Investigating the Effect of Different Block Dimensions

on the Economic Life of Open Pit Mines

A Hekmat1, M Osanloo2 and P Moarefvand3

ABSTRACT
The anticipated economic life of the mine, which defines the rate of mine production, is dictated
initially by the design capacity of the mill/concentrator and the production capacity of the mine
relative to the grade and tonnage of ore that can be encompassed by the pit design. A small pit
will result in smaller investment and cash flow; in contrast, a larger size of pit will increase capital
investment and annual revenue. Since open pit mine design and long-term production sequencing are
essentially based on three-dimensional block models, changes in block dimensions leads to different
mine sizes, and therefore changes in the mine life. The physical characteristics of the deposit, such
as reserve tonnage and ore grade, affect the expected future revenues from the mining project, and
consequently they affect the life of the mine. Large blocks will increase the recoverable ore reserves
and production rates and hence increase the mine life. This paper discusses the effects of the block
dimension on the commercial ore reserve, grade-tonnage curve and its effect on the production rate,
ultimate pit size, mining cost and consequently the mine life. The result shows that block height is the
most effective parameter governing the economical life of the mine.

INTRODUCTION
Mine life, which is strongly related to the production rate, is a vital variable in a mining project. It is
an inescapable fact that, despite other business enterprises, mining projects are finite life operations.
Therefore, the profit stream generated by a mining project has a limited length. In order to minimise
the mine life, production rate should be increased; this requires higher capital investment. Besides,
longer mine life has higher operating costs due to lower production rates. Briefly, any extension in
mine planning and life results in increasing the cost and minimising the profit, and this ultimately
raises the cut-off grade, and thereby the recoverable reserves of a deposit.
Block model, on the other hand, is a prerequisite for determining the optimum pit limit and mine
planning. In general, the block model concept allows the mine planner conducting the model to
easily assign different characteristics such as grade, density, lithology and other properties. Although
some studies have been done about the choice of block size (Cai, 1992; Hulse, 1992; Jara et al, 2006;
Krige, 2007; Hekmat, Osanloo and Asi, 2008), selection of a block size for a computerised three
dimensional orebody model is an exercise in compromises. Large blocks decrease the calculation
time and also the variance of block estimation and selectivity, but cause more productivity and
smaller operating costs. Smaller blocks increase the resolution and selectivity of the model, which
can be useful in planning but increases the variance of the estimation in the individual blocks and
also calculation time and decreases productivity and total net present value (NPV); furthermore, the
extraction costs of small block is more than large blocks. It is important to select the block size such
that matches the equipment used in the mining operation. Mostly, the block height is selected equal
to the bench height or to some exact fraction of it in order to balance between the bench face and
loading equipment. Indeed; the horizontal dimension of the blocks is determined so as to obtain the
most accurate pit slope angle.
There are some empirical rules for estimating the life of the mine (Taylor, 1977), but the role of
block dimension in mine life is not considered. This paper aims to reveal the relationship between

1. PhD Student, Department of Mining and Metallurgy, Amirkabir University of Technology, 424 Hafez Avenue, Tehran, Iran. Email: [Link]@[Link]
2. Professor, Department of Mining and Metallurgy, Amirkabir University of Technology, 424 Hafez Avenue, Tehran, Iran. Email: [Link]@[Link]
3. Associated Professor, Department of Mining and Metallurgy, Amirkabir University of Technology, 424 Hafez Avenue, Tehran, Iran. Email: parvizz@[Link]

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A HEKMAT, M OSANLOO AND P MOAREFVAND

block size and mine life. For this purpose, commercial reserve was determined for different block
dimensions based on the database from the Chador Malu iron ore mine in Iran and using the NPV
scheduler package. Consequently, a linear model was developed based on a multiple regression
method in order to predict the commercial reserve for different block sizes. Then considering
a constant mineral grade and price, present revenue and cost were determined based on block size,
production rate and mine life. Finally, the mine life for each block dimension was determined such
that equalise the present value of the expected revenue and the cost of the mine.

