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Article in Engineering Optimization · September 2013

DOI: 10.1080/0305215X.2013.819094

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 Engineering Optimization, 2013
http://dx.doi.org/10.1080/0305215X.2013.819094

Stochastic production phase design for an open pit mining

complex with multiple processing streams
Mohammad Waqar Ali Asada *, Roussos Dimitrakopoulosb and Jeroen van Eldertc
Downloaded by [McGill University Library] at 06:02 10 October 2013

a Department of Mining Engineering, Western Australian School of Mines, Curtin University, Kalgoorlie,
Australia; b COSMO Stochastic Mine Planning Laboratory, Department of Mining and Materials
Engineering, McGill University, FDA Building, 3450 University Street, Montreal, Quebec, Canada
H3A 2A7 c Department of Mining and Materials Engineering, McGill University, FDA Building, 3450
University Street, Montreal, Quebec, Canada H3A 2A7

(Received 14 January 2013; accepted 11 June 2013)

In a mining complex, the mine is a source of supply of valuable material (ore) to a number of processes
that convert the raw ore to a saleable product or a metal concentrate for production of the refined metal. In
this context, expected variation in metal content throughout the extent of the orebody defines the inherent
uncertainty in the supply of ore, which impacts the subsequent ore and metal production targets. Traditional
optimization methods for designing production phases and ultimate pit limit of an open pit mine not only
ignore the uncertainty in metal content, but, in addition, commonly assume that the mine delivers ore to a
single processing facility. A stochastic network flow approach is proposed that jointly integrates uncertainty
in supply of ore and multiple ore destinations into the development of production phase design and ultimate
pit limit. An application at a copper mine demonstrates the intricacies of the new approach. The case study
shows a 14% higher discounted cash flow when compared to the traditional approach.

Keywords: stochastic optimization; maximum flow algorithm; mining engineering applications; produc-
tion planning

1. Introduction

An open pit mining complex constitutes multiple open pits, processing streams and products. A
typical open pit produces materials of various categories. This material is fed to the appropriate
processing streams for recovering metal as a valuable product. Owing to the large scale of open pit
mining operations, the optimal long-term planning in the context of production phase design and
production scheduling is a complex technical challenge. Long-term planning of a typical open
pit mining operation involves three sequential steps (Hustrulid and Kuchta 2006): (i) developing
a three-dimensional orebody model that consists of an accumulation of mining units (blocks)
with their available metal content (quality) and tonnage (quantity); (ii) accomplishing production
phase design, i.e. a phase-wise sequence of extraction that reaches the ultimate pit limit or overall
extent of extraction; and (iii) scheduling production of mining blocks within each phase subject
to the physical mining and processing constraints. The outcome of the first step is the economic
value of a mining block, which is calculated using available metal content, tonnage, and economic
parameters such as metal price, marketing or sales cost, mining cost, processing cost and recovery.

