MineSight VALP
Optimizing Cut-Off Grades
© 2012 Dr. B. C. Paul
Note – MineSight and VALP are both trademarked names belonging to Mintec
Inc. These slides suggest ways of using VALP to improve the NPV of surface
mining operations. VALP was designed for this purpose by Mintec. Thus,
many of the ideas in this presentation come from Mintec. The presentation
also contains screen shots taken from the MineSight program. Credit is given
to Mintec for development of the software and ideas associated with its use.
Optimizing Surface Mines
• A given body of ore may yield some total profit of
a period of time, but the NPV (Net Present
Value) of those profits can be increased by
taking larger profits in the early years of mining
where time discounting has less impact.
• One practical was of taking more profit in the
early years is to sequence mining pushbacks so
that richer ore is mined earlier
– Your sequence planning activities in MSOPIT tries to
do exactly this.
Adjusting Cut-Off Grades Also Can
Do This
• Normal Cut-Off Grades are based on BreakEven
– Any rock that does not contain enough metal to pay
for processing would loose money if it were
processed
• It is said to be below cut-off grade
• Only rocks containing enough metal to pay for processing
would be sent for processing
• A standard design finds the ultimate pit that
maximizes total profits
– You do this when you get the Ultimate Pit with
MSOPIT
Apply a Standard Break-Even CutOff Grade
• Quite often mineral processing costs are the
largest in a mining operation
– With a break-even cut-off grade the total amount of
ore is known
– With a plan for the mine life the mineral processing
plant is sized to process the ore in the assigned mine
life
– Mining Capacity is then sized and planned to supply
the amount of ore and to perform the required
stripping capacity
• The Processing Plant and Mine Capacity are set
in this was to be compatible.
Making Extra Profit with
Unbalanced Facilities
• Suppose one has more mining capacity than the
processing plant can handle
– Now the mine will send more ore to processing than
processing can handle
– Processing now takes only the best of the ore it has
capacity for
• The low grade portion of the extra ore is now set aside (either
wasted or stockpiled for another day)
– The result is that a higher grade of ore is processed in
the early in the mine life than would be possible just
from adjusting the mining sequence
What VALP Does
• First VALP mines each of your Pit shells in
order from the top down using the breakeven cut-off grade to determine where
material goes.
– If it runs out of mining capacity in any year it
moves the extra material up in time and
counts it a pre-stripping
– VALP calculates the NPV of the cash flow and
calls it the “Base Case”
VALP’s Next Move
• Next VALP substitutes an arbitrary higher cut-off
grade for the break even cut-off grade
– This results in higher grade material being mined first
– Lower grade is deferred or wasted
– If the NPV increase from higher grade processed first
is greater than the earnings lost from low grade that is
wasted or saved till the end for processing then total
NPV will increase
– VALP tries a set of arbitrary cut-off grades and reports
the one with the highest NPV at a constant cut-off
grade
Last Move
• VALP applies the theory of economic rent
– For any time period there is an NPV of all the remaining material
to mine
– Anything you process now puts off getting that NPV of future
earnings
• Any time you put off getting money you get charged interest
• That interest is an added cost added to the break-even cut-off grade
– Early in the life of the mine the interest charge is high so the cutoff grade is high
– Later in the mine life the remaining material has little value so
the interest charge is small and lower grade material makes
sense
– The result is a declining cut-off grade that is optimized to
maximize the NPV
Lets Try to Do It
Fire-Up MineSight Compass
On the Menu Tab
Pick the MSEP group (MSEP is for
MineSight Economic Planner)
Scroll Through the Program List
and Pick VALP
The First Panel Controls the Block
Model and Areas Examined
Tell it where your block
Model is that it will work
With.
Click the next panel when you want to move on.
If your block model is
Large compared to the
Area where the pit is at
You may want to limit
Which parts of the block
Model are examined to
Speed up execution.
(often in our cases we will
Take the defaults which
Are to look at the whole
Block model).
