Fundamentals of Open Pit Planning and Scheduling

J G 0 CRONE 1
ABSTRACT
Open pit planning and scheduling play a significant role in establishing,
maintaining and improving the economics of open pit mining ventures.
The development of an open pit plan and schedule involves
consideration of the following elements:
the market for the mineral,
the mineral deposit,
the treatment process,
the external factors,
the mining method,
the scale of operations,
the open pit design,
the open pit schedule,
the calculation of economic performance, and
the implementation of the open pit plan and schedule.
The above factors are described and discussed. Open pit planning and
scheduling is the linkage which enables a mineral deposit amenable to
open pit mining to meet a market requi,rement for the particular mineral.
To effect this linkage the open pit planner should have a good detailed
appreciation of both the mineral deposit and the market.
Maximisation of the net present value of an open pit project serves as
an objective in planning and scheduling. This is achieved by maximising
the net present value at each stage of the operational life. Maximisation
of net present value means that the capital invested in the project is being
used most efficiently.
'
Open pit operations take place in a continually changing environment.
Consequently open pit planners must take account not only of current
conditions but also conditions that are expected to develop in the future.
The implementation of an open pit plan and schedule requires that
those responsible for seeing that it is carried out are committed to the
plan. In effect they must 'own' the plan.

INTRODUCTION
The theme of the conference is 'Maintaining and improving the
Open pit plarming and
economics of open pit mining'.
scheduling play a significant role in establishing, maintaining and
improving the economics of open pit mining. A concept which is
developed in the paper is that open pit piarming and scheduling
provide the link between a mineral deposit amenable to mining
by open pit methods, and the market for the particular mineral
produced. It is the role of open pit plarmers and schedulers to
ensure that this link is effective. An effective link capitalises on
the advantages and strengths of the particular mineral deposit,
and seeks to derive maximum benefit from the characteristics of
the market.
Mining is a commercial activity. A prime measure of success
in open pit mining is the profitability of the operation, the margin
between the value of outputs and the value of inputs. Therefore
the maximisation of profit is an objective to be sought in
conducting open pit planning and scheduling. Maximisation of
profit means that capital is biing used most efficiently.
In mining, the combination of capital and ,operating cost
outlays, combined with sales revenue and any revenue from the
sale of capital items, can be effectively quantified by present
value or discounted cash flow determinations. These measures
are widely used and well understood within the mining industry.

1. Principal Engineer - Mining, Minenco Pty Limited, GPO Box

M958, Perth WA6001.

Third Large Open Pit Mining Conference

They provide a method of estimating the success or failure of a

projected operation.
The title of this paper is 'Fundamentals of Open Pit Plarming
and Scheduling'. It should, perhaps, have been 'Fundamentals of
Open Pit Plarming and Scheduling - 1992' to emphasise the point
that we are in a continuously changing situation, with today's
fundamental certainties not necessarily being applicable in the
future. Techniques which have an important application today
may be irrelevant tomorrow. The relationships between the
community at large and'the mining industry are changing. New
demands are being made on open pit mining projects by the
communities within which operations are conducted.
Open pit planning and scheduling can be subdivided into two
categories, which reflect different stages in the life an open pit
operation. Firstly there is open pit plarming which is carried out
at the feasibility study stage of a mineral project. This type of
plarming and scheduling is intimately associated with the basic
concepts of the project and the scale of the operation, and
consequently plays a major role in determining project viability.
Secondly there is the open pit plarming and scheduling which is
carried out on an existing operation. Although ~s type of
piarming and scheduling may offer scope for major change and
innovation, for example when a large expansion is contemplated,
it is usually fairly well constriUned by existing practices and
installations. It often involves revision of an existing open pit
plan and schedule. Such a revision may be made necessary by
changing circumstances, for example, changes in product prices,
operating costs, orebody interpretation, product demand, or
mining methods. Although these two categories of open pit
plarming and scheduling may have different emphases, the basics
are similar.
The development of an open pit plan and schedule involves
consideration of a number of inter-related elements. These,
which are listed below in the order in which they might normally
be addressed, will be described and discussed. The relationship
between the main elements is depicted in Figure 1.
The market for the "mineral,
the mineral deposit,
the treatment process,
the external factors,
the mining method,
the scale of operations,
the open pit design,
the open pit schedule,
the calculation of economic performance, and
the implementation of the open pit plan and schedule.
A characteristic of open pit piarming and scheduling arising
from the inter-related nature of the above elements, is that it is an
iterative process with potential improvements from each iteration.
Computers enable the large quantity of data required for such
iterations to be handled expeditiously and effectively.

