open pit mining

Fundamentals of Open Pit Planning and SchedulingJ G 0 CRONE1

ABSTRACTOpen pit planning and scheduling play a significant role in establishing,maintaining and improving the economics of open pit mining ventures.

The development of an open pit plan and schedule involvesconsideration of the following elements:

the market for the mineral,the mineral deposit,the treatment process,the external factors,the mining method,the scale of operations,the open pit design,the open pit schedule,the calculation of economic performance, andthe implementation of the open pit plan and schedule.

The above factors are described and discussed. Open pit planning andscheduling is the linkage which enables a mineral deposit amenable toopen pit mining to meet a market requi,rement for the particular mineral.To effect this linkage the open pit planner should have a good detailedappreciation of both the mineral deposit and the market.

Maximisation of the net present value of an open pit project serves asan objective in planning and scheduling. This is achieved by maximisingthe net present value at each stage of the operational life. Maximisationof net present value means that the capital invested in the project is beingused most efficiently. '

Open pit operations take place in a continually changing environment.Consequently open pit planners must take account not only of currentconditions but also conditions that are expected to develop in the future.

The implementation of an open pit plan and schedule requires thatthose responsible for seeing that it is carried out are committed to theplan. In effect they must 'own' the plan.

INTRODUCTIONThe theme of the conference is 'Maintaining and improving theeconomics of open pit mining'. Open pit plarming andscheduling play a significant role in establishing, maintaining andimproving the economics of open pit mining. A concept which isdeveloped in the paper is that open pit piarming and schedulingprovide the link between a mineral deposit amenable to miningby open pit methods, and the market for the particular mineralproduced. It is the role of open pit plarmers and schedulers toensure that this link is effective. An effective link capitalises onthe advantages and strengths of the particular mineral deposit,and seeks to derive maximum benefit from the characteristics ofthe market.

Mining is a commercial activity. A prime measure of successin open pit mining is the profitability of the operation, the marginbetween the value of outputs and the value of inputs. Thereforethe maximisation of profit is an objective to be sought inconducting open pit planning and scheduling. Maximisation ofprofit means that capital is biing used most efficiently.

In mining, the combination of capital and ,operating costoutlays, combined with sales revenue and any revenue from thesale of capital items, can be effectively quantified by presentvalue or discounted cash flow determinations. These measuresare widely used and well understood within the mining industry.

1. Principal Engineer - Mining, Minenco Pty Limited, GPO BoxM958, Perth WA6001.

They provide a method of estimating the success or failure of aprojected operation.

The title of this paper is 'Fundamentals of Open Pit Plarmingand Scheduling'. It should, perhaps, have been 'Fundamentals ofOpen Pit Plarming and Scheduling - 1992' to emphasise the pointthat we are in a continuously changing situation, with today'sfundamental certainties not necessarily being applicable in thefuture. Techniques which have an important application todaymay be irrelevant tomorrow. The relationships between thecommunity at large and'the mining industry are changing. Newdemands are being made on open pit mining projects by thecommunities within which operations are conducted.

Open pit planning and scheduling can be subdivided into twocategories, which reflect different stages in the life an open pitoperation. Firstly there is open pit plarming which is carried outat the feasibility study stage of a mineral project. This type ofplarming and scheduling is intimately associated with the basicconcepts of the project and the scale of the operation, andconsequently plays a major role in determining project viability.Secondly there is the open pit plarming and scheduling which iscarried out on an existing operation. Although ~s type ofpiarming and scheduling may offer scope for major change andinnovation, for example when a large expansion is contemplated,it is usually fairly well constriUned by existing practices andinstallations. It often involves revision of an existing open pitplan and schedule. Such a revision may be made necessary bychanging circumstances, for example, changes in product prices,operating costs, orebody interpretation, product demand, ormining methods. Although these two categories of open pitplarming and scheduling may have different emphases, the basicsare similar.

