Life of Business Optimisation System (LOBOS)

LOBOSTM is a commercial mine optimisation platform, developed and fully owned by

MineSmith. LOBOS is used to rapidly implement and solve complex business and
mine planning problems, providing greater project value at lower cost. Reserve and
development objects are imported from standard design packages (e.g., Micromine)
and converted into optimisation model elements in LOBOS. Even pre-existing
scheduling activities can be imported into LOBOS and used as the basis for
optimisation of production plans. The user adds capacities, financial calculations,
fleets, stockpiling multi-mine or mill interactions, products and alternative options (eg.
cutoffs or designs). LOBOS converts this to an optimization model and cooperates
with a high performance commercial Solver (Gurobi) to find an optimal solution.
Solution results can be viewed as tables and graphs in LOBOS and output to Excel
as input to in-house financial modeling and operational planning.

How is LOBOS different?

LOBOS is a platform for building and solving mine plan optimization models. It is not
another Black Box application. Black Box software applications have predetermined
inputs and outputs, solving a specific problem. Inputs must be altered to fit the
problem. Likewise, the solution, or output, is only for the presumed problem. When
evaluating the likely value of a proposed mining project, a Black Box may be all that
is needed. However, active operations are always unique with specific geologic,
metallurgical, environmental, financial and regulatory settings. Operating mines have
complex constraints and production requirements that cannot be accommodated by
a generic Black Box application. LOBOS dispenses with the Black Box paradigm,
allowing the user the flexibility to develop a customized model that fits specific
requirements.
Whereas other mine optimisation applications are for specific applications and look
at each mine in isolation, LOBOS is a general business and mine planning
optimisation platform that can be applied to entire business complex consisting of
multiple planning units such as mines, concentrators, stockpiles, dumps, smelters
and refineries. LOBOS integrates these operations, optimising all elements
simultaneously. LOBOS can even consider alternative product mixes and capital
expansion options over time. Unlike other applications, LOBOS is not a black box in
which set data goes in and a set answer comes out. Rather, the user defines the
data that will be used and how it will be used to generate a solution for the required
problem. Use LOBOS to solve your problem as you see it, at the level of detail
appropriate for the decisions being made. Solve a specific planning problems for a
greensfield site or solve for an integrated mine plan in an existing mining complex.
The commercial market for mine optimization is dominated by General Mine
Planning systems (GMPs) who seek to provide comprehensive mine design and
planning systems in a single software package. The core application in all GMPs is
CAD-based engineering design. These are primarily applied to computer drafting
and volumetric calculations but also offer standard mine planning applications. All
GMPs include two common applications of mine optimization: open pit optimization

and some means of scheduling, typically based on scheduling of benches in a pit

and closely associated with pit optimization.
There are many other possible applications of optimization technology to mining
related problems. A few of these are bundled as add-on applications available from a
GMP vendor. The common element in all such applications is they are application
specific and often GMP specific. No one GMP-based platform is available which can
be applied to any mine planning application, whether for haulage, scheduling or
cutoff optimization.
This application directed approach to mine optimization has made it difficult to apply
optimization outside of open cut mining. While the underlying optimization
technology (e.g., scheduling) may have general applicability to metals, coal, surface
or underground mining, if the software application is purpose built for scheduling of
cut coal, then considerable additional effort will be required to apply the software to a
different application. An example would be reconfiguring an underground mine into a
data structure of an open pit.
To date, optimization in the mining industry has been oriented towards specific
applications rather than the underlying technology. Industries as varied as
communications, banking and telecommunications have concentrated on using
optimization professionals with expertise in these fields of application. The principle
technology in use is Linear and Mixed Integer Programming (LP/MIP). These
professionals develop and solve LP/MIP models for a wide variety of applications
using mathematical programming languages (such as AMPL) and high end
dedicated LP/MIP Solvers (such as Gurobi). They are not limited in what software
applications are commercially available and continuously seek to apply the best
available technology to any given problem to achieve the best result.
There is one problem with applying the general industry standard for optimization to
the mining industry an absence of mining professionals with the required training in
LP/MIP and other supporting Operations Research (OR) techniques.
MineSmiths LOBOS product makes LP/MIP standards, power and flexibility
available to mining industry professionals. LOBOS enables the mining professional
by converting mine plans into LP/MIP model formulations without the need for math
programming languages or a technical OR background. This means that one
software platform can be used to optimize nearly any mine planning application
whether that application is for stockpile strategies, cutoff policies, underground or
open pit scheduling.
LOBOS is different not simply because it provides you with access to the best
available optimisation technology, but because it frees you from the limitations of
black box applications and opens the doors to the industry standard of problem
solving.

