Optimisation of Cut-Off Grade Considering Dilution and Waste Rehabilitation Costs

Abstract

Cut-off grade is one of the most important factors in open pit mine
production planning. Due to the sensitivity of this parameter, which
can greatly affect the net present value (NPV) and cash flow of
mineral projects, its accuracy is of great importance. To determine
the optimal cut-off grade, Lane’s method is commonly used. Lane
provided his method to determine the optimal cut-off grade by
considering factors such as the capacity of the mine, treatment
plant and refinery facilities, the time value of money and grade
distribution of the mineral deposit. In Lane’s algorithm, mining
dilution and waste rehabilitation as well as their associated costs
are not considered during the optimisation. In this work, the effects
of dilution and waste rehabilitation on the cut-off grade are studied
using Lane’s theory. These costs are inserted directly into Lane’s
objective function and production schedules are drawn. Results
showed that dilution and waste rehabilitation, when considered in
cut-off grade policies, decreased the average grade of materials
and consequently, cut-off grade increased. As a result, the yearly
processed tonnage and amount refined decreased in a significant
portion of the mine life. This led to a reduction in the annual profits
and NPVs by $ 2 388 (a 28% decrease) and $ 944 (a 37%
decrease) respectively.