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Incorporating Geometallurgy Into Strategic Mine Planning

SRK News | Issue 53: Metallurgy and Mineral Processing

A4   |   Letter

The objective of strategic mine planning is to maximise the near-term cash flow of a mining project. A mine operator needs to maximise the discounted cash flow and net present value to help secure low cost financing for mine construction. The operator selects a mining direction and a pit phasing strategy.

Conventionally, the value of each block of ore is calculated from the metal grade, recovery and processing costs and that value drives the strategic mine planning process. Processing costs are estimated on a per tonne basis and combined with the estimated mineral revenue to determine a value per tonne. The areas with the highest value on a per tonne basis are deemed the most desirable to mine first.

However, this process does not account for the fact that not all rock types, alteration zones or mining areas necessarily have the same hardness and grind at the same rate. This mine planning strategy can be improved by incorporating more geometallurgical modelling practices.

To maximise the revenue generated in a finite period of time, the comparative value of each ore block should be estimated on a time basis rather than a tonnage basis: the value could be calculated as cash flow per day, instead of cash flow per tonne.

Consider that a mine planner has two blocks of ore and wants to select the best block to mine first. On a tonnage basis the first block may be worth $100/t and the second is $75/t. Is the first block the smart choice? Suppose that further metallurgical testing indicates that the second block will grind twice as fast as the first. Now the second block will actually generate a better cash flow.

It is not necessary to model a unique processing rate for each block for this methodology to have a positive impact on the mine plan. Simply identifying broader zones of harder or softer ore, be it alteration zones, rock types or mining areas, can materially improve a mine plan.

In addition to strategic mine planning, this same philosophy can be applied to pit optimisation. Many processing costs and general and administrative costs are fixed on a time basis. When we acknowledge that the plant will process more tonnes of one rock type in a day than another, we can see that the effective processing costs will differ. Applying a time based block value in pit optimisation results in an ultimate pit shell which accounts for the higher real cost of hard zones.

Incorporating geometallurgy into strategic mine planning creates the opportunity to exploit softer ores which will produce better cash flow than harder ores.

Grant Carlson:

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SRK North America