Why LP/MIP based optimisation?

LP/MIP technology provides an exact optimal solution in that no better solution is
possible. Backed by 70 years of research and development, the algorithms used to

solve LP-based models find a mathematically provable optimum solution. Few mine
optimization applications can make the same claim; they may produce a superior
solution to one produced by hand and they may refer to optimisation, but they
cannot demonstrate they have found the true optima.
When comparing options or conducting sensitivity analysis, the users of LOBOS can
be assured that the differences in value between options or the impact on value or
productivity associated with a change in a parameter are due to the option or
parameter change themselves. For this reason, LOBOS is ideal for strategic
optimisation and project sensitivity analysis, providing a powerful tool for evaluating
project risk.
Solutions based on non-exact optimisers must be used with caution when applied to
sensitivity and option analysis. Options or capacities can be compared from many
repeated runs, but there is no guarantee that the comparison is being made with a
true global optima. Instead, the comparison may be between alternative local optima
and not reflect the change in option value.
LOBOS is not application specific. Models are formulated based on your input and
then solved to a verifiable level of optimality. The technologies imbedded in other
mine optimization packages must be written for very specific applications. For
example, consider the common case of finding a production schedule that
maximizes NPV. The user of a scheduler not based on LP/MIP who wishes to apply
a new type of constraint cannot do so, not until changes in the underlying algorithm
have been made by the developer, most likely at the users cost. In contrast, since
LOBOS is a platform for LP/MIP formulation and solution, the user simply adds the
new constraint, adding new variables and relationships between variables. If you
require new modeling elements, MineSmith can rapidly provide the required
modeling interface as this involves no changes to the underlying technology.

What is LP/MIP Optimisation?

Linear (LP) and Mixed Integer Programming (MIP) is a branch of Mathematical
Programming in which all terms are linear combinations of individual variables. The
mathematical structure of a LP model allows even extremely large models consisting
of hundreds of thousands of variables and constraints to be solved a provable
optimum value with the computational resources available on your desktop. The
addition of variables that must solve to binary or integer values in a LP results in a
MIP. Problems that involve sequencing constraints require binary variables and are
solved by a combination of LP solution algorithms and intelligent search and solution
space reduction. MIP formulations are common in detailed (tactical) mine planning
problems that involve sequencing and scheduling of activities as a means of
determining cash flow for Present Value maximisation. MIPs are also required for
strategic optimization if alternative options are being optimised directly.
There are two approaches available for optimisation: formulation as a mathematical
program or development of an application specific algorithm. In the case of
mathematical programming, a model is formulated as a combination of variables
(such as a tonnes mined from a given stope), constraints involving combinations of
variables (such as the tonnes mined from all stopes) and an objective (to maximise