THE MARKET
The market or outlet for the mineral product is of fundamental
importance, for it provides a motivating force for the operation of
an open pit venture. This is a fact which engineers, conunonly
pre-occupied with technical standards, tend to overlook. Unless
the output of a projected open pit operation can be sold over a

Mackay, 30 August - 3 September 1992

261

JGD CRONE

PIT PLANNING
SCHEDULING
THE MINERAL
DEPOSIT

MANAGEMENT I

EXTERNAL
FACTORS

TREATMENT

FINANCIAL

FIG 1 - Open pit planning and scheduling - the role in a feasibility study.

long-term at a satisfactory price, or unless there is a good

assurance that this' will happen, there is no justification in
proceeding with the project no matter how good the orebody, and
no matter how efficient the planned open pit operation might be.
So before commencing open pit planning it is necessary to survey
the market into which the mineral is to be sold.
Different minerals have different types of market. Certain
minerals, notably base metals, are sold with reference to a free
and open market eg The London Metal Exchange - with the
intrinsic fluctuations and uncertainties that it implies. Other
minerals, such as coal and iron ore, are priced according to long
term contracts between the buyer and the seller. Certain other
minerals, for example diamonds, are priced on the basis of
producer price setting; in other cases such as certain industrial
minerals it is the consumer who largely sets the price. Some
markets offer the opportunity for forward selling, enabling
producers to lock in forward production at an assured price.
For the open pit planner it is beneficial to know not only the
method and mechanism by which minerals are sold, but also to
appreciate:

262

the minimum quality which the market will accept;

the bonuses and penalties which apply for changes in grade
or quality;
the merits and demerits of minor constituents in the ore;
the projected market behaviour, e g does the market appear
to be contracting or expanding by virtue of consumer
preferences, technological changes or environmental
pressures?;
the cost levels of competing producers, and hence where a
new operation will rank in the ordered cost schedule listing
of world producers;
the reserves of competing orebodies;
the historical pattern of pricing for the particular mineral;
and
opportunities for marginal sales, at a price below the
average price, but at a level which yields a satisfactory
marginal profit.
Appreciation of the market gives the open pit planner a setting
within which the mine will operate, an understanding of
opportunities worth grasping, and difficulties to be avoided.

Mackay, 30 August - 3 September 1992

Third Large Open Pit Mining Conference

FUNDAMENTALS OF OPEN PIT PLANNING AND SCHEDULING

A noteworthy market trend is the reduction in real terms prices

for many metals and minerals as reported by Etheridge (1978).
This reduction has occurred despite the added costs associated
with
increasing
governmental
regulation,
including
environmental requirements, and the increasing cost of
discovering and developing new deposits. It might be concluded
that the development and application of new technology coupled
with effective management has brought this about.
Free
enterprise proponents would claim that it is the result of
competition. If this trend continues it will present new challenges
to open pit planners and operators.

