SME Annual Meeting
Feb. 23-25, Denver, Colorado
CONDITIONAL SIMULATION AS AN EFFECTIVE TOOL FOR LONG RANGE MINE PLANNING:
APPLICATION TO AN UNDERGROUND NICKEL-SULFIDE DEPOSIT
A. Proulx
INCO, Limited
Thompson, MB, Canada
O. Tavchandjian
INCO Technological Services Ltd.
Sudbury, ON, Canada
A. Aubut
INCO Technological Services Ltd.
Thompson, MB, Canada
ABSTRACT
Results obtained from conditional simulations and multiple indi-
cator kriging were compared in the assessment of two different min-
ing methods proposed for the extraction of the down-dip extension of
a nickel-sulfide ore body located in the Thompson mining camp,
Canada.
An enhanced turning band simulation algorithm, supplemented
with an unfolding technique, was used. A floating stope optimization
process was used to effectively compare tonnage and grade figures.
A calibration exercise was also conducted in the upper portion
of the ore body. This study demonstrates that conditional simulations
provide better spatial models for conceptual mine design and capital
budgeting decisions.
INTRODUCTION
Traditional mineral assessments use non-geostatistical and/or
geostatistical estimation methods to provide optimal estimates of the
local block grade. When the drilling sample density is too sparse for
the level of detail required in the mining plan, these methods fail to
properly represent the inherent spatial variability of the estimated
grade. Mining decisions based on smoothed estimates can lead to
false assumptions about the ore body grade distribution. Project suc-
cess often depends on the validity of these assumptions. In under-
ground mining projects, recovering from false mining assumptions
can be costly and may result in project failure. A proper characteriza-
tion of the spatial variability of the grade distribution can lead to more
realistic mining assumptions and reduced project risk.
Attracting investment capital for mining projects has become
increasingly challenging. Projects, which demonstrate to key decision
makers that the risk is recognized and managed, have a better
chance of advancing to the construction and production stages.
Conditional simulation (CS) methods aim to reproduce the in-
situ variability of the sample data set while honoring the values at
1 Copyright 2004 by SME
Preprint 04-120
existing sample points, as opposed to obtaining optimal local esti-
mates. The results are equal-probable-realization models. These
models respect the input sample data histogram and variogram and
are conditioned to local sample point values. Models that have a
proper characterization of the grade spatial variability can provide
mine planners with realistic bases from which to plan and estimate
the recoverable tonnage and grade from an ore body. These models
also allow the mine planners to be aware of the confidence of the
local and global resource and reserve estimates as well as the effect
of the grade dispersion on the short-term mineral extraction process.
This paper presents an example of the application of CS as a
mineral assessment tool. It was used to compare and select the most
suitable mining method for an underground, massive sulfide, ore
body in the Thompson Nickel Belt (Manitoba, Canada).
The nature of the distribution and continuity, of the metal grade,
was addressed using a turning band simulation algorithm along with
the DATAMINE unfolding routine (to deal with variable geometrical
trends in the data). Recoverable resources from numerous simulation
and estimation models assuming bulk-mining and selective-mining
methods were obtained using the DATAMINE Floating Stope
Optimizer (FSO). In order to gain confidence in the results, a recon-
ciliation exercise was performed, by applying the same methods on
a mined-out portion of this ore body. Estimation and simulation
results using a data set from advance exploration and a data set from
detailed production -drilling, were compared
KRIGED MODEL OF THE 1D LOWER ORE BODY
The mineral deposit assessment area is located at INCOs
Thompson Mine in Northern Manitoba, Canada. The 1-D Lower ore
body is located in a linear deformation belt known as the Thompson
Nickel Belt. Mineral deposits in this belt consist of nickel-sulfide with
varying amounts of ultra-mafic rocks, hosted in Proterozoic age, meta-
sedimentary units. (Peredery, 1982) The mineralization lateral extent is
579 m (1900 ft) and the vertical extent is 183 m (600 ft) (Figure 1).

