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BEYOND OPEN PIT OPTIMIZATION PLANNING, SCHEDULING AND

SENSITIVITY ANALYSIS

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Golden, Colorado

For presentation at the SME Annual Meeting

Reno, Nevada - February 15-18, 1993

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 1

Abstract In this paper, a commercial open-pit optimization

Traditionally, open pit optimization has been used to
produce a single outline which can guide the pit
design. This paper describes how a series of optimum
nested pits are utilized to:
a. produce different mining sequences and to help in
mine planning and phase design;
b. evaluate different metallurgical processes,
production scenarios and equipment size;
c. investigate the sensitivity of a project to prices,
recoveries. production rates, costs, ultimate pit
slopes etc.
package was used (Whittle J., 1988) on several gold
mining projects and some of the results will be
presented here.
Characteristics and
Capabilities of the Software
The most important characteristics of this package are:
(a) It uses the "pit parameterization" concept
(Francois-Bongarcon, D., 1981) in a simplified
form. The economic parameters that determine
the outline of an optimal pit were combined and
scaled in such a way that were essentially reduced
to two:

Introduction (i) The ratio of processing cost / mining cost

The optimal ultimate pit outline for a given ore body
is defined as the one with the highest Net Present
Value (NPV) at a given discount rate. Commodity
prices. various costs such as mining, processing.
refining and administration, metallurgical recoveries
and ultimate pit slopes are the factors that affect the
optimal outline. The most commonly used method
that attempts to find the ultimate pit outline is the
floating cone method. which although easy to
understand, does not give the optimal. ~.fgre tb.a..~ a
dozen algorithms based on Dynamic Programming
(l..erchs, H. and Grossmann, I.F. 1965). Graph Theory
and Network Flow (Johnson, T.B.. 1968) have
appeared in the literature in the past 25 years. They
all guarantee to find the optimum outline. some faster
than others, but they all share the drawback that they
are difficult to understand and implement.
Every technique has in common the input of a three
dimensional computer economic model produced from
interpolation. Every block in the model contains
tonnage and grade or equivalently the commodity
content. The economic model requires the assumption
of a fIxed set of physical and economic parameters,
(cut-off grade, costs, commodity prices, recoveries,
mining and processing throughput, required pit slopes).
All these parameters have a dynamic nature. If any of
these factors change, then the particular optimal
solution may become obsolete.
which is assumed to be relatively stable with
time and changes at the same rate of inflation
and,
(ii) The ratio of mining cost / price of the
commodity.
This way, a lot more combinations of factors can
be examined more quickly.
(b) ~4..1argeset of nested pits as shov..n in Figure 1 can
be generated easily, where each pit is optimal for
a different commodity price (assuming mining cost
is constant). This set constitutes an excellent data
base that triggers many possibilities of analysis
beyond just the determination of a pit outline.
(c) The idea of reblocking the original block model
greatly reduces the computer run time while it still
keeps a reasonable accuracy. This option is useful
for quick evaluation of alternatives and for
sensitivity analysis of several factors as it will be
seen later.

During the planning process in an open pit mine, a set

of three to four open pit optimization runs are usually
performed for different commodity prices, keeping all
other inputs constant. Then, the mine phases are
designed by the planning engineer, based on the
outlines of the ultimate pits.

