Optimal production scale of open pit mining operations with uncertain metal supply and long-term stockpiles

An open pit mining operation consists of various stages, and the calculation of the production capacities of these stages depends upon the available supply of ore (mineralized material of economic value) and waste material. Cutoff grade is the criterion that specifies the amount of ore and waste. The material with grade equal to or higher than the cutoff grade is classified as ore. The material with grade less than the cutoff grade is considered waste. While this explains the link between cutoff grade theory and the calculation of production capacities, the majority of optimization models for finding production capacities not only disregards this relationship but also ignores expected variations and uncertainty in metal content or the available supply of ore and waste material.     

Evaluating mine plans under uncertainty: Can the real options make a difference?

Over the last few years, many studies have presented the real options valuation (ROV) as a promising technique of valuing natural resource investments under conditions of uncertainty. Apart from the common conclusion that the ROV is better than the conventional net present value (NPV) method in integrating the value of management flexibility and proper handling of cash flows risk, there is a lack of procedures for testing the usefulness and advantages of the ROV over the static NPV method in practice. Arguably, it is not yet clear whether the ROV can deal with the complexity of mining projects and whether it can really be applied to make decisions that improve project value.     

Assessing the impact of driverless haul trucks in Australian surface mining

Australia has been a leading mining nation and its mines continue to attract substantial investment due to its strong mineral endowment, mining tradition and high skills base. In recent years Australian mining companies have been facing higher labour costs, which need to be offset by other savings. Automating mine-site machinery offers one potential source of such savings.Underground mines pioneered automated technology largely for safety and mine accessibility reasons and to reduce operating costs. Yet these operations now represent a much smaller portion of the total ore tonnes mined due to the changing mining techniques meaning larger lower grade deposits are becoming economic. It appears the future of mine automation will be directed by surface mining as this maturing technology finds further applications above ground and in the next decade large scale open pit automation trials gain more momentum.This paper assesses the implications of introducing driverless haul trucks in a typical large remote Australian open-pit mine. Such automation will save employee and associated costs, increase operational productive hours and ultimately will reduce mine site workforce numbers. While there will be fewer jobs per mine, with reduced costs and higher productivity some previously uneconomic mines may again be profitable.The social implications of greater mine site automation are the reduction in population of remote mining towns and a decrease in the lower skilled labour requirements for the mining sector. There will be an increase in fly-in fly-out mining operations and companies will establish remote control centres for automated mines in larger cities. This may decrease overall labour requirements and so reduce employment in the sector; therefore, the government should be mindful of implementing policies that ensure a fair return on the economic rent of mineral leases.     

Incorporating environmental issues into optimum cut-off grades modeling at porphyry copper deposits

Cut-off grade is defined as the grade which discriminates between ore and waste within a given orebody. Determination of a complete optimum cut-off grade policy is a very important function during mine life. Using the modified optimum cut-off grade model presented in this paper not only the net present value of a porphyry copper mining project is maximized, but also the adverse environmental impacts of the project are minimized simultaneously. This methodology is more effective in long-range planning. For showing the effectiveness of the model, two scenarios are considered in a hypothetical deposit and the results show that incorporating the modified optimum cut-off grade policy, the net present value will be increased by 3.6% in comparison with the Base Case.     

Global trends in gold mining: Towards quantifying environmental and resource sustainability

In recent years, due to public concern over perceived and actual environmental impacts, the global mining industry has been moving towards a more sustainable framework. For gold mining, there are a number of fundamental issues with regard to assessing sustainability. Commonly perceived as a finite and non-renewable resource, long-term gold production trends include declining ore grades and increasing solid wastes (tailings, waste rock) and open cut mining. Conversely, core sustainability issues include water, energy and chemical consumption and pollutant emissions—also known as ‘resource intensity’. It is important to recognise the links between gold production trends and resource intensity, as this is critical for understanding future sustainability challenges. This paper links data sets on historic gold mining production trends with emerging sustainability reporting to estimate resource intensity, demonstrating the sensitivity of ore grade for gold production and sustainability. Final judgement of the sustainability of gold mining must take account of the sensitivity of the ore grade in the resource intensity of gold production. This has implications for environmental policy and sustainability reporting in the gold mining sector.     

The Selebi-Phikwe Nickel/Copper Mine in Botswana

The development of the Selebi-Phikwe nickel/copper mine from its inception to the commencement of production and the role of the various parties in the financing of the project are described. The project was launched with every expectation of financial success by the Government of Botswana and the mining companies involved. Unfortunately, from the beginning it was plagued by technical difficulties which led to cost overruns and by falling nickel/copper prices which led to negative cash flows. Shortages of capital and cash flow difficulties necessitated three separate re-structurings of the financial package.     

