Maximizing NPV by Blasting

José Cáceres Saavedra,

P.D. Katsabanis, C. W. Pelley and S. Kelebek, Queen’s University

Abstract
Years of depressed market prices have forged a culture of cost minimization. Drilling and Blasting, has not been
exempt from this trend. However recent market behavior has pushed for expansions, new projects and for changes in
actual economic goals. Nevertheless, expansions and new projects require years of study and construction while
prices push for actions to maximize the company’s Net Present Value.
The interaction between blasting and comminution generates areas where opportunities for maximizing profit exist.
Drilling and Blasting, comparatively, are the lowest cost comminution operations, while crushing and grinding are more
costly. Better yet, compared with crushing and grinding, blasting is an almost free investment alternative, not requiring
preproduction periods.
An improved planning strategy, integrating blasting parameters with opportunity cost techniques for maximizing net
present value, is applied. This strategy is applied in two industrial cases, a new project with a production target of 80
Kton/day and an existing operation undergoing optimization.
For the new project, decreasing 40% in the blast pattern parameters decreased investment by 30%, increasing the
global net present value by 25%. For the on going operation, facing higher prices, the net present value increased by
13.5% without additional investment in the mineral processing area.

1. INTRODUCTION Smith (1997) as well as Campbell and Scott (1980)

The purpose of blasting is to reduce particle size and
benefit subsequent operations. Traditionally blasting is
considered to be a cost, which needs to be minimized.
However, from the economics standpoint, the interaction
between blasting and comminution generates areas where
opportunities for maximizing profit exist. Economic
decisions and the effect of blasting are analyzed in the
following sections using industrial data from two porphyry
copper deposits, located in Chile’s Andes Mountains.
1.1. Traditional Analysis:
Flat Production Rate and Fixed Parameters
The estimation of traditional expansion projects and their
optimization are based on the assumptions of constant
throughput and fixed parameters over the mine life. This
strategy is supported by the idea of using the maximum
capacity of equipment and resources to repay the
investment made to buy such equipment. This strategy is
well documented and supported by previous work. It is also
supported by practical time frame constraints generated by
the necessary preproduction time for installing new
crushers and grinding circuits.
Carlisle (1954) applied the principles of pure economics
to the mining business, specifically the concept of
diminishing returns, to suggest the existence of an optimum
production level that maximizes the net present value or the
total cash flow.
Campbell (1980) supported the same, suggesting that
mine owners have to operate at a constant rate equal to the
mill maximum capacity. Campbell and Douglas (1985) state
that “A mining firm that faces a substantial initial investment
will not find it optimal to maintain idle capacity”.
The statements justify flat production rates, flat recoveries and
fixed parameters using the maximum available capacity.
Increasing production rate, holding the same
metallurgical parameters and the same blast design, forces
the purchase of new equipment, but changing the blast
design and metallurgical targets may be able to achieve a
better scenario without new equipment and infrastructure.
1.2. Capital Cost
Hotelling (1931), Carslise (1952), Levhari and Liviathan
(1977) share the principle that the capital cost must be
included in the operational cost.
consider that capital investments are related to the
production rate according to the following equation:
K = CZα
where K is the capital , C and α are constants and Z is
the production rate.
All previous researchers do not considerer any mineral
processing variable in their models, generating the
following questions:
Are mineral processing variables not relevant enough to
be considered in the capital cost definition?
What is the impact of the granulometric target in the
capital cost? By simple reasoning, a grinding circuit will
require a different layout for a product size of 100 µm
instead of 300 µm if throughput is supposed to remain the
same.
In the same perspective, is there a chance that
fragmentation by blasting could save energy downstream,
saving capital investment?.
The present paper addresses these questions from an
economic point of view, incorporating drilling, blasting, and
mineral processing in the definition of capital investment
and maximizing net present value.
2. DRILLING AND BLASTING.
Drilling and Blasting are considered unit operations
related to short term planning. For long term planning, only
loading and haulage fit in this category. Simulation,
forecasting and benchmark analysis are widely used for
cost analysis, as an open pit mine increases in depth and
distance from the concentrator.
Loading and haulage have the highest capital and
operational cost of all mining operations while drilling and
blasting, comparatively, have the lowest operational cost
and no investment associated with them. This fact seems to
justify an apparent under-estimation of the influence of
drilling and blasting, especially for long term planning
strategies.
Long Term planning variables, such as cut-off and ore-
waste ratios, are typically used to maximize the net present
value of a mine. Operational areas, such as drilling and
blasting are considered short-term variables, associated
exclusively with a cost, which must be minimized.