The development of an open pit plan and schedule involvesconsideration of a number of inter-related elements. These,which are listed below in the order in which they might normallybe addressed, will be described and discussed. The relationshipbetween the main elements is depicted in Figure 1.

The market for the "mineral,the mineral deposit,the treatment process,the external factors,the mining method,the scale of operations,the open pit design,the open pit schedule,the calculation of economic performance, andthe implementation of the open pit plan and schedule.

A characteristic of open pit piarming and scheduling arisingfrom the inter-related nature of the above elements, is that it is aniterative process with potential improvements from each iteration.Computers enable the large quantity of data required for suchiterations to be handled expeditiously and effectively.

THE MARKETThe market or outlet for the mineral product is of fundamentalimportance, for it provides a motivating force for the operation ofan open pit venture. This is a fact which engineers, conunonlypre-occupied with technical standards, tend to overlook. Unlessthe output of a projected open pit operation can be sold over a

Third Large Open Pit Mining Conference Mackay, 30 August - 3 September 1992 261

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EXTERNALFACTORS

PIT PLANNINGSCHEDULING

IMANAGEMENT ITREATMENT

THE MINERALDEPOSIT

FINANCIAL

FIG 1 - Open pit planning and scheduling - the role in a feasibility study.

long-term at a satisfactory price, or unless there is a goodassurance that this' will happen, there is no justification inproceeding with the project no matter how good the orebody, andno matter how efficient the planned open pit operation might be.So before commencing open pit planning it is necessary to surveythe market into which the mineral is to be sold.

Different minerals have different types of market. Certainminerals, notably base metals, are sold with reference to a freeand open market eg The London Metal Exchange - with theintrinsic fluctuations and uncertainties that it implies. Otherminerals, such as coal and iron ore, are priced according to longterm contracts between the buyer and the seller. Certain otherminerals, for example diamonds, are priced on the basis ofproducer price setting; in other cases such as certain industrialminerals it is the consumer who largely sets the price. Somemarkets offer the opportunity for forward selling, enablingproducers to lock in forward production at an assured price.

For the open pit planner it is beneficial to know not only themethod and mechanism by which minerals are sold, but also toappreciate:

the minimum quality which the market will accept;the bonuses and penalties which apply for changes in gradeor quality;the merits and demerits of minor constituents in the ore;the projected market behaviour, e g does the market appearto be contracting or expanding by virtue of consumerpreferences, technological changes or environmentalpressures?;the cost levels of competing producers, and hence where anew operation will rank in the ordered cost schedule listingof world producers;the reserves of competing orebodies;the historical pattern of pricing for the particular mineral;andopportunities for marginal sales, at a price below theaverage price, but at a level which yields a satisfactorymarginal profit.

Appreciation of the market gives the open pit planner a settingwithin which the mine will operate, an understanding ofopportunities worth grasping, and difficulties to be avoided.

262 Mackay, 30 August - 3 September 1992 Third Large Open Pit Mining Conference

A noteworthy market trend is the reduction in real terms pricesfor many metals and minerals as reported by Etheridge (1978).This reduction has occurred despite the added costs associatedwith increasing governmental regulation, includingenvironmental requirements, and the increasing cost ofdiscovering and developing new deposits. It might be concludedthat the development and application of new technology coupledwith effective management has brought this about. Freeenterprise proponents would claim that it is the result ofcompetition. If this trend continues it will present new challengesto open pit planners and operators.

THE MINERAL DEPOSITHaving formed an appreciation of the market situation the nextstep in the open pit planning process is to get to know the mineraldeposit. The mineral deposit, or orebody, is of importancebecause it is the source of product which is sold; it is the sourceof the wealth which the mine generates or hopes to generate; it isthe prime asset which is extracted to meet the marketrequirement.

