GEO-STATISTICAL SIMULATION FOR OPEN PIT DESIGN

OPTIMIZATION AND MINE ECONOMIC ANALYSIS

IN DECISION-MAKING
Abu Bakarr Jalloh and Kyuro Sasaki
Kyushu University, Fukuoka, Japan

Abstract. In this study, an Iron Ore deposit which lies within the Marampa schist formation located
in Sierra Leone, that hosts a primary quartz-hematite schist horizon with thickness of up to 65m, was
used for eventual block estimation, grade uncertainty characterization and final pit outline design.
Economic sensitivity analysis was done to determine how sensitive the investment will be to certain
economic variable changes such as metal prices, refining cost, operating costs and other economic
parameters that are not known with certainty. The optimization results obtained showed that BPITC
can always produce optimal solutions for final pit designs and gives effective information on mineral
project decision-making and mining sequencing. The kriging and simulation algorithms revenue
evaluation showed nearly same optimal values at the same cut-off grade.

All the information which can be obtained once drilling has started and in making decisions whether
or not to develop the mineral deposit through geo-statistical analysis using GSLIB was shown.
Finally, the new concept for final pit shape in open pit mine design namely Best Positive Inverted
Truncated Cone (BPITC) algorithm is applied in optimizing the pit shape.

Keywords: Geo-statistics, Stochastic Simulation, Kriging, GSLIB software.

1 INTRODUCTION

The Mining industry has for many years, been challenged by problems involved in determining
optimal open pit limits. This difficulty is experienced owing to considerably many variables required,
amongst which are the estimation techniques to evaluate mineral deposits. All estimation techniques
whether empirical or geo-statistical require certain assumptions either explicit or implicit that may
impact significantly on quantity and quality of the estimated resource.

Initially, to accomplish the purpose of getting geo-statistical information, geostatistical tools such
variogram calculations and plotting tools are used to summarize drillhole data. Secondly, geological
resource models of the data set are generated by the utilization of a geo-statistical modeling package.
The steps involved in the geo-statistical estimation process of a mineral deposit are as follows:

1) Measure the spatial continuity of the deposit and construct a variogram.

2) Fit a model to the variogram and produce block estimates by kriging or conditional simulation.

Two geo-statistical estimation techniques namely; ordinary kriging (OK) and conditional simulation
are used for block grade estimation and presented for feasibility studies. The conditional simulation
is carried out many times using hard and soft data generated with a probability density, and used to
estimate statistical variations. Each conditionally simulated model is used for mine design and
averaged to quantify metal content and the realizations used to characterize grade uncertainty to help
in making decisions whether or not to develop the mineral deposit.

The developed geological reserve models are then transformed into economic block models using
objective mathematical function formulations and relevant mining and metallurgical cost items. The
mathematical models allowed for flexibility in basic mining design procedures. The economic block
models are then used as input to open pit limit design and optimization by BPITC method.
In this study, the geo-statistical simulations and mine design optimization were done on a deposit of
Iron oxide minerals in Sierra Leone. The effect of geological uncertainty on mine design results which
was our interest was investigated. The steps previously described were carried out in this research
and the estimation was done in both methods with the simulated models accounting for geological
grade uncertainty.

Figure 1 shows the geological map of Sierra Leone and the position of the Marampa formation. The
data used corresponded to 13406 composites from an exploration diamond-drill campaign. Figure 2
shows the mineral map and the project area located approximately 80km from the capital city and
30km from the nearest port of Pepel. The deposit under studies lies within the Marampa schist
formation. This formation hosts one primary quartz-hematite schist horizon that ranges in thickness
up to 65m. The Iron oxide minerals (specularite, hematite and magnetite) were formed due to
prograde metamorphism.

Fig. 1 Geological map of Sierra Leone and the location of the project area (Ministry of Mines and Mineral Resources,
Sierra Leone, 2011)

Fig. 2 Mineral distribution Map and location of project area (London Mining Company, 2009)
2 EXPLORATION DATA ANALYSIS

Figure 3 shows drillhole locations and data pattern map of the targeted Iron oxide minerals. Statistical
analysis of the data showed minimum and maximum metal concentrations to be 0.510% and 62.634%
respectively. From this analysis, summary statistics were deduced.

It is important to note that geo-statistical methods of estimation are only optimal when data are
normally distributed and stationary. Any significant deviation in the normality and stationarity can
cause problems. The first step done towards data analysis was to construct a histogram plot of metal
values from which summary statistics were deduced. As shown in Figure 4, the histogram plot of the
metal values showed that the data did not deviate too severely from either normality or stationarity
however; it did require Normal Gaussian Transformation.

From summary statistics, an asymmetric distribution was observed with a negative skew.

3 MODELING SPATIAL VARIABILITY

The grade of ore in a deposit has certain properties; it behaves like regionalized variables, may be
continuous in the case of metal concentration and presents anisotropies. These characteristics can be
quantified by a variogram which is a function expressing the variance of two samples with respect to
their separation distance (see Figure 5).