246 Santiago Chile, May 2006 Fragblast-8

 Cost minimization has been the target for drilling and
blasting and typically operations are successful in this.
Figure 1 shows the mine operational cost in US/$ per ton of
material (ore + waste) in 2001 for Operation 1
Figure 1: Chilean Mining Operation 1.
Drilling and blasting traditional targets are:
1. To produce a manageable size for shovels.
2. To produce a pile of blasted material with a good
distribution.
3. To avoid damaging the new face generated by the blast
(geotechnical concern).
4. To avoid damage of surrounding infrastructure.
5. To produce a fragment size suitable for primary
crushers.
According to these objectives, drilling and blasting are
strongly related to short term planning. However, if the
interaction between comminution by crushing and grinding
and blast induced fragmentation is considered, it may be
possible to shift costs from energy consuming processes,
such as grinding, to less costly processes, such as
blasting.
Figure 2 shows unit costs from drilling to flotation in year
2001 at Operation 1. These costs are expressed in US$ per
ton of ore, different from Figure 1, where the cost is related
to the mine and is expressed in US$ per ton of total material
(ore + waste).
Figure 2: Chilean Mining Operation 1 Relative Cost by
Activity.
Analyzing Figure 2, it is possible to conclude that the
drilling and blasting cost is practically four times smaller
than the cost of crushing and grinding. The interesting link
is that both processes share common characteristics; they
are comminution processes based on energy consumption,
and are strongly dependant on rock properties.
Thus, it is reasonable to analyze the effect of reducing
fragmentation size by blasting on throughput, and
investment in acquiring crushers. The present paper
Fragblast-8 Santiago Chile, May 2006
examines this and shows the economic potential of drilling
and blasting in long term mine planning.
A new planning strategy has been developed; this
strategy attempts to maximize the net present value of a
new project, as well as the net present value of on- going
operations, integrating mining, mineral processing and
mining economics in a single decision model denominated
Integrated Mine Management Model.
3. MODEL DESCRIPTION
The decision model was programmed in Visual Basic. It
is supported by MS Excel for visualization and graphical
output.
The model incorporates genetic and non linear
algorithms as optimization engines. These engines can be
improved by more powerful commercial packages, suitable
to interact with Visual Basic applications.
The model was especially developed for 20 years of mine
life, conventional crushing and grinding circuits, flotation
plants and open pit mines. With little effort, the same
components and optimization engines can be modified for
semi-autogenous grinding and underground mines.
The decision variables defined for the model are:
• Production Rate: The model uses production rate and
calculates the effect on grades and ore waste ratio and
generates a production plan per year.
• X80: Fragmentation size by blasting.
• CR80: 80 % passing product for crushers, which is the
feed size for Rod Mills.
• K80: 80 % passing size for rod mills, which is the feed
size for Ball Mills.
• P80: Final product of ball mills, the resulting feed size for
flotation circuits.
Every variable was defined per period, generating a
model of 100 decisions (5 variables x 20 years). These
create a non linear, non-smooth and complex problem,
impossible to solve by linear algorithms.
3.1. Model Components
The model is divided in eight modules, each module
connected with the next through the decision variables,
and sharing information with the rest of the model. The
schematic diagram of the information flow is showed in
Figure 3.
The inputs, outputs and parameters requested by every
module are explained in Table 1.
Figure 4 shows the flowchart of the algorithm supporting
the integrated mine management, indicating the various
steps of the process. (1) The first row shows the external
parameters (Parallelogram), where market prices interest
Figure 3: Schematic Model.
247
 Table 1: Model Components

Module Name Description Inputs and Dependencies Outputs

Optimization Model This is the central core Throughput, Burden, Crushing Net Present Value, Investment,
of the model, where product size, rod product size, Cost and Cash Flow analysis.
decision variables by ball mill product size by period,
period are defined and a guess solution to be used as
optimized a starting point.

