The Mine Planning Process

By Jonathan Barber, Managing Director

ECS International Pty Ltd., www.ecsi.com.au

A mine is like a factory, which produces a product. For a mine, the product could be copper, gold or coal.
Consider a factory producing light bulbs, the factory must produce light bulbs at the lowest possible cost
to be competitive. This low cost is achieved by optimising the mix of the factors of production, labour
and capital. This correct mix must be achieved on a long-term and a short-term basis. If in the long term,
the right manufacturing equipment is not purchased, for example, the plant is under-capitalised with
poor equipment, then costs may be prohibitive. Similarly, a plant could be over-capitalised using very
elaborate equipment and cannot compete with production from a labour intensive, but low cost
producer.

In manufacturing cases, this mixture of capital and labour, once committed to, must be maintained on a
daily basis. For example, equipment breakdowns which leave labour idle, must be managed by
implementing regular and adequate maintenance programs. This day-to-day planning and control
process is essential if the long-term goals of the factory are to be achieved.

The mine is similar to a factory. The two major inputs - capital and labor - are the same. These are
however, combined with a third resource; the geology and geography of the deposit. Nature provides to
the mine or mining company, a deposit with certain attributes. Typically these attributes are the number
of tonnes, the amount of waste and the attributes of the ore (quality or grade). In the long-term planning
process, capital and labor should be optimised to the geological resource. Once the long-term plan is
set, then on a daily basis planning needs to ensure the goal is achieved. Like a factory this involves daily
planning, maintenance and resource allocation. Unfortunately however the geology and geography
make this daily work complex. As Runge (1) points out: "Production from large manufacturing plants, as
well as from most capital-intensive enterprises, is quite consistent from day to day, but all mines change
from one day to the next. It is very difficult to establish enough consistency for new personnel to
understand the operation well enough to operate efficiently."

In the mine planning process three main stages of work are involved. These are geology, long-term
planning and short term planning

Geology

The basis of all mine planning, whether short term or long term, is the geology. The geological resource
differs of course depending on the type of mineral. Many metals deposits result from volcanic or hot fluid
activities. This forms large bodies such as porphyry coppers or thin bodies such as vein gold and nickel.
Coal, which this paper primarily concentrates on, is formed in swamps by the depositing of woody
material, which is subsequently buried and compacted into a high carbon content coal. Generally coal
deposits are relatively flat lying and extend over substantial distances. This is true of most economic
deposits in Australia and the USA. On occasions however, due to tectonic activity, particularly related to
mountain building, the coal is deformed by faulting or folding. Examples include the Rocky Mountains of
Canada and the United States. Small deposits in Australia are similarly deformed, but these are unusual.
Two Australian mines, Leigh Creek and the CIM Stratford mine take advantage of these economic
structures.

The sequence of developing the geological understanding for use in mine planning is three phased, as
shown in Figure 1. The result of this process is a geological model for use by the planners. Generally,
the first phase involves collection of data; frequently referred to as exploration. Exploration involves
surface mapping, chip sampling, drilling and remote sensing such as magnetics or non penetrative
techniques such as seismic. In the exploration phase, the amount of data required and acquired is a
function of the project stage and the budget appropriate to that stage. Early on in a project life a small
number of holes will be drilled and the process of Figure 1 followed. These results and economics may,

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justify more data. The looping of this geological process is a common thread in this paper for mine
planning.

All exploration data is collated in the second stage - interpretation. This is one of the most important
facets of geology. In a coal deposit, this requires the correlation of information from one drillhole to
another. This is done by a process of connecting the dots or the signatures at each drillhole. Methods
are available to automate this using signature or pattern recognition based on neural network and other
artificial intelligence techniques. Downhole geophysical tools such as density, gamma and sonic logs
are used to provide these signatures.

Figure 1: Geological Process

Data Collection

Correlation &
Interpretation

Modelling

Model

A correlation is an interpretation of a deposit. Compared to exploration, correlation is quite cheap.