Tell It Where to Find the Surfaces
This must be the specialized file 13 that contains your pit shell surfaces that
Represent the push-back sequence you developed in MSOPIT.
Give the Program Your Push-Back
Sequence
When you ran MSOPIT you put each pit in your mining push-back sequence into
A pit surface number from 0 to #51. List those surface numbers in expanding pit
Order. (Note that you do not have to have numbered your pits any particular way)
Set the Summary Information
Enter the number of pits that represent your development from the smallest
Pit to your ultimate pit.
What’s This Rationalize Pits Crap?
VALP will not let you unmine rock once you mine it (ok neither will real life).
VALP thus requires that each successive pit contain completely all pits mined
Before it. Depending on how you created the pits pushbacks it might be possible
That you having a little rounding error where some material from a previous push
Back is not 100% contained in a subsequent push-back. This will cause the program
To crash. By checking the rationalize pits box you instruct the program to check
All your pit surfaces and if any later push-backs unmine previously mined rock they
Later pit will be adjusted so this does not happen. It’s a good CYA maneuver to check
MineSight Block Model Stuff
MineSight Uses Regularly
Sized blocks for its
Block model. This
Makes routines run faster
And uses memory better
Than if some blocks
Are subdivided into
Smaller blocks (called
Sub-blocking and used
By some other programs).
The weakness is that a
MineSight block may well
Be bigger than an ore
Feature – example a
Block at the surface where
70% of the block is above
The surface.
Coping with Blocks too Big for
Features
• MineSight uses a topo% or rock% or some
other variable with a name of your choice
to indicate what % of a block is actually
rock
– Thus that block that was 70% above the
surface has a rock% of 30% since only 30%
of the blocks volume is actually rock
Problems with Veins
• What happens if a vein is 3 ft thick and a
block is 40X40X40.
– Obviously even though the block contains
valuable ore, only a small part of the block is
actually ore
– MineSight keeps track of this with an item that
says how much of the rock is ore (often the
variable in the block model is called ore%)
Handling Both Ore and Rock %
• Suppose a vein goes through a surface
block and only 30% of the block is rock
and only 33% of the rock is ore
– We would get our ore a rock%*ore% or
30%*33% = 10% of the block volume is
actually ore.
• But what if someone clipped the blocks to
topography ore we are mining a vein and
we will leave the footwall and hanging wall
waste behind?
Clipped Topography
• If 70% of the block is already gone then
the correct ore tonnage is 33% - not 10%
• If we are going to mine ore and leave the
footwall and hanging wall behind we will
only mine 33% of the block and leave the
waste behind.
Telling MineSight About the
Problem
Tell it to “Take Ore First”. Then when it mines the vein it will get mining costs for
33% of the block and leave the rest behind. Or when 70% of the block is already
Clipped away instead of doing rock%*ore% it will just use ore% to figure out how
Much of the block to mine as ore.
Tell VALP Where To Find Its Rock%
Item
Normally MineSight calculates the % of a block that is rock by looking at the
Gridded surface in your file 13. But perhaps you used a smooth surface and stored
The rock percent in your block model. Tell MineSight it can read the topo% (rock%)
Out of the block model.
Then tell it which variable in the block model has that rock percentage in it or should
Be used by the routine to store the rock %.
Now About That Optional Items List
Of course optional item means the program will run fine if you put nothing at all
Down here.
When Would I Use It?
Not all ore is equally certain. In fact we
Will not know exactly whats in the earth
Until we have dug it out and processed it
(and only then if we keep good records).
Sometimes we have very good information
And we are very sure what we have.
We call this Measured – coded 1
We may think the ore is there but not be sure – we call this Indicated – coded 2
Sometimes the drilling suggests that ore should be there – we call this inferred
Coded 3
Sometimes with a “Hale Mary” and a lot of hope we believe ore might be there. This
Is beyond just inferred – its faith ore coded 4
Sometimes we don’t have a clue whats there coded 5 for unknown
How Sure Do You Have To Be
Before You’ll Make It Your Mine
Plan?
