Incorporating grade uncertainty into open-pit long-term production planning using loss and profit functions

Abstract

Long-term production planning for open-pit mines is recognised as one of the vital decision-making issues in open-pit mining operations. In addition, the ore grade is one of the most significant sources of uncertainty in a mining operation, as it classified run-of-mine material into ore and waste. In the classical approach, the destination of mining blocks is determined by comparing the estimated grade with a pre-determined cut-off grade. However, the uncertainty of material grade dramatically affects production planning. In this paper, a novel model was developed based on the idea of simulating the grade to incorporate the risk of grade uncertainty. In the proposed model, the economic consequences of the assigned destination are calculated using the profit and loss functions and they are integrated with the production scheduling. The proposed production planning was implemented in an iron ore mine, and the results were discussed for classical, loss, and profit models. Results show that the net present value increases by 3.64% by implementing the profit function. In contrast, the loss function method reduces the net present value by 2.23% compared to the classic model. This happens because the amount of ore class is increased by 7.46% using the profit function method and decreased by 2.49% using the loss function method. Additionally, the coefficient of variation, as an index of uncertainty, was investigated. The results show that the loss function approach attempts to extract more reliable blocks in the early years and postpone the high-uncertain blocks to the later years of the production.

Keywords

• mine planning
• profit and loss functions
• grade uncertainty
• open-pit mines