Mine Reserves Grades, and waste are An initial and feasible A projected production plan as
estimated as function production plan by period with function of projected
of throughput grades, work indexes and throughput to be defined in the
waste movement. variables model

Mine Operation Costs, investment and Drilling parameters, haulage Mine costs, investments and
equipment for the Mine distances, energy cost, equipment requirement.
operation are equipment acquisition cost and
calculated several other parameters
explained in the mine operation
section.

Fragment-Blasting Fragmentation size is Uses information from the mine Fragmentation size to be used
FragBlast calculated as function operation module in the calculation of crushers
of drilling parameters
and type of explosive

Plant Number of crushers, Availability of equipment, Investment requested through

grinders, flotation cells, equipment acquisition and mine life assuming 3 years for
energy and recovery installation cost, recovery curve installation.
are calculated

Economics Parameters for Prices, discount, by period and Internal outputs for the
economic evaluation interest rate. Maximum evaluation modules
are calculated investment allowed and
constraints over payback
period or cash flow can be
defined.

Evaluation Module for economic Use of information provided in Economic evaluation results
evaluation the other modules

Graphical Outputs Module for graphical None Graphics with production plan,
and summarized cashflow, reserve schedule,
results net present value, investment
schedule, recoveries, grades
and fragmentation sizes.

rate and acquisition cost are represented by the block
named “Economic Parameters”.
Fragmentation prediction is based on engineering
models, such as Kuz-Ram (Cunningham, 1983), or
relationships between fragment size and powder factor
(Lownds, 1997). The recovery relation is based on
statistical analysis or lab tests .Finally, to reflex grades, and
waste movement, a feasible mine plan including all
available reserves is fed into the Reserves module (2). In a
second stage the economic, fragmentation, plant and
reserve modules interact with the mine operation and plant
modules setting up all the relations between decision
variables and economics results (3).
The last step of the model preparation is to provide an
initial “guessed” solution. It is wise for an on-going
operation to use the variables already available in the
operation. For new projects, burden, throughput and
liberation sizes used in other operations, or other guesses
may be used.
Once the guess solution is provided, the model
generates the reference economic evaluation with an initial
Net Present Value, Cash flow and Investment (4).
At this level the optimization process begins, using the
genetic algorithm technique, developed by Holland (1964).
The initial solution is combined with several randomly
generated solutions, creating an initial population of
solutions. In genetic terms, these are the “parents
population” and from this population “parents” are selected
using a roulette method. These parental solutions are
mated using two genetic operators, “Crossover” and
“Mutation”. Crossover is made by mixing part of the
“father” solution with another part of the “mother” solution.
In mining terms, if the “father” solution produced a
throughput of 30 Kton per day using a burden of 10 m, and
P80 of 300 µm, and the “mother” solution produced an
optimal throughput of 60 Kton per day with a burden of 4
m. and P80 180 µm, the crossover will generate a possible
“child” with a throughput of 30 Kton per day, burden of 4m
and P80 of 300 µm. Thus “parents” will generate a new
generation of “children” solutions.
A small percentage (1 – 3%) of this “children” generation
will be under “mutations”. “Mutations” are random changes
in certain components of the solution. In mining language,
a “child” solution, instead of choosing from the ”parent”