You can tell VALP to only bet economics
On ore you are sure about. Commonly
You might say to only count on ore that
Is clearly indicated. In other words don’t
Count on anything with a code greater
Than 2.
I can give this order by telling the program
What parameter in my block model tells
Me how sure I am, and then what is the
Least certainty I will accept for planning
Purposes.
Note – in order for me to have this option the people who built my block model have
To have not only predicted ore grades for me. They must have coded into the block
Model how sure they are of the result.
Suppose I Am Remining an Area
Where Some of the Rock is already
gone?
I can tell the computer what
Part of a block may have
Already been mined (if it is
Coded in my block model).
Tell the computer which
Variable in the block model
To look at for mined out
Percentage.
This might happen if I am surface mining coal that was previously auger mined or
Room and pillar mined.
What If I Want to Make Sure the
Routine Does Not Mine Certain
Ground
With a little planning you probably
Kept your pit shells out of no mining
Allowed ground to begin with.
If not you can tell it that it cannot mine
Blocks that have a positive value.
Just tell it which variable in your block
Model contains a do not mine
Restriction code (a positive number).
Handling Mixed Ore and Waste
Blocks
Ore and Waste in a Block
Might have different density
Or a different mining cost.
You can store this
Information in a block
Model, but you have to
Tell the computer which
Variables contain this
Information.
This Panel Is Exactly Like the One
You Know and Love from MSOPIT
Since You Are Optimizing Cut-Off
Grades You Need a Panel on CutOff Grades
The computer needs to know what “grade” item in your block model to use when it
Evaluates Cut-Off Grades.
Consider a Copper Mine
• Suppose the percent copper were
contained in a block model variable called
Cu (Since you assign names to block model variables, exactly
what it is called is up to you)
• The program will systematically check
economic results at a series of cut-off
grades you pick
– You will pick the lowest Cut-Off Grade
– The increment by which to increase the cut-off
grade
– And the number of different Cut-Off Grades to
try
Where to Enter Things
Here you identify
Your cut-off grade
Variable
Here you enter the
Lowest Cut-Off
Grade you would
Consider
Here you enter the number of
Cut-Off Grades to Try
Here you enter the
Increment by which
To increase the
Cut-Off Grade
The Poly-metallic Problem
• Many ore deposits gain their value by combining
the earnings of several minerals
– For example Copper deposits are often
•
•
•
•
Copper and Molybdenum
Copper and Gold
Copper, Lead, Zinc, and Silver
Copper and Cobalt
• A cut-off grade on one element would ignore the
contribution of the other elements
A Problem Solution
• Equivalent Grades
– You may be able to convert the grade of one metal to a grade of
another
• Suppose a block contains 0.3% Copper and 0.1%
Molybdenum
– Suppose that copper sells for $3/lb and molybdenum for $9/lb
• Moly is worth 3 times as much as copper
– Therefore 0.1% moly equals 0.3% copper
• Convert Moly to an Equivalent amount of Copper
– Add them up 0.3% Cu + 0.3% Equiv Copper = 0.6% copper
• There is a separate slide show on how to add equivalent
grades to a block model
The Problem With a Solution
• While getting a price ratio is straight
forward – different minerals may have to
be processed in very different ways – and
at very different costs and recoveries
– It is possible for a block to contain moly that is
not economic to recover at all
– Discerning such things requires extensive
review of recoveries and economics that
would be tedious (at best) for a block model
that may have a million blocks
The Value Per Ton Solution
• When you run MSOPIT you have the ability to
enter complex process paths, recoveries and
economics for many grade items.
– You also have a panel that allows you to save the
value per ton of rock back into the block model
– Save back the value of the block excluding mining
costs (what you do with a block after its dug out of the
ground is a function of the processing costs – if you
had to mine it to get to other ore your not going to
throw away money you could make having a tantrum
over money you’ve already spent).