To investigate the sensitivity of the economic

parameters, a range of values should be used rather
than adopting one ultimate pit obtained with the best-
guessed values of economic parameters.
Figure 1. A series of optimal nested pits.
 2
(d) After all optimization runs are performed, the
results can be processed by another program which
can analyze different economic and production
scenarios requested by the user. This is done by
selecting the nearest optimal pit and printing out
mining schedules with tonnages, grades and cash-
flow figures. By utilizing all the nested pit shells,
the program produces three mining simulations:
The worst case sequence consists of mining
each bench completely before starting the next.
This sequence is feasible and gives the lower
bound on the NPV.
The best case sequence consists of mining the
inner-most pit shell first, then mining out each
subsequent pit shell from the top down before
starting the next. This sequence, although it is
not feasible, sets an upper bound to the NPV.
The selected case sequence allows the user to
specify the phases. It mimics very closely the
cash-flow which would be achieved in practical
mining.
Figure 2 which was obtained from project A displays
for every pit the total cash flow and the discounted
cash flows of the worst, selected and best cases with
7% discount rate. In general, if worst and best case
NPV differ by only 2% to 3%, then for that pit, mining
sequence is not importallt.
Figure 3, which is taken from project B is similar to
Figure 2, however on the X-axis "pit number" is
replaced by "total tons". It is clear that although a
certain pit is the optimum, there are several adjacent
pits that are near optimum if a good mining sequence
is selected. It is up to the management to decide on
a shorter or a longer project. It should be noted that
capital expenditures are not included at this point. If
~.-----------------------------~
~+---------------------~~~~~
l00~--------------~~~~~
~ 100+-----------------~~~~~~
~I1~r-----------~----~~
~ i 1~+-------------_,~----------~~
~ l00It-----------~~--------------~
oo+-------~~~----------------~
~o 2 4 8 8 101214 18 18 ~ 22 24 28 28 30 32
PIT ...
Figure 2. Cash Flow vs. Pit numbers; Project A
Not sensitive to mining Phases.
they are, the shape of the curve (particularly to the
right of the optimum) could change (drop)
dramatically.
Figure 3 indicates that this project is extremely
sensitive to mining phasing since the best and the
worst case curves diverge significantly from each other.
A selection of many narrow phases will result in a
NPV closer to the best case and a selection of large
wide phases will give a NPV closer to the worst case.
The difference in the NPV for the $350joz. scenario
can easily be as much as $50 million. On the other
hand, Figure 2 shows that the other project is less
sensitive to the phasing.
Figure 4 shows for project B the relationship of total
ore, waste and therefore the stripping ratio. It shows
that pits #20 and #22 are very close to the optimum
#21. This shows that minor changes due to design
smoothness will not significantly affect the NPV.
However, we should be careful when approaching Pit
#23 because there is a 'Jump" in the stripping ratio
curve.
In general, when the cut-off grade changes, the optimal
pit outline is affected. Figure 5 displays a typical cut-
off grade tonnage relationship. Each point on the
graph represents an optimum pit that was produced
under a different cut-off grade assumption. Some
portions of the curve are steeper than others which
indicates talJat smaller changes in the cut-off grade will
result in large differences in the tonnage.
By inputting different annual production rates or
equipment sizes to the program that analyzes
production scenarios, the optimums can be found. For
example, it can be seen from Figure 6 for project B, a
total of 45 million tons per year is the best production
rate, or where the selected discounted cash flow curve
flattens out.
TOTAL CASH FLOWS PIT #21 OPTIMUM
IIOUl ~.:I&U TOIISIYII. no RATE
~r----------------'~rt~21----------~
E 4OOr~~~===:::=:=:=!~1
~I~~~~-----------~
BI ~+-____________~~____________~
~+-------------------~~~----~
~OO 150 ~ 250 ~ ~ 400 450 ~i
TOTAL TONS
(Millions)
1___ TOTAL Cf' -0- WOIIST Del' ....... BElKT Del' -e- BElIr Del'
Figure 3. Cash Flows vs. Total Tons; Project B.
Very sensitive to mining phases.
 3

TOTAL ORE .. WASTE PIT #21 OPTIMUM

GOlD II4OOIOZ 35M TONSlYR 7'!f. RATE MILL CUT OFF GRADE vs.
MIll. ORE TONNAGE
22
350,....---------------.:----,-3.2
20
3
~+-------------~
2.8 18

~=
I"
I
250+------------1~

2OO+------------..'1FHHH-lI---l2.4

~ 150
2.8 ~

ui
2 i
~ !! _
~
e~ i
18
14

12
" \
"\.
~
100 1.8 ~ 10
1.8 8 ~
50

0+---",''H'-F-H,...,..~..,.,._
1.4
_I'_h..,.,.'R'_HY'',''--+1.2
e *--.......
1 3 5 7 9 11 131517 192123 25 27 ~
2 4 8 8 1012 14 18 1820 22 24 28
4
----.
PIT" 2
0.018 0.02 0.022 0.024 0.028 0.028 0.03 0.032 0.034 0.038
I_TOTALOIIE ~WASTE -+- SlJUI'. RAllO I CUT OFF GRADE (02'ITON)

Figure 4. Ore-Waste and Stripping Ratio relationship Figure 5. Cut-off grade - Tonnage relationship.
for all nested pits; Project B.