MINE LIFE AND PRODUCTION RATE

The factors affecting mine life and optimum production rate are physical characteristics of the
deposit, economic and financial factors. The expected life of a mine (T) can be determined based on
the production rate as below:
Qc
T= (1)
N # Pr
where:
Pr is the production rate (tonnes per day)
N is the number of working days per year
QC is the commercial reserve which is obtained by deducting the operational loss from
the mineable reserve (Tatiya, 2005)
Equation 1 shows that increasing the production rate causes shorter life of mining operation;
indeed, the production rate is strongly related to mining cost. Figure 1 illustrates the relation between
production rate and cost of mining. It indicates that the lower the production rates the higher are the
total costs, which equals operating costs plus capital investment. Figure 1 also contains a curve which
shows the relation between the production rate and net present value of the revenue. The optimum
production rate is the point in which the maximum the net present value is obtained.

FIG 1 - The relationship between production rate, mining cost and net present value (Tatiya, 2005).

Since the block size should be synchronised with the equipment used, when the block height is short,
small size equipment should be selected. Therefore, in order to reach a constant production rate, the
number of equipment units should be increased. Based on this logic, the capital and operating costs
would be changed; thus, to reach the optimum net present value, mine life would be changed also.

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 INVESTIGATING THE EFFECT OF DIFFERENT BLOCK DIMENSIONS ON THE ECONOMIC LIFE OF OPEN PIT MINES

The optimum mine life is the length in which the present value of mining costs is equal to the
present value of gross annual revenue. The question is that how the mining costs and revenue will
change in different block size.

BLOCK SIZE AND ANNUAL GROSS REVENUE

The gross annual revenue (GAR) can be defined by the following equation (Abdel Sabour, 2002):

GAR = Pr N gr S R (2)
where:
Pr is the production rate, which is considered as a constant tonnage per day
N is the number of working days per year
gr is the average ore grade
S is the price of the final product
R is the ore recovery
Among these parameters, gr is the only one related to the block size. Figure 2 reveals the comparison
of grade-tonnage curves for two different block sizes in Chador Malu iron ore mine, which is located
180 km northeast of Yezd city in the central part of Iran, and has a reserve of 400 million tonnes
of ore with a mean grade of iron at 51.02 per cent, phosphorous at 0.95 per cent and sulfur at
0.11 per cent. The ordinary kriging approach was implemented to estimate different block dimensions
based on exploratory drill hole samples. Since large blocks have more chance to cover the data points,
more blocks would be estimated when the block size increases. In order to compare the tonnage of
the different block sizes, the tonnage of each cut off category was normalised by dividing it by the
total tonnage. It is inferred from Figure 2 that both block dimensions have the same tonnage when
the cut-off grade is equal to the mean grade. But for the cut-off grade less than the mean grade, the
tonnage of large blocks is more than the small blocks. Thus it can be concluded that there are areas
in this reserve with high mineral concentration and low mineral concentration around it. Therefore,
due to being less effected by dilution, the grade in small blocks shows a higher value. This result
is also obtained when comparing the mean grade curves, Even though the difference between the
grades for two block sizes is not significant.

FIG 2 - Comparison of grade-tonnage curves for two different block size in Chador Malu iron ore mine.

In order to find the relationship between total ore tonnage and block size, for different block
dimensions total ore tonnage determined in Chador Malu iron ore mine, using the NPV scheduler
package. Then a multiple regression analysis model was developed to predict the total ore tonnage
(commercial reserve) as a dependent variable for different block dimensions as the independent
variables. Total number of block models used in this regression analysis is 45 models. The horizontal
block size change in the range of ten to 40 and the block height changes from 5 to 20 m. Using SPSS
software, the regression model developed as below:

QC = -0.61X + 0.15Y + 0.3Z + 560.5 (3)

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A HEKMAT, M OSANLOO AND P MOAREFVAND

With coefficient of determination R = 0.85. The parameters X, Y and Z in Equation 3 are the block
dimensions in east, north and vertical directions respectively. Table 1 shows the model summery
and coefficients.

TABLE 1
The model summary and coefficients for prediction of commercial reserves in Chador Malu iron ore mine.

Model summaryb
Model R R square Adjusted R square Standard error of the estimate
1 0.846a 0.716 0.696 5.87595
a. Predictors: (constant), block size (x,y,z).
b. Dependent variable: in pit ore tonnage.

Coefficientsa
Standardised
Unstandardised coefficients 95% confidence interval for B
Model coefficients t Sig.
B Std error Beta Lower bound Upper bound
1 (Constant) 560.490 3.408 164.44 .000 553.611 567.368
X -0.607 0.062 -0.804 -9.767 .000 -0.733 -0.482
Y 0.149 0.062 0.199 2.414 0.020 0.024 0.273
Z 0.279 0.168 0.137 1.663 0.104 -0.060 0.617
a. Dependent variable: in pit ore tonnage.