Mineral envelopes were based on host lithologies and the sub-
sequent structural deformation, which control the emplacement of the
ore mineralization. Drilling information was supplemented with cross-
hole seismic tomography surveys, oriented core measurements, and
in-hole Gyro location surveys. These surveys helped in establishing
the shapes and extents of the envelopes.
The 1D Lower ore body contains at least three different zones
of mineralization: Footwall zone (FW), Mid zone (MID), and Hanging
wall zone (HW) (Figure 1). The FW zone mineral envelope was divid-
ed into two mineral domains: Fw1 and Fw2. The MID zone was sub
divided into three mineral domains: Mid, S_mid and S_fw. The
Hanging wall zone contained a single domain (Hw) (Figure 1). The
domain envelopes were created loosely by allowing for 1.52 m (5 ft)
of waste along their margins. This approach ensured that the grade
estimates would not be biased by an overly constrained interpreta-
tion. Domain overlapping was used to capture samples, which could
potentially belong to more than one domain.
Project Database
Approximately 700 drill-holes outline the assessment area. The
drill-hole collars are located approximately 15 m (50 ft) apart on East-
West oriented sections with some minor off-section drilling.
Core recovery is excellent. Implicitly missing assays were
assigned background default values while explicitly missing assays
were replaced by nil values.
The Specific Gravity was calculated using a multi linear rela-
tionship based on Ni, Fe, S, and Cu grades:
SG = 100 / (100 / 2.6633 - 0.1833 x Cu - 0.412 x Ni -
0.3969 x Fe + 0.2114 * S) (Eq. 1)
Where
SG= specific gravity in grams per cubic centimeter
Cu = assayed copper by percentage
Ni = assayed nickel by percentage
Fe = assayed iron by percentage
S = assayed sulfur by percentage
All the drill-hole assays were captured in each respective
domain and stored in separate files. All assays were composited on
a uniform length of 1.52 m (5 ft) weighted by SG. The composite
HW EXPLOR
ATION DR
IFT
3500 LEVEL
FW ZONE
N
FW RAMP
3D VIEW
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SME Annual Meeting
Feb. 23-25, Denver, Colorado
length approximates the routine sample length for significant miner-
alization.
The mineralization envelopes vary along strike and dip with
pinch and swell geometries. Cartesian distances do not reflect the
natural geological distances between samples. Therefore, an
unfolding procedure (DATAMINE, 1997) was applied to ensure
appropriate geological distances between samples for the geostatis-
tical modeling. This unfolding procedure resulted in the creation of a
new set of co-ordinates (UCSA [across direction], UCSB [down dip
direction], and UCSC [along strike direction]) for each sample and
each discretization point of the deposit.
To properly weight the grade by density, a service variable was
used for the construction of both the interpolated and the simulated
models. This service variable is defined as QNi = Ni x SG. The aver-
age percentage Ni of each block was back calculated after modeling
by dividing the estimated QNi by SG
Variography
The experimental variograms of QNi were calculated for the
composite sample sets using the unfolded co-ordinates. The
anisotropy was evaluated by analysis of variogram fans every 13
degrees in the strike-dip plane of the mineralization.
The QNi grade variograms were then modeled by the linear
combination of a nugget effect and two spherical structures (Figure
2).
As expected, the grade variograms were found to be signifi-
cantly different in each domain. This result confirmed the justification
for the separate modeling of the domains.
Declustered Statistics
Declustered statistics were computed within the domains using
a nearest neighbor (NN) block model. The NN model was built using
an anisotropic search ellipsoid, defined from the longest range of the
QNi variogram. This model included the transformation of the
Cartesian distances into geological distances using the unfolding
algorithm of the DATAMINE software.
The QNi declustered statistics are presented in Table I for the
individual domains. All the elements showed skewed frequency dis-
tribution reflecting the dominance of low-grade mineralization with a
few higher values related to massive sulfide mineralization.
HW ZONE
Figure 1 Mineral zones defined in
assessment area
MID ZONE
 SME Annual Meeting
Feb. 23-25, Denver, Colorado