For several reasons it is vital to know and understand theorebody as fully as possible:

to gain a confident appreciation of the project overview;to be able to conceive options in the extraction method andthe extraction sequence;to increase the confidence of estimates of project costs andproject viability; andto be able to react effectively to unexpected developmentsin orebody data or interpretation.

Data about the orebody which must be known includes:the orebody shape, size and structure;the nature of the ore mineral, and the nature and mode ofassociation of the gangue minerals;the distribution of the ore grades throughout the orebody,and the distribution of any minor constituents of interest;graphs of orebody grade characteristics such as head gradevs cut-off grade, or grade vs frequency; ,the densities of the different ore and waste rocks;the hydrogeological characteristics of the orebody and thesurrounding rocks: water table levels, permeabilities,transmissivities; andthe physical properties of the ores and rocks to be mined,and the distribution of these physical properties throughoutthe orebody.

Frequently, exploration geologists stop a drill hole when itpasses out of mineralisation. This practice causes problems foropen pit planners who need data relating to low grade and wasterock surrounding the ore zone.

It is the physical properties of ore and waste rocks whichlargely dictate the mining method. Physical properties to beassessed include intrinsic strength (normally unconfmecIcompressive strength), abrasiveness, and the nature, spacing andorientation of fractures or other discontinuities. Specialistgeotechnical advice is necessary in this field, a field which alsocovers the important matters of pit slope design and slopestability.

It should be noted that the above data can never be knownexactly - it must always be estimated from sample measurementstaken from within the orebody and surrounds. It is important torecognise the statistical nature of estimates made from samplemeasurements.

THE TREATMENT PROCESSMining is influenced by any treatment process. If a concentrationprocess is used, it is necessary to know the recovery of the

FUNDAMENTALS OF OPEN PIT PLANNING AND SCHEDULING

process, the grade of concentrate produced and the cost of theprocess. This information is required for revenue and Costcalculations. It may also influence cut-off grade calculations.

It is also necessary to know whether there are any. deleteriousimpurities or physical characteristics which need to be blendedout in the mining operation to improve the efficiency of thetreatment process. The blending out of impurities will constrainmining.

It must be established whether the ore suffers any physical orchemical degradation through time. If, for example, oxidation isa problem which inhibits metallurgical performance, there will beimplicati~ns for mining.

It may be that mining gives a pattern of material presentationwhich is undesirable metallurgically but which is dictated by theorebody shape. Under such conditions the consequences of suboptimal metallurgical performance cannot be corrected by miningse'l.uence, and must be endured.

THE EXTERNAL FACTORSBefore addressing mining method selection, and detailed open pitdesign, it is necessary to consider the external factors:

legal and statutory requirements;political constraints;community relations;industrial practices;environmental standards;meteorological conditions; andcapital availability.

These factors will place limitations on what can be done withthe open pit design and schedule.

Legal and statutory requirements need to be identified andworked through. Specialised legal advice is valuable in this task.Reference to similar open pit projects within the same region, orstate, is useful.

Political constraints depend on what the particular party inpower believes is politically acceptable, and to what extent theparty believes it can gain favour from special interest groups bylegislating to benefit such groups. It should be remembered thatthe life of most mining operations far outlasts the term of powerof a particular political party. Political risk is related to thecountry or state in which the deposit is located. Australia is notimmune from political risk as evidenced by the recent CoronationHill decision.

Community relations is an area which can be demanding, andif neglected may cause prickly relationships. There is nosubstitute for good, persistl

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practices. When a new operation is set up remote from anestablished industrial area there is an opportunity to establish anew industrial culture, adopting practices which better suit theplanned mining operation. The Argyle diamond open pitsuccessfully followed this path in the mid-1980s.

Today, environmental standards need to be addressed at theoutset of a new operation. By taking account of these mattersearly, and by incorPorating them into the planning, the effect isless traumatic than if they were added in at 'a later stage. Theneed for the mining I industry to be proactive rather than reactiveis often advpcated, and should be followed.