THE MINERAL DEPOSIT

Having formed an appreciation of the market situation the next
step in the open pit planning process is to get to know the mineral
deposit. The mineral deposit, or orebody, is of importance
because it is the source of product which is sold; it is the source
of the wealth which the mine generates or hopes to generate; it is
the prime asset which is extracted to meet the market
requirement.
For several reasons it is vital to know and understand the
orebody as fully as possible:
to gain a confident appreciation of the project overview;
to be able to conceive options in the extraction method and
the extraction sequence;
to increase the confidence of estimates of project costs and
project viability; and
to be able to react effectively to unexpected developments
in orebody data or interpretation.
Data about the orebody which must be known includes:
the orebody shape, size and structure;
the nature of the ore mineral, and the nature and mode of
association of the gangue minerals;
the distribution of the ore grades throughout the orebody,
and the distribution of any minor constituents of interest;
graphs of orebody grade characteristics such as head grade
vs cut-off grade, or grade vs frequency;
,
the densities of the different ore and waste rocks;
the hydrogeological characteristics of the orebody and the
surrounding rocks: water table levels, permeabilities,
transmissivities; and
the physical properties of the ores and rocks to be mined,
and the distribution of these physical properties throughout
the orebody.
Frequently, exploration geologists stop a drill hole when it
passes out of mineralisation. This practice causes problems for
open pit planners who need data relating to low grade and waste
rock surrounding the ore zone.
It is the physical properties of ore and waste rocks which
largely dictate the mining method. Physical properties to be
assessed include intrinsic strength (normally unconfmecI
compressive strength), abrasiveness, and the nature, spacing and
orientation of fractures or other discontinuities. Specialist
geotechnical advice is necessary in this field, a field which also
covers the important matters of pit slope design and slope
stability.
It should be noted that the above data can never be known
exactly - it must always be estimated from sample measurements
taken from within the orebody and surrounds. It is important to
recognise the statistical nature of estimates made from sample
measurements.

THE TREATMENT PROCESS

Mining is influenced by any treatment process. If a concentration
process is used, it is necessary to know the recovery of the

Third Large Open Pit Mining Conference

process, the grade of concentrate produced and the cost of the

process. This information is required for revenue and Cost
calculations. It may also influence cut-off grade calculations.
It is also necessary to know whether there are any. deleterious
impurities or physical characteristics which need to be blended
out in the mining operation to improve the efficiency of the
treatment process. The blending out of impurities will constrain
mining.
It must be established whether the ore suffers any physical or
chemical degradation through time. If, for example, oxidation is
a problem which inhibits metallurgical performance, there will be
implicati~ns for mining.
It may be that mining gives a pattern of material presentation
which is undesirable metallurgically but which is dictated by the
orebody shape. Under such conditions the consequences of sub
optimal metallurgical performance cannot be corrected by mining
se'l.uence, and must be endured.

THE EXTERNAL FACTORS

Before addressing mining method selection, and detailed open pit
design, it is necessary to consider the external factors:
legal and statutory requirements;
political constraints;
community relations;
industrial practices;
environmental standards;
meteorological conditions; and
capital availability.
These factors will place limitations on what can be done with
the open pit design and schedule.
Legal and statutory requirements need to be identified and
worked through. Specialised legal advice is valuable in this task.
Reference to similar open pit projects within the same region, or
state, is useful.
Political constraints depend on what the particular party in
power believes is politically acceptable, and to what extent the
party believes it can gain favour from special interest groups by
legislating to benefit such groups. It should be remembered that
the life of most mining operations far outlasts the term of power
of a particular political party. Political risk is related to the
country or state in which the deposit is located. Australia is not
immune from political risk as evidenced by the recent Coronation
Hill decision.
Community relations is an area which can be demanding, and
if neglected may cause prickly relationships. There is no
substitute for good, persistl<nt information and communication, lo
overcome incorrect perceptions and bias against the mining
industry. Having the community on side is important. Where an
open pit mining operation is established within an area containing
established residences, including farmhouses or weekend
cottages, dust and noise may need to be severely curtailed.
Blasting may not be possible, requiring that a non explosive form
of breaking be used. The bauxite mining operations in the
Darling Ranges to the south of Perth are examples of companies
working hard and effectively to establish good community
relations. The closure of Bougainville Copper can be cited as an
example of breakdown in community relations, albeit a complex,
and extreme case.
Established and entrenched industrial practices can have an
inhibiting influence on setting up a new open pit where this
occurs within the influence of an established industrial area. For
example, in considering the method of truck loading in a new
operation, established union practices may require a two man
crew for loading with a rope shovel, and this restriction may
favour the choice of front end loaders.
Fortunately the
debilitating influence of union demarcation practices is becoming
less common with multi-skilling and other flexible work