Kriging Interpolation
Interpolation techniques based on kriging algorithms aim at min-
imizing the variance of the error on the estimate of the local average
grade (Matheron, 1963; Journel and Hjuibregts, 1983). The metal
grade is usually estimated for small blocks corresponding to the
smallest mining unit (SMU) that can be considered to discriminate
between ore and waste for mine planning.
In the present study, Multiple Indicator Kriging (MIK) was select-
ed as an appropriate interpolation method in order to deal with the
skewness in the grade frequency distribution (Journel, 1983). MIK is
based on binary indicator coding of grade data. Each grade field is
replaced by a binary function; coding the presence or the absence of
a metal grade above a given threshold. A local conditional distribution
can be built for each block from the kriged estimates of the indicator
Mid domain functions, from which an average grade can be estimated.
In each domain, all of the composite samples were coded
according to QNi indicator cut-offs. These were determined from the
declustered cumulative statistics and each represents approximately
9% of the total metal in the domain. Indicator variograms were mod-
eled by a linear combination of a nugget effect and two spherical
structures. In order to compare the various indicator variograms, they
were normalized to their respective variance. As expected, high-
grade indicators show a shorter range (i.e. lower spatial correlation)
than low-grade indicators
Each block in the block model was discretised by a matrix of 2
x 3 x 3 points. The indicator functions were interpolated at each
unfolded discretization point using the search volume ratios defined
by the second range of the median indicator variogram (within the
unfolded plane of the mineralization) A nested sample search was
used. It applied octant constraints on sample selection. For blocks
not estimated during this first search, expanded search ellipsoids,
with reduced constraint restrictions on the minimum number of sam-
Hw domain ples and octants, were applied. Blocks estimated during the least
constrained searches were flagged in the model. The estimates in
these blocks may be locally imprecise and have a potentially large
conditional bias.

Fw domain

Figure 2 Grade variograms for the main domains

Figure 3 MIK E-W oriented section showing geometrically vari-

able QNi grade-trend resulting from unfolding of the sample
location and the model cell discretization points

3 Copyright 2004 by SME


Block Model Validation
The first check on the validity of the block model was a compar-
ison between the block grade spatial distributions with the cross sec-
tional drill-hole data. The unfolding procedure significantly improved
the spatial distribution of the grade (Figure.3). Trends in the block
grade spatial distributions honor the geological trends. The statistics
on QNi derived from the MIK model are presented in Table II. These
can be compared to NN model statistics for each domain in Table I.
As expected, the MIK models have a similar global mean to the
NN model estimates (Table I) but have a significantly lower variance
and a reduced skewness. The lower variance and skewness are
expected since the NN model represents the sample population and
not the block population.
Volume-Variance Adjustment
In many instances, the drill spacing is large compared to the
SMU size and the resulting local estimates are significantly
smoothed. This is a common problem faced during the
exploration stages of underground deposits. It is at this time
that important investment decisions are commonly made
while data acquisition is limited by both economic and tech-
nical constraints. When the smoothing is deemed too high,
volume-variance corrections can be used to restore the
SMU histogram of the deposit. Unfortunately, this histogram
is only valid globally and does not answer the key issue of
the spatial continuity of the SMUs that can be mined at a
profit. . In areas where samples are sparse, the MIK models
tend to act like NN models (i.e. polygonal models- overstate
the spatial continuity of the blocks above cut-off). The MIK
results in the 1-D Lower ore body were post-processed by
an indirect lognormal correction (Isaacks and Srivastava,
1989) in order to address over-smoothing issues in the
model.
Table I Declustered univariate statistics of QNi composites for
each domain of mineralization
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SME Annual Meeting
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Table II Statistical description of QNi in the MIK model
CONDITIONAL SIMULATION MODEL OF THE 1-D
LOWER ORE BODY
Stochastic simulations have been widely used in many fields of
science to perform sensitivity and risk analyses. In a stochastic sim-
ulation, reproducing certain statistical characteristics of the global
population takes precedence over local accuracy. The objective of
the well-known Monte-Carlo simulations is to reproduce a given his-
togram (i.e., the input model histogram).
However, traditional Monte-Carlo simulations are not appropri-
ate for geological variables since they assume random spatial distri-
bution of the variable. Conditional simulations were developed 30
years ago in order to add spatial correlation constraints to stochastic
simulations. In addition to respecting the histogram, a geostatistical
simulation model reproduces the variogram (i.e., reproduction of spa-
tial correlation) and if conditioned, honors the actual existing data.
In addition to the original turning band method (Journel, 1973),
there are now several established methods of carrying out geostatis-
tical simulations including the sequential methods (Gaussian, indica-
tor), the LU decomposition algorithm, simulated annealing and
Boolean simulations. Comprehensive comparisons of the six different
methods were performed by Gotway and Rutherford (1993) on a vari-
ety of data sets. The results of this study revealed a number of dif-
ferences between the simulation methods and the sensitivity of the
results to particular simulation algorithms. This study also pointed out
some advantages of the conditional Gaussian based algorithms (i.e.,
turning band and sequential Gaussian) over the other methods. It is
not the intent of this report to detail the pros and cons of each tech-
nique. Comparisons can be found in a number of publications
(Deutsch and Journel, 1998; Armstrong and Dowd, 1993; Chiles and
Delfiner, 1998).
The turning band approach was selected for this study. Some
authors have qualified the method as being computer intensive with
built-in limitations, (i.e., number and orientation of bands, number of
discretization points along the bands, rotation of anisotropy axis
[Deutsch and Journel, 1998; Ravenscroft, 1993]). It was found that
most of these problems are related to the improper algorithms used
and not to the method. The algorithm used in this study was slightly
modified by Lantuejoul (1993). The program does not suffer from any
of the above listed limitations.
 SME Annual Meeting
Feb. 23-25, Denver, Colorado