*Corresponding author. Email: waqar.asad@curtin.edu.au

© 2013 Taylor & Francis

 2 M.W.A. Asad et al.

The mining blocks are then classified as ore and waste blocks based on the positive and negative
economic values, respectively. Depending upon the geometry of the orebody and the size of mining
blocks, a typical orebody model consists of millions of blocks. The input to the second and third
steps is the economic value of these blocks (Asad 2011). The objective of these steps is to maximize
the net present value (NPV) over the life of the operation (Ramazan 2007). While a mixed-integer
programming (MIP) based production scheduling model combining steps two and three promises
an optimum solution to the long-term planning problem, the size of MIP models—due to the
existence of millions of blocks or binary variables—limits the solution strategies to heuristics
that may lead to suboptimal solutions (Denby et al. 1998; Caccetta and Hill 2003). Consequently,
it is an established practice to divide the long-term planning problem into two sub-problems
declared in steps (ii) and (iii), where the second step identifies the mining blocks included in the
ultimate pit limit, thereby reducing the size of the MIP based production scheduling model in
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step three (Lerchs and Grossmann 1965; Tachefine and Soumis 1997; Whittle 1998; Hochbaum
2001; Hustrulid and Kuchta 2006; Albor and Dimitrakopoulos 2010). The work presented herein
addresses the second step and develops production phase design and ultimate pit limit.
The development of production phase design and ultimate pit limit is possible through con-
ventional (deterministic) or stochastic approaches. The conventional optimization approaches do
not account for geological uncertainty, more specifically, uncertainty in available metal content,
material types, and/or metal recoveries. The underlying assumption in conventional models is that
the inputs are perfectly known. Consequently, these models cannot handle input uncertainty and
utilize an estimated average type orebody model containing single or constant economic value
for a particular mining block (Dowd 1994; Dimitrakopoulos 2011). However, in the presence
of geological and/or financial uncertainty, the implications of economic decisions suggested in
conventional optimization studies may lead to the closure of capital intensive mining projects
(Dimitrakopoulos and Abdel Sabour 2007; Godoy and Dimitrakopoulos 2011).
Stochastic approaches, on the other hand, honour geological and/or economic parameters uncer-
tainty. Accordingly, stochastic optimization models utilize a set of equally probable simulated
orebody and/or economic parameter realizations as an input. Therefore, for a particular mining
block, a set of equally probable economic values are utilized in the optimization process, giving
an opportunity to quantify and manage the risk of wrongly identifying a waste block as an ore
block at the time of extraction (Ramazan and Dimitrakopoulos 2013). However, the detrimental
effects of geological risk to mining projects have been acknowledged and documented, and this
becomes a driving force for the majority of stochastic optimization models to focus exclusively
on geological uncertainty. For instance, Baker and Giacomo (1998) demonstrated that out of 48
mining projects in Australasia, 9 realized reserves less than 20% originally expected and 13 over
20% more reserves than forecasted; with the vast majority of inconsistencies coming from poor
understanding and description of the orebody being mined. For Canada and the USA, Vallee
(2000) referred to a World Bank survey showing that 73% of mining projects were closed prema-
turely due to problems in their ore reserve estimates, and led to severe losses in capital investment.
Recognizing these important facts, Goodfellow and Dimitrakopoulos (2013) proposed a simu-
lated annealing based stochastic model for phase design under uncertainty in metal content and
material types considering multiple ore processing destinations. While the heuristic model pro-
poses a computationally efficient method, it is restricted to modifying or improving an existing
phase design (conventional or stochastic) incorporating uncertainty in metal content and material
types. Montiel and Dimitrakopoulos (2013) account for geological uncertainty in terms of metal
content and material types, as well as multiple processes; however, the simulated annealing based
model develops the production schedule rather than solving the phase design and ultimate pit limit
problem. Alternatively, a stochastic network flow approach is proposed that focuses on the phase
design and ultimate pit limit problem under geological uncertainty in terms of metal content,
material types, and metal recoveries associated with multiple processing facilities.
 Engineering Optimization 3

A directed graph describes the production phase design and ultimate pit limit problem (Johnson
1968; Picard 1976). However, the structure of the graph in a stochastic framework is different
from the graph representing a conventional framework. An input in terms of a set of equally
probable simulated orebody realizations (Goovaerts 1997; Horta and Amilcar 2010; Boucher and
Dimitrakopoulos 2012; Machuca-Mory and Deutsch 2013) as well as the number of ore processing
streams in the open pit mining complex dictate the difference in the structure of the graph.
Meagher et al. (2010) as well as Asad and Dimitrakopoulos (2013) acknowledged the difference
in structure of the graph between conventional and stochastic frameworks. While Meagher et al.
(2010) demonstrated the theoretical background of the open pit mine design under uncertain
supply and demand, Asad and Dimitrakopoulos (2013) utilized the Lagrangian relaxation of the
pit (mine) production capacity constraint and presented an implementation of the maximum flow
algorithm for production phase design under economic and geological uncertainties. However,
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both studies are lacking in their application to an open pit mining operation with multiple ore
processing options.
In this article, the stochastic optimization model given in Asad and Dimitrakopoulos (2013)
becomes a basis for the proposed method, such that the maximum flow algorithm solves a graph
representing the stochastic framework that jointly accounts for multiple equally probable orebody
realizations and ore processing streams. Additionally, as opposed to utilizing the Lagrangian
relaxation of the mine capacity constraint as in Asad and Dimitrakopoulos (2013), the Lagrangian
relaxation of processing capacity constraints has been integrated to develop successive production
phases leading to the ultimate pit limit design. This article contributes a comparison of the proposed
stochastic and conventional approaches through an application at a copper mine. More specifically,
the article (i) describes the structure of the graph representing the stochastic framework, (ii)
develops a strategy for designing production phases and ultimate pit limit by solving this graph
through the maximum flow algorithm, and (iii) compares the production phase design and ultimate
pit limit in the stochastic and conventional approaches.

