Cutoff grade specifies the available supply of metallic ore from an open pit mine for the multiple processing and refining streams of the corresponding mining complex. An optimal cutoff grade strategy maximizes the net present value (NPV) of the open pit mining operation subject to mining, processing and refining capacity constraints. Even though the quantities of material flowing from the mine to the market are influenced by the expected variation in the available metal content or inherent uncertainty in the supply of ore, the majority of cutoff grade optimization models not only disregard this aspect and may lead to unrealistic cash flows, but also they are limited by addressing an open pit mine operation with a single processing facility. The model proposed herein determines the optimal cutoff grade policy based on a stochastic framework which accounts for uncertainty in supply of ore from the pit to the multiple ore processing streams. An application at a large-scale open pit mining operation develops a cutoff grade policy along with a portfolio of mine, process, and refinery production rates. Owing to the geological uncertainty, the approach addresses risk by showing a difference of 14% between the minimum and maximum production rates, cash flows and NPV.
Published September 2013 , 16 pages