248 Santiago Chile, May 2006 Fragblast-8

genetic information, will randomly select a variable; i.e. P80 1’s Case, the studies were made using the parameters
will be randomly selected to 70 µm, not respecting the of table 2. For Operation 2 the parameters are shown in
“influence” of the parents solutions. table 3.
This new solution is evaluated in the Integrated Using the parameters of tables 2 and 3 and considering
Management Model and then NPV and Cash flow are an installation cost equal to 10 times the equipment
compared with the previous solutions. acquisition cost, calculations were made using the
Then the first decision of the model will be executed (6); Integrated Management Model and compared with the
if the new solution was able to generate better results than actual values, obtained though detailed engineering
the “parents”, then, it n will replace the “parent” solution studies.
and the process will start again.
If none of the “children” solutions could improve the
previous best solution, then a second decision must be Table 2:
made by the model (7) on the number of “children” Operation 1 Expansions Metallurgical Parameters
generations which are permitted, changing mutation factor
and ”parents”. Variable Quantity Unit
If, after a certain number of generations, it is impossible
to improve the “parents” best solution, the algorithm will Throughput Base Case 64 Kton/day
stop and the best solution will be defined (8). Experience Throughputs 69.5 - 73.5 -74.5 Kton/day
indicates that genetic algorithms provide a good but not a Size from Mineral
demonstrated optimal solution. Run Off Mine (Max) 101.6 (40’’) cm
For evaluation, the model’s accuracy was tested against Crusher Product Size 10.100 µm
six industrial expansion projects in Chile, three from Rod Mill Product Size 2600 µm
Operation 1 and three from Operation 2 for which detailed Ball Size Product 210 µm
calculations existed and years of engineering studies were Work Index 15 KWh/ Short Ton
invested.
Various scenarios were defined and the solution for every
one was analyzed and compared with the results
suggested by previous researchers.
Table 3:
Operation 2 Expansions Metallurgical Parameters

Throughput Base Case 11 Mton by year

Throughputs 12-13-14 Mton by year
Size from Mineral
Run Off Mine (F80) 25.4 µm
Crusher Product Size 9.710 µm
Rod Mill Product Size 2600 µm
Ball Size Product 220 µm
Work Index 14 Kwh/ Short Ton

Figure 5 shows the expansion projects of Operation 1

and Operation 2 mines in Chile compared with the model
estimation as a function of throughput.
Figure 6 shows the correlation between estimations made
by analytical and numerical simplified relations used in the
current model versus other methods using detailed
engineering calculations on work force, equipment and
installation requirements.

Figure 4: Flowchart Integrated Management Model.

3.2. Model Validation

For Operation 1, operating at 64 Kton per day,
expansions to 69.5, 73.5 and 74.5 Kton per day were
analyzed by external mineral processing consultants.
The analysis followed the traditional method in which
fixed metallurgical parameters are defined at the Figure 5: Expansion Projects and Integrated Mine
beginning and detailed equipment, work force, and Management Model Estimation as function of
installation requirements are estimated. In Operation throughput.

Fragblast-8 Santiago Chile, May 2006 249

 4.1. Fragmentation by Blasting.
Using industrial fragmentation data provided by a
Canadian Copper open pit mine, a fragmentation curve was
fitted for different powder factors. The relation was estimated
using image analysis information correlated with different
blasting parameters used for production blasts and for buffer
blasts. The parameters of the Power Law were estimated
using the two different powder factors areas. Figure 7 shows
the curve and its equation. Obviously a larger number of
fragmentation – powder factor observations are desirable.
However, for the purposes of this study, the fragmentation –
powder factor relationship will be considered reliable.

Figure 6: Scatter Plot for Queen’s IMM plant investments v/s

Actual Expansion Projects.

It is possible to argue that the established 85%

correlation means differences of approximately 10 MUS$
which are not acceptable. The integrated mine
management model does not pretend to replace the work
of consulting groups based on detailed and well-supported
estimations. Instead the model supports managers and
mining investors in the decision of how much to produce,
what operation settings are the most adequate for a given
operation and finally to define the most likely scenarios to
Powder Factor Kg/t
be developed by consulting.
In the case of Operation 2, the cost estimations were
based on capacities of 12, 13 and14 Mton per year, which Figure 7: Fragmentation Prediction.
were selected arbitrarily based on experience.
A second validation was made on the basis of energy 4.2. Throughput and Recovery Relations
consumption and is presented in table 4. Using the A conventional grinding circuit is well represented by the
simplified Bond Equation and assuming just one type of Bond equation, which was calibrated using historical data
equipment representing all crushers, one type of rod mills provided by Operation 1 as shown in figure 8. A simple
and one type of Bond Mill, the largest commercial linear regression was enough to build a predictive recovery
equipment available, model calculations were very close to model (figure 9).
the registered energy consumption for year 2001 at
Operation 1’s conventional crushing and grinding circuit.
The lower estimated value in table 4 is based on smaller
equipment.