2. Phase design and ultimate pit limit

Generally, if vi represents the economic value of a mining block i, then a directed graph, G =
(N, A), best describes the phase design and ultimate pit limit problem. Where a mining block i is
represented as a node in the set of nodes N, and A is the set of arcs from node i to i translating the
extraction precedence of a set of successors (i ∈ ξi ) over node i. The mathematical formulation
of this problem is given as (Tachefine and Soumis 1997; Hochbaum and Chen 2000):

max vi xi (1)
i∈N

xi − xi  0, i ∈ ξi , i ∈ N (2)
xi ∈ {0, 1}, i ∈ N. (3)
The solution to this problem lies in finding the maximum closure on the graph, i.e. maximizing
Equation (1) for a set N  ⊆ N containing all predecessor nodes corresponding to the maximum
value nodes. Equation (2) identifies the precedence arcs on the graph and the binary variable xi is 1
if block i is inside the phase or pit (or closure), and 0 otherwise. However, owing to the geological
uncertainty, a number of equally probable economic values are associated with a particular mining
block, requiring a different framework to create and solve the graph.
More specifically, the production phase design and ultimate pit limit considering the uncertainty
in grade, tonnage, and metal recoveries requires the development of a stochastic framework.
Therefore, the orebody model for an open pit mining operation contains varying values of metal
 4 M.W.A. Asad et al.

content (grade), quantity of material (tonnes), and metal recovery for a particular mining block
over a number of equally probable realizations. The procedure for achieving a solution to this
particular problem includes the calculation of a set of block economic values, the creation of a
graph for the stochastic framework, and the implementation of the maximum flow algorithm to
solve the graph.
Given the following notation:

P is the set of processes,

 is the set of orebody realizations,
gγ i is the grade (% or g/tonne or oz/ton) of block i in realization γ ,
Qγ i is the available quantity (tonnes) of material in block i and realization γ ,
bp is the processing capacity (tonnes) of process p,
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S is the metal price ($lb or g or oz of metal),

yγ pi is the recovery (%) of block i in process p and realization γ ,
m is the mining cost ($/tonne of material),
cp is the processing cost ($/tonne of ore) of process p,
r is the recovery (%) of block i in process p and realization γ ,
vγ pi is the economic value of block i in process p and realization γ ,

then vγ pi may be calculated as

vγ pi = [(S − r)gγ i yγ pi − m − cp ]Qγ i . (4)

However, the economic value of the block i is adjusted as


vγ pi if vγ pi > 0, i.e. i is an ore block in realization γ ;
vγ pi =
−mQγ i if vγ pi  0, i.e. i is a waste block in realization γ .

Equation (4) presents the general definition of the economic value of a mining block. In practice
(Hustrulid and Kuchta 2006), it identifies ore and waste blocks in an orebody model. If a mining
block i with vγ pi > 0 is identified as an ore block, then Qγ i , i.e. the quantity of material in mining
block i is considered as the quantity of ore, and the term gγ i yγ pi Qγ i corresponds to the quantity
of metal in the output (i.e. concentrate) from the processing stream p. Similarly, if a mining block
i with vγ pi  0 is identified as a waste block, then Qγ i is considered as the quantity of waste.
Furthermore, Equation (4) reflects that a mining block identified as an ore block not only incurs
the cost of processing in the relevant processing stream, but also it covers the marketing or refining
cost for sale as the final product or production of the refined metal.
The formulation from (1)–(3) may be updated as follows:

max vγ pi xγ pi (5)
γ ∈ p∈P i∈N

xγ pi − xγ pi  0, i ∈ ξi , i ∈ N, ∀γ p (6)
xγ pi ∈ {0, 1}, i ∈ N, ∀γ p. (7)

Consequently, the stochastic framework described in graph problem (5)–(7) constitutes PN
number of nodes for a particular mining block as compared to i number of nodes in the conven-
tional framework described in graph problem (1)–(3). Nevertheless, irrespective of the number
of orebody realizations  and the number of available ore processing streams P, the decision to
mine a particular block i is binary, i.e. a block is either inside or outside the production phase or
 Engineering Optimization 5

ultimate pit limit. Therefore, the stochastic framework requires an additional constraint ensuring
that, if a given block is inside the closure, it remains inside in all orebody realizations, and if it
is an ore block, then it is processed in one of the processing facilities (Meagher et al. 2010). As
such, graph problem (5)–(7) may be augmented as