TOTAL CASH FLOWS PIT #21 OPTIMUM

Sensitivity and Risk Analysis GOIJ)~. 7'!f. RATE WIllt CAPITAL

Risk and sensitivity analysis is performed by varying

cosis, commodity prices or other factors that affect the
property and evaluating the various alternatives. e
It is a flexible tool for the decision maker mainly in
three cases:
!j I :t--;:t.7"--~------J
2OOr-~~----------~
150t---~L------ _____________~
1. When a property is evaluated for the purpose of
financing or purchasing, several alternatives have loot-~~-------------_____~

to be examined, and quick decisions are required

5O't-~~~~~---r--'---'-~r-~
to be made. An example is presented later on. o 10 20 110 40 50 80 70 80
ANNUAL PRODUCTION RATES
(Millions) -
2. It is necessary and useful to know before hand
what are the factors that affect the viability of the 1...... 1'OTALCI' - - WONTDeI' --- HLECTDeI' -e- IIESTDCF

project and by how much. Several examples are

shown further on.
Figure 6. Annual Production Rate selection
3. During the life of a project several "what if' type of
questions are asked by the management.
Questions such as the following could be examined
very quickly.

a What if metal prices fall or rise by 10%. How
is the project affected? Do the phases need to
be redesigned?
b. Will changing the cut-off grades improve the
NPV of the property and if so, by how much?
d. What is going to happen to the cash flow if any
waste mining is deferred for later (or earlier)?
e. How much is it worth investing in a metallurgical
study which may decrease the processing cost by a
certain percentage?

c. What if the pit slopes were 3 degrees steeper? f. If heap leach recovery is improved or if dump
How much is it worth investing in a leach recovery is poorer than expected how will
geotechnical program? this affect the cash flow and the economic pit
limiis?
 4
Some results on Selection of Alternatives and
Sensitivity Analysis.
As mentioned above, the results from the nested pits
are processed by another program which can analyze
any production scenario. The output of this program
contains information on many associated variables and
is given in a spreadsheet format. Then the user can
produce graphical output. For example, figures 7 and
8 show the ore and waste relationship over the life of
the same project under two different scenarios:
(i) 35 million of total tons mined per year and
(ii) 7 million tons of ore processed by heap leach
and 3 million tons milled.
Figures 9 and 10 show for the two respective
alternatives the upper and the lower bounds (best and
worst case) and the selected case, the discounted cash
flows by year. The NPV or the Internal Rate of
Return (IRR) can also be calculated. It should be
noted that no capital was introduced to these
particular graphs.
The planning engineer can use graphs such as Figures
7 or 8 to determine if a particular production scenario
is feasible based on the budget requirements, mining
fleet or mill capacities etc. If several alternatives are
feasible, then by analyzing figures such as 9 or 10, a
decision can be made based on the economics. The
desired criteria can be the NPV, the IRR, the Payback
period, the life of the mine, etc.

SELECT CASE PRODUCTION PIT#21 OPTIMUM TOTAL DCF PIT #21 OPTIMUM 7% RATE
OOI.D _OZ 35101 TONSIYII no RATE
.
Au ~z 711 HEAl'; :1M IIIU. TONSffR

30. . . - - - - - - - - - - - - - - - - - , . 4 . 5

25 4

20
at
Z
f!
Ii 15

10

5 -,.,." -,-----c1.5
10~-~--:!,-,---:!,-"""",--:!,-"""",,,,,,,,,,,-,,,,,,,,,,,,,,,,,,,...J
23456 7 8 II 2 3 4 5 6 7 8 II 10 11
YEAR YEAR

i_TOTALORE liliiii WASTE --- lIlIIN'. RATIO I 1--- WORST -+- BS.ECT --- DEBT

Figure 7. Ore - Waste relationship of production Figure 9. Discounted Cash Flows of Worst, Best and
scenario 1 Select cases of production scenario 1.

SELECT CASE PRODUCT1ON-ft1 0f'T. 7%RATE TOTAL DCF PIT #21 OPTIMUM
Au ~7II_,3III1111U TN OOI.D ~Z. 35101 TONSffR no RATE
2OO.-----r--------------.
OO~------------~----,.4

