This chapter has discussed recommended mine planning processes and indicated how the various cut-off and optimisation processes described in previous chapters might be included. Mine plans and strategies must have a clearly defined goal. If plans are not intentionally derived to deliver a specified corporate goal, the de facto goal of the corporation will become the goal that is implicit in deriving the plan.
In a long-life operation, where there are major lag times between exploration, planning, development or waste stripping and production, plans must be developed in a hierarchy from long- to short-term. Short-term plans should be consistent with but provide more detail than the long-term plans from which they are derived. The long- term or life-of-mine plan (LOMP) is set to achieve the corporate goal and ultimately
15. Similar logic applies in an open pit. Classifying material as ore and waste is made at the pit rim. that some material may have come from near the surface and some from the bottom of the pit is irrelevant. the cut-off does not depend on the depth of mining. Shallower material does not have a lower cut-off than deeper material because of different haulage costs. the haulage cost at the point where the ore–waste decision is made – the pit rim – is a sunk cost and does not come into future decisions. In Lane parlance, it is a mining variable cost, and we know from Chapter 5 that these do not come into Lane’s limiting cut-offs. this assumes that the mining schedule has already been determined. Depth-related costs will, however, affect the optimum mining schedule.
CHAPTer 7 | Cut-off Derivation Methodologies generates value. Once the optimum LOMP is approved, all short-term plans must be developed to deliver that LOMP.
Preproduction studies for a project go through several stages with increasing levels of detail, and potentially different ways of determining cut-offs and other strategic options.
A scoping or conceptual study is typically at an order-of-magnitude accuracy (±30 per cent). Its major purpose is to demonstrate early in the resource discovery that further work is justified. It is therefore only necessary to find one case that proves this. A cut- off must be selected to derive ore tonnages and grades, but there may be insufficient information to rigorously derive one by any of the methods discussed in previous chapters. Some form of full-cost break-even is perhaps the most appropriate method. If there is a reasonable amount of tonnage and grade data, a Mortimer-style analysis might be the preferred option, particularly if the deposit is low-grade. Strategy optimisation is generally unsuitable at this level of study but, if the cases evaluated are not viable and a better case must be found, or if the study’s purpose is to determine what the optimum strategy might be, a high-level optimisation study might need to be conducted.
A prefeasibility study (PFS) should demonstrate to a higher level of confidence (±20–25 per cent) that the project is technically and economically viable. It should evaluate a range of options to ensure that the best is selected for further study. Usually the case selected at this stage will be the one developed if it is proven to be feasible. A full strategy optimisation study should therefore be seen as an integral part of the prefeasibility study.
The feasibility study (FS) is intended to demonstrate technical and economic viability of the project at a level of accuracy sufficient to justify proceeding with the project (typically ±10–15 per cent). The policies identified as best in the PFS, such as production rates and mining and treatment methods, will normally carry forward into the FS, and will only change if more investigations expose previously unidentified problems. However, cut-offs will be recalculated if price and cost projections have changed since the PFS was done. Depending on how much the resulting orebodies change, it may be necessary to completely rework other major strategic decisions. The first part of the FS may need to be an update of the PFS optimisation using the latest data and forecasts to assess whether the major decisions going forward into the FS should be changed.
Detailed engineering is required to convert the principles in the FS into construction and mining plans for practical implementation. With improving knowledge of the mineralisation and updated price and cost forecasts, it may be necessary to revise cut- offs at this stage. With many parameters such as mining and treatment capacities now locked in, simpler cut-off models may be better. If the nature of the deposits and mining methods permit, a Lane-style cut-off optimisation may suit. If not, a Mortimer-style cut- off specification is preferable to a simple break-even analysis. Opportunity cost should also be considered in break-even formulas. It would also be desirable to consider the capacities of the now-defined production stages. Lane-style balancing cut-offs should therefore be identified. If prices have increased significantly, the cut-off should not be depressed in a break-even manner to the extent that ore grades fall too low and product targets cannot be met – a balancing cut-off may be more appropriate.
At an operating mine an integrated planning process is recommended. The process works in a hierarchy from long term to short term. Longer-term plans set the overall strategic direction. Progressively shorter-term plans provide more detail at the front end
of long-term plans. Approvals processes also work from long term to short term. Long- term plans must focus on delivering the corporate goal. Short-term plans must then detail how operations in the near future will help achieve long-term plans.
The strategy options analysis (SOA) evaluates, at a high level, the impacts on value of all strategic decisions that the company can make, both separately and together. A full SOA is not normally done annually but should be reviewed annually as part of the planning cycle to ensure that the approved LOMP continues to be the best long-term plan. Major updates and reworking the SOA should occur approximately every three to five years.