Conditional simulations were applied to properly reproduce the

variability in the metal grade distribution and obtain an unbiased esti- 2
mate of the recoverable resource. Conditional simulations were con- 1.8
ducted using the same mineral domains, and sample database used 1.6
to construct the MIK block models (including the transformation of the
1.4
Cartesian distances into geological distances using the unfolding
1.2

Gamma(h)
algorithm of the DATAMINE software).
1
Gaussian Transform 0.8
A requirement of any Gaussian algorithm is an assumption of 0.6
normality. Since the original sample grades were not normally dis- 0.4
tributed, the declustered histograms of QNi, obtained using the NN
0.2
interpolation (Table I) were used to build graphical anamorphoses of
0
QNi values to normalized Gaussian values with a mean of 0 and a
0 50 100 150 200
variance of 1. The theoretical model statistics were obtained by prop-
erly assigning each Gaussian value, its declustering weight. Since h (feet)
the model considered here is an anamorphosed Gaussian random Variogram Theoretical Experimental
function, it is important to test the compatibility of the data with the
selected model. A number of tests can be used for an anamorphosed
Figure 4 Bigaussian Normality check on Hw domain sam-
Gaussian random function. A check used by many authors (Verly,
ple data
1983) is to calculate the ratio between the square root of the vari-
ogram (?2) and the madogram (1). This ratio should present a con-
stant value of 1.77 (i.e., ? ). This check was carried out on the raw
data for each domain. Although these checks cannot be considered Gaussian Variograms
as totally conclusive, (they did not take into account the declustering The experimental variograms of the Gaussian transformed val-
weights and the number of pair of points was fairly restricted) they do ues were calculated in the unfolded coordinate system: UCSA, UCSB
not indicate any significant problem with the proposed models. Figure and UCSC. Modeling of the variograms was carried out for each
4 illustrates an example of the graphical results of a bigaussian nor- domain (Table III).
mality check.

Table III Summary of variogram modeling parameters for the Gaussian transformed values of QNi

To ensure that the simulated variograms corresponded well to of all the simulated points was also produced and compared against
the model variogram, the simulations were randomly sampled and the input histogram. This initial check verified that the non-condition-
variograms were calculated from the sampled points. The histogram al simulations were performing well.