~+_---------111. 100t----7-T----------~
3.5
~+----------~

:.f----'' r--+-II-B-I---l:' i
~+_--~-------+-JI 3 ~

!I
15 1I-_S----i.U5 at
10
6
0+---<'I...,.-..,.....y....,.--.,.A"........
.....,-~---.l().6 ~~r-~-~-r-~-~-~~-_r...J
234 567 8 9
8 II
YEAR

i - TOTAL ORE _ WASTE ...... STIlII'. RATIO I

Figure 8. Ore Waste relationship of production Figure 10. Discounted Cash Flows of Worst, Best and
scenario 2. Select cases of production scenario 2.
 5
Some sensitivity analysis results are presented next.
TOTAL OUNCES FOR DIFF. OPERATING COSTS
1.4 Each point on the graph of figure 11 represents the
1.8 _-c~ ounces contained within the optimal pit for a range of
1.2 ~ gold prices and operating mining costs. This particular
/. -----~~ project is less sensitive to mining costs.
rI/J'./
Figure 12 shows the same type of graph but this time
..... .':'''''-)!I';;;.r
~,/ the processing cost is examined. For the $25/ton
TIT,?' curve, the sensitivity range is for gold prices between
0.5
0.4 Y $310 and $390. The same information on this graph
can be presented in a different format in figure 13. It
0.3
150 200 250 300 350 400 450 500 can be recognized how extremely sensitive this project
OOLOPRICE is to the processing cost. For a $375/oz gold price, the
total ounces can range from -50% to + 50% if the
1---- SO.60 -+- SO.1'O - - SO.75 processing cost changes from +$5 to -$5. It is more
-e- SO.60 --- SO.90 sensitive to lower gold prices than higher ones.

Figures 14 and 15 present similar sensitivity analysis

Figure 11. Total Ounces affected by Operating Mining results for metallurgical recoveries. The sensitive
Cost for different Gold prices. ranges can be picked from Figure 14, their magnitude
is shown on Figure 15.

TOTAL OUNCES FOR OIFF. PROCESSING COSTS TOTAL OUNCES FOR DIFFERENT RECOVERIES
7,---------------------------------, 6,---------------------------------,
6;+----------------
o 4t-------------__~
~ I
~ ~ 3-t------+---c
~ i
12

~ 300 320 340 360 380 400 420 440 480

GOLD PRICE ($IOZ)

...... $2OITON -- 822.aJTON - - ~

1 ...... 7~ __ 76% ___ 8O% I
118% __ 80% ..... 86%
I...... m.51OZ
-<It-
-M- I3OIOZ

Figure 12. Total Ounces affected by Processing Cost Figure 14. Total Ounces affected by metallurgical
for different Gold prices. Recoveries for different Gold prices.

totAl.. OUNCES" CHANGE VS. ~IIS. COST TOTAL OUNCES % CHANGE VS. RECOVERIES

tlJ

.,.~
40

20

0
, _IL

-I ~-
ijfJ
-20
~
0

~
;;!
-40

60
--- ---

g -so
loo'-!------.---,.....---....,.--..,...------1
20 22.5 25 27.5
-100
70 75 80 8S 90 95
30
PROCESSING COST ($/TON) SULFIDE MILL RECOVERY (%)

1_ _/OZ liliiii 8371110Z _ ...2II/OZ 1 _ _IOZ liliiii 1376/02 _ ... 25/0Z

Figure 13. Ounce % change vs. Processing Cost. Figure 15. Ounce % change vs. Recovery.
 6
TOTAL UNO. CFFOR OIFF. ULT. PIT SLOPES TOTAL CASH FLOW "VS. ULT. PIT SLOPES

1~r-----------------~~=v~~=---, w
CJ
1~+-------------.r~~~~~-+--,.~ ~ 6
x
x .,.0 4
~ 1~+-------~.~~~"~~----------~
~ ... 150 ~x 2

0
z J! 1401+------D----!'-.:E---------------------_j Jj
i 1~+-----~~----------------------~ ~ -2
~
Z lro+---~~------------------------~
0
I!!z -4
11
::l
110+--m--------------------------_j
~
-e
l00+--4~--------------------------_j ~
z -8
~+---~----r_--~--~----,_--~--~ ::l

~
150 200 250 300 350 400 '450 500 -10
GOLD PRICE (S/Ol) ,3 0 -3 -6
ULT. PIT SLOPES DIFFERENCES FROM BASE

Figure 16. Cash Flow affected by pit slopes Figure 17. Cash Flow % change vs. pit slopes.