Table 4: Energy Validation Queen’s IMM v/s

Operation 1’s Base Case 2001

Crushing Grinding
Energy Energy
MW-Year MW-Year

Queen’s IMM 20.3 111.06

Andina’s Base Case 2001 22.6 112.55 Figure 8: Bond Equation calibrated for Industrial Data.

4. APPLICATION USING INDUSTRIAL DATA.

The following sections developed a series of potential

scenarios using data from a variety of sources. The
metallurgical relation was obtained for Operation 1’s
conventional circuits, the fragmentation model was based
on Lownds’ Power Law relation (Lownds, 1997), calibrated
for a Canadian Copper operation, and the grades and
waste transportation are those of Operation 1’s Open Pit
Mine (2001). Equipment costs are based on supplier
information and engineering studies of the above
expansion projects. Although the sources vary, they are all
similar types of mines and should not affect the trends Figure 9: Cu recovery model against liberation size (P80
discussed in the next session. mm).

250 Santiago Chile, May 2006 Fragblast-8

4.3. Cost and Capital Models
For every area from drilling to milling, a cost and capital
model was developed. For example, in drilling and blasting
an analytical model was built and tested against industrial
data (Aimone, 1983) as shown in figure 10.
5.1. Traditional Project Estimation
Considering a flat production plan, with fixed parameters
over time and the metallurgical parameters shown at table
6 and the stated relationships for recovery and
fragmentation, the base condition was defined. This was
optimized using the same throughput, same prices and
interest except for the metallurgical parameters (80%
passing sizes for crusher and mills). The burden was
considered equal to 10 meters, generating a fragmentation
size X80 equal to 600 mm.

Table 6: Decision Variable Traditional Case

Period Throughput Burden P80-CRU P80-ROD P80-Balls

KTon/Day m mm um um

1 30.0 10 10.1 2600 210

2 30.0 10 10.1 2600 210
3 30.0 10 10.1 2600 210
4 30.0 10 10.1 2600 210
5 30.0 10 10.1 2600 210
Figure 10: Cost Model for Powder Factor and Blasting 6 30.0 10 10.1 2600 210
Parameters. 7 30.0 10 10.1 2600 210
8 30.0 10 10.1 2600 210
The capital model was validated as was previously 9 30.0 10 10.1 2600 210
shown in this paper. Subsequently, the model was applied 10 30.0 10 10.1 2600 210
over different scenarios. 11 30.0 10 10.1 2600 210
12 30.0 10 10.1 2600 210
5. ON-GOING OPERATION 30 KTON/DAY 13 30.0 10 10.1 2600 210
14 30.0 10 10.1 2600 210
The first scenario considers an on-going operation with a 15 30.0 10 10.1 2600 210
conventional circuit designed for 30 Kton/day. The market prices 16 30.0 10 10.1 2600 210
were considered flat for the next 20 years and equal to 140 17 30.0 10 10.1 2600 210
cUS$/pound with a discount equal to 40 cUS$/Pound, equivalent 18 30.0 10 10.1 2600 210
to treatment and refining cost plus selling, commercialization, 19 30.0 10 10.1 2600 210
concentrate freight and penalties for impurities. 20 30.0 10 10.1 2600 210
The interest rate was assumed 10%, the Work index
equal to 15 kWh/short ton and the concentrator cost equal
to 4 US$/ton. The operational parameters are given in
Table 2 and the base case scenario is based on the use of Table 7: Economic Results for Base Case Scenario
conventional circuits for 20 years of mine life.
For new projects, the installation and equipment Actualized Valvues IR 10%
acquisition are considered three years before starting full NPV Investment Ratio
production. This assumption attempts to represent the time MUS$ MUS$
needed for engineering studies, equipment installation and
infrastructure construction. Base 712.29 198.20 3.59
Table 5 shows the main equipment and economical
parameters used in the construction of the base case and Not Actuallized Valvues
the evaluation of the projected scenarios. Cashflow Investment Ratio
MUS$ MUS$