5 Copyright 2004 by SME


Conditioning of Simulations Using Simple Kriging
The non-conditional simulations were forced to honor the actu-
al data using the following procedure:
For all the nodes located within a distance corresponding to
approximately 90% of the total sill of the Gaussian variogram, calcu-
late the conditioned simulated value (Ycs) as:
Ycs = Ysk + (Y1TB Y1sk) (Eg.2)
Where:
Ysk is the Kriged value using actual samples
Y1TB is the turning band simulation at node location
Y1sk is kriged value using simulated samples
For all the other nodes set Ycs to Y1TB since simple kriging of
N(0,1) would potentially suffer from significant conditional bias and
result in nil very low values for both Ysk and Y1sk.
At this stage, a second validation check was performed to
ensure that the conditional simulations still respected the input model
variogram and histogram.
Back Transformation of Simulated Gaussian Values to QNi
and Reconstitution to Ni Values
Conditional simulations of Gaussian values were back trans-
formed to QNi using the inverse graphic anamorphosis based on the
cumulative histograms. Histograms of the back transformed data
were compared to the original declustered histograms of QNi for each
mineral domain. The agreement was generally very good (Figure 5).

Declustered
Simulated
QNI QNI
Figure 5 Simulation reproduction of input Gaussian model
variogram and QNi histograms.
Finally, the SG and Ni values were back calculated from the QNi
values using the following linear relationship based on the declus-
tered statistics:
SG = 0.03 x QNi + 2.82 (Eq. 3)
Ni = QNi/SG (Eq. 4)
6 Copyright 2004 by SME
SME Annual Meeting
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For all the conditional simulations, the final global mean and
variance for QNI, Ni and SG, were consistent with the expected val-
ues defined by the declustered statistics and variograms.
CALIBRATION AND VALIDATION OF SIMULATIONS IN
THE UPPER 1-D ORE BODY
In order to validate the application of the results of the condi-
tional simulations to the assessment of recoverable resources and
reserves, a calibration exercise was undertaken. A mined-out portion
of the ore body was selected as a back-analysis case study. This
area is similar geologically to the advanced exploration portion of the
ore body. The case study area was well-drilled (drill-holes were col-
lared on 7.6 m [25-foot] and 15 m [50-foot] centers) and has exten-
sive mapping of underground openings. The record of the mill-credit-
ed production was also available. However, the credited grade rep-
resents a prorated credit back to the grade reported as mined based
on production tonnage and grade estimates.
The methodology applied was as follows:
Create an exploration data set by removing all in-fill produc-
tion drilling.
Create mineral envelops from the exploration data set (15 m
and 30 m [50 and 100-foot] drill spacing).
Perform NN, MIK, and CSs modeling from the exploration
data set.
Assess the recoverable resource at various cut-off grades
based on the exploration data set.
Create mineral envelops from in-fill drilling data set. (7.6 m
[25-foot] drill spacing).
Perform MIK and CSs modeling using all in-fill drilling from
the production data set.
Assess the recoverable resource at various cut-off grades
based on the in-fill drilling data set.
Compare historical credited production, NN, MIK and CSs
results based on both, the exploration dataset, and the pro-
duction data set (based on bulk-mining only).
Compare the actual detailed ore mapping from mine open-
ings to the spatial patterns produced by NN, MIK and CSs
models.
Although a large number of publications present successful
applications of CSs, few are for underground mining (Ravenscroft,
1993; Davis, 1999). This is deemed related to the additional difficulty
of handling the large number of simulations when performing mine
NC SIMULATION3 MIK
3200L MAPPED ORE NN
Figure 6 Comparison of actual ore mapping, CS, MIK and NN
models in the calibration zone
 SME Annual Meeting
Feb. 23-25, Denver, Colorado

Back Analysis Tonnage Curves

1.2 Back Analysis Grade Curves
3.50

1.0
3.00
Recoverable Resource Tonnage

Recoverable Resource Grade

0.8

2.50

0.6

2.00

0.4

1.50

0.2

1.00

1.00

1.25

1.50

1.75

2.00
0.0
1.00

1.25

1.50

1.75

2.00

%Ni Cut-off
% Ni Cut-off NN_EXPL IK_DEFN
NN_EXPL IK_DEFN MILL CREDIT IK_EXPL
MILL CREDIT IK_EXPL CS 6 CS 7
CS 6 CS 7 90% LCL 90% UCL
90% LCL 90% UCL