Mereorological conditions influence planning. Adverseweather condi~ons can stop operations, leading to a reduction inprojected annual operating days. Heavy rainfall require that openpit design allow for drainage. Alti~ude, ambient temperature andmoisture levels in the atmosphere have an effect on equipmentoperation, requiring that equipment specification take account ofsuch influences.

Capital availability cannot be taken for granted, particularly ifthe requirement is large. Put simply, if there is no capitalavailable, there is no open cut mine. Capital availability maylimit the total capital expenditure with consequent influence onthe scale of operation.

THE MINING METHODBefore the open pit design and schedule can be addressed indetail it is necessary to decide upon the mining method.

The primary determinants ofmining method are:The nature ofthe orebody and the associated waste rockThe physical 'I1roperties of these materials must beassessed, and this information, together with the shape andstructure of the orebody, used to select mining methods. Inthe past, mining engineers have used qualitativejudgements in mining method selection. Todayquantitative aSSessments of the materials to be excavatedmust be made. Commonly rock hardness or compressivestrength, tensile >strength, abrasiveness, degree of fracturingor RQD, cohesiveness, drillability, and behaviour whenblasted need to be assessed, and used in mining methodselection.The scale ofoperationsScale of operations influences the size of equipment, andhence the number of units required. Commonly a balanceneeds to be struck between large fleets which affordflexibility and small fleets which yield maximum benefitfrom scale econqmies.The needfor sele.ctive miningIf selective minirJ.g is practised a decision must be made onthe size of the mining block - the ore unit on which anaccept/reject dec~sion can be made.The acceptable levels ofdilution and ore lossThese factors neted to be estimated for different miningtechniques.The unit value ofthe ore in the groundIf the deposit is marginal, mining cost is important: if thegrade is high, good mining recovery is important.

Drilling and blastin& is a significant cost in open cut mining,and if there is any method of obviating this operation, then suchmethod deserves careful examination.

Characteristically the mmmg industry is extremelyconservative in mining method selection. There is good reasonfor such an attitude: the consequences of failure, or even suboptimal performance, are severe; if the mine doesn't operate, orworks at low efficiency, the result may be financial loss.Assurance that the mining method will work, and will work

effectively in the first year of production, is vital. Taylor (1991)tabulates the effects of a bad start to a new mine.

Despite this tendency to be conservative there are a number ofnew technologies and technological developments which arebeing applied as open pit operators strive for lower costs, forgreater efficiency, for an improved environment, and for greatersafety. These include:

increasing equipment size to achieve economies of scale;replacement of truck haulage, with conveyortransportation, preceded where necessary, by a crusher,either mobile or relocatable;replacement of rope shovels with hydraulic excavators infront shovel or backhoe mode;use of continuous mining machines with the application ofsuch units in increasingly hard rocks;use of hydraulic hanuners to directly quarry rock;use of remote control of mining equipment to remove theoperator from potential danger from rockfalls (this trend iscurrently limited in open-cut mines, being more prevalentin underground operations); andgeotechnical input to slope design, achieving steeper pitslopes, reduced stripping and improved safety.

It should be remembered that once fixed installations havebeen established and heavy equipment purchased, it is extremelyhard to economically justify changes in those areas.

THE SCALE OF OPERATIONSScale of operation is an important question in open pit planningand scheduling. Often the scale of operation cannot be finallydecided until late in a feasibility study. The level of output whichmaximises the DCF rate of return may be used as a guide to thescale of operations.

The level of output which the market can accept, or the level ofoutput which the orebody can sustain, may be the maindeterminant of the scale of operation. If there is no possibility ofdisposing of. more than a certain quantity of mineral per year,then an upper limit to the scale of operation is established.Likewise if the size of the orebody is such that physically it willnot sustain more than a certain level of output, then this will setan upper limit to extraction rate.

Increased levels of output commonly bring benefits througheconomies of scale. Frequently the primary rationale ofexpansions is to achieve economies of scale.