Mackay, 30 August - 3 September 1992

263

JGDCRONE

practices. When a new operation is set up remote from an

established industrial area there is an opportunity to establish a
new industrial culture, adopting practices which better suit the
planned mining operation. The Argyle diamond open pit
successfully followed this path in the mid-1980s.
Today, environmental standards need to be addressed at the
outset of a new operation. By taking account of these matters
early, and by incorPorating them into the planning, the effect is
less traumatic than if they were added in at 'a later stage. The
need for the mining I industry to be proactive rather than reactive
is often advpcated, and should be followed.
Mereorological conditions influence planning.
Adverse
weather condi~ons can stop operations, leading to a reduction in
projected annual operating days. Heavy rainfall require that open
pit design allow for drainage. Alti~ude, ambient temperature and
moisture levels in the atmosphere have an effect on equipment
operation, requiring that equipment specification take account of
such influences.
Capital availability cannot be taken for granted, particularly if
the requirement is large. Put simply, if there is no capital
available, there is no open cut mine. Capital availability may
limit the total capital expenditure with consequent influence on
the scale of operation.

THE MINING METHOD

Before the open pit design and schedule can be addressed in
detail it is necessary to decide upon the mining method.
The primary determinants of mining method are:
The nature ofthe orebody and the associated waste rock
The physical 'I1roperties of these materials must be
assessed, and this information, together with the shape and
structure of the orebody, used to select mining methods. In
the past, mining engineers have used qualitative
judgements in mining method selection.
Today
quantitative aSSessments of the materials to be excavated
must be made. Commonly rock hardness or compressive
strength, tensile >strength, abrasiveness, degree of fracturing
or RQD, cohesiveness, drillability, and behaviour when
blasted need to be assessed, and used in mining method
selection.
The scale ofoperations
Scale of operations influences the size of equipment, and
hence the number of units required. Commonly a balance
needs to be struck between large fleets which afford
flexibility and small fleets which yield maximum benefit
from scale econqmies.
The needfor sele.ctive mining
If selective minirJ.g is practised a decision must be made on
the size of the mining block - the ore unit on which an
accept/reject dec~sion can be made.
The acceptable levels ofdilution and ore loss
These factors neted to be estimated for different mining
techniques.
The unit value ofthe ore in the ground
If the deposit is marginal, mining cost is important: if the
grade is high, good mining recovery is important.
Drilling and blastin& is a significant cost in open cut mining,
and if there is any method of obviating this operation, then such
method deserves careful examination.
Characteristically the mmmg industry is extremely
conservative in mining method selection. There is good reason
for such an attitude: the consequences of failure, or even sub
optimal performance, are severe; if the mine doesn't operate, or
works at low efficiency, the result may be financial loss.
Assurance that the mining method will work, and will work

264

effectively in the first year of production, is vital. Taylor (1991)

tabulates the effects of a bad start to a new mine.
Despite this tendency to be conservative there are a number of
new technologies and technological developments which are
being applied as open pit operators strive for lower costs, for
greater efficiency, for an improved environment, and for greater
safety. These include:
increasing equipment size to achieve economies of scale;
replacement of truck haulage,
with conveyor
transportation, preceded where necessary, by a crusher,
either mobile or relocatable;
replacement of rope shovels with hydraulic excavators in
front shovel or backhoe mode;
use of continuous mining machines with the application of
such units in increasingly hard rocks;
use of hydraulic hanuners to directly quarry rock;
use of remote control of mining equipment to remove the
operator from potential danger from rockfalls (this trend is
currently limited in open-cut mines, being more prevalent
in underground operations); and
geotechnical input to slope design, achieving steeper pit
slopes, reduced stripping and improved safety.
It should be remembered that once fixed installations have
been established and heavy equipment purchased, it is extremely
hard to economically justify changes in those areas.