Value can be added to a project by a good geological interpretation. In correlating coal seams, the
geologist is implying that the coal exists in a hole between one depth and the next depth, and exists in
adjacent holes. By joining these intervals or picks together, the correlation is turned into a model. The
correlation or interpretation also implies, something about subsequent mining. Correlation can, for
example, be based on bulk mining, or selective mining. This is illustrated in Figure 2. Mixing mining and
correlation has some pitfalls. As a general rule, it is better to correlate at the lowest or thinnest unit
possible. Subsequently, thin units can be combined into thicker seams or working sections. The
geologist or engineer can then consider issues such as minimum mining height, inter-seam dilution and
out of seam dilution. Where an interpretation uses a bulk seam scenario, such as illustrated in Figure
2b, these decisions are precluded. This comment is particularly true with changing technologies.
For example, thin seam mining technology and practice is continually developing, and todays wasted
thin seams may be mined tomorrow with future technology. or for underground operations where
thinner seams may be mined using low height equipment the interpretation should be on the thin or ply
basis. The decision to interpret as thin or thick is also critical for capital. As examples, the Camberwell
and Lemington mines in New South Wales, maximise coal production by thin seam mining. In both
cases this allows the wash plant throughput to be maximised.

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 Figure 2: Different Correlations

With Domain control

tonnage is lower but grade
higher

B
Without Domain control
tonnage is higher but grade
lower

The coal correlation methodology is equally applicable to bedded metal deposits such as gold, nickel,
zinc or other sedimentary deposits such as phosphate. In many of these cases however, the correlation
may be based on the grade rather than the geology. This is common in phosphate and zinc, where the
correlation is one of economics, based on the percentage of TCP or zinc (Figure 3).

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 Figure 3: Correlation on TCP Content

A1

A2
TCP

Correlation or interpretation is equally important in massive deposits such as porphyry copper. In these
cases, a wireframing technique is usually applied. Here the wire outlines interpret the ore body. In a
porphyry copper, this interpretation may bound the barren core from the high grade material. These
interpretations on sections, are linked together to form a three dimensional solid body (Figure 4). These
correlations for coal and interpretations for metals are effectively a model of the deposit. The geologist
has implied by his correlation, how he understands the geology.

Figure 4: Wire Frame

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The volume or tonnage of the deposit is a function of this interpretation. As mentioned earlier,
interpretation is one area where value is added to a deposit. In the case of coal (Figure 5) an alternative
interpretation A1 and A2 rather than A, will reduce the tonnage but increase the energy. This change
may move the project from uneconomic to economic. As a rule in coal or metals the interpretation
should be on the finest detail possible. The knowledge or experience to do this interpretation is critical.
In some case the available data is insufficient to support this detail and can be supplemented with
geological experience.

Figure 5: Alternative Interpretations

A1
A

A2

The final stage in the geology process is generation of a model. Given an interpretation the model is
relatively straight forward or mechanical. The model is passed to the engineers for planning.

Long Term Planning

The geological model provides a starting point to evaluate economics and to carry out mine planning.
The long-term planning process is often referred to as strategic planning, feasibility or pre-feasibility
studies. In long-term planning, decisions will be made about the output capacity of the operation, the
major equipment items, and the design and sequence of moving through the deposit.

Consider a simple, single seam open cut deposit as shown in Figure 6. Economics can be determined
by estimating the cost of mining the overburden, cost of mining the coal and the cost of washing the
coal. It is normal, for the economic evaluation to be carried out on an FOR basis (Free on Rail at the mine
mouth) or FOB basis (Free on Board at a port), so comparison with competitors can be made.

Figure 6: Simple Coal Geology

B
A

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This first stage in mine evaluation is called ranking or costing. In this stage unit costs, such as $X per
cubic metre, and unit revenues, such as $ per product tonne are used. Using Figure 6 again, costs can
be summed vertically at any point on the section and revenue can be determined at each point.
By division, a nett revenue per tonne is available. Obviously, as the coal gets deeper, costs rise, nett
revenue falls and eventually goes negative. Ranking, of various types, is the first stage of the planning
process. This process is shown in Figure 7.

Maximisation of nett present value is the standard method of ranking projects or justifying capital. In
Figure 6, NPV is maximised by mining the shallow profitable coal prior to the deeper coal. The simplistic
ranking of Figure 6 also raises the issue of capital. For an operating cost of $2.00 per cubic metre, a set
of equipment is implied. If a large dragline is implied then the volume of economic coal must be
adequate to fully utilise the dragline. The selection of capital and operating costs is usually circular or
iterative. An initial selection is made of equipment and costs and the volumes of waste and tonnages of
economic coal are determined. Based on these results the initial equipment selection is modified to a
larger or smaller unit as required and the process is repeated. This equipment selection process is
implied in Figure 7.