Finally, Figure 16 shows how the cash flow is affected
by different ultimate pit slopes for a range of gold
prices in another project. The magnitude of the
sensitivity is clearly shown for a hypothetical $400 per
ounce gold price in Figure 17. The total undiscounted
cash flow can change by 4% for a 3 degree change of
the ultimate pit slope.
In general, the more sensmve a proje(.i is tU it
particular factor, the more justified it is to spend
money to improve that factor and the amount of
money that could be spent is dictated by the magnitude
of the sensitivity.
Planning and Scheduling
The sequence of the nested optimal pits can be useful
in planning and scheduling. Figure 18 shows one of
the plan views of a gold project with 3 individual pits.
Each number or letter represents the pit that the
particular block belongs to. The smaller the number
or the lower in the alphabetical order the letter is, the
higher the r-.JP\' of the pit. By grouping together
several blocks as shown on Figure 18, the planning
engineer can choose which is the best phase to design
within each pit but also which is the best sequence of
phases among all pits.

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ES
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Figure 18. A plan view of nested pits can assist in

planning and scheduling.
 7
STRIPPING RATIO VS. GOLD PRICE
b. examine several production alternatives;
25
c. evaluate different metallurgical processes,
20
production rates and cutoff-grade scenarios.
15
d. investigate the sensitivity of a project to commodity
prices, recoveries, costs, ultimate pit slopes etc.
10

e. answer "what if' type of questions.

5

0
150 200 250 300 350 400 450 500 References
BREAKEVEN GOLD PRICE (Sial)

Alford, CG., and Whittle J., 1986, Application of

I. . . . N -e-- 5
Figure 19. Stripping Ratio relationship of four
separate pits in the same property
for a range of gold values.
TOTAl. UNOISCOUNTED CASH FLOW
~+---------------~~~~------~
~+-------~~~~--------------~
!:
~g 35t=::~6=~~~==i
~I OO+---~~------------~~------~
~ 25~~----=-~------------~
2O~~L----------- __- - - - - -______~
1~50 200 250 300
BAEAKEVEN GOLD PRICE (S10Z)
Figure 20. Cash Flow contribution of four
separate pits in the same property
for a range of gold values.
Lerchs-Grossman Pit Optimization to the Design
of Open Pit Mines", The AusIMMjIE Aust
Newman Combined Group, Large Open Pit Mining
Conference.
Charbonneau, D.J., 1990, "Application of the Whittle
4D Pit Optimizing Program for Mineral Resource
Evaluation", Internal Report, Steffen Robertson
and Kirsten, Vancouver, BC, Canada.
Dagdalen, K., and Francois-Bongarcon, D., 1982,
'Towards the complete Double Parameterization of
Recovered Reserves in Open Pit Mining", 17th
APCOM Symp., Golden, CO.,
Francois-Bongarcon, D., and Guibal, D., 1981,
"Parameterization of Optimai Designs of Open Pit;
Beginning of a New Phase of Research", AIME
350 400
Annual Meeting, Chicago, Ill.
Johnson, T.B., 1968, "Optimum Open Pit Mine
Production Scheduling" Ph D Dissertation,
University of California Berkley, Operations
Research Department.
Johnson, T.B., 1973, "A Comparative Study for
Determining Ultimate Open-Pit Mining Limits,"
11th APCOM, Tucson, AZ.

Kim, Y.C, 1978, "Ultimate Pit Design Methodologies

If there are a number of deposits that exist on the
same property, scheduling becomes more challenging.
Figure 19 shows the stripping ratio relationship for
different gold prices for each one of the four pits on a
property. Figure 20 shows the contribution to the cash
flow of each one of the four pits for a range of gold
prices.
Conclusions
Using Computer Models - The State of the Art",
Mining Engineering, Vol. 30, pp. 1454-1459.
Lerchs, H. and Grossmann, I.F., 1965, "Optimum
Design of Open Pit Mines", Transactions, CLM.,
Vol. LXVIII, pp. 17-24
Stewart, D.H., 1991, "Aspects of Pit Optimization, Pit
Design, Planning and Scheduling", ACADS
Conference, Kalgoorlie, Australia.

When certain assumptions are made on the economic
parameters that determine the outline of an optimal
pit, a large set of nested pits can be generated easily.
These can be utilized to:
a. obtain a lower and an upper bound on the NPV of
a project;
Whittle, J. and Rozman, L.I., 1991, "Open Pit Design
in the 90s", Mining Industry Optimization
Conference, Sydney, Australia.
Whittle, J., 1988, "Beyond Optimization in Open Pit
Design", First Canadian Conference on Computer
Applications in the Mineral Industry, Quebec City,
Canada.