Slope Stability Santiago Chile, November 2009

A Quick Analysis Tool to Show Cost Savings in Pit Wall Angle Changes

We have all been faced with the problem of explaining to mine operations or mine management how to improve the pit wall angles through various changes in operational practice and not had buy in to the changes. How do we put our design into terms that everyone in mine operations and mine management can understand so that they will put the resources into making the change happen. Geotechnical Engineers need a way to show the cost savings or NPV benefit to our management but rerunning the pit shell and mine plan is very time consuming and nobody wants to do the work just to find out there really are no savings. This paper will provide a simple tool for doing a fast analysis on the costs and savings of making changes in the pit wall angle. The tool can quickly calculate a total cost savings and NPV savings which can be presented to the mine management in order to quickly achieve buy in, or show that there is no practical economic benefit to the plan. This is a simple but reasonably accurate tool that can be run in a matter of minutes. This paper will show practical examples that may give surprising results.

Abstract

R.C. (Bob) Gill

Snowden Mine Industry

Consultants

INTRODUCTION

We have all been faced with the problems of explaining to mine operations or mine management that we can improve the pit wall angles through various operational practices. Often we are listened to and then ignored or worse the design is changed but operations do not follow the plan because it costs too much to do the work. As geotechnical engineers we talk about the advantages of steeper pit walls, and of better pit walls but often the planning and operations staff look at us like are not even speaking the same language.

Throughout my career I have continuously run into problems of communicating my ideas in a form that the mine engineers and operations

staff understand and will listen to. In my experience the mine engineers keep asking for a simplified list of one or two slope angles in as few domains as possible because incorporating detailed geotechnical parameters into the design is time consuming and the benefit is unknown without running many planning scenarios. As well the operations staff that I have worked with only wanted my input when they had a problem but almost always came back with the same replies for general recommendations around the subject of costing too much.

At one mine operation I managed to get the mining engineers to rerun the pit shells and do a quick schedule to show cost savings if we increased the pit slope by one degree. The analysis showed that we could save $250 million over the life of the mine. Armed with my new knowledge I went to the mine operations manager with this information. He responded with questions like: What is the NPV on that, and is that with all costs included? Of course I couldnt answer any of his questions and when I asked the mine engineers if they could do the work that was necessary to put in additional costs for pre-shear blasting, extra face preparation, and other works they told me that I had no idea how much work I was asking them to do. I was left with the knowledge that there might be some big savings out there, but no ability to do anything with that information.

Another time the mine where I worked was having problems with failing benches. Operations were doing a poor job of pre-shear blasting and every time I talked to the operations superintendent he would tell me that the costs were too high so he couldnt do the work. My alternative was that we would have to lay back the wall by 4 for safety. When asked what the difference would be in costs, I told them that as we were not doing the higher cost drill and blasting there was no cost savings. I told them that we would not get all the planned ore in that phase though but would be able to get the ore in the next pushback. Ultimately the conclusion was that costs would go down and the ore would be recovered later anyway so that must be good. Everyone was happy with the answer because they could stop doing the time consuming pre-shear blasting and we were making safety improvements in the mine. No one knew what the overall cost difference to the company was.

At another time, one of our consultants kept telling me that by doing better pre-shear and bench prep work or by installing dowels or other face support we could steepen the pit walls. His belief was that there would always be savings in steepening the benches. I knew that this was probably true in many cases however I could not quantify the cost savings.

I had ideas for what I believed were improvements for the operation, but no way to analyze or show others whether these were good

Santiago Chile, November 2009 Slope Stability

ideas or not. I would normally fall back on the safety argument, or manage to persuade one of the long range planning engineers to make the change without any valid justification. I was left wondering what I needed to do in order to communicate to the rest of mine engineering and operations.

THE QUICK ANALYSIS TOOL

The language that I was not speaking was the financial side of mining. As we all know, unless a mineral can be extracted from the earth economically it is not ore. The ore extracted also has to pay for all the costs in removing the waste above it. All decisions made in mine operations are based on a few criteria including financial to manage costs, or safety to manage risk. As a geotechnical engineer I couldnt speak of pit slope angles in terms of costs and savings, or NPV on overall mine operations. I needed a tool to allow me to convert pit slope concepts into financial concepts.

Not having any tools to do financial analysis of pit slopes, I decided that I needed to create one. Having ready access to Microsoft Excel and VBA I built a spreadsheet tool to do this analysis. The project ended up being more complicated than I ever thought it could be, but the result is a quick analysis tool to show cost savings in pit wall angle changes.