Figure 7: Planning Process

Model

Rank

Design

Schedule

NPV

By contouring the economics ($/tonne) the best coal can be ranked above the poorer coal. Various other
methods of ranking are also used. These include strip ratio usually measured as bcm of waste per tonne
of insitu coal or more usefully per tonne of product coal. Product coal allows, of course, for both mining
and processing losses.

Another method of ranking is "pit optimisation". Pit optimisation was developed in 1964 by Lerchs and
Grossmann (2) to evaluate the economic pit limits of 3D deposits such as phorphy coppers. In these
cases the waste on the walls must be carried by the profit contribution from the ore removed. In the
definition of the optimum pit a number of variables are critical. Example variables are wall slope, mining
cost, metal price, mill recovery and mill cost. Ceritus paribus higher metal prices will result in a larger

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economic pit. As with the ranking in Figure 6, the pit optimizations assist in maximisation of NPV and
capital selection. The capital selection process is iterative, for a particular set of costs, a mining and mill
capacity is implied. The final economic pit based on these decisions may be too big or too small for the
preselected equipment and a refined selection is made. Similarly, NPV is maximised by mining the best
or most profitable material first. Usually incremental metal prices are optimised to generate "nested
pits". The smallest nested pit is the most profitable and by mining from one nested pit to the next NPV is
maximised.
Pit optimisation is used in some coal mines. Its use is particularly common in deep open cut mines such
as those in Colombia, Indonesia and the Rocky Mountains. The combination of many seams and steep
dip provide opportunities on multiple subcrops to open profitable pits.

The use of pit optimisers or economic ranking techniques, thus defines two facets of the mine. Firstly, at
current economics the limit of the pits defined. Secondly, at lower sale prices or higher operating costs,
incremental or sequential pits are defined. The sequence of these pits is an approximation to a mining
schedule.

One particularly interesting aspect of the nested optimised pits is termed resistance. Because of the
geology (either grade or tonnes), certain sale price increments are disappointing in terms of incremental
tonnes. In Figure 6, two obvious resistance points are the hills labelled A and B. Small incremental sale
price increases (say 5%) will not push the mine through these hills. Some significant price increments
(say 20%), will break through and possibly double the economic tonnage. These resistance points are
very important for capital and scheduling decisions. The resistance point A (Figure 6) may present the
planner with two mining options; a small contractor truck operation limited to the tonnes to the left of A
or a large dragline operation limited to the tonnes left of B. Obviously capital and risks vary with each
case.

This concept of resistance is illustrated in Figure 8, a multi seam coal deposit is used. An optimiser is
used to generated a series of structured pits. Costs are simple at $2.00/bcm and $3.00.tonne of coal.
Revenue is $17 and $18/tonne. Two important points are illustrated in this case. Firstly a small changes
in sale price, results in a large change in the optimum pit. This point is illustarted on the development of
the left hand pit. Secondly there are resistance points between the two groups where the lower seam is
too deep and uneconomic to carry the extra stripping.

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 $17 price

The significance of the resistance points depends on the economics. If the ultimate sale price is $19 a
tonne then the resistance points should be considered as final walls and used to develop ramps or other
access. If the ultimate sale price is $30 then practical mining may suggest they be taken in the logical
mining progression.

The next stage in a mine planning process is to design a rational mine from the limits provided by the
optimisation or ranking process. A rational mine will straighten curves or add detailed benches to
increase safety. This process will make the mine slightly sub-optimal as profitable material is trimmed
off the final wall or, poor material is taken. The mine economics will change by a small factor. Strip
ratio will typically increase. This adjustment is normally a factor of the pit dimensions and shape. For
small mines tonnes may fall by 10%. In large mines of say, 20-30 million tonnes of coal, the adjustment
may be less than 1%. Losses in deep open cuts, which are conical in shape, will incur higher design
losses than flat coal deposits. This is due to the final ramp forcing the pit outwards and raising the ratios
and lowering tonnes.
$18 price
The rational design limit is normally broken up for scheduling purposes into sensible mining blocks.
These blocks are dimensioned according to the selected mining equipment, for example the size of the
dragline and its reach. For a truck and shovel operation, the mining panel or block must give adequate
working room for the complexity of the operation. In multi-seam, Hunter Valley operations, truck shovel
mining is carried out at 200-250m strip widths to provide working room for the multiple seam mining.
Dragline strips vary between 30 and 100m depending on the depth and the size of the equipment.