The LOMP is the formal long-term plan for the mine or business. It is selected after conducting an SOA, and is the plan identified as best delivering the corporate goal. It establishes the framework within which all other short-term plans are developed. The LOMP should be reviewed and updated annually as part of the planning cycle, taking account of constraints identified in shorter-term plans or resulting from actual events, and changes in the SOA.
The five-year plan (5YP) forms a critical medium-term link between the high-level strategies in the LOMP and the detailed short-term implementation plans. The 5YP would usually be generated annually, with quarterly time periods reported. It provides sufficient look-ahead time for long lead items to be identified and planned for. Formal approval of the 5YP should be part of the annual planning cycle.
The two-year rolling plan (2YP) provides a higher level of detail and is supported by detailed engineering work at the front end of the 5YP. It would be formally updated quarterly and report activities on a monthly basis. It is a regular ongoing part of the short- term planning process and is not just done once a year as part of the budgeting cycle. Formalising these regular updates requires both operators and planners to regularly look at the effects of current issues up to two years ahead, avoiding actions that may be expedient in the short term but create major problems long term. The appearance of an activity at the end of the 2YP would be the flag for detailed design work to commence. All activities occurring in the first 12–18 months of each 2YP should have been planned in detail, with solutions found for any problems identified.
The annual budget plan is simply the plan for the 12 months of the financial year to be budgeted in the version of 2YP that is created three to six months before the start of the budget year. Its preparation should not require any special attention, since the rolling process of plan and schedule generation and associated approvals ensures that it is realistic, achievable and aligned with the corporate goal. Physical quantities in the realistic and corporate-goal-oriented budget plan should drive the budget costs via cost models, whose detail will have evolved in the same way as the physical plans.
Short-term detailed operational plans, consistent with the 2YP and, when appropriate, the budget, should be developed to ensure that all activities required to implement the plans are scheduled, with all necessary inputs available as required. These would be for three-monthly periods, updated monthly, with time frames of weeks, days or shifts.
Cut-off determination and strategy optimisation would be incorporated in the planning process as follows. The SOA will identify the optimum mine plan. This would be formalised as the LOMP, which will identify not only the immediate cut-offs but important inputs for ongoing cut-off derivation, such as pit limits and pushback staging in open pits, ore boundaries and mining methods underground, mining and treatment
CHAPTer 7 | Cut-off Derivation Methodologies rates, products and the like. These will be the strategic decisions to be implemented between successive strategy optimisations, which may be several years apart.
For an open pit, once mining sequences and capacities of various stages of the production process have been set by the LOMP, most of the conditions required for a successful Lane-style cut-off optimisation have been satisfied. For an open pit, a Lane- style analysis should be used for short-term cut-off optimisation for all time frames – from the 5YP to short-term operational plans. If for some reason Lane’s methodology is not easily applied, a Mortimer-style cut-off specification is preferable to a simple break- even analysis, but a Lane-style opportunity cost should also be considered in break-even formulas. Lane-style balancing cut-offs should be identified as a balancing cut-off will often be more appropriate than a break-even.
Underground, cut-offs define the size and shape of the orebodies, and in many cases, the mining sequence will depend on the nature of the orebodies defined. A Lane-style cut-off optimisation, which in its simple form depends on sequence, depends on the cut- offs. It may therefore be impractical, though, in some circumstances, the iterative nature of a Lane-style optimisation will account for this and other cut-off-dependent inputs. Lane-style cut-off optimisation is most easily applied underground when there is a single production front moving in one direction, with no returning to extract additional ore from parts of the resource that the production front has already moved through. In such cases, a Lane-style analysis should be applied to optimise cut-offs for short-term plans where the overall development rates, ore handling and treatment capacities have been established in the LOMP and long-term plans. Care must be taken to ensure that costs and capacities are correctly attributed to the Lane-style production stages.
In the more common situations where Lane’s simple methodology is not easily applicable underground, a Mortimer-style cut-off will be preferred to a simple break- even analysis for short-term plans. A Lane-style opportunity cost should also be included in break-even formulas. Lane-style balancing cut-offs should be identified as a balancing cut-off will often be more appropriate than a break-even. The time required to change a cut-off in an underground operation, particularly upwards, should also be considered. Short-term responses to fluctuations in prices, costs or other inputs may not be practical.
For both open pit and underground operations, a simple marginal break-even cut-off will only be suitable as an operational cut-off to account for very short-term fluctuations in availability of ore to feed the treatment plant.