xγ pi  1, ∀i. (8)
γ ∈ p∈P

Equation (8) maintains (P − 1) number of arcs for a particular mining block i among the nodes
representing this block in different ordebody realizations and processing options. The structure
of the stochastic framework shown in problem (5)–(8) is not only different from the conventional
framework in problem (1)–(3), but also the increased number of nodes and arcs leads to the
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computational complexity of the graph (Asad and Dimitrakopoulos 2013). However, the problem
(5)–(8) maintains the structure of the maximum closure problem.
The Lerchs and Grossman (LG) algorithm (Lerchs and Grossmann 1965), a graph theory
based approach to solving problem (1)–(3), has been improved in several variations (Whittle
1998) to facilitate successful implementation in commercial mining software, which becomes a
reason for its acceptance in the mining industry. However, the maximum flow algorithm has been
recognized as an alternative for solving the open pit mine design problem. Hochbaum and Chen
(2000) described problem (1)–(3) as the dual of the maximum flow problem, i.e. a minimum cut
problem, and presented a performance analysis of the LG and maximum flow algorithms. Picard
(1976) created a related graph G̃ = (Ñ, Ã) by augmenting a source s and a sink t into problem
(1)–(3), such that Ñ = N ∪ {s, t}, and implemented the minimum cut algorithm to generate the
maximum closure (i.e. the ultimate pit limit) on the graph.
Figure 1 explains the structure of the related graph for the stochastic framework. If the strategy
described in Picard (1976) is implemented, the related graph for problem (5)–(8) constitutes the
following.

Figure 1. The structure of the related graph in the stochastic framework.

 6 M.W.A. Asad et al.

(1) The set of nodes N + = {i ∈ N|vi > 0, ∀γ p}, representing ore blocks over all orebody
realizations and processing streams.
(2) The set of nodes N − = {i ∈ N|vi ≤ 0, ∀γ p}, representing waste blocks over all orebody
realizations and processing streams.
(3) The set of arcs from source s to nodes representing ore blocks {(s, n)|n ∈ N + }, over all
orebody realizations and processing streams. The capacity of these arcs is equal to |vn |, such
that v(s, n) = vn for n ∈ N + .
(4) The set of arcs from nodes representing waste blocks to sink t {(n, t)|n ∈ N − }, over all
orebody realizations and processing streams. The capacity of these arcs is equal to |vn |, such
that v(n, t) = −vn for n ∈ N − .
(5) The set of arcs in A with capacity equal to ∞ (Equation 6), maintaining precedence of block
i ∈ ξi over block i, over all orebody realizations and processing streams.
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(6) The set of arcs from block i in one orebody realization and processing stream to block i
in another orebody realization and processing stream, ensuring that, if block i is inside the
closure, it remains inside the closure over all realizations and processing streams. The capacity
of these arcs is also ∞.

3. Solution strategy

Traditionally, the LG algorithm (Lerchs and Grossmann 1965) solves problem (1)–(3) and
develops an optimal ultimate pit limit. Nevertheless, for production phase design, it requires
modification in vi by changing (increasing or decreasing) a parameter λ through an arbitrary or
trial and error procedure, such that vi (λ) = αλ − β, where α and β represent revenue and cost
parameters, respectively. Thus, an arbitrary increase in λ increases the revenue factor and the
economic value of mining blocks. Consequently, the number of ore blocks increases, resulting
in a larger size pit as compared to the previous value of λ. This arbitrary procedure generates
multiple pits (called nested pit shells), which are subsequently used for developing production
phases design (Whittle 1998, 1999). Therefore, the traditional approach achieves the phase design
in two separate steps (Asad and Dimitrakopoulos 2012). The solution to graph problem (5)–(8) for
production phase design and ultimate pit limit may be generated by implementing the maximum
flow algorithm. However, as opposed to the traditional approach that accomplishes production
phase design in two standalone steps of an arbitrary or trail and error procedure, the proposed
method incorporates the processing capacity constraints in graph problem (5)–(8) for guiding
the selection of λ values, such that the development of operationally practical and successive
phases leading to the ultimate pit limit is achieved through an exclusive computation of the proce-
dure implementing maximum flow algorithm (Asad and Dimitrakopoulos 2013). The processing
capacity constraint is given as follows:

Qγ i xγ pi  bp , ∀p. (9)
γ ∈ i∈N

 
However, the left side of Equation (9), i.e. [ γ ∈ i∈N Qγ i xγ pi ], corresponds only to the set
of nodes N + = {i ∈ N|vi > 0, ∀γ p} inside the closure. Equation (9) restricts the application of
the maximum flow algorithm because it violates the classical structure of the maximum closure
problem. However, the Lagrangian relaxation of the processing capacity constraints as suggested
in Tachefine and Soumis (1997) and implemented in Asad and Dimitrakopoulos (2013) recaptures
the structure of the maximum closure problem and allows application of the maximum flow
algorithm. If λ  0 is the Lagrangian multiplier for Equation (9), the modified graph problem
 Engineering Optimization 7