The third major phase in the mine planning process is scheduling. Scheduling differs from optimisation
Resistance
and ranking in that it brings to the deposit a time component. The time required to mine a particular
Points of the equipment. Time is also incurred
block is a function of the shift pattern worked and the capacity
between various operations. For example, mining would normally be preceded by drilling and blasting
or ripping. Figure 8: Illustration of Resistance Points

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A variety of methods of scheduling are available. These include:

• Polygonal methods where the user digitises a polygon. Volumes and tonnages are calculated and the
polygon is either accepted or rejected. Polygon methods are useful in flexible mines such as metals
or large open pit coal where the working shapes are not pre-defined by the equipment or the mining
sequence. In these cases, the polygon advance is both the schedule and the design.

• Block based methods which assume development in a series of regular blocks such as strips or
panels. Volumes are determined for these blocks and stored in a database. During scheduling
blocks or partial blocks are mined in a variety of methods. In this method, the design to a certain
extent, pre-defines the schedule. Various methods are available with the block system for
scheduling. These include iterative point and shoot methods and automatic methods.

The outcome of a schedule is a series of timed (yearly) volumes, tonnes and costs (equipment hours
etc). These are the input to a budget and an NPV. In project evaluation, a common method is to
calculate NPV or IRR. A project which meets a corporate threshold IRR or has a high NPV may be robust
and approved. Another method of approval, (in addition to corporate thresholds) is relative cost curve
position. A project that, by virtue of its costs or favorable geology is positioned low on the cost curve is
relatively risk free. As commodity prices fall, these low cost producers will survive relative to higher
costs producers. A common project approval criteria is that the new project be positioned in the lower
25% of the cost curve.

The supply curve concept ranks the mines with the lowest at the bottom of the curve followed by the
next least expensive mine (Figure 9). A cost curve should be constructed on some equitable basis. When
comparing export steaming coal production, the equitable basis could be FOB Newcastle, for a standard
calorific and moisture value. Thus mines, producing slightly different quality products or delivering over
different rail freight distances are normalised at the common point. For phosphate the comparison may
be on TCP value landed in the agricultural market of interest (Europe, Asia, USA).

Figure 9: Cost Curve or Supply Curve

Price
per tonne

Cummulative Tonnes

Short Term Planning

As mentioned earlier the short term mine planning process is equivalent to the day to day running of a
factory. Short term supervision and control is required to ensure that production is attained efficiently
and cleanly. The short term process in mining will involve surveying, pegging of designs of ramps etc
and layout of blast areas or grade control areas. Operator training in geology, selective mining, drill and
blast, dilution and losses is also critical. The assumptions made in the long-term plan must be achieved.
Some of these areas of control have been automated rapidly in the past ten years with the emergence

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of global positioning systems for survey and drill control. Truck dispatch systems have been
implemented to improve truck utilization. These innovations result in better cost and quality control.

Software

The process of mine planning relies on a good geology and planning component. While the process has
been discussed, two key ingredients; software and staff, allow it to happen. As commodity prices
continue to fall, software, hardware and experienced staff provide a means to effect the planning more
efficiently. In the past twenty years, the mining software industry has developed rapidly in parallel with
the emergence of a faster and lower cost computers. Mining software has followed this hardware
evolution using mini computers (1980's), RISC machines (1990's) and Windows NT (late 1990's). Each
generation of hardware has offered improved speed and reduced costs.

A number of trends are however of concern in this push for lower costs. In the Hunter Valley many
mines have reduced core technical groups including geology, survey and mining engineering.
Technology (e.g. GPS) and hardware have assisted this process of staff reductions. Mines do
however, risk loss of corporate knowledge by loss of staff. A mining companies core asset is its
geology and the wealth created by this geology. Loss of core knowledge is critical, and
outsourcing geology and planning is questionable.

References

(1) Runge, Ian, C. 1998. Mining Economics and Strategy. (p21.)

(2) Lerchs, H and Grossmann, I. F 1964. Transactions, C.I.M., Volume LXVIII, 1965, pp. 17-24 Optimum
Design of Open-Pit Mines, Joint C.O.R.S and O.R.S.A. Conference, Montreal, May 27-29, 1964.

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