widen or narrow them, adapt them to specific conditions, and obtain the result in a matter of seconds.

Once the roads are finalized, we can add the topographic base to the project and calculate the result, accounting for the surface and actual mining operations. The sequence of actions can be adjusted if the roads need to be adapted to the existing haul system in the pit.

The final result is a mesh that integrates the design with actual conditions. Additionally, polylines are created, along with the option to include the intersection line of the two meshes. As an option, the resulting mesh can be used for further constructions, such as waste dumps for overburden.

And finally, let’s summarize… Using the planning and design modules in K-MINE, users can complete all stages of the planning process. In this article, we provided a detailed overview of creating the final pit contour project. As you can see, the entire process is sequential and does not require extraordinary effort or a significant amount of time. Understanding the process increases confidence in the results, while multiple iterations with different data provide insights into potential fluctuations in financial indicators and pit boundaries.

Strategic planning is critically important and essential in today’s market-driven economy. It offers a clear understanding of how to respond to the challenges the future may bring. Being forewarned means being prepared.

Source: https://k-mine.com/articles/mastering-open-pit-optimization/