(5)–(8) may be presented as

⎧⎡ ⎤ ⎫
⎨   ⎬
Z(λ) = max ⎣ (vγ pi − λp Qγ i )xγ pi ⎦ + λp b p (10)
⎩ ⎭
γ ∈ p∈P i∈N p∈P

xγ pi − xγ pi  0, i ∈ ξi , i ∈ N, ∀γ p (11)

xγ pi  1, ∀i (12)
γ ∈ p∈P

xγ pi ∈ {0, 1}, i ∈ N, ∀γ p, and λ  0, ∀p. (13)

An application of the maximum flow algorithm solves the problem (10)–(13) over a number of
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iterations updating λp and vγ pi to develop the production phase design and ultimate pit limit. At
iteration e = 1, keeping the initial value of λ1p = 0, the algorithm utilizes the actual block economic
values vγ pi and produces the ultimate pit limit, then it is updated using λe+1
p = [λep − σpe ], such that
e
σp represents the subgradient as follows (Tachefine and Soumis 1997; Asad and Dimitrakopoulos
2013):
  
[Z(λep ) − Z] bp − i∈N qi xγ pi (λep ) [μbpit P]
σp =    ,
e
(14)
bp −  qi xγ pi (λe )2    1
i∈N p γ ∈ p∈P i∈N qi xγ pi (λp )

where Z is an estimate of the solution, qi = γ ∈ Qγ i / , xγ pi (λep ) relates to the ore blocks in
the solution vector for γ and p corresponding to the solution, μ is the number of years in which
a production phase may be mined, and bpit isthe pit production capacity.
Over successive iterations, the term bp − i∈N qi xγ pi (λep ) remains negative, which gives σpe <
0, i.e. λe+1
p increases and vγ pi for the set of nodes N + = {i ∈ N|vi > 0, ∀γ p} decreases, generating
production phases within the ultimate pit limit until the smallest production phase is developed
depending upon the pit production capacity or mining capacity and the number of years μ in
which a production phase may be mined.

4. Numerical results and comparisons

The open pit mining complex constitutes an open pit, four ore processing facilities, and a waste
dump. The open pit produces sulphide, mixed, and oxide ores, as well as waste material. The
sulphide ore may be processed in one of the two flotation-mills or the bio-leach pad, the mixed
ore is restricted to processing in the bio-leach pad, the oxide ore is sent to the acid leaching plant,
and finally the waste material is destined for the waste dump. The pit production capacity stands
at 182.5 million tonnes of ore and waste. The processing capacity of flotation-mills, acid-leaching
plant, and bio-leaching pad is 43.8 million, 21.9 million, and unlimited tonnes of ore, respectively
(Eldert 2011). Figure 2 explains the flow of material from the mine to processing facilities and
waste dump.
A set of 15 simulated orebody realizations (Goovaerts 1997; Horta and Amilcar 2010; Boucher
and Dimitrakopoulos 2012; Machuca-Mory and Deutsch 2013) have been used in this case study.
The input information in an orebody realization includes the block location in terms of the x, y and
z coordinates, quantity of material (tonnes) in each block, block grade (%), and its recovery (%) for
all four processing options. The uncertainty in grade (metal content), material type, and processing
recovery is reflected through a variation in their values over all orebody realizations. However,
for establishing the difference among processing streams, the average processing recovery for
flotation-mill A, flotation-mill B, acid-leaching plant, and bio-leaching pad is equal to 79, 81,
 8 M.W.A. Asad et al.

Flotation-mill A Bio-leaching pad

(43.8 million) (21.9 million)

Mine
(182.5 million)
Acid-leaching plant
Flotation-mill B (unlimited capacity)
(43.8 million)