Because of the high fixed charges inherent in the use of largeequipment and installations which are required to achieveeconomies of scale, when production is cut back, total costs fallat a slower rate than revenue. This is a fundamental andunpalatable fact to be borne in mind when considering scale ofoperations.

The past three decades have seen an increase in the generalscale of open pit mines. The large open pit of the 1960s hasbecome the medium sized or even small pit of today. Severalfactors have led to this situation including:

pressure for unit cost reduction;pressure for profit improvement;increased levels of product demand;higher interest rates, which favour shortened project life toenhance rate of return;the increased size and geographical extent of markets;the depletion of higher grade orebodies, leading to theworking of lower grade deposits often at a higher rate so asto maintain product output;the mining of high grade and associated low grade ore, indeposits which in the past were exploited by underground

264 Mackay. 30 August -.3 September 1992 Third Large Open Pit Mining Conference

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methods for the high grade ore only. eg the Kalgoorliesuper pit; ,the increased size of deposits available for development;andthe increased amount of information sought and used insetting up mineral projects.

Regarding the lattermost factor, it is as if the rule of thumbdecisions of yesterday are being replaced by reasoned technicalexpertise based on extensive amounts of carefully collected andanalysed data. The added attention to detail aims to reduce therisks associated with a new open pit mining venture byendeavouring to minimise uncertainties. This increase in theknowledge and information applied to mineral projectsdisadvantages small operations. There are economies of scale incollecting, handling and analysing the data required to set upopen pit mining operations. Small operations simply do not havethe potential revenue to justify this level of information input,without which the chances of failure or sub optimal performancegreatly increase. Very high grade deposits will always have abasic attractiveness, for the potential profit margin can absorbcertain inefficiencies.

THE OPEN PIT DESIGNFactors to be taken into account in an open pit design include:

The geology ofthe depositGeological data provides the three dimensional outlines ofthe ore which is to be recovered, together with the physicaland chemical properties of the ore and enclosing wasterock.TopographyThe open pit designer must work within the topography ofthe mine area.Access to the open-pit and continuing access to miningareas throughout the mine life.Low grade and waste dump sites.The location of the crusher, or ore delivery point, and othernecessary fixed installations.The subdivision of the deposit into separate, perhapsindependent, mining areas, if required.The design ofpit slopesAt the feasibility study stage pit slope angles are based onpreliminary data. With additional geotechnical work, orwhen experience with practical slopes in the open pitoperation has been obtained, slopes can be designed withgreater certainty.Pit design parametersItems to be specified include:

road width,road gradient,maximum road curvature,minimum operating bench width,bench interval, andsafety berm detail.

A common approach to open pit design is to draw up anultimate pit. This can be done manually or with computerassistance, the objective being to remove all ore, with marginalstripping ratio checks in areas where the waste to ore ratioappears dubious or unacceptable.

Computer programs which assist with this approach arecommonly based on the Lerchs-Grossmarm optimisationprogram.

From the raw Lerchs-Grossmarm output, or the manuallydetermined ultimate pit, a more detailed practical pit design canbe developed, incorporating road ,systems, dumps, crusher

location, power and water services and so on. The quantities ofdifferent ore types and waste rock which lie within this ultimatepit can then be measured.

The design stage may require the assessment of alternativeproposals, for example whether all or part of a truck haulageroute can be replaced by conveyor transportation. Conveyorsoffer significant economies compared with trucks where there isapredominant uphill component in the ore transport path; wherethe path is level the advantage is less marked, and trucks may befavoured on the grounds of flexibility. The use of mobile andrelocatable crushers feeding onto conveyor systems is moreenergy and manpower efficient than truck haulage albeit at theexpense of greater initial capital and some loss of flexibility.