THE SCALE OF OPERATIONS

Scale of operation is an important question in open pit planning
and scheduling. Often the scale of operation cannot be finally
decided until late in a feasibility study. The level of output which
maximises the DCF rate of return may be used as a guide to the
scale of operations.
The level of output which the market can accept, or the level of
output which the orebody can sustain, may be the main
determinant of the scale of operation. If there is no possibility of
disposing of. more than a certain quantity of mineral per year,
then an upper limit to the scale of operation is established.
Likewise if the size of the orebody is such that physically it will
not sustain more than a certain level of output, then this will set
an upper limit to extraction rate.
Increased levels of output commonly bring benefits through
economies of scale.
Frequently the primary rationale of
expansions is to achieve economies of scale.
Because of the high fixed charges inherent in the use of large
equipment and installations which are required to achieve
economies of scale, when production is cut back, total costs fall
at a slower rate than revenue. This is a fundamental and
unpalatable fact to be borne in mind when considering scale of
operations.
The past three decades have seen an increase in the general
scale of open pit mines. The large open pit of the 1960s has
become the medium sized or even small pit of today. Several
factors have led to this situation including:
pressure for unit cost reduction;
pressure for profit improvement;
increased levels of product demand;
higher interest rates, which favour shortened project life to
enhance rate of return;
the increased size and geographical extent of markets;
the depletion of higher grade orebodies, leading to the
working of lower grade deposits often at a higher rate so as
to maintain product output;
the mining of high grade and associated low grade ore, in
deposits which in the past were exploited by underground

Mackay. 30 August -.3 September 1992

Third Large Open Pit Mining Conference

-------------------------------------------------

FUNDAMENTALS OF OPEN PIT PLANNING AND SCHEDULING

methods for the high grade ore only. eg the Kalgoorlie

super pit;
,
the increased size of deposits available for development;
and
the increased amount of information sought and used in
setting up mineral projects.
Regarding the lattermost factor, it is as if the rule of thumb
decisions of yesterday are being replaced by reasoned technical
expertise based on extensive amounts of carefully collected and
analysed data. The added attention to detail aims to reduce the
risks associated with a new open pit mining venture by
endeavouring to minimise uncertainties. This increase in the
knowledge and information applied to mineral projects
disadvantages small operations. There are economies of scale in
collecting, handling and analysing the data required to set up
open pit mining operations. Small operations simply do not have
the potential revenue to justify this level of information input,
without which the chances of failure or sub optimal performance
greatly increase. Very high grade deposits will always have a
basic attractiveness, for the potential profit margin can absorb
certain inefficiencies.

THE OPEN PIT DESIGN

Factors to be taken into account in an open pit design include:
The geology ofthe deposit
Geological data provides the three dimensional outlines of
the ore which is to be recovered, together with the physical
and chemical properties of the ore and enclosing waste
rock.
Topography
The open pit designer must work within the topography of
the mine area.
Access to the open-pit and continuing access to mining
areas throughout the mine life.
Low grade and waste dump sites.
The location of the crusher, or ore delivery point, and other
necessary fixed installations.
The subdivision of the deposit into separate, perhaps
independent, mining areas, if required.
The design ofpit slopes
At the feasibility study stage pit slope angles are based on
preliminary data. With additional geotechnical work, or
when experience with practical slopes in the open pit
operation has been obtained, slopes can be designed with
greater certainty.
Pit design parameters
Items to be specified include:
road width,
road gradient,
maximum road curvature,
minimum operating bench width,
bench interval, and
safety berm detail.
A common approach to open pit design is to draw up an
ultimate pit. This can be done manually or with computer
assistance, the objective being to remove all ore, with marginal
stripping ratio checks in areas where the waste to ore ratio
appears dubious or unacceptable.
Computer programs which assist with this approach are
commonly based on the Lerchs-Grossmarm optimisation
program.
From the raw Lerchs-Grossmarm output, or the manually
determined ultimate pit, a more detailed practical pit design can
be developed, incorporating road ,systems, dumps, crusher

Third Large Open Pit Mining Conference

location, power and water services and so on. The quantities of

different ore types and waste rock which lie within this ultimate
pit can then be measured.
The design stage may require the assessment of alternative
proposals, for example whether all or part of a truck haulage
route can be replaced by conveyor transportation. Conveyors
offer significant economies compared with trucks where there isa
predominant uphill component in the ore transport path; where
the path is level the advantage is less marked, and trucks may be
favoured on the grounds of flexibility. The use of mobile and
relocatable crushers feeding onto conveyor systems is more
energy and manpower efficient than truck haulage albeit at the
expense of greater initial capital and some loss of flexibility.