I Can Then Run a Cut-Off Purely
on post mining profit per ton
Obviously in this
Case I would never
Set the base as
Less than the 0
Break-even.
Note I have picked the block model item where I saved the value per ton as my
Cut-Off Grade item.
Scheduled Tons
The computer will look to mine so many tons at a time for scheduling purposes. In
General you will get the best balance of speed and precision if you pick about
1 weeks production. Suppose I mine 50,000,000 tons a year and run the mine 50
Weeks every year. 50,000,000/50 = 1,000,000 tons. But Wait! The blank asks
For k-tons (ie thousands of tons). 1,000,000/1,000 = 1,000. This is the value I would
Enter here in this case.
You Need A Discount Rate to Do
An NPV
Most often the planning time unit for long range planning will be 1 year. (It could be
A longer or shorter time). Take the interest rate for that standard time period and
Enter it here. A common discount rate for Mining is 15% per year.
You Remember That In Order to Charge
Economic Rent Each Year You Had to Know
How Much the Mines Future Earning Were
Worth
But you won’t know that till you’ve done the calculation. MineSight does repeated
Iterations till the results converge. You set the limit on the number of iterations. It will
Most likely converge well before 2,000 is reached.
You Can Also Set Variable Costs
By Bench
It includes the ability to do variable mining costs by bench which will activate
Another panel
Holly Crap! – Whats This?
Actually all it is is where you tell the computer what capacity you have for your
Various processes.
Note That Here Is Your List of
Processes
It’s the same process list you filled
Out on an earlier panel
You Need to Enter the Capacity of
Each of Your Processes Per Time
Period (usually 1 year)
You can pick the units for your process capacity and then enter the amount of
Material each process can handle in each planning time unit (usually 1 year)
The Mystery of the Check Boxes
If you are using that process click the use check box (more on why you might
Not check something coming up)
Some processes have a lot of money invested and you want the full capacity of
That process to be used each year (your mill and other processes that cost a lot to
Build will likely be checked). Check this as a “rate” process.
Explain “Rate” Process
• A Rate Process is a process that you demand be
kept running at capacity
– Everyone has to have at least one rate process to tell
the computer they want to run the mine and will not
accept excuses
• Why would I be touchy about using a process to
its capacity limit?
– Suppose I build a Mill for $200,000,000.
• That money is earning interest and getting taxed and
maintained whether you use it or not
• Its probably costing you $3,000 an hour just to sit there
– Can you afford to have an asset like that just sitting around
idle?
– (It will financially eat you alive if you do)
The Capacity Totals
How many tons of rock
Can your fleet haul and
Your mining equipment
Blast and dig up in any
One time period (usually
1 year). You
Need to tell the
Computer.
Sometimes you may
Have a separate
Equipment fleet for
Moving ore. (Mining
Capacity is total ore and
Waste). Usually your
Ore Mining Capacity is set equal to the sum of your rate controlling processes but
It does not necessarily have to be.
Note that the units are 1,000s of tons (ie ktons)
Another Note On Mining and Ore
Capacity
Think about how
Optimizing a cut-off
Grade works. If you dig
Up a bunch of material
But only process part
Of it you can select only
The best for processing.
This improves NPV
Potentially.
Note that unless I have
More mining capacity
Than needed to keep
My ore processes
Busy I will have no
Chance to optimize
My cut-off grade.
The Problem of Changing Capacity
• Sometimes people will start one part of an
operation before another
– For example someone might start mining
copper ore from the oxide cap and leach the
ore while a more complex sulfide floatation
mill is being built.
• Starting a mine involves a lot of capital that starts
charging interest as soon as its taken. Starting an
early payback cash flow will often improve the
project economics
Entering This in VALP
I could enter the year
I start my leach
And the year my
Sulfide mill comes
On line and then
Check only the leach
And waste processes
For that time period.