the value of all tonnes mined). Once formulated, the emphasis in optimization is to
find the most suitable solution algorithm, yielding the best result in the least time. In
most LP/MIP Solvers, this process is automated, allowing the user to focus on the
model.
Some problems do not lend themselves to solution as a mathematical program. In
these cases specific algorithms have to be developed. An example is the Steiner
Tree problem in which there is a network in which only the position of some nodes is
known and the objective of the optimisation is to find the location of the Steiner
Points such that some aspect of the resulting network is optimal. In the case of
decline optimization, only the access points are known and the problem is to solve
for intermediate points in the declines path such that the total length is minimized.
This problem cannot be directly solved using a Network LP. Instead, application
specific algorithms have been developed using both Simulated Annealing (SA) and
Dynamic Programming (DP) techniques.
There is a fundamental difference in optimisation applications using LP/MIP and
other technologies:
For LP/MIP applications a library of standard solution algorithms are available
that can be applied to all LP/MIP problems. Some libraries are open source.
Others are commercial and proprietary, but in all cases the underlying LP/MIP
technology is well understood and published.
For specific applications that do not lend themselves to formulation as an
LP/MIP, specific algorithms must be designed using technologies such as
Genetic Algorithms (GA), Dynamic Programming and Simulated Annealing.
The resulting engine is application specific, highly proprietary and delivered as
a black box.
Therefore, the focus of LP/MIP based optimisation for industrial applications is on
model formulation as the underlying algorithms to optimise the model are not
dependent on the formulation. This is not to say that the formulation is not important
in terms of algorithmic efficiency, but that while the formulation might be improved,
the underlying Solver does not need to be altered, regardless of the variables,
constraints and objective included in the model.
In contrast, for applications not solvable by mathematical programming (or not
efficiently solvable), the emphasis is on development of the Algorithm itself using a
toolbox of optimisation techniques including GA, DP and SA. The emphasis in these
applications is not on the formulation. In fact, the formulation will not be evident to
users who will only see data entry and solution results. There is no addition or
modification of variables and constraints as these are fixed in the application. If new
forms of variables, constraints or objective are required, then the underlying
algorithm must be modified before they can be accounted for.

Why is Exact optimisation important?

The concept of optimisation has been used very loosely in the minerals industry.
Generally, the sense of the word has come to imply an improved solution rather

than a true optimum. A solver, such as Gurobi, that can tell you how close a
solution is to an upper limit on the true optimal solution is an Exact optimiser. This is
a key concept; most optimisation applications in the industry cannot actually
provide any estimate of how close they are to true optimality.
But isnt this just academic hair splitting? If an application provides a significantly
improved solution over one done by hand, isnt that good enough?
The answer depends on the problem being solved. Specifically, it depends on the
size and complexity of the solution space. A purpose built non-exact algorithm
designed for a problem that is of limited size and highly constrained might
consistently manage to find a solution that is close to optimal for that specific
problem, but when applied to a much larger and more loosely constrained problem, it
may fail miserably. A good example of this is the application of Genetic Algorithms to
activity scheduling to support detailed mine project management.
In a sequencing and scheduling problem a GA seeks a local maximum (remember,
we never know about optimality with a GA, which will simply continue to solve until it
can get no better solution in the allotted time). To be effective, the GA must include
another heuristic search algorithm that will move into other areas of the solution
space to see if a better solution can be found in that locality. For the final solution to
be optimal, all localities would have to be visited by the GA. In a relatively small
problem that is tightly constrained, the probability of visiting all important localities
might be high and the resulting solution may be globally optimal.
Unfortunately, with a GA there is no way of knowing if the local solution is optimal
and certainly no way to judge the adequacy of the search heuristic in hitting all the
local optima. If the GA is being applied to improving an activity schedule, this
limitation is not a real problem; as long as it is producing an improved solution it is
adding project value. But, serious problems could arise if this same GA was used for
a different application, especially one with a much larger and less tightly constrained
solution space.
A prime example of misuse of a GA-based activity scheduler is to apply it to option
analysis. GAs should never be used for option analysis as you have no idea what
you are actually comparing: the value of the solution at different local optima or the
actual value difference of, for example, two cutoffs at the global optimum. In fact, the
two top populations of solutions might be coming from the two best localities
examined, and these maybe significantly suboptimal in comparison to the true
optimal solution. A GA has no way of evaluating how far any solution is from the true
optimum. Therefore, while is perfectly reasonable to use the GA to improve an
activity schedule, there is significant risk associated with using it for strategic
analysis, especially when you have an alternative in LOBOS which can evaluate the
distance from the true optima. For further discussion of this issue we refer you to:
http://en.wikipedia.org/wiki/Genetic_algorithm#Criticisms