In GSLIB, there is difference in variogram modeling between data on a regular and irregular grid.
The drill data utilized for this study consist of irregularly spaced drill grids. Hence, the irregular grid
modeling algorithm that requires the explicit specification of dip and azimuth angles, lag distances
and their corresponding tolerances was adopted.

Figure 5 shows GSLIBs required parameters in variogram modeling. The numbers from 0 to 6
represent lags. From the diagram, we can deduce the following: the azimuth angle is measured
clockwise and the dip from horizontal in negative degrees. Both azimuth and dip require angular
tolerances. The function below shows the semi variance.

Semi-variograms of the deposit were studied in the X, Y and Z directions in addition to the general
direction. After the experimental points of the obtained graphs for variance were developed for all
possible sample pairs, they were fitted by theoretical Gaussian model function. Various variations of
nugget effect, sill and radius of influence or effective range (see Figure 6) were tested, for fitting the
theoretical model to the experimental semi-variogram values.

Example of the resulting experimental semi-variogram model and fitted standard Gaussian model for
the deposit is as depicted in Figures 6. The generated experimental variogram did show that the
mineralization is continuous in all the studied directions and the ranges of influence (ROI) in the
studied directions did not vary distinctively. However, the Range Of Influence for the variograms
generated is shorter. This is a characteristic of thin type deposits. This is true for Marampa deposit.
Anisotropies were also quantified by calculating the ratios of the ranges for one direction for the
models.

4 GEO-STATISTICAL ESTIMATION (ORDINARY KRIGING AND

SIMULATION)

For the available data set, GSLIB was used for modeling the geologic resource models to generate 3-
D visible models. Despite the endless list of kriging types, ordinary kriging was employed to pre-
determine the grade of required blocks from the available DDH data. The output from this process
consists of a single grade and a single Kriging variance values.

The Gaussian related algorithm called Sequential Gaussian Simulation (SGSIM) was applied to the
data during this study because it is the most straight forward algorithm for generating realizations of
a multivariate field (Deutsch & Journel 1992). The principle behind this algorithm is that each
variable is simulated sequentially according to its normal cumulative condition distribution function
fully characterized through a kriging system type. The conditioning (hard) data and all previously
simulated (soft) values found within a neighborhood of the location being simulated were used to
produce results. This technique generates one or more simulated models with mean, variance,
histogram, and variogram function as the real deposit.

The available grade data was simulated 100 times and averaged into one block. The generated 3-
Dimensional mineral inventories of the deposit models were then transformed into economic block
models in which each block was assigned a block net value (BNV) basing on its volumetric reserves
and quality, and on the economics of open pit mining. Figure 7 shows the comparison of the simulated
models at different elevations. Figures 8 shows the TMA of the 100 simulations plotted and
benchmarked against the kriged model. Figures 9 and 10 show a plan view of the kriged and averaged
simulated models respectively at the same level.
 Fig. 7 Comparison of two simulations from the 100 realizations generated

Fig. 8 A plot of the realizations benchmarked against the ordinary realizations benchmarked against the ordinary Kriging
model.
5 ECONOMIC BLOCK MODELLING

Before applying the optimizer, the geologic reserve models were initially partitioned into 470000
cubic blocks. There were 100 x 100 x 47 unit blocks in the X, Y, and Z directions respectively and
an average density equal to 1650 kg/m3 or 1.65t/m3. Bounding techniques were applied to discard
the un-necessary blocks. Furthermore, since the mineral concentration is that of Iron Ore, an
approximate market price of $100 per ton, mining and haulage at $1.2 per ton, mining and haulage
increment cost of $0.1 per level, administrative cost of $1.5 per ton, milling and transport $1.5 per
ton and a refining cost of $60 per ton were assumed and metal recovery of 98%. Additionally, the
metals contained in the mining area were mined whilst taking into consideration a cut-off grade of
14%.
The BNV were calculated using this relation:

Block Net Value = (Ore Area)*(Net ore Value) (waste area*waste removal cost)

Where, Block Net Value (BNV) is assigned to each block in the deposit model. Table 1 shows cut-
off grade, Total Metal Amount and overall average stripping ratio of the average simulated model.
Total Metal Amount (TMA) for each of the 100 simulated block models was calculated and plotted
against the number of geo-statistical simulations and benchmarked against the kriged model for
optimal selection (see Figure 10).
From observed results, we have the pessimistic case that falls below the optimum line and optimistic
case above the optimum line.

Fig. 11 Total Metal Amount for 100 simulations benchmarked against the kriged model

6 OPEN PIT LIMIT OPTIMIZATION METHODS

6.1 Positive Moving Cone (PMC) Based Algorithms

Many authors have researched and published papers on the subject of ultimate open pit design
algorithms both in the heuristic category, such as the Positive Moving Cone (PMC) algorithm, in
the mathematical category, such as the graph theory algorithm, linear programming and network
flow algorithm. Gershon 1983 reported that the PMC technique, in-spite of being fast, does not
 guarantee that the best solution is obtained. Wright (1990) editorialized that PMC technique should
employ the re-testing procedure as suggested by Korobov 1974.