VALP Allows Me to Have Different Time
Periods With Different Capacities
Other Time Period Uses
• One way to increase the NPV of a project is to
delay building full capacity
– Later capacity additions can then be paid for with the
mines own cash flow instead of investor dollars that
have steep rate of return demands
• Sometimes as the pit gets deeper you have to
change the fleet capacity
– For example total mining capacity might increase (to
handle the increasing strip ratio)
– While ore mining capacity stays the same.
That Just Leaves the Capital
Investment Box
The bigger the mill
Or mine capacity, the
More the equipment
Costs. You can enter
That cost here.
If you do then
MineSight will
Calculate NPV as
NPV of earnings –
NPV of capital
Investment.
That makes sure you
Get the real NPV of
A particular scenario.
But it does not change any of the optimizing procedures (because the optimizing
Procedure is working on making NPV of earnings as large as possible). Capital
Investment is not in any of those equations.
You Might Want to Leave Capital
Investment at 0.
• NPV is not a good way to compare investments
of different size
– Big projects will tend to have higher NPVs than
smaller projects
– But bigger may not be better
• A better way to optimize the size of a project is
PVR
– PVR is NPVearnings/NPV investment
– It tells you how many dollars you get back (after
interest) for every dollar you put in.
Doing PVRs with VALP
• Set the Capital Investment at 0
• Then VALP will return for you
NPVearnings
• You then do NPV investment
• Now you can do PVR =
NPVearnings/NPVinvestment
– Get the program to calculate the numerator
for you (it’s the tougher one to calculate)
What Happens to the Low Grade?
In optimizing cut-off grades the idea for improving NPV is to process high grade
Material first to increase early year profits. Mother nature does not always cooperate.
That early year high grade ore probably was accompanied by low grade ore. What
Happens to that low grade?
1- You might just throw it in the waste pile
2- Or you might stockpile it for later processing after all the good stuff has
had its turn first. - That’s what this Stockpile Panel is for!
First We Identify Whether We Will
Have a Stockpile for a Process
Checking use means “yes I will stockpile my low grade”. No check mark means
The low grade will be discarded.
Note that it would be hard to explain why one would have a stockpile for
Material being sent to waste.
Stockpiles Aren’t Free
• Suppose I send some rock to a low grade ore
stockpile instead of a floatation mill?
– I will have to send it to a different location
• That could mean an increase or a decrease in my haul costs.
– I may have to position it with a dozer or stacking
conveyor
• That might cost me something (or maybe I would have done
about the same thing at the mill so there really is no cost
different)
– Finally when I process it later I will have to dig it out of
the pile, load it in the truck and haul it to the mill
• I know that not free (rehandle is seldom less than 25 cents a
ton and often distinctly more).
– Add up my net cost increase per ton for stockpile
handling and recovery from the stockpile.
Enter the Cost Per Ton of
Stockpiling
More Stockpile Hickups
• If I end up processing my low grade
stockpile at the end of the mine life
– That means I will have to keep mine offices,
guard sheds, and a mill superintendent
working
– These types of costs are a function of time –
not tonnage processed
• When I process the tonnage I have to make
enough profit on the low grade rock to pay the
fixed costs of keeping the operation open.
Enter that Number Here
Ok – I may end up splitting those costs between ore and leach or other involved
Processes. The idea is that I will not keep a process open to process low grade
Ore unless the low grade ore can generate enough money to pay the fixed cost
Of keeping the process open.
Note That I Can Also Define Time
Intervals for My Stockpile
Operations
I might not have a mill stockpile
If I had no mill?
Enter the first year in which
Some stockpile costs or
Availability will occur
Then enter the last year
I can add additional time
Periods as needed.
The Audit Options Panel is the
Same as in MSOPIT
The Output Panel is Similar to
MSOPIT but with Fewer Options
It tells you where
Its output
Reports are
going
You can save for
Every block
What pushback
It was in, what
Process it went
To, and what
Year it happened
(You don’t have
To save this).
Of Course You Know How to
Run the Procedure