The negative coefficient of X in Equation 3 reveals that there is low extension in the deposit along
the east-west (x) direction. Hence, expanding the X dimension of the block causes the centre of
the block to be placed on the waste material, so the whole block would be considered as waste. As
a result, the commercial reserve decreases.
The present value of expected annual revenue (PVAR) is determined based on Equation 2:
T
PVAR = # Pr $ N $ S $ gr $ R $ e-it dt (4)
0
where:
T is the expected life of the mine, years
i is the expected growth rate of price
Solving Equation 4 within the limits of 0 to T, PVAR equals:

P $ N $ S $ gr $ R
PVAR = r (1 - e-iT ) (5)
i

Substituting Pr based on mine life (Equation 1) and QC as a function of block size (Equation 3),
the PVAR is calculated based on block dimensions as:

(1 - e-iT ) E
PVAR = ^- 0.61X + 0.15Y + 0.3Z + 560.5h $ S $ gr $ R $ ; (6)
i

BLOCK SIZE AND CAPITAL COSTS

Capital costs are related to sizes of the mining equipment, mine development, plant-site topography,
climate and accessibility, plant services and personal housing. The sizes of the mining equipment are
strongly related to the block height, which is an exact multiple of bench height. Therefore, the capital
cost discussed in this research refers to the investment required for the main mining equipment
including drills, shovels and trucks.

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 INVESTIGATING THE EFFECT OF DIFFERENT BLOCK DIMENSIONS ON THE ECONOMIC LIFE OF OPEN PIT MINES

Many methods are available to estimate the mining costs such as cost estimation from similar
mining operations, accounting cost estimation methods and the OHara cost estimation method.
OHara (1980) offers guides in judging the effect of local conditions on the sizing and 1978 costs
of specific items of capital and the operating cost of mining project. OHara and Suboleski (1992)
cover the costs associated with both open pit and underground mining. All of the costs were
expressed in US dollars appropriate for the third quarter of 1988. Akbari and Osanloo (2005)
updated the OHara model based on the conditions of Iran and also added reclamation costs to this
model. In this research the updated OHara cost estimator is used to predict the capital cost of the
main mining equipment.
Drills
The size, hole diameter, and number of drills required depends on the tonnes of ore and waste to
be drilled off daily. Hole diameters are matched to blasting bench heights and consequently block
height. Large blasthole diameters can accommodate more explosives, allowing for a hole pattern
to be designed with wide spacing between the blastholes. This generally means lower drilling costs
with fewer holes to be drilled for a given production. There are many rules of thumb for matching
hole diameter to bench (block) height. A common method for calculating this relationship is that
diameter in inches should be less than the height in feet divided by five (Lopez et al, 1995).
Figure 3 shows the minimum and maximum range of appropriate hole diameter for each block
height. Based on figure 3, the mean blast hole diameter (d) can be determined based on block height
(BH) as:

d = 0.4 BH +0.9 (7)

FIG 3 - Range of appropriate blasthole diameter for each block height.

The cost of the drilling equipment (Cd) is given by:

Cd= Nd $20 000 d1.8 = Nd $20 000 (0.4 BH + 0.9)1.8 (8)

where:

Nd is the number of drills which is never less than two

For tonnages up to 25 000 t/d, two drills of appropriate hole diameter should be chosen. Three
drills should be adequate for up to 60 000 t/d and four or more drills will be required for daily
tonnages over 60 000 t/d.
Shovels
The capital cost of shovels is dictated by the optimum bucket size, number of shovels N and the
tonnes of ore and waste will be extracted daily. Figure 4 shows the relation between the size of bucket
and bench (block) height (Osanloo, 2010).

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A HEKMAT, M OSANLOO AND P MOAREFVAND

FIG 4 - Definition of the average bucket capacity based on bench (block) height (Osanloo, 2010).