THE OPEN PIT SCHEDULE

With an ultimate pit defined, open pit plarming and scheduling
consists of deciding on how to proceed from the unmined
orebody to the ultimate pit. The technique in doing this depends
on the type of deposit. For example with a base metal or precious
metal deposit, intermediate Lerchs-Grossmarm pits can be
determined by depressing the product price or lifting the cost
levels. The resulting intermediate pits can then be used as a
guide to the design of staged pits in proceeding to the ultimate
pit. For a 'bulk' mineral such as iron ore, coal or bauxite, where
achievement of a constant quality of output is important, a
different approach is more appropriate. This is to subdivide the
orebody into a number of areas, each area being topographically,
geologically or structurally distinct or distinguishable by virtue of
different physical and chemical characteristics. Scheduling then
consists of combining ore from the different areas to achieve the
desired physical and chemical composition of the blend. This
must frequently be achieved within certain constraints such as
total mining capability, equipment available, and mining rate per
area.
Whichever technique is adopted, open pit piarming and
scheduling is essentially a design problem. Just as it is necessary
to revise and re-work a design to arrive at an optimum or
acceptable ultimate result, so open pit design and scheduling
benefits from applying an iterative approach.
When the open pit design and schedule has been completed (to
a broadly satisfactory preliminary phase) the viability of the
project can be projected. At this stage a critical examination may
yield areas where changes can bring about worthwhile
improvements. Typical questions to be asked are 'Is there any
way of taking more cheaply mined, or more profitable ore,
earlier?' and 'Can any expenditures be deferred without undue
prejudice? '
For deposits which are dependent on a cut-off grade, cut-off
grade optimisation can be examined as means of potentially
enhancing the profitability of the operation. This technique
developed by Lane (1988), aims to optimise the profitability of a'
mining operation by successively maximising the net present
value of the operation at each stage. A case study application of
this approach has been reported by Crone and Hunter (1992).
Table 1 shows the optimisation of a fictitious iron ore deposit.
Here the question addressed is 'At what point does the
tonnage-grade characteristic of the deposit match with the
price-grade characteristic of the market to yield an optimum
result?' There are two answers which might be given. Firstly
there is the grade which yields the maximum immediate [armual]
profit, ie the largest difference between the (gross) revenue and
the total costs. From the column headed 'Net Revenue' this is
seen to occur at 59 per cent Fe cut-off grade to yield an armual
figure of $136 million. The constant cut-off grade which
maximises the present value of the operation is seen to be 57 per
cent, the increased life (four years) brought about by this lower
figure offsetting the reduced armual profit ($131.7 million vs

Mackay. 30 August 3 September 1992

265

JG D CRONE

TABLE

Open pit project optimisation matching an iron ore mineral deposit and market.

DEPOSIT CHARACTERISTICS
Cut-off
Grade

Ore
Quantity

Ore
Grade

(%Fe)

(Mt)

52

550

54

OPTlMISATlON CALCULATIONS
Unit
Price

Revenue

(%Fe)

Discard
(Waste
+ LG.)
(Mt)

($/t)

59.5

110

22.30

500

60.2

160

56

440

60.9

57

410

58

Mining
Rate

Mining
Costs

($M/a)

(Mt/a)

($M/a)

Downstream
Costs
($M/a)

446

24.0

36.0

300.0

23.00

460

26.4

39.6

220

23.70

474

30.0

61.2

250

24.00

480

370

61.6

290

24.40

59

330

62.0

330

60

280

62.4

61

230

62.9

DATA AND PARAMETERS

PRODUCTION RATE
ORE PRICE
MINING COST
DOWNSTREAM COST
PROJECT CAPITAL COST DISCOUNT RATE

Net
Revenue

Ufe

Costs

PV
(@1%/mo)

($M/a)

($M/a)

(Years)

($M)

336.0

110.0

27.5

82.3

300.0

339.6

120.4

25.0

152.6

45.0

300.0

345.0

129.0

22.0

197.3

32.2

48.3

300.0

348.3

131.7

20.5

202.6

488

35.7

53.5

300.0

353.5

134.5

18.5

197.8

24.80'

496

40.0

60.0

300.0

360.0

136.0

16.5

175.3

380

24.96

499.2

47.1

70.7

300.0

370.7

128.5

14.0

69.6

430

20 million tonnes of ore product per annum.

$0.40 per metric tonne unit at, and above 62.0%Fe
$1.00 per metric tonne unit penalty below 62.0%Fe
$1.50 per tonne
$15 per tonne (covers, crushing and screening, railage, port operations, marketing, administration, overheads)
$800 Million
12% p.a. (1% per month)

$136 million). A further stage of grade optimisation could be

applied to enhance the final present value by progressively
maximising the present value through time. Table 2 shows such a
procedure and indicates that the life of the operation is slightly
lengthened and the net present value raised by some five per cent.
Such a course may not appeal to an iron ore buyer who looks for
constant quality product.

THE CALCULATION OF ECONOMIC

PERFORMANCE
As already intimated, discounted cash flow rate of return, or the
present value calculated at a nominated discount rate, is used as a
criterion of success in determining the economics of a mineral
venture. Another measure used is the payback period, the time
which elapses from the start of operations until the initial capital
outlay is recouped.
There will inevitably be some debate as to whether any of these
measures truly reflect the value of the investment. One problem
with present value or discounting techniques is that revenues in
the distant future are given little value. With discount rates
around ten per cent pa what happens in the first five years has a
major influence on profitability. What happens beyond 20 years
has only a very minor effect on present value or discounted rate
of return. Thus there is merit in looking at fmancial performance
from several points of view including looking at totally
undiscounted cash flow projections. A deposit such as Roxby
Downs would require an undiscounted assessment to show one
aspect of its value - its potential long life.
Sensitivity calculations reveal the vulnerability or robustness of
an open pit project to changes in capital and operating costs, and
to product prices. The results of such sensitivity calculations
reveal the level of financial risk associated with the project.
Sensitivity calculations can also examine the exposure to other
factors such as metallurgical recovery, head grade, equipment
levels, and production rates.

266

Tot~1

THE IMPLEMENTATION OF THE OPEN PIT

PLAN AND SCHEDULE
An open pit plan and schedule must be understood and accepted
by those responsible for seeing that it is carried out, that is by
senior management. If senior management does not understand
the plan, and is not committed to seeing that it is carried out, then
the plan will be of little value for it will not be respected and
followed. Clearly the principle to be adopted is to involve in the
development and formulation of the plan those responsible for
seeing that the plan is accepted and carried out. This may be
achieved by keeping them informed of progressive results in the
plan development, and by involving them in drawing up the
planning scope and the. pian parameters.
One of the frequent problems which beset open pit plarmers is
the gap between the plarmers and those who carry out the plan the operators, or doers. In part this gap is a consequence of the
different psychological make up of those who plan from those
who operate. There is no royal road to solving this dilemma. A
solution is to make those responsible for the actual operation
responsible for plarming the operation as well. Good, effective
communication helps to smooth the differences between plarmers
and operators.
One of the processes which should be followed in any plarming
work is to check actual operations with the plan and to analyse
any differences. Was the plan at fault? Was the plan not
followed, and if so why? Was the plan achievable? Often the
parameters and assumptions on which the plan was drawn up
change, and such changes are given as reasons for divergence
from the plan. It is nevertheless worthwhile to compare the
realisation with the plan, making adjustments for changes, for
either the plan must be modified, or the operation must adapt to
go back on plan.
Open pit plarming and scheduling must be dynamic, adapting
to changing parameters, costs, prices, statutory requirements,

Mackay, 30 August - 3 September 1992

Third Large Open Pit Mining Conference

FUNDAMENTALS OF OPEN PIT PLANNING AND SCHEDULING

TABLE

Open pit optimisation - stage 2

maximising the net present value.
54

56

57

58

59

13.6

12.0

11.1

10.1

90

1271

127.3

121.0

115.6

107.0

97.1

127.1

127.3 X

253.6

21

238.5 X

239.9

20

338.5 X

226.3

19

420.3 X

18

494.2 X

4939

199.0

17

558.8

559.6 X

185.4

16

617.6 X

173.4

15

6691 X

161.4

14

7148 X

149.4

13

755.3 X

755.1

12

791.3

791.4 X

125.4

823.7 X

1142

PV PER INCREMENT $Ml

Increment Number

22

2126

11

NET PRESENT VALUE

PROGRESSIVE
TIME TO COMPLETE EACH
INCREMENT (MONTHS)

52
15.0

CUTOFF GRADE (%FE)

MONTHS OF OPERATION
PER INCREMENT

137.4

1030

10

852.6 X

878.4 X

8762

91.8

901.5 III

901 5(4) X

80.6

922.5 X

70.6

941.4 X

60.5

958.6 X

504

9741 X

403

988.1 X

302

10008 X

10122 X

(ALLOWING FOR $800M PROJECT CAPITAL)

202
1012.1

101

212.2

~fz~Atn:t~~~W~NtS3~~/t?kMERIAL (ORE PLUS DISCARD}

geotechnical developments and industrial developments.
Resulting from these changes the ultimate pit may expand or
contract. If a final cutback has been put in place it may not be
possible to marginally expand the ultimate pit, although there is
no hindrance to contraction. The sequence of mining is unlikely
to change other than marginally.

CONCLUSIONS
1.

3.

Open pit planning and scheduling provide the linkage

between the potential value of a mineral deposit
amendable to open cut mining and the market
requirement for the particular mineral. This linkage
exerts a significant influence on the economics of the
open pit, and means that the planner should not only have
a full appreciation of the characteristics of the mineral
deposit, but also an understanding of the elements of the
particular mineral market.
Discounted cash flow rate of return or net present value at
a nominated interest rate are used as measures of success
in assessing economic performance. Maximisation of
either of these measures means that capital is being used
most efficiently. Maximisation of net present value can
be achieved by successively maximising the net present
value at each stage of an open pit operation.
Open pit planning and scheduling takes place in a
continually changing environment, requiring that
planning must take cognisance not only of conditions
today, but also as they are projected to be in the future.
The trend towards greater concern for the environment is
unlikely to lessen, implying that new open pit operations
today must anticipate and make provision for the more
stringent standards of tomorrow. The observed reduction
in the real price of many minerals, if ongoing, means that
open-pit mines must be set up not only for profitable

Third Large Open Pit Mining Conference

operation today, but to have the ability to maintain

profitability in the future.
4.

An open pit plan and schedule needs to be effectively

communicated to those responsible for carrying it out, so
that they understand the reasoning behind the plan and
become committed to it. The best way of gaining
commitment to an open pit plan is to involve in the
formulation of the plan those responsible for carrying it
out. This involvement may be limited to contributions in
deciding parameters or plan scope, but the greater the
involvement the greater will be the commitment.
Ultimately it is the responsibility of senior management
to see that the plan is carried out, so it is important for
that group to own' the plan.

ACKNOWLEDGEMENTS
The author acknowledges with gratitude the permission of the
management of Minenco Pty Limited to publish the paper. The
assistance of colleagues in the preparation of the paper is also
gratefully acknowledged.

REFERENCES
Crone, J G D and Hunter, M McC, In press. Mine profit enhancement
through cut-off grade management, Proceedings, (The Australasian
Institute of Mining and Metallurgy: Melbourne).
Etheridge, W S, 1978. Aspects of real metal prices, Transactions of the
Institution o/Mining and Metallurgy, 87, AI72-181.
Lane, K F, 1988. The Economic Definition of Ore, pp 149, (Mining
Journal Books Ltd: London).
Taylor, H K, 1991. Ore reserves - the mining aspects, Transactions of the
Institution of Mining and Metallurgy (Sect A Mineral Industry)
AIOO,146-158.

Mackay, 30 August - 3 September 1992

267

268

Mackay, 30 August - 3 September 1992

Third Large Open Pit Mining Conference

SESSION 7.2
Blasting 11 (Coal)