TheoryThe theory behind the analysis is fairly simple. By calculating the total volume mined before making a change and then calculating

the volume mined after the change we can get the difference in volume mined. By multiplying this change in volume by our waste rock density and then multiply by waste mining costs we can get the cost savings of steepening up a pit wall. To simplify this model I assumed that a pit is elliptical in shape so volume is calculated using conical ellipses. This is done by calculating an elliptical area for the top of the pit and an elliptical area for the bottom of the pit, taking the average and multiplying by the height. This gives us a close approximation of pit volumes and a good estimation of change in volume between two cases. Because the volume changes occur along the pit parameter this method provides a close approximation.

In mining we almost never have the ability to make the pit slope angle change uniformly around the whole pit, so the ability to choose a design sector was added. This option allows the calculation of the volume change over a portion of the whole pit. By calculating the circumference of the pit and the partial circumference of the sector we are interested in and we can determine what percentage of the whole volume we are interested in. The ability to rotate the ellipse to the same orientation as the pit was added to allow entering sectors in their design azimuth rather than having to calculate a relative angle.

The total mining cost savings by making a change in pit slope angle is calculated by multiplying the two numbers above together. Of course nothing comes for free, so we need to calculate the additional costs of cutting the pit wall to a steeper angle. Usually we need to make changes in one of three ways to steepen pit walls. The first option is that there will be a different mining method such as pre-shear and buffer blasting, careful scaling of the bench face or different loading practices along the face over a certain width adjacent to the bench face. This width of adjacent to the pit wall is referred to as skin thickness. By calculating the cost per tonne for this area, we can calculate the additional costs by multiplying volume of this skin thickness with the density and costs.

The second option is that there will be some higher cost per unit length of bench face such as returning and scaling the bench face, or installing dowels into the face to strengthen the rock mass. By putting in the cost per unit length of bench face we can calculate additional costs by multiplying the total length of the bench faces with the cost per unit length.

The third option is that there will be a capital cost and a yearly operating cost for things such as purchasing a pre-shear drill and maintaining it or purchasing a monitoring system. This cost is calculated by summing the initial capital costs and each years sustaining capital and operating cost.

By comparing the total cost savings, from mining a reduced volume with the total additional costs for achieving the steeper slopes we can compare the two options and calculate any cost savings for making a change.

Total savings is not the only number that is needed when we are looking at longer term projects, so a NPV calculation was included. The yearly costs and savings are calculated and discounted at a specified discount rate to calculate the NPV savings of the project. A table of yearly costs and expenses and the discount is provided for looking at the details.

This is a simplified tool, so there are a number of assumptions made in the calculations. The first and most important is that we are comparing two equally safe options. This means that the flat slope without improvements has equal risk as the steeper slope with the additional improvements. There is no calculation for risk so we must use our geotechnical analysis and judgement in the designs of the steeper slope and find reasonable costs for the implementation of the design.

The second assumption is that the pit is mined in what the pit shell analysis calls the worst case scenario which means that one

Slope Stability Santiago Chile, November 2009

bench is completed before the next bench is started. If the pit walls are pushed back in phases, then the scenario should be run in two halves and the costs and savings added together in another spreadsheet with the proper timing and discount calculations reapplied.

The third assumption is that the base of the excavation will always stay in the same location. The crest varies with different options for steepness. This may not always be the case such as when we make a change part way through a phase where we will just flatten the slopes. Most comparisons can be analysed by keeping the base of the excavation in the same location as this is what needs to be exposed to allow extraction of the ore.

ExamplesNow lets look at the questions posed earlier and see what the answers the tool can provide. For the first example we have a mine pit

that at the base is about 1000 metres long and 100 metres wide. The ultimate pit is 750 metres deep. The initial pit slopes are 37 and the steepened pit slopes are 1 steeper or 38. In this case we will include the whole pit circumference and assume a density of 2.5. The original cost per tonne is $0.95 and the life of the mine is 25 years. Not considering additional costs for slope improvements, the savings are around calculated to be $250 million over the life of the mine.