Waste dump

Figure 2. Flow of material from the mine to processing streams and the waste dump.
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35 and 55%, respectively. Given the x, y and z coordinates, the size (in metres) of a particular
mining block is 25 × 25 × 15, i.e. (9375 m3 ), which leads to division of the orebody into 573,192
mining blocks with an average block tonnage approximately equal to 23,000 tonnes. Similarly,
the numerical results are produced by fixing the economic parameters including the metal price
(S) at $2.00 per lb. of copper, mining cost (m) at $1.50 per tonne of material, flotation-milling cost
(c1 , c2 ) at $6.00 per tonne of ore, bio-leaching cost (c3 ) at $1.50 per tonne of ore, acid-leaching
cost (c4 ) at $4.00 per tonne of ore, marketing or selling cost (r) at $0.1 per lb. of copper, and
discount rate at 8% (Eldert 2011). Joining the input information in orebody realizations and the
economic parameters, the block economic values are calculated using Equation (4).
Since material types in various parts of the open pit define the block precedence relationship, the
deposit is divided into four zones for maintaining pit wall slope angles at 35, 35, 33 and 40◦ along
the North, South, East and West directions, respectively. Given the minimum and maximum values
of block z-coordinates and block height = 15 m, the orebody is divided into 56 levels, requiring a
set of 667 arcs for a particular mining block for satisfying the precedence constraint as described
in Equation (11).
Considering this arrangement, the graph described in Figure 1 constitutes 34,391,520 (15 × 4 ×
573,192 = 34,391,520) nodes, 22,939,143,840 (34,391,520 × 667 = 22,939,143,840) infinite-
capacity arcs corresponding to Equation (11), 2063,491,200 (34,391,520 × 15 × 4 =
2063,491,200) infinite-capacity arcs corresponding to Equation (12), and 34,391,520 (15×4 ×
573, 192 = 34,391,520) arcs from source s to an ore block or a waste block to sink t. The solution
strategy described in the previous section and an implementation of an open source Goldberg
algorithm (Goldberg and Tarjan 1988) from Microsoft™ Research (Babenko and Goldberg 2006)
have been employed to solve this graph. However, owing to the size of this graph problem, the
algorithm could not offer a solution and generate a production phase design and ultimate pit limit
for this full-scale orebody model.
To demonstrate this computational complexity and knowing that mining of the initial production
phases has been completed, only 54,858 of the remaining mining blocks (sufficient to supply ore
for the next 15 to 20 years) are considered, and the production phase design and ultimate pit limit
for the following cases have been developed.

A: Simplified stochastic framework This case considers a set of three (among fifteen) orebody
realizations with a constant pit slope angle of 45◦ (which requires only 25 instead of 667
precedence arcs), and solves the graph described in Figure 1.
B: Modification of the stochastic framework This case proposes a modification in the struc-
ture of the graph allowing a reduction in the number of infinite-capacity arcs, solves this
modified graph, and compares the solutions from the original (i.e. Case A) and the modified
graph structures.
 Engineering Optimization 9

C: Full-scale stochastic and conventional frameworks This case utilizes all fifteen orebody
realizations along with variable slope angles, solves this stochastic framework using the mod-
ified graph introduced in Case B, and compares this solution with the conventional framework
that utilizes the Etype orebody model (by averaging fifteen orebody realizations).

5. Case A: Simplified stochastic framework

The stochastic framework considers a set of three ( = 3) orebody realizations, four process-
ing options (P = 4), and 54,858 mining blocks in each orebody realization (i.e. N = 54,858).
Having a slope angle of 45◦ , the related graph comprises 658,296 (3 × 4 × 54,858 = 658,296)
nodes, 658,296 arcs from source s to ore blocks and waste blocks to sink t, and 11,415,618
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infinite-capacity arcs satisfying Equations (11) and (12). An implementation of the maximum
flow (minimum cut) algorithm (Goldberg and Tarjan 1988; Babenko and Goldberg 2006) fol-
lows the solution strategy described in the previous section to develop production phase design
and ultimate pit limit. At each iteration, the algorithm solved an approximately 554,174 kB input
matrix, and converged to generate the final solution in three hours. The solution suggests mining
51,337 blocks in three production phases, including 16,555 blocks in Phase 1, 11,646 blocks in
Phase 2, and 23,136 blocks in Phase 3, respectively.

6. Case B: Modified stochastic framework

For the simplified stochastic framework in Case A, Equation (12) maintains 11 infinite-capacity
arcs for a particular node i over three orebody realizations and four processing options. This
ensures that a mining block remains on same side of the cut in all orebody realizations, and if it is
an ore block, then it is processed in one of the four processing options. This fact allows merging of
the nodes connected through the infinite-capacity arcs from one orebody realization to the next into
a single node (Meagher et al. 2010). For example, if nodes representing three orebody realizations
in Case A are merged, then only three infinite-capacity arcs (instead of 11) for a particular block
in four processing options would be required to ensure that an ore block is processed in only
one of the processing streams. Similarly, for arcs from source s to node or node to sink t, the
capacity of the arc is the sum of the capacities of the arcs from the source to the merged nodes
or the sum of capacities of the arcs from the merged waste nodes to the sink over all realizations.
Figure 3 explains this concept, where only one infinite-capacity arc from a node representing
a block in process 1 to the node representing same block in process 2 is required to satisfy
Equation (12), as compared to three arcs in Figure 1. Also, +v11 = +v111 , −v11 = −v211 , +v12 =
+v212 , −v12 = −v112 , +v13 = +v213 , −v13 = −v113 , +v14 = [+v114 + v214 ], −v14 = 0, +v21 =
+v221 , −v21 = −v121 , +v22 = [+v122 + v222 ], −v22 = 0, +v23 = 0, −v23 = [−v123 − v223 ], and
+v24 = [+v124 + v224 ], −v24 = 0, for all arcs from source s to node or node to sink t (Asad and
Dimitrakopoulos 2013).
By applying this proposed modification in the stochastic framework in Case A, the related
graph constitutes 219,432 (4 × 54,858 = 219,432) nodes, 264,394 arcs from source s to ore
blocks and waste blocks to sink t, and 3768,634 infinite-capacity arcs satisfying Equations (11)
and (12). While solving this related graph in an implementation of the maximum flow (minimum
cut) algorithm (Goldberg and Tarjan 1988; Babenko and Goldberg 2006), at each iteration the
algorithm solves an approximately 185,110 kB input matrix and finally converges to generate the
solution in 46 minutes. The solution suggests mining 45,784 blocks in four production phases,
including 5582 blocks in Phase 1, 13,266 blocks in Phase 2, 12,295 blocks in Phase 3 and 14,641
blocks in Phase 4, respectively.
 10 M.W.A. Asad et al.
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Figure 3. The structure of the related graph with merging of the nodes for orebody realizations.

