Choice of mine-mill capacities and production schedules using open-ended dynamic programming

"A mine evaluation method based on the use of a computer program that models mining with an open-ended dynamic program is presented in this paper. It is demonstrated with an example how the method is applied, how some of the decision variables are related in the particular industrial environment and how these decision variables affect the economic benefits of mining.IntroductionTwo distinguishing characteristics make mining a particular industrial environment: exhaustible resources of a given ore deposit and heterogeneousness of the ore grade spatial distribution in the ore deposit. These characteristics, inflation, uncertainty and cyclical price variations which greatly affect estimated cash flows also contribute in rendering difficult the evaluation of the economic outcome of mining at the preliminary planning stage.Decision variables and their ranges are associated with the mine plan; basically, they include choices of the mine's nominal capacity (mining and milling), the sequencing of mining through the deposit, the ranges of possible production rates and cutoff grades, and the stockpiling policies. The mine's nominal capacity must be decided at the planning stage, but this capacity choice must take into account flexibility to modify other decision variables as mining commences and uncertainty resolves.Although it is generally accepted in discounted cash flow analysis that the sequence of mining must proceed from the richest to the lowest-grade stopes (with correspondingly ajusted cutoff grades), this may not produce optimum benefits when cyclical price variations are considered.Mining rates and cutoff grades can also be adjusted to changing economic conditions, taking into account the limited resources of the ore deposit. Thus, when prices are thought to be in the trough of a cycle, production can decrease to preserve ore for expected greater future profits. When prices rise, mining rates can increase possibly even over the mine's nominal capacity. In both cases, the machinery's effectiveness shall not be-optimally utilized; this will be reflected particularly by the variations in the concentrator's metal recovery and the concentrate grade output."