Applications in Strategic and Tactical Optimisation

Standard mine optimization applications are specific to a predetermined level of

decision making, such as life of mine (strategic) planning using a pit optimizer or
operational planning using an activity scheduler for project management. This
limitation is an intended and unavoidable consequence of the data structures
required by a purpose built software application: pit optimizers take block models as
input and output benches and pit shells, activity schedulers take lists of predecessor
and successor activities and fixed activity rates as input and produce detailed
schedules.
LOBOS makes no assumptions regarding data inputs, freeing the user to develop an
application at any level of detail for any mineral deposit, mining or processing
method. Mine plans can be based on individual drill and blast units or aggregated
into more granular mine planning objects such as benches in a pit stage or stoping
blocks. Mine planners, especially for underground projects, can face a month of work
just developing one detailed plan at one cutoff for a single mining method when
conducting a strategic analysis using a GMP and activity scheduler. This level of
detail is rarely justified for a strategic analysis and the resources required to do so
ensure a very cursory option analysis.
When conducting option analysis, LOBOS can function at a high level of detail
replacing stopes with stoping blocks and detailed access designs with access costs
per block and earliest start dates. LOBOS can consider alternative designs, costs,
capacities and mining inventories associated with different options simultaneously, to
either solve for the optimal option value or to produce a full set of scheduled mining
and processing physicals for each option. These solutions by option can be dumped
to Excel for detailed financial analysis. LOBOS can be applied at a high level of
abstraction to high level decision making, allowing hundreds of options to be
evaluated in the time frame normally required to create and evaluate a single design.
LOBOS is ideal for business wide studies. A scenario in LOBOS can extend to
multiple mines (both surface and underground), processing plants (not just mills) and
products. Use LOBOS to evaluate value maximizing product mixes, new projects,
alternative capacities, transportation and resource allocation on a corporate scope.
LOBOS is not just a strategic tool. Import detailed mine plans, defining complex
scheduling and sequencing constraints using LOBOS utilities, optimizing mine plans
at a tactical level. Use LOBOS to optimize multi-mine and mill business strategies
and then implement these strategies on each business entity as production targets in
a tactical optimization process.

LOBOS Scheduling and Activity Schedulers

LOBOS provides you with great flexibility in defining production constraints. This
flexibility extends to sequencing and scheduling. Activity schedulers require as input
activity durations and specific lists of predecessor and successor activities. LOBOS
allows mine plans to be optimised with or without specific durations per activity. A
production related object in LOBOS, whether it is a ramp or a smelter, is treated as a
variable to which the user can apply an upper and lower limit on activity level. If
these limits are equivalent, then the production rate and the activity duration are

fixed and the resulting MIP can be applied to the optimization of activity scheduling
with all the power and flexibility offered by LP technology.
A feature of LP/MIP optimisation that differentiates LOBOS from purpose built
activity schedulers is the ability to optimise rates. This enables LOBOS to assign
high rates to objects whose rapid completion contributes to increased project value.
Likewise, LOBOS can slow or even halt an activity if this results in improved blending
or when production resources are needed elsewhere.
The value of varying rates is more apparent when LOBOS is applied to aggregations
of production objects such as a stoping block. Since a stoping block may include
many stopes and numerous production faces, rates will vary depending on how
many faces can be brought into production in parallel. LOBOS resolves this difficulty
by determining the rate of production and development of a stoping block based on
both the blocks capacity (if assigned) and the optimal allocation of production
resources throughout the operation.

How LOBOS is Implemented

MineSmith was established to provide mine optimisation via mathematical
programming to the mining industry. The company has focussed on the mining
industry based on the philosophy that mine optimisation is best performed by
experienced industry professions with excellent optimisation skills rather than
optimisation specialists outside of the mining industry. MineSmith was founded in
2009 by Dr. Martin Smith who has over 30 years experience in the mining industry
with a continuous career focus of mine optimisation.
MineSmith is available to assist you in your optimisation needs. This includes the
sale and licensing of LOBOS and training. We offer several approaches to help you
implement LOBOS or support you in the application of optimisation technologies to
your projects:

Purchase a LOBOS license and take your strategic and tactical planning to
the next level
We provide consulting services where we apply all our professional expertise
and experience to develop a strategic or tactical plan for your business
A combination of the above, where we come in as consultants and
additionally provide a LOBOS installation and scenario tailored to your
business, and then step back and let you take it from there.