Figure 4. Cross sections of phase design and ultimate pit limit in Cases A and B.

Figure 4 shows the section maps of production phases and ultimate pit limit for Cases A and
B. Table 1 presents a comparison of Cases A and B in terms of tonnes of ore and waste in each
phase, production stripping (the ratio of tonnes of waste to tonnes of ore), and discounted and
un-discounted cash flows. As shown in Table 1, the production phase design and ultimate pit limit
in Case A promises higher ore and metal production as compared to Case B. However, Case A
 Engineering Optimization 11

Table 1. Production phase design and ultimate pit limit in Cases A and B.

Quantity (tonnes) Cash flow ($ million)

Stripping
Cases Phase Ore Waste Copper ratio Discounted @ 8% Undiscounted Blocks

A 1 290,944,547 87,561,907 2058,166 0.30 6386 7280 16,555

2 207,863,884 61,326,201 1095,531 0.30 2044 2674 11,646
3 299,284,992 241,091,402 1236,864 0.81 1377 2215 23,136
Ultimate pit 798,093,423 389,979,510 4390,561 0.49 9807 12,169 51,337
B 1 102,555,218 25,078,913 928,532 0.24 3438 3713 5582
2 230,469,882 73,508,171 1382,242 0.32 3533 4208 13,266
3 222,704,502 62,625,423 1113,596 0.28 1972 2629 12,295
4 225,201,237 118,375,507 907,164 0.53 1094 1681 14,641
Ultimate pit 780,930,839 279,588,014 4331,534 0.36 10,037 12,231 45,784
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requires higher production stripping, which offsets the ore and metal production with lower total
discounted and un-discounted cash flows as compared to Case B.
While Case B demonstrates better performance than Case A in terms of discounted cash flows, it
is clear that Cases A and B have demonstrated the proposed method and its limitations, otherwise
it is expected that utilizing as few as three orebody realizations may not regenerate identical results
if different orebody realizations are swapped as an input to the proposed model.

7. Case C: Full-scale stochastic and conventional frameworks

In this case, the application of the modified approach introduced in Case B continues with input
from all 15 orebody realizations. The block precedence constraint is satisfied by maintaining
pit wall slope angles at 35, 35, 33 and 40◦ along the North, South, East and West directions,
respectively.
For the stochastic framework, the related graph constitutes 219,432 (4 × 54,858 = 219,432)
nodes, 314,380 arcs from source s to ore blocks and waste blocks to sink t, and 15,972,322 infinite-
capacity arcs satisfying Equations (11) and (12). An application of the maximum flow (minimum
cut) algorithm (Goldberg and Tarjan 1988; Babenko and Goldberg 2006) solves this graph. At each
iteration, the algorithm solves an approximately 747,535 kB input matrix and finally converges
to generate the production phase design and ultimate pit limit in 4.5 hours. The solution suggests
mining of 54,028 blocks in four production phases, including 13,127 blocks in Phase 1, 13,459
blocks in Phase 2, 13,081 blocks in Phase 3 and 14,361 blocks in Phase 4, respectively.
For the conventional framework, the block metal content, block tonnages and processing recov-
eries are averaged over 15 orebody realizations to develop an Etype orebody model. The related
graph for the conventional framework constitutes 219,432 (4 × 54,858 = 219,432) nodes and
219,432 arcs from source s to ore blocks and waste blocks to sink t. This shows that, as opposed
to the stochastic framework shown in Figure 3, the conventional framework maintains constant
economic values for a particular mining block, i.e. a mining block is either an ore block, keeping
an arc from source s to this block, or it is a waste block, keeping an arc from this block to sink t.
Additionally, the related graph maintains 15,972,322 infinite-capacity arcs satisfying Equations
(11) and (12). An application of the maximum flow (minimum cut) algorithm (Goldberg and Tar-
jan 1988; Babenko and Goldberg 2006) solves this graph. At each iteration, the algorithm solves
an approximately 743,177 kB input matrix and finally converges to generate the production phase
design and ultimate pit limit in 3.5 hours. The solution suggests mining 49,670 blocks in four
production phases, including 4109 blocks in Phase 1, 13,135 blocks in Phase 2, 14,600 blocks in
Phase 3 and 17,826 blocks in Phase 4, respectively.
 12 M.W.A. Asad et al.