Figure 7 Comparison of tonnage and grade curves- obtained from the various assessment methods and mill credit in the calibra-
tion zone (CSs 6 and 7 represent the range of 90% of simulated outcomes, while the 90% control limits represent a +/-10% differ-
ence from the median simulation)

planning for underground deposits, which is more complex than in
most open pit situations. The FSO was used to quickly assess the
recoverable resource from all the block models and simulations at
various cut-off grades. This is similar to the floating cone algorithm
used for open pit situations. It provides a close to finish product,
which may be used to effectively compare alternative mining scenar-
ios for conceptual planning exercises.
Results indicated that the recoverable tonnage and grade are
better predicted using the CSs than the NN or MIK block models
(Figure 7) when the exploration data set is used. As well, the spatial
patterns created by the CSs, more closely resembles those defined
by the detailed ore mapping of the existing openings (Figure 6). The
results show that when little information is available for estimation,
the spatial continuity of the high grade and low grade is over-stated
in the NN and MIK block models. This produces an over-estimation
of the recoverable grade and an under-estimation of the recoverable
tonnage for the NN model (NN_EXPL) and, a general overestimation
of both tonnage and grade for the MIK model (IK_EXPL), when com-
pared to the historical mill-credited production and the MIK model
(IK_DEFN) based on the production data set (Figure 7).
USE OF CS TO COMPARE TWO MINING METHODS FOR
THE 1-D LOWER ORE BODY
Based on the results obtained during the validation exercise, CS
was selected as a better tool to allow mine planners to compare bulk-
mining and cut-and-fill mining in the 1-D Lower ore body. Twenty CSs
were created for all six mineral domains. The mineral domains and
samples used in the MIK block modeling were used to constrain and
condition the simulations.
A randomly selected simulation was chosen as a base-case.
Detailed mine planning for the two mining options was performed on
this simulation model. Comparison of the FSO runs to manual plan-
ning performed on the simulation, verified the FSO parameters.
These results are illustrated in Table IV and Figures 8a and 8b, for the
bulk-mining scenario. The detailed mine planning also allowed for the
development of global factors for mining recoveries and dilution. All
subsequent FSO runs on the simulation models and estimation mod-
els used these same parameters.
Figures 9a and 9b summarize the results of this comparative
study in the form of grade and tonnage curves. The results obtained
with the NN and the MIK models are also plotted on these graphs for

7 Copyright 2004 by SME

 SME Annual Meeting
Feb. 23-25, Denver, Colorado

reference. These series of curves show that the MIK model provides
a similar answer to the CSs for the bulk-mining scenario. However,
there is a significant difference between the MIK model and the CSs
in the cut-and-fill scenario. This result implies that making a capital
investment decision based on only a MIK model, would present a sig-
nificant risk of not selecting the best mining method. Applying the
FSO to the NN model produces erroneous results, except for the
recoverable grade in the cut-and-fill scenario. The most likely expla-
nation for this result is that the dilution included by the FSO counter
balanced the high grading effect of the NN model. In addition, these
graphs show that the range of simulations provides a tool to perform
meaningful risk and sensitivity analysis on each option.

Table IV Summary of FSO parametersbulk-mining option as compared to manual planning on a base-case simulation

Figure 8a Plan view of manual bulk-mining stopes (white Figure 8b Plan view of FSO Run1 bulk-mining
lines) stopes (white lines)

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 SME Annual Meeting
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FSO Recoverable Resources

FSO Recoverable Resources
Bulk-Mining Option
Cut-and-Fill Mining Option
14.5
14.5

12.5
12.5

10.5
10.5
Recoverable Tonnage

Recoverable Tonnage
8.5
8.5

6.5
6.5

4.5
4.5

2.5
2.5
1.00

1.25

1.50

1.75

2.00

1.00

1.25

1.50

1.75

2.00
%Ni Cut-off %Ni Cut-off
CS 19 CS 20 MIK CS 19 CS 20 MIK
NN 90% LCL 90% UCL NN 90% LCL 90% UCL