Table 5: Main Evaluation Parameters Base 2440.82 224.24 10.89

Price 140 cUS$/Pound

Discount 40 cUS$/Pound The reference case considering years of high market
Interest Rate 10 % price (140 cUS$/Cu Pound) generate a NPV of 712 MUS$
Processing 4 with actualized investment of 198.20 MUS$ according to
Recovery Variable, Andina’s Relation Table 7.
Fragmentation Variable, Highland Valley
Copper Relation 5.2. “Drill to Mill” Alternative Base Case.
Drills 900,000 US$/Equipment The alternative case optimizes fragmentation and
Shovels 3,500,000 US$/Equipment generates the best potential scenario for production of 30
Trucks 2,000,000 US$/Equipment Kton per day. After a run of 2 hours and 2360 generations,
Crushers 743,134 US$/Equipment the solution found and tested by four independent runs is
Rod Mill 1,183,814 US$/Equipment shown in table 8.
Ball Mill 2,160,766 US$/Equipment Under the high selling price, the algorithm found optimal
Flotation Cells 85,500 US$/Equipment to reduce investment in crushers and invest in blasting and
Installation 10 times Cost fine grinding, maximizing metallurgical recovery. The
Explosives 300 US$/Ton optimal solution suggested doubles the investment in ball
mills and decreases the number of crushers to the

Fragblast-8 Santiago Chile, May 2006 251

minimum while increasing the drilling and blasting cost Table 9 shows the economical advantage of a drill to mill
from 0.1 to 0.2 US$/ton of mineral. Figure 11 shows the project under the same conditions and throughput
drilling and blasting cost of both cases. requirements where the net present value increased by
13% and the investments were reduced by 17% and a “drill
to mill” optimized case. The ratio between NPV and
Table 8: 30 Kton/day Drill to Mill Project Investment increased more than 25%, giving preference to
the fine grinding over crushing and coarse grinding.
Throughput Burden P80-CRU P80-ROD P80-Balls The advantages of the “drill to mill” alternative under high
KTon/Day m mm um um market prices are not in cost minimization. They are in optimizing
investment and maximizing the company Net Present Value. In
30.0 6.0 78.5 6452 133 a high price scenario as the one studied, it is highly justified to
30.0 6.0 78.4 6448 133 increase operational cost for achieving better results expressed
30.0 6.0 78.1 6607 134 as savings in investment, using a smaller number of crushers,
30.0 6.0 78.4 6449 133 and increasing metallurgical recovery.
30.0 6.0 78.5 6451 133 In the previous example the mining cost increased, as
30.0 6.0 77.7 6442 134 drilling and blasting cost increased. The mineral
30.0 6.0 77.3 6424 155 processing cost increased as well because of the intensive
30.0 6.0 77.5 6433 133 use of electric energy in the fine grinding to achieve a lower
30.0 6.0 77.4 6448 133 liberation size for increasing metallurgical recovery.
30.0 6.0 77.1 6450 133
30.0 6.0 76.9 6502 134 6. EXPANSION PROJECT
30.0 6.0 76.9 6773 136
30.0 6.0 76.9 6814 138 6.1. Traditional Expansion in High Price.
30.0 6.0 77.0 6785 141 Considering the same economic parameters, the same cost
30.0 6.5 77.0 6756 144 and investment functions but assuming an unconstrained
30.0 6.5 77.1 6760 147 production rate, limited only by the amount of available reserves,
30.0 6.5 77.1 6787 150 a traditional expansion scenario was constructed.
30.0 7.0 77.1 6777 154 This traditional expansion considers flat production rates, flat
30.0 7.0 77.5 6767 158 blasting costs and metallurgical parameters maximizing net
30.0 7.0 77.1 6772 163 present value by maximizing the production rate during the first
years of mine life, accelerating the mine depletion process.
Considering the given reserves, the project has a maximum
capacity of 200 Kton per day with a mine life of 10 years. Figure
Table 9: 30 Kton/Day Drill to Mill Project 10-6 shows the production plan for this traditional expansion.