THE OPEN PIT SCHEDULEWith an ultimate pit defined, open pit plarming and schedulingconsists of deciding on how to proceed from the unminedorebody to the ultimate pit. The technique in doing this dependson the type of deposit. For example with a base metal or preciousmetal deposit, intermediate Lerchs-Grossmarm pits can bedetermined by depressing the product price or lifting the costlevels. The resulting intermediate pits can then be used as aguide to the design of staged pits in proceeding to the ultimatepit. For a 'bulk' mineral such as iron ore, coal or bauxite, whereachievement of a constant quality of output is important, adifferent approach is more appropriate. This is to subdivide theorebody into a number of areas, each area being topographically,geologically or structurally distinct or distinguishable by virtue ofdifferent physical and chemical characteristics. Scheduling thenconsists of combining ore from the different areas to achieve thedesired physical and chemical composition of the blend. Thismust frequently be achieved within certain constraints such astotal mining capability, equipment available, and mining rate perarea.

Whichever technique is adopted, open pit piarming andscheduling is essentially a design problem. Just as it is necessaryto revise and re-work a design to arrive at an optimum oracceptable ultimate result, so open pit design and schedulingbenefits from applying an iterative approach.

When the open pit design and schedule has been completed (toa broadly satisfactory preliminary phase) the viability of theproject can be projected. At this stage a critical examination mayyield areas where changes can bring about worthwhileimprovements. Typical questions to be asked are 'Is there anyway of taking more cheaply mined, or more profitable ore,earlier?' and 'Can any expenditures be deferred without undueprejudice? '

For deposits which are dependent on a cut-off grade, cut-offgrade optimisation can be examined as means of potentiallyenhancing the profitability of the operation. This techniquedeveloped by Lane (1988), aims to optimise the profitability of a'mining operation by successively maximising the net presentvalue of the operation at each stage. A case study application ofthis approach has been reported by Crone and Hunter (1992).

Table 1 shows the optimisation of a fictitious iron ore deposit.Here the question addressed is 'At what point does thetonnage-grade characteristic of the deposit match with theprice-grade characteristic of the market to yield an optimumresult?' There are two answers which might be given. Firstlythere is the grade which yields the maximum immediate [armual]profit, ie the largest difference between the (gross) revenue andthe total costs. From the column headed 'Net Revenue' this isseen to occur at 59 per cent Fe cut-off grade to yield an armualfigure of $136 million. The constant cut-off grade whichmaximises the present value of the operation is seen to be 57 percent, the increased life (four years) brought about by this lowerfigure offsetting the reduced armual profit ($131.7 million vs

Third Large Open Pit Mining Conference Mackay. 30 August 3 September 1992 265

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TABLE 1Open pit project optimisation matching an iron ore mineral deposit and market.

DEPOSIT CHARACTERISTICS OPTlMISATlON CALCULATIONS

Cut-off Ore Ore Discard Unit Revenue Mining Mining Down- Tot~1 Net Ufe PVGrade Quantity Grade (Waste Price Rate Costs stream Costs Revenue (@1%/mo)

+ LG.) Costs(%Fe) (Mt) (%Fe) (Mt) ($/t) ($M/a) (Mt/a) ($M/a) ($M/a) ($M/a) ($M/a) (Years) ($M)

52 550 59.5 110 22.30 446 24.0 36.0 300.0 336.0 110.0 27.5 82.3

54 500 60.2 160 23.00 460 26.4 39.6 300.0 339.6 120.4 25.0 152.6

56 440 60.9 220 23.70 474 30.0 45.0 300.0 345.0 129.0 22.0 197.3

57 410 61.2 250 24.00 480 32.2 48.3 300.0 348.3 131.7 20.5 202.6

58 370 61.6 290 24.40 488 35.7 53.5 300.0 353.5 134.5 18.5 197.8

59 330 62.0 330 24.80' 496 40.0 60.0 300.0 360.0 136.0 16.5 175.3

60 280 62.4 380 24.96 499.2 47.1 70.7 300.0 370.7 128.5 14.0 69.6

61 230 62.9 430 - - - - - - - - -

DATA AND PARAMETERSPRODUCTION RATEORE PRICE

MINING COSTDOWNSTREAM COSTPROJECT CAPITAL COST -DISCOUNT RATE

20 million tonnes of ore product per annum.$0.40 per metric tonne unit at, and above 62.0%Fe$1.00 per metric tonne unit penalty below 62.0%Fe$1.50 per tonne$15 per tonne (covers, crushing and screening, railage, port operations, marketing, administration, overheads)$800 Million12% p.a. (1% per month)