Figure 5. Vertical sections of the optimal phase design and ultimate pit limit in the stochastic and conventional
frameworks.
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Table 2. Production phase design and ultimate pit limit in the stochastic and conventional frameworks.

Quantity (tonnes) Cash flow ($ million)

Stripping
Cases Phase Ore Waste Copper ratio Discounted @ 8% Undiscounted Blocks

A 1 198,996,956 98,992,624 1492,438 0.50 5243 5499 13,127

2 216,732,461 92,020,593 1235,879 0.42 2730 3252 13,459
3 233,189,344 73,439,815 1134,498 0.31 1914 2553 13,081
4 163,954,709 171,251,139 717,083 1.04 822 1292 14,361
Ultimate pit 812,873,470 435,704,171 4579,898 0.54 10,709 12,595 54,028
B 1 75,381,090 18,483,427 732,882 0.25 2655 2655 4109
2 198,896,260 99,955,677 1124,818 0.50 3115 3410 13,135
3 261,223,749 76,507,096 1287,318 0.29 2437 3005 14,600
4 261,087,704 155,026,033 1014,712 0.59 1192 1776 17,826
Ultimate pit 796,588,803 349,972,233 4159,730 0.44 9399 10,846 49,670

Figure 5 shows the section maps of production phases and ultimate pit limit for the stochastic
and conventional frameworks. Table 2 presents a comparison in terms of the quantity of ore and
waste in each phase, production stripping, and discounted and un-discounted cash flows. As shown
in Table 2, the stochastic framework promises larger ultimate pit limit, consistent size production
phases, higher ore and metal production leading to higher discounted and un-discounted cash
flows.
Furthermore, it is recognized that the formulation (10)–(13) maximizes un-discounted cash
flows and, consequently, that the production phase design in Case C (as well as in Cases A and
B) has been developed without discounting the block economic values. However, for a valid
comparison with conventional approaches (Whittle 1998, 1999), the discounted cash flows in
Tables 1 and 2 have been calculated (based on an approximate production schedule [Whittle
1999]) after achieving the production phase design through an implementation of the maximum
flow algorithm.

8. Conclusions

This article presents a stochastic network flow approach to solving the production phase design
and ultimate pit limit problem. The application of the proposed approach shows that, as opposed to
the current practice that employs the conventional framework, the stochastic framework performs
better by forecasting an 8.7% larger pit limit, 10% increase in total copper content, along with a
16 and 14% increase in un-discounted and discounted cash flows, respectively.
 Engineering Optimization 13

The results presented in Cases A and C also reveal the importance of accounting for the expected
variability and uncertainty in a number of orebody realizations. The stochastic framework in Case
C considers 15 orebody realizations and projects a 5% larger ultimate pit limit, as compared to
Case A that considers only three orebody realizations.
Even though the structure of problem (10)–(13) imitates the structure of the production schedul-
ing problem, the proposed method is intended to solve the production phase design and ultimate
pit limit problem. The processing capacity constraints are included only to facilitate the selection
of values through Lagrangian relaxation of these constraints. The results also demonstrate that
the difference in structure of the graph in the stochastic and conventional frameworks and the
systematic selection of λ values yields relatively consistent size production phases coupled with
higher cash flows.
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Acknowledgements
The work in this article was funded from Natural Sciences and Engineering Research Council of Canada CRDPJ Grant
411270-10 and the members of the COSMO Stochastic Mine Planning Laboratory—AngloGold Ashanti, Barrick, BHP
Billiton, De Beers, Newmont and Vale. Thanks are in order to Brian Baird, Peter Stone, Darren Dyck and Gavin Yates of
BHP Billiton for their support, collaboration and technical comments.

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