Yamatomi et al. 1994 presented their findings by application of computational algorithm for 3-D
open pit designs in order to obtain the most profitable pit configuration. The traditional PMC
algorithm was modified by including refilling of negative blocks while complying with slope
angles constraints.

6.2 Dynamic Cone (DC) Based Algorithms

The first optimization technique applied to the problem of UPL was dynamic programming (DP)
based on Lerchs and Grossmann algorithm (1965) as described by Wright (1990) and Yamatomi et
al. (1994). Wright (1990) proclaimed that they managed to successfully employ DP applications
directly to solve 3-D open pit design problems by using a 3-D algorithm. The above-mentioned
algorithm was employed with a 3-D incremental minimum removal cone over each block
considered. Yamatomi et al. 1994 recommended that CPVs be employed instead of BCVs in the
decision-making RF used when determining the pit values.

Therefore, Yamatomis algorithm identified that the block under assessment had twelve neighboring
blocks among which the best possible one must be selected from. Notwithstanding the above, the
authors conceded that their improved algorithm could not always obtain the optimal solution due to
existence of multistage paths, among which only one was really optimal.

6.3 Mixed Integer Linear Programming Algorithm

Knowles 1999 introduced a Mixed Integer Linear Programming (MILP) approach to determine and
optimize the sequence of mining. This optimization processing involved minimization of the NPV
of annual costs while achieving a minimum annual production goal. The author pointed out that
MILP was difficult to solve to proven optimality and that proving optimality took an extremely long
time.

7 OPEN PIT LIMIT OPTIMIZATION OF THE AVERAGED SIMULATED MODEL

BY BPITC

The PMC algorithm involves examination of the block model starting in the top most left corner and
proceeding from left to right on every level, searching for all positive valued blocks on the first level,
prior to those on the second level and then truncated cone with maximum benefit and then iterates the
same procedure. The calculation scheme of the BPITC decides size, position and depth of the cone at
each stage by the same procedure, and final pit shape is remained at last as shown in Figure 13. This
algorithm can be simply explained as outlined in the phases below;

Phase 1: Assess values for cone of the lowest block, bij in the biggest possible pit. If the value of the
lowest block for the cone is negative, then leave the negative block un-mined. Otherwise, if this block
is positive, then mine it and the sub or intermediate pit and the respective pit topography outcome are
noted.

Phase 2: Evaluate other blocks on the lowest level and repeat Phase 1. Otherwise, move to the third
phase.

Phase 3: Proceed to subsequent levels upwards and each time repeating phases 1 and 2 until the top
level of the block model has been reached.
Whilst BPMC finds and mines the maximum pit using a cone, BPITC finds and mines a truncated
cone with highest pit value (PV). Two distinctive features for BPITC are; (i) BPTIC finds the
maximum PV and (ii) optimizes the truncated variable distance (see Figure 12). Upon successful
examination of the economic block models, optimum pit values were then collected to give the
optimum path for the 3-D open pit.

This optimizing algorithm (BPITC) was applied to each of the models. This gave rise to pit
topographies whose data was then used to develop visible 3-D open pit models. Comparison of the
benefit results reveal that the BPITC based algorithm gives good results for both deposit models. The
BPITC method was not compared to any other optimizing algorithm in this paper.

Irrespective of comparison, obtained results for the models used indicate that BPITC is a good
optimizing algorithm. This makes it one of the best moving cone methods for maximization of profits
computed during pit design. Even if the BPITC optimizer gives the best and true optimal solution, it
has a limitation of not realizing the time effect or present value of money. This factor makes it not to
be reliable over time.

Economic analysis done on the block models showed that metal price and refining cost has the
strongest effects. The above parameters were iterated three times with respect to block number
starting from lowest market price of $10 to $100 per ton for metal price and $5 to $ 60 per ton for
refining or processing cost.

Figure 14 shows economic analysis on benefit increment for each iterative calculation. The all most
benefit was gained from exploration by three moving cones at initial stage of iterations.

Figure 14 shows the number of iterations plotted against benefits ($) and block volume. The metal
price and refining cost varied linearly with benefits and block volume as was expected.

Figure 15 shows a graphical representation of recoverable reserve for the averaged simulated model
plotted against planning years.
8 CONCLUSIONS

In this study, eventual block estimation, grade uncertainty characterization and final pit outline design
were carried out for an Iron Ore deposit which lies within the Marampa schist formation located in
Sierra Leone that hosts a primary quartz-hematite schist horizon with thickness of up to 65m. The
economic sensitivity analysis was done to determine how sensitive the investment will be to certain
economic variable changes such as metal prices, refining cost, operating costs and other economic
parameters that are not known with certainty. Furthermore, an optimization method, named BPITC,
has been presented for the final pit design of open-pit mines. The optimization results showed that
BPITC can simulate optimal solutions for final pit of the Iron ore open-pit mine, and it gives effective
information on project decision-making and mining sequencing. Ultimately, the effective information
on mineral project decision-making was given by scheduling sequence over production years.

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