$136 million). A further stage of grade optimisation could beapplied to enhance the final present value by progressivelymaximising the present value through time. Table 2 shows such aprocedure and indicates that the life of the operation is slightlylengthened and the net present value raised by some five per cent.Such a course may not appeal to an iron ore buyer who looks forconstant quality product.

THE CALCULATION OF ECONOMICPERFORMANCE

As already intimated, discounted cash flow rate of return, or thepresent value calculated at a nominated discount rate, is used as acriterion of success in determining the economics of a mineralventure. Another measure used is the payback period, the timewhich elapses from the start of operations until the initial capitaloutlay is recouped.

There will inevitably be some debate as to whether any of thesemeasures truly reflect the value of the investment. One problemwith present value or discounting techniques is that revenues inthe distant future are given little value. With discount ratesaround ten per cent pa what happens in the first five years has amajor influence on profitability. What happens beyond 20 yearshas only a very minor effect on present value or discounted rateof return. Thus there is merit in looking at fmancial performancefrom several points of view including looking at totallyundiscounted cash flow projections. A deposit such as RoxbyDowns would require an undiscounted assessment to show oneaspect of its value - its potential long life.

Sensitivity calculations reveal the vulnerability or robustness ofan open pit project to changes in capital and operating costs, andto product prices. The results of such sensitivity calculationsreveal the level of financial risk associated with the project.

Sensitivity calculations can also examine the exposure to otherfactors such as metallurgical recovery, head grade, equipmentlevels, and production rates.

THE IMPLEMENTATION OF THE OPEN PITPLAN AND SCHEDULE

An open pit plan and schedule must be understood and acceptedby those responsible for seeing that it is carried out, that is bysenior management. If senior management does not understandthe plan, and is not committed to seeing that it is carried out, thenthe plan will be of little value for it will not be respected andfollowed. Clearly the principle to be adopted is to involve in thedevelopment and formulation of the plan those responsible forseeing that the plan is accepted and carried out. This may beachieved by keeping them informed of progressive results in theplan development, and by involving them in drawing up theplanning scope and the.pian parameters.

One of the frequent problems which beset open pit plarmers isthe gap between the plarmers and those who carry out the plan -the operators, or doers. In part this gap is a consequence of thedifferent psychological make up of those who plan from thosewho operate. There is no royal road to solving this dilemma. Asolution is to make those responsible for the actual operationresponsible for plarming the operation as well. Good, effectivecommunication helps to smooth the differences between plarmersand operators.

One of the processes which should be followed in any plarmingwork is to check actual operations with the plan and to analyseany differences. Was the plan at fault? Was the plan notfollowed, and if so why? Was the plan achievable? Often theparameters and assumptions on which the plan was drawn upchange, and such changes are given as reasons for divergencefrom the plan. It is nevertheless worthwhile to compare therealisation with the plan, making adjustments for changes, foreither the plan must be modified, or the operation must adapt togo back on plan.

Open pit plarming and scheduling must be dynamic, adaptingto changing parameters, costs, prices, statutory requirements,



TABLE 2Open pit optimisation - stage 2

maximising the net present value.