National benefits,local costs? Local residents' views on environmental and social effects of large‐scale mining in Chingola,Zambia

This study examined the environmental and social effects of large‐scale mining in Chingola, Zambia. Data was collected through semi‐structured interviews with 164 residents living close to Zambia's largest open pit mine, key informants and desk analysis of secondary data. Quantitative data was analysed using the chi‐square test, one sample T‐test and two sample Z‐proportions test, while qualitative data was analysed using content analysis. Results show that the residents reported being most affected by sulphur dioxide air emissions and noise pollution due to the proximity of the copper smelter and heavy moving machinery to their residences. The residents received domestic water containing rust and copper ore particles from the water utility company which draws raw water from the mine. Although the mine was a source of employment for locals, over 4,000 jobs (representing a 33% decrease) have been lost over a period of 4 years, negatively affecting the local economy. Mine management attributed the job losses to high production costs and mechanization of mining processes. The residents perceived the job losses to have led to crime, alcohol abuse and prostitution among youths as well as a general increase in poverty levels. Analysis of air emissions data from the mine found elevated levels of dust, cadmium, copper and lead pollutants. Key informants from Nchanga Mine reported implementing bioremediation to reduce soil contamination by the heavy metals and recycling SO₂ to produce sulphuric acid. The study recommends an increase in social corporate responsibility from the mine management to ensure residents derive more substantive benefits from their proximity to the mine.     

An uncertainty based multi-criteria ranking system for open pit mining cut-off grade strategy selection

Cut-off grade strategy (COGS) is a concept that directly influences the financial, technical, economical, and environmental issues in relation to the exploitation of a mineral resource. Despite the simple definition of cut-off grade, the COGS problem is one of the complex and complicated problems in the mine planning process. From the optimization point of view, the COGS with an objective of maximizing the present value of future cash flows is a non-linear and a non-convex problem that even in its deterministic form can be solved using approximate optimization methods. This optimization problem will also be more complex and complicated under uncertainty conditions. This paper proposes an uncertainty based multi-criteria ranking system to investigate the problem of COGS selection considering metal price and geological uncertainties. The proposed system aims at selection of the best COGS among technically feasible alternative COGSs under uncertainty circumstances. Our developed system is based on integrating metal price and geological uncertainties as well as operating flexibility to close the mine early. We incorporate this operating flexibility into the proposed system using a Monte Carlo based real options (RO) valuation model. For this purpose, in addition to the expected value, other risk criteria are considered to rank the alternatives. These risk criteria include abilities of strategies in producing extra profits, minimizing losses, and achieving the predefined goals of the production. In this study, the technically possible COGSs are generated using the Lane comprehensive algorithm. To demonstrate the effectiveness of the proposed system, we utilize data of an Iranian gold mine. Results show that the proposed system outperforms conventional methods in the sense that it shows significantly lower average mis-ranking than the other methods and also selects a strategy with a higher value. The sensitivity analysis of the proposed system relative to the gold price shows that the system is highly dependent on the parameters of the stochastic process used to model the evolution of the metal price. Therefore, special consideration should be given in estimating stochastic process parameters.     

Valuing uncertain asset cash flows when there are no options: A real options approach

The real option valuation method is often presented as an alternative to the traditional discounted cash flow (DCF) approach because it is able to quantify the additional asset value arising from flexible asset management. However, these two valuation methods differ on a more fundamental level: their approach to determining the effects of cash flow uncertainty on asset value. Real option valuation adjusts for risk within the cash flow components while the DCF method discounts for risk at the aggregate net cash flow. This seemingly small difference allows the real option method to differentiate assets according to their unique risk characteristics, while the conventional DCF approach cannot.This paper presents an overview of the real options and conventional DCF frameworks for valuing uncertain cash flows. To emphasize the approaches' different treatment of risk we assume an absence of managerial flexibility. Using simple algebra, this paper demonstrates that the traditional DCF method fails to adequately discount net cash flow risk, no matter what discount rate is used. Finally, in a stylized mining example we show that DCF rules would lead a developer to forego $24.5 million in value creation, at a profitability index of 1.49, by making a poor investment decision.     