FSO Recoverable Resources FSO Recoverable Resources

Bulk-Mining Option Cut-and-Fill Mining Option
3.30 4.00

3.10

3.50
2.90

2.70
Recoverable Resource Grade

Recoverable Resource Grade

3.00
2.50

2.30
2.50
2.10

1.90
2.00

1.70

1.50 1.50
1.00

1.25

1.50

1.75

2.00

1.00

1.25

1.50

1.75

2.00

% Ni Cut-off % Ni Cut-off
CS 19 CS 20 MIK CS 19 CS 20 MIK

NN 90% LCL 90% UCL NN 90% LCL 90% UCL

Figure 9a Comparison of bulk-mining grade and tonnage Figure 9b Comparison of the cut-and-fill mining grade
curves- obtained with the various assessment methods (CSs and tonnage curves- obtained with the various assess-
19 and 20 represent the range of 90% of simulated outcomes, ment methods (CSs 19 and 20 represent the range of 90%
while the 90% control limits represent a +/-10% difference of simulated outcomes, while the 90% control limits rep-
from the median simulation) resent a +/-10% difference from the median simulation)

9 Copyright 2004 by SME


APPLICATION FOR FEASIBILITY STUDIES AND
INVESTMENT DECISIONS
In the case study presented in this article, mine planners were
able to complete a pre-feasibility study including estimates on capital
cost expenditures, mining rate, mining sequence and production pro-
file, for both mining methods, based on the CS results. Mine planners
were also able to optimize the cut-off grade and the SMU size for the
cut-and-fill scenario. These pre-feasibility estimates are based on
more realistic representations of the spatial variability of the metal
grade distribution and therefore provide more reasonable results than
previous estimates based on polygonal and MIK models.
The economic and technical parameters defined by the pre-fea-
sibility study were used as input in a discounted cash flow analysis.
Based on the CS results, a range of ROR and NPV estimates were
calculated in order to quantify the risk associated with the base-case
assumptions and to identify potential upsides and downsides to the
project.
Additional applications of the CS results during this project
which are not presented in this article include: the use of probability
plots to understand the confidence in the ore body stope locations,
the design of a grade control program, and the identification of areas,
which require additional drilling to decrease the uncertainty in the
local estimates.
CONCLUSIONS
A proper resource/reserve assessment requires a good under-
standing of the grade variability. CSs allow the spatial grade variabil-
ity to be properly characterized (assuming sample data histogram,
variogram and domain size, shape and location are representative).
The results from CSs can be used to determine the range of possible
resources and reserves as defined by various levels of mining selec-
tivity.
CSs allow practitioners to quantify the uncertainty associated
with any given reserve estimate and to perform better sensitivity
analyses to estimate the risk of not achieving the projects financial
targets. CS provides an additional tool in mineral assessments to
enable key decision makers to better understand the risk associated
with projects.
This study also provides evidence that enhancements of block
modeling and CS methods with the use of data unfolding and floating
stope optimization, makes computer assisted mineral assessments in
complex geological terrains, viable and more robust.
10
SME Annual Meeting
Feb. 23-25, Denver, Colorado
ACKNOWLEDGEMENTS
The Authors gratefully acknowledge all the INCO personnel who
have worked on this project: Rob Stewart, Dave Owens, Rob
StewartRoss Gowan, Brian Plamondon, John Hilchey, Rob Smith,
John Kelly, Pat Babulic, Sue Blakley, Rogerio Monterio, Ian
Fieldhouse, Tim Lloyd, Andre Lauzon, Tim Mayor, Ian Blakley, Gary
Sorensen, Boris Shepertycky, John Ryan, Michael Anderson, Scott
Bishop and non-INCO personnel: Dave Henderson and Rob
Vaillancourt. We would also like to thank Lawrence Cochrane,
Dwayne Kroll and Alan Chan for their help editing this paper in the
final edition of this paper.
REFERENCES
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