CUTOFF GRADE (%FE) 52 54 56 57 58 59 PROGRESSIVEMONTHS OF OPERATION TIME TO COMPLETE EACH

PER INCREMENT 15.0 13.6 12.0 11.1 10.1 90 INCREMENT (MONTHS)PV PER INCREMENT $Ml 1271 127.3 121.0 115.6 107.0 97.1

Increment Number 22 127.1 127.3 X 253.6

21 238.5 X 239.9

20 338.5 X 226.3

19 420.3 X 2126

18 494.2 X 4939 199.0

17 558.8 559.6 X 185.4

16 617.6 X 173.4

15 6691 X 161.4

14 7148 X 149.4

13 755.3 X 755.1 137.4

12 791.3 791.4 X 125.4

11 823.7 X 1142

10 852.6 X 1030

9 878.4 X 8762 91.8

8 901.5 III 901 5(4) X 80.67 922.5 X 70.6

6 941.4 X 60.5

5 958.6 X 504

4 9741 X 403

3 988.1 X 302

2 10008 X 202

1 10122 X 1012.1 101

NET PRESENT VALUE (ALLOWING FOR $800M PROJECT CAPITAL) 212.2

~fz~Atn:t~~~W~NtS3~~/t?kMERIAL (ORE PLUS DISCARD}geotechnical developments and industrial developments.Resulting from these changes the ultimate pit may expand orcontract. If a final cutback has been put in place it may not bepossible to marginally expand the ultimate pit, although there isno hindrance to contraction. The sequence of mining is unlikelyto change other than marginally.

CONCLUSIONS1. Open pit planning and scheduling provide the linkage

between the potential value of a mineral depositamendable to open cut mining and the marketrequirement for the particular mineral. This linkageexerts a significant influence on the economics of theopen pit, and means that the planner should not only havea full appreciation of the characteristics of the mineraldeposit, but also an understanding of the elements of theparticular mineral market.

2 Discounted cash flow rate of return or net present value ata nominated interest rate are used as measures of successin assessing economic performance. Maximisation ofeither of these measures means that capital is being usedmost efficiently. Maximisation of net present value canbe achieved by successively maximising the net presentvalue at each stage of an open pit operation.

3. Open pit planning and scheduling takes place in acontinually changing environment, requiring thatplanning must take cognisance not only of conditionstoday, but also as they are projected to be in the future.The trend towards greater concern for the environment isunlikely to lessen, implying that new open pit operationstoday must anticipate and make provision for the morestringent standards of tomorrow. The observed reductionin the real price of many minerals, if ongoing, means thatopen-pit mines must be set up not only for profitable

operation today, but to have the ability to maintainprofitability in the future.

4. An open pit plan and schedule needs to be effectivelycommunicated to those responsible for carrying it out, sothat they understand the reasoning behind the plan andbecome committed to it. The best way of gainingcommitment to an open pit plan is to involve in theformulation of the plan those responsible for carrying itout. This involvement may be limited to contributions indeciding parameters or plan scope, but the greater theinvolvement the greater will be the commitment.Ultimately it is the responsibility of senior managementto see that the plan is carried out, so it is important forthat group to own' the plan.

ACKNOWLEDGEMENTSThe author acknowledges with gratitude the permission of themanagement of Minenco Pty Limited to publish the paper. Theassistance of colleagues in the preparation of the paper is alsogratefully acknowledged.

REFERENCESCrone, J G D and Hunter, M McC, In press. Mine profit enhancement

through cut-off grade management, Proceedings, (The AustralasianInstitute of Mining and Metallurgy: Melbourne).

Etheridge, W S, 1978. Aspects of real metal prices, Transactions of theInstitution o/Mining and Metallurgy, 87, AI72-181.

Lane, K F, 1988. The Economic Definition of Ore, pp 149, (MiningJournal Books Ltd: London).

Taylor, H K, 1991. Ore reserves - the mining aspects, Transactions of theInstitution of Mining and Metallurgy (Sect A Mineral Industry)AIOO,146-158.

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SESSION 7.2

Blasting 11 (Coal)

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