RESERVOIR OPERATION ANI EVALUATION OF DOWNSTREAM FLOW AUGMENTATION1

ABSTRACT: Operation of a storage‐based reservoir modifies the downstream flow usually to a value higher than that of natural flow in dry season. This could be important for irrigation, water supply, or power production as it is like an additional downstream benefit without any additional investment. This study addresses the operation of two proposed reservoirs and the downstream flow augmentation at an irrigation project located at the outlet of the Gandaki River basin in Nepal. The optimal operating policies of the reservoirs were determined using a Stochastic Dynamic Programming (SDP) model considering the maximization of power production. The modified flows downstream of the reservoirs were simulated by a simulation model using the optimal operating policy (for power maximization) and a synthetic long‐term inflow series. Comparing the existing flow (flow in river without reservoir operation) and the modified flow (flow after reservoir operation) at the irrigation project, the additional amount of flow was calculated. The reliability analysis indicated that the supply of irrigation could be increased by 25 to 100 percent of the existing supply over the dry season (January to April) with a reliability of more than 80 percent.     

The influence of geomorphology on the role of women at artisanal and small‐scale mine sites

The geologic and geomorphic expressions of a mineral deposit determine its location, size, and accessibility, characteristics which in turn greatly influence the success of artisans mining the deposit. Despite this critical information, which can be garnered through studying the surficial physical expression of a deposit, the geologic and geomorphic sciences have been largely overlooked in artisanal mining‐related research. This study demonstrates that a correlation exists between the roles of female miners at artisanal diamond and gold mining sites in western and central Africa and the physical expression of the deposits. Typically, women perform ore processing and ancillary roles at mine sites. On occasion, however, women participate in the extraction process itself. Women were found to participate in the extraction of ore only when a deposit had a thin overburden layer, thus rendering the mineralized ore more accessible. When deposits required a significant degree of manual labour to access the ore due to thick overburden layers, women were typically relegated to other roles. The identification of this link encourages the establishment of an alternative research avenue in which the physical and social sciences merge to better inform policymakers, so that the most appropriate artisanal mining assistance programs can be developed and implemented.     

The Contribution of Small-Scale Mining to World Mineral Production

There is no agreement as to the definition of a small-scale mine. It is proposed that for a developing country a small-scale mine be defined as a producer (often sporadically) of limited amounts of minerals for deposits with a few known ore reserves, and of a character not readily amenable to mass mining. Output is won without appreciable use of mechanical energy and by exploitation of labor under leadership which sometimes lacks technical, managerial or entrepreneurial skills. A mine producing less than 100 000 tons of ore is considered to be a small-scale mine. Using these criteria and worldwide production data, an estimate of the contribution of small-scale mining to world mineral output is made. The estimate is 16%.     

Surface iron ore mining in eastern India and local level sustainability

Mining often brings certain irreversible changes to the surrounding environment. Different types of natural resources mostly surround the mines. Degradation of natural resources around the active mining zone may adversely affect the local economy. After cessation of mining operations local people may no longer be able to sustain their livelihood from the surrounding degraded natural resource; there are chances that the economy of the region will be shattered. The paper deals with this problem of local level sustainability of iron ore mining in eastern India. This problem is examined in the light of different theories of sustainability and national policies. By using household survey data, sustainability of iron ore mining in this region is tested. Substitution of depleting natural capital with other forms of capital can promote long-term sustainability of the local economy. This necessitates certain policy interventions to induce the mine operators to reinvest some part of their resource rent in the natural capital of the region.     

Geological supply and economic demand: The unresolved equation

Whereas the ultimate world supply of minerals is controlled by geological factors, the actual supply at any particular time is controlled by economic factors. Mineral production is a function of investment in exploration, mining, and processing - and research in these fields. Given the long lead time between a decision to explore and actual production from any deposit found, the increasing difficulty of finding deposits in the well prospected parts of the world, the political barriers to exploration in the less developed countries, the energy barriers to mining and processing ever lower grade ores, and the lengthy time required to develop new exploration, extraction, and processing techniques, adjustments in supply in response to changes in demand cannot be assumed to be automatic.     

Modelling mining: Open pit copper production in British Columbia

Open pit copper mining in British Columbia is modelled to examine how different price levels affect rates of output and stocks of reserves and to consider the existence and distribution of economic rents. The model depicts the influence of different economic circumstances on production plans, for example, with respect to scale of operations and cutoff grade. To achieve this it represents a balance between the high level of abstraction which has characterized the writing of most economists and the degree of detail and complexity required of models used by operating mines. The model provides a basis for the study of the consequences of alternative forms of taxation, a subject to be pursued in subsequent articles.     

Hydrologic Effects of Surface Coal Mining in Appalachia (U.S.)

