Long Term Mine Planning at Minera Yanacocha S.R.L.

Steve Hoerger, Superintendent Long Term Planning

Manuel Jessen, Senior Long Term Planning Engineer, West Area
Pedro Estatuet, Long Term Planning Engineer, East Area
INTRODUCTION
Minera Yanacocha S.R.L. (MYsrl) operates the largest gold mine in South America near
Cajamarca in Northern Peru. In August 2002, total mining from four pits averaged 535,000
tonnes per day using 5 hydraulic front shovels, 13 front end loaders and 88 haul trucks. All
gold is produced by cyanide heap leaching on four pads using a combination of the MerrillCrowe process and carbon columns for recovery of gold from solutions.
Minera Yanacocha was incorporated in 1992 and started production in 1993. Continued
exploration and production successes have lead to growth in reserves and production. End of
1994 gold reserves were 4.0 million ounces (based on $400/oz Au). End of 2001 gold
reserves were 34.2 million ounces (based on $300/oz). Gold production has grown from 0.3
million ounces in 1994 to an expected 2.3 million ounces in 2002. In early 2002, life of mine
sales passed the 10 million ounce mark. 2002 is the first recent year in which mining capacity
has not increased significantly.
As this period of significant growth ends, Minera Yanacocha has set the goal of being the
worlds best heap leach gold operation in terms of efficiency, safety and environmental
performance.
In support of this goal, the long term planning function seeks to maximize the value of MYsrls
resources. This includes not only the value of the orebody, but also the value of all past and
future investments and the value of the companys relationships with its employees, the
environment and the local communities. All of these components will be critical to MYsrls
continued long-term success.
PIT LIMIT DESIGN
Ultimate pit limits are designed to maximize the value created from an orebody. In general,
MYsrl uses a standard Lerchs Grossman (LG) procedure for identifying pit limits. However,
several critical details in the process have been used to make sure that all parts of the
designed pit produce an acceptable return on investment, without leaving economic rock in
the ground.
Deposit models for pit design: The starting point for pit limit design is a deposit model. For
each block in the deposit model, gold and silver grades and recoveries are estimated. Models
are normally created within geologic domains by ordinary kriging using a limited number of
samples in order to avoid too much smoothing. Deposit models also identify various
geotechnical domains that will need different slope angles.
Costing for pit design: For pit limit analysis, the key principle is that every incremental tonne
mined must provide enough revenue to pay for all of its related operating and capital costs.
This includes not only mining and processing costs, but also all mine and pad development,
environmental protection, reclamation and closure costs and all overhead and production
support (O&PS) costs.
The costing process starts with life of mine capital and operating budgets. Each cost is
allocated to either a mining, processing or production support category. Overhead and
production support costs related to numbers of people, such as Human Resources and Loss
Prevention, have been reallocated to mining and processing based on the number of people
in the mining and processing functions. Based on expected life of mine tonnes mined and
processed, unit costs are computed. Any unallocated O&PS costs, such as senior
management and security, are allocated on a per recovered ounce basis. Royalty costs are
computed as a percentage of recovered ounces multiplied by metal price.

Sunk costs (i.e. already spent or already committed to, regardless of future mining) have been
excluded from pit design cost calculations. An example of a sunk cost would be the cost of
leach pad ponds that have already been builtthis cost will be the same regardless of any
expansions in pit sizes.
Future one time costs will also be excluded if the amount of