Regarding Figure 4, the average bucket capacity of a shovel (BC) in cubic metres can be determined
based on block height (metres) as:

BC = 0.61 exp (0.22 BH) (9)

Substituting Equation 9 in OHara capital cost estimator for a shovel, the capital cost of a shovel (CS)
can be determined based on block height as:
0.8
6193 # T p
Cs = (10)
exp (0.044 # BH)

Multiplying QC by the stripping ratio will yield Tp, which is the total material (ore +waste) is mined
per day. Based on the relationship between QC and block dimensions, it can be concluded that the
block size also affects the capital cost of equipment.
Trucks
Since the optimum truck size in tonnes should be well matched with the bucket size of shovels, based
on the relationship between bench (block) height and bucket size; it can be concluded that block
height also affects the capital cost of trucks. Regarding the OHara cost estimator, the capital cost of
truck (CT) can be determined based on block height as:
0.8
4240 # T p
CT = (11)
exp (0.024 # BH)

As mentioned, Tp = Qc SR. Since, by changing the block dimensions the QC varies; therefore the
block size also effects on the capital cost of equipment.

BLOCK SIZE AND OPERATING COSTS

The operating costs of open pit mines depends on the size and numbers of drills, shovels, and trucks,
which in turn is dependent on the tonnes per day of ore and waste (TP). In most open pit mines,
blasting characteristics and the haulage distance to the ore dump usually does not differ very much
from the waste haulage distance. Consequently, the cost of mining a tonne of ore will be virtually
the same as the cost of mining a tonne of waste. In this research the daily operating cost of drilling,
blasting, loading, haulage and general services is considered. The open pit general services cost
includes the cost of pit maintenance, road grading, waste dump grading, pumping, and open pit
supervision, but it does not include the cost of primary crushing or electric power. Concerning the
OHara estimator method, the annual production cost (AOC) in open pit mine is:

AOC = 32.46 Tp0.7 N (12)

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Tp in Equation 12 reveals that AOC is related to block dimension. The present value of annual
operating cost (PVAOC) is:
T 32.46 # N # T p0.7
PVAOC = 32.46 # N # T p0.7 # e-it dt = ^ 1 - e - iT h (13)
i
0

DISCUSSION
The present value of annual revenue (PVAR), capital cost and present value of operating cost (PVOC)
were determined based upon mine life and block size. Considering a constant production rate, the
optimum mine life (T) should be determined in order to satisfy the following condition:

PVAR = Cd + CS + CT + PVOC (14)

Substituting Equations 6, 8, 10, 11 and 13, Equation 14 can be numerically solved to find the lifetime
of the mine respecting the size of blocks. The method was used in Chador Malu iron ore mine, based
on the information listed in Table 2, to estimate the optimum mine life for a range of block sizes.

TABLE 2
Database employed in calculation of the mine life in Chador Malu iron ore mine.

Data Value Data Value Data Value

Interest rate 15% Mena grade 50% Strip ratio 2:1
Price 160 $/ston Recovery 74% WDPY 350 day/year

Figure 5 illustrates the relationship between block size and commercial reserve. It can be concluded
from this figure that:
The sensitivity of commercial reserve to the horizontal block size increases in large blocks.
The influence of block height over commercial reserve is less than the horizontal block dimension.
For a constant overall pit slope, blocks with large heights are more likely to reach the depth of the
deposit. Therefore, increasing block height will augment the commercial reserve.

FIG 5 - Variation of commercial reserve in different block dimensions.

Despite the significant influence of horizontal block size over commercial reserve, Figure 6 reveals
that the block heights impact on mine life is more than horizontal block dimension. This is due to

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A HEKMAT, M OSANLOO AND P MOAREFVAND

FIG 6 - Variety of mine life with block size.

the fact that the block height is the only dimension which is strongly related to the equipment used
as well as the capital cost. While the production rate is constant, higher blocks result longer mine life,
since more reserve will be obtained by increasing the block height (Figure 5).

CONCLUSION
This paper aims to define the economical lifetime of open pit mines based upon block dimensions.
The mine life, itself, is determined based on reserve geometry and size plus economical and fiscal
parameters. Thus, these parameters are firstly defined based on block size. The OHara cost estimator
method was employed as a tool to calculate capital and operating costs. Correlating drill hole diameter
and bucket capacity with bench (block) height made it possible to define capital and operating costs
based on block height.
Mine life is associated with production rates and mineable (commercial) reserves. Using the
database of exploratory drilling for the Chador Malu iron ore mine, a range of commercial reserves
was determined by changing block size. Consequently, a model was developed to predict commercial
reserves for each dimension of block. Since the size and geometry of deposit is not unique, the
suggested model is merely defined for the condition of the Chador Malu iron ore deposit.
The optimum mine life is calculated in order to equalise mining costs and revenue. The results
show that among dimensions of a block, block height is the most effective parameter on mine life.
However mine life increases less than one year by doubling the block height.

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