Surface coal mining operations alter landscapes of the Appalachian Mountains, United States, by replacing bedrock with mine spoil, altering topography, removing native vegetation, and constructing mine soils with hydrologic properties that differ from those of native soils. Research has demonstrated hydrologic effects of mining and reclamation on Appalachian landscapes include increased peakflows at newly mined and reclaimed watersheds in response to strong storm events, increased subsurface void space, and increased base flows. We review these investigations with a focus on identifying changes to hydrologic flow paths caused by surface mining for coal in the Appalachian Mountains. We introduce two conceptual control points that govern hydrologic flow paths on mined lands, including the soil surface that partitions infiltration vs. surface runoff and a potential subsurface zone that partitions subsurface storm flow vs. deeper percolation. Investigations to improve knowledge of hydrologic pathways on reclaimed Appalachian mine sites are needed to identify effects of mining on hydrologic processes, aid development of reclamation methods to reduce hydrologic impacts, and direct environmental mitigation and public policy.     

Tracking changes in the global impacts of metal concentrate acquisition for the metals industry in Finland

This article considers the environmental impacts and the governance framework of the domestic and international supply of iron, zinc, copper and nickel concentrates smelted and refined in Finland. The metals industry in the country is heavily dependent on imported concentrates, and the research is thus focused on defining the level of impacts related to mining and mineral processing abroad, and the change in the impacts between 2000 and 2010. The estimations of environmental impacts are based on waste minerals and CO_2eq emissions, and the quality of governance in the set of indicators measuring different aspects of governance. The total amount of waste minerals and CO_2eq emissions related to metal concentrates decreased over the ten-year period. At the same time, the quality of governance improved in all concentrate groups except nickel. Ore grade, mine type and transportation distance appear to be the most influential factors on environmental impacts. The results suggest that the country of origin can have a noticeable effect on the environmental impacts and the quality of governance of the mining and processing of metal concentrates.     

矿业环境治理的经济学分析

当前，我国矿山环境问题突出。重点分析了矿山开采环境问题的特殊性，这些特殊性包括矿业对地域区位的依赖性、破坏的大量不确定性以及不可逆性。根据特殊性，讨论了环境经济学的适用性。不确定问题转化为确定性问题或者风险问题依赖于技术层面学科（如矿山环境影响评价和矿山环境地质学等）的支撑。最后指出随着这些技术学科的发展，矿山环境问题就会更精确地纳入成本——效益分析框架，从而发挥更大的作用。     

Characteristics of coal mine ventilation air flows

Coal mine methane (CMM) is not only a greenhouse gas but also a wasted energy resource if not utilised. Underground coal mining is by far the most important source of fugitive methane emissions, and approximately 70% of all coal mining related methane is emitted to the atmosphere through mine ventilation air. Therefore, research and development on mine methane mitigation and utilisation now focuses on methane emitted from underground coal mines, in particular ventilation air methane (VAM) capture and utilisation. To date, most work has focused on the oxidation of very low concentration methane. These processes may be classified based on their combustion kinetic mechanisms into thermal oxidation and catalytic oxidation. VAM mitigation/utilisation technologies are generally divided into two basic categories: ancillary uses and principal uses. However, it is possible that the characteristics of ventilation air flows, for example the variations in methane concentration and the presence of certain compounds, which have not been reported so far, could make some potential VAM mitigation and utilisation technologies unfeasible if they cannot cope with the characteristics of mine site ventilation air flows. Therefore, it is important to understand the characteristics of mine ventilation air flows. Moreover, dust, hydrogen sulphide, sulphur dioxide, and other possible compounds emitted through mine ventilation air into the atmosphere are also pollutants. Therefore, this paper presents mine-site experimental results on the characteristics of mine ventilation air flows, including methane concentration and its variations, dust loadings, particle size, mineral matter of the dust, and other compounds in the ventilation air flows. The paper also discusses possible correlations between ventilation air characteristics and underground mining activities.     

Mineral sector technologies: policy implications for developing countries

Over the past 20 years the mining industry has been a leader in the conception and application of advanced technologies. New thinking about earth tectonics as well as advances in geophysics, geochemistry, remote sensing, data processing and communications permit more effective and accurate geological exploration. Mechanization, more durable materials and more powerful explosives, as well as computer aided mine design and management have led to substantial gains in productivity. Minerals processing has similarly seen significant technological advances including solvent extraction, electro-winning of metal ores, bath smelting techniques, cyanide leach to produce gold, and bioleaching of sulphide and refractory ores. New technologies have dramatically improved mine health and safety as well as making possible control of water and air pollution. Improved communication and transport have stimulated competition and fostered the internationalization of mineral commodity prices. As these technologies are essentially market driven, developing countries should continue current efforts towards economic liberalization. Promoting investment in mining entails lifting many of the restrictions and taxes that can hinder efficient exploration and development. We examine some developments that have greatly increased the efficiency of exploration, mining and marketing. To obtain maximum benefit from many of these technologies requires governments to adopt a wide range of new policies which are examined in some detail.