Actualized Valvues IR 10%

NPV Investment Ratio Table 10:
MUS$ MUS$ Production Plan for traditional Expansion Project

Base 712.29 198.20 3.59 Period Throughput Burden P80-CRU P80-ROD P80-Balls
Optimized 820.26 169.27 4.85 KTon/Day m mm um um
Diference 13.16% -17.09% 25.84%
1 200.0 10 10.1 2600 210
2 200.0 10 10.1 2600 210
Not Actuallized Valvues 3 200.0 10 10.1 2600 210
Cashflow Investment Ratio 4 200.0 10 10.1 2600 210
MUS$ MUS$ 5 200.0 10 10.1 2600 210
6 200.0 10 10.1 2600 210
Base 2440.82 224.24 10.89 7 200.0 10 10.1 2600 210
Optimized 2691.31 198.73 13.54 8 200.0 10 10.1 2600 210
Diference 10.26% -11.37% 24.41% 9 200.0 10 10.1 2600 210
10 200.0 10 10.1 2600 210

Table 11:
Economic results for traditional expansion project

Actualized Valvues IR 10%

NPV Investment Ratio
MUS$ MUS$

Base 1410.39 1321.34 1.07

Optimized 1410.39 1321.34 1.07
Diference 0.00% 0.00% 0.00%

Not Actuallized Valvues

Cashflow Investment Ratio
MUS$ MUS$

Base 3605.90 1494.91 2.41

Optimized 3605.90 1494.91 2.41
Figure 11: Drilling and Blasting Cost in Ore, US$/Ton. Diference 0.00% 0.00% 0.00%

252 Santiago Chile, May 2006 Fragblast-8

 Table 11 shows the economic results for a traditional
expansion scenario, generating a Net Present Value of
1410 MUS$ with investment of 1321.34 MUS$ with a ratio of
1.07, typical of expansion projects.
6.2. “Drill To Mill Expansion”
in the case of high metal price
Applying the “Drill to Mill” model, including throughput as
a decision variable, the solution obtained did not use a flat
production rate. Instead of having a production rate of 200
Kton per day, it uses a lower rate adjusting reserves to
maximize the net present value and saving in investing. It
maximizes recovery during the first years of operation and
sacrifices recovery in the last operational years of the mine
life, which are typically associated with low grades,
generating marginal benefits.
Table 13 shows the economic results obtained for this
“drill to mill” expansion project where Net Present Value
was increased by 22.83%, compared with the traditional
expansion project.
Table 12: Drill To Mill Expansion Project
7. THE EFFECT OF BLASTING
In the analysis of the first case, blasting and milling
parameters are modified at the same time. In the second
case, blasting, milling parameters and throughput are
modified together.
Blasting optimization must not be separated from milling
and throughput optimization. For on-going operations, a
change in blasting would exploit the alternative for
increasing throughput or increasing recovery while for new
projects it would result in reduction of investment in
crushing. The following section evaluates the impact of
blasting optimization for new projects and its relation with
metal price, holding throughput and milling parameters
constant.
As an example, a new project was evaluated with a
throughput equal to 50 Kton per day, burden 10 m,
crushing P80 10.1 mm, rod mill P80 2600 µm and ball mill
P80 210 µm. The project was evaluated for metal prices of
100 cUS$/lb and 200 cUS$/lb and for burdens of 10 m
(Base Case), 8 m, 6 m and 4 m.
The summary of this sensitivity analysis is shown in table
14 and figure 12.

Period Throughput Burden P80-CRU P80-ROD P80-Balls Table 14: Cases Definition
KTon/Day m mm um um
Throughput Burden P80-CRU P80-ROD P80-Balls
1 158.6 6.0 83.9 60.74 134 KTon/Day m mm µm µm
2 158.5 6.0 82.9 6039 133
3 158.4 6.0 82.4 6346 134 Base Case 50 10 10.1 2600 210
4 161.3 6.0 83.9 6291 138 Case 1 50 8 10.1 2600 210
5 161.4 6.0 86.5 6493 139 Case 2 50 6 10.1 2600 210
6 160.6 6.0 87.6 62.60 137 Case 3 50 4 10.1 2600 210
7 159.0 6.0 84.6 6308 135
8 158.2 6.1 85.0 6167 133
9 159.2 6.2 84.6 6508 136
10 160.3 6.3 85.2 6686 139
11 86.8 6.4 69.4 6757 205
12 69.4 6.5 69.4 6738 250
13 57.5 6.6 69.4 6786 300
14 49.4 6.7 69.3 6798 339
15 44.2 6.8 100.0 6809 395
16 40.8 6.9 69.3 6826 443
17 39.1 7.0 100.0 6837 477
18 38.7 7.1 69.3 6936 498
19 39.1 7.2 69.3 10000 518
20 1.0 7.3 69.2 6851 536

Table 13:
Economics Results Drill To Mill Expansion

Actualized Valvues IR 10%

NPV Investment Ratio Figure 12: Blasting Impact for different market conditions.
MUS$ MUS$
From figure 12 and table 14 it is possible to conclude that
Base 1410.39 1321.34 1.07 blasting by itself plays an important role especially for
Optimized 1885.15 888.90 2.12 “Low” prices scenarios, considering 100 cUS$/lb as a low
Diference 25.18% -48.65% 49.67% price.
For higher prices, such as 200 cUS$/lb, the price
Not Actuallized Valvues generates a screening effect in the Net Present Value,
Cashflow Investment Ratio hiding the effect of investment reduction. For companies
MUS$ MUS$ where strategic decisions are supported by net present
value, blasting offers optimization capabilities by reducing
Base 3605.90 1494.91 2.41 investments and increasing the net present value.
Optimized 4412.15 1021.71 4.32 Potential planning policies could be generated to define
Diference 22.36% -31.65% 79.03% the optimal decision under high and low prices for new and
on-going operations. Considering the results shown in this
paper, blasting appears as the area capable of responding

Fragblast-8 Santiago Chile, May 2006 253

to changes in market conditions. As this paper showed, in
the case of low prices, new projects could improve their
economic performance saving crushing investment; in the
case of high prices, the combination of increasing
throughputs without sacrificing recovery without waiting for
new equipment installation could enable taking advantage
of positive and probably brief market conditions.
Isolating the blasting effect from milling and throughput
optimization is almost impossible. The analysis made
allows the highlighting of the relevance of blasting in the
design of new projects and the optimization of on going
operations. This impact justifies including blasting as a
design variable for long and short term planning.
8. CONCLUSIONS
Drilling and Blasting plays an important role in the
definition of capital cost and the optimization of crushing
circuits. Therefore drilling and blasting parameters must be
seriously considered in the long term planning of mining
operations.
Fragmentation by blasting plays a key role for new
projects and on-going operations affecting throughput and
recovery relations. For new projects the relevance of
fragmentation by blasting comes as a result of the
reduction in crushing investment by increasing the drilling
and blasting cost.
An additional advantage is that there are no installation
time requirements to respond to size reduction
requirements, further improving the Net Present Value
estimation generated by traditional planning. The
improvement generated by the current “drill to mill”
alternative depends on the actual mine; however,
improvement in Net Present Value from 5% up to 25% is
possible.
The time expended into analyzing a project in the
conceptual stage, using the current method will generate
large savings in time and economics results allowing
focusing in more accurate scenarios.
As Smith recognized, the production rate decision is
almost arbitrary, based more on the available investment
level than on optimized decisions. With the current “Drill to
Mill” model this decision is better supported, even under
investment constraints.
254 Santiago Chile, May 2006
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Fragblast-8