RSE4010 Mine planning and scheduling
Resources Engineering, Faculty of Engineering
RSE4010 Mine planning and scheduling
Assignment 1
Due: Week 7, Friday Worth 18%
Project – Mine planning using a hypothetical copper deposit
The Project Statement:
Taking into account the following input parameters, you are required to develop ultimate pit
limits and production plans of a small-scale copper deposit (primary ore = copper; secondary
ore = gold).
Economic parameters:
Copper price (pcu) = $5000 / tonne of Cu
Copper selling or marketing and refining cost (rcu) = $1300/tonne of Cu
Gold price (pau) = $50.00 per gram of Au
Gold selling or marketing and refining cost (rau) = $2.00 per gram of Au
Mining cost (m) = $1.42 per tonne of material
Mining cost adjustment factor (MCAF) = 1
Processing cost (c) = $20 per tonne of ore
Metallurgical recovery – copper (ycu) = 88%
Metallurgical recovery – gold (yau) = 79%
Discount rate = 10%.
Orebody model:
Mining block size = 10m×10m×10m, i.e. bench height = z = 10m
Material density = 1.52 tonne per m3
Number of mining blocks = 2240
Model file = Copper_Deposit.xlsx.
Operational parameters:
Pit slope angle = 45°
Mining capacity = 60,800 tonnes of material per year
Processing capacity = 22,800 tonnes of ore per year.
Tasks:
Please use Microsoft Excel to complete tasks I to IV.
I. [Marks = 10] Given the x, y, z coordinates, develop plan (bench-by-bench) and section
(include only those sections that contain metal content greater than zero on different z-
levels) maps. Use mining block economic value equations to convert the orebody model
into the economic block model.
II. [Marks = 20] Given economic block model, use 1-5 block precedence pattern to develop
ultimate pit limit using floating cone (manual) procedure (however, allow for mining block
mutual support). Calculate:
a. The undiscounted value ($) of the pit.
RSE4010 Mine planning and scheduling
. The quantity of ore, average grade of copper and gold, quantity of waste, and overall
stripping ratio within the ultimate pit limit.
Note: For precedence or slope constraint in tasks II and III, use 1-5 mining block pattern (as
given below):
III. [Marks = 40] Given the ultimate pit limit, operational (mining and processing) capacities
and precedence constraint (1-5 pattern), develop life-of-mine production schedule.
a. Initially, develop a production schedule based on a simple bench-by-bench
sequence (i.e. mine blocks on bench 1, then on bench 2, and so on; no stockpiling
of ore; do not mine from bench below until bench above/cu
ent bench is complete),
and calculate:
i. The discounted value ($) of the operation
ii. Period-by-period quantity of ore, average grade of copper and gold, quantity
of waste, and stripping ratio. Present these figures in both tabular and
graphical forms
iii. Assuming that each period represents a phase (pushback), present a phase-
wise expansion of the pit in plan and selected section maps
. Then, develop a production schedule independent of bench-by-bench sequence, i.e.
ased on next best ore (or value) concept, and calculate items (i)-(iii) in III-(a).
IV. [Marks = 20] Given production schedules in III-(a) and III-(b) a mining company has
acquired the mineral rights of this small scale orebody, and now evaluates the economic
potential of the deposit in terms of project after-tax cash flow analysis, NPV, and IRR.
For both production schedules, before performing after-tax cash flow analysis, multiply
quantity of material mined per year and quantity of ore processed per year by 1000 [for
example; if during year 1, material mined = 60,800 tonne and ore processed = 22,800;
then, new values would be material mined = 60,800,000 tonne and ore processed =
22,800,000 tonne].
a. Assume:
i. Mineral rights acquisition cost (or cost of purchasing the property) of AUD
$1,000,000.00 is incu
ed now (in year 0)
ii. The infrastructure development cost of AUD $2,500,000 is incu
ed now (in
year 0)
iii. The company plans to acquire equipment now (year 0) and replace in years
6. It is expected that the capital cost associated to initial purchase will be
equal to AUD $30,000,000. The company expects a 5% per year escalation
in the capital cost associated to mining and processing equipment. The
depreciation deductions must begin when equipment goes into service in
RSE4010 Mine planning and scheduling
production years 1 and 6 using straight line method over seven year
depreciation life
iv. Concentrate grade = 38%
v. Use cu
ent exchange rate for cu
ency conversions
vi. Smelter deduction and charges: copper metal deduction = 0.46% of Cu value
in $ per tonne of concentrate, smelter charge = US $25 per tonne of
concentrate, transport charge = US $15 per tonne of concentrate, and
efining cost = AUD $250 per tonne of Cu (out of the total of marketing and
efining cost of $1300 per tonne Cu mentioned in economic parameters on
page 2)
vii. Tax rate = 30%
viii. Losses must be ca
ied forward to the next tax year
ix. Mineral royalties = 5%
x. The company is expecting a mine closure and rehabilitation costs equal to
AUD $1,000,000 in the final year of operation. These costs are estimated in
the dollars of the year in which they will be incu
ed. However, as a legal
equirement, the company must invest now (year 0) to ensure AUD
$1,000,000 available in the final year of operation. The company expects a
eturn on this mandatory investment @ 5% per year.
xi. It is expected that the company requires about AUD $3,000,000 of working
capital to support production during initial years.
xii. The company operates on a financial structure of 65% equity and 35% debt.
Therefore, it funds AUD $1,950,000 of its working capital through sale of
its shares, and bo
ows AUD $1,050,000 at an interest rate of 11.5%. The
AUD $1,050,000 debt will be repaid in equal payments during first three
years of ore production (i.e. the payments continue once started in the first
year of ore production). Also, the company expects to recover part (AUD
$1,050,000) of the working capital by salvaging equipment and other
inventories in last year of operation.
V. [Marks = 10] Write an executive summary and present all calculations (worksheets,
drawings/maps, etc.) as an appendix. Please submit a soft copy of the Excel worksheets for
verification of results.
The Project Statement:
Economic parameters:
Orebody model:
Operational parameters:
Tasks: