Net present value maximization model for optimum cut-off grade policy of open pit mining operations

M. W.A. Asad, E. Topal

Research output: Contribution to journalArticlepeer-review

39 Citations (Scopus)

Abstract

The optimum cut-off grade policy maximizes the net present value (NPV) of an open pit mining operation subject to the mining, processing, and refining capacity constraints. The traditional approaches to cut-off grade determination ignore the escalation of the economic parameters such as metal price and operating costs during life of an operation, and consequently lead to unrealistically higher values of the objective function. Further, the NPV of a mining operation declines due to the depletion of the available reserves, causing a decline in the optimum cut-off grade, i.e. higher cut-off grades in the early years of an operation and lower cut-off grades during the later years. Hence, low grade material mined in the earlier years may be stockpiled for processing during later years to offset the effect of escalating economic parameters on NPV. This paper demonstrates the combined impact of introducing economic parameters, escalation and stockpiling options into the cut-off grade optimization model. The model promises an enhancement in NPV as illustrated in a case study incorporating practical aspects of an open pit mining operation.

Original languageEnglish
Pages (from-to)741-750
Number of pages10
JournalJournal of the Southern African Institute of Mining and Metallurgy
Volume111
Issue number11
Publication statusPublished - Nov 2011

Keywords

  • Cut-off grade
  • Mining
  • Modelling
  • Optimization
  • Stockpiling

ASJC Scopus subject areas

  • Geotechnical Engineering and Engineering Geology
  • Metals and Alloys
  • Materials Chemistry

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