Now if add additional costs for the steeper slopes we can calculate the real savings. Assuming a new drill strictly for pre-shear blasting will cost $1,500,000 and its costs of $650,000 per year for operations and maintenance. On top of that we will need an additional backhoe for scaling that will cost $2,000,000 and have operational costs of $450,000. The per ton costs will also be higher in the first 20 metres next to the wall because of buffer blasting and additional loading requirements and will be $1.25 per tonne for a 20 metre skin thickness. Using the additional costs of improvements in our calculations shows that the savings have dropped to around $190 million.

Finally with a discount rate of 10.5% used at the mine we calculate the NPV savings to be about $87 million. This is still a very impressive amount of savings for a large open pit and one which will get the mine engineers and operations staff interested in analysing the option.

In my second example the pit walls were failing because the mine operations superintendent thought that the pre-shear and buffer blasting and wall cleanup were too expensive to justify the costs. To get the same ore as was planned for the phase we look at two scenarios, the flatter slopes of 34 which we changed to and the original 4 steeper slopes at 38. In this mine the base of the pit was 650 metres long and 150 metres wide and the pit was 300 metres deep. The pit was oriented at 160 and the sector was from about 45 to 130 this was about 400 metres along the crest. To get to the same ore, the steeper mine removes about 450,000 tonnes less rock than the flatter mine in this sector alone. If we dont put in any costs for slope improvements we calculate or overall difference in costs. The mine costs were about $1.15 per tonne of waste rock moved, so the savings come out to be about $11 million over the life of that phase which was 5 years.

By using the goal seek option in Excel we can calculate what that works out to be per tonne for additional work at a break even cost. We can consider a 20 metre skin where more expensive drilling, blasting and handling must be carried out. We turn on the skin cost and use goal seek to set the savings to $0 by varying the skin costs. The spreadsheet calculates a cost of about $6.70 per tonne or about 6 times higher. If the costs of the steeper slope were less than $6.70 per tonne then it is cheaper to mine the more expensive steeper slopes.

The estimated actual mine costs for the pre-shear and buffer blasting and special scaling and handling were around $1.65 per tonne. The analysis shows that there is a savings of about $10 million to mine the steeper slopes with the additional work, which is calculated as an NPV savings of about $8 million at a discount rate of 12%. So effectively not doing the more expensive mining would be costing the mine a decrease in NPV of $8 million.

This can be a bit of a confusing result, because in the actual case the mine strips less material if the slopes are flatter but the crest does not change. The result though is that less ore is exposed and thus less revenue if obtained because of the stripping completed. We do not have the ability to calculate the lost ore but can show the costs of exposing the ore which has to be less than the value of the ore exposed.

In my third example at the same pit our consultant suggested that in one bad sector above the ramp near the pit entrance we could use old drill steel to dowel the benches. The sector was about 200 metres long and 4 benches or 60 metres high. By doweling we hoped to keep the slope on the design of 38 rather than flattening the slope back to 32 or 6 flatter. The costs of the material and installation worked out to be about $500 per metre of bench crest. In this example we will use the same crest that was calculated in the previous example. For this we need to put the pit depth at 60 metres and a pit base of 1418 and 918 to get the same crest. The pit sector is from an azimuth of 0 to 15. By steepening the wall we save about 290,000 tonnes which is over $300,000 in savings.

When we put the value of $500 per metre in for the costs we calculate a loss of over $40,000. As the work is completed in one year the NPV loss is just under $40,000 at the discount rate of 12%. In this case if there was no infrastructure reason to not flatten the slope, there would be no advantage in doing all the extra work to steepen the pit wall.

Santiago Chile, November 2009 Slope Stability

CONCLUSIONS

Through the creation and completion of this simple pit slope analysis tool, many scenarios have been run. The open pit slope analysis provides a simple tool for doing a fast analysis on the costs and savings of making changes in the pit wall angle. The tool can quickly calculate a total cost savings and NPV savings which can be presented to the mine management in order to quickly achieve buy in, or show that there is no practical economic benefit to the plan. This is a simple but reasonably accurate tool that can be run in a matter of minutes.

As with all tools we need to understand that it is not a definitive answer but a guide to be used in conjunction with other tools in the geotechnical engineers work. The result can be used to justify why additional work in mine planning or operations needs to be carried out. The results can also be used to provide the financial justification for a change or purchase to be made.

The answers have sometimes been what would be expected and sometimes not. Typically what has been observed is that as the open pit gets deeper, the volume of material saved up increases at a much faster rate than the skin or linear area along the bench. Deeper sections provide more potential for cost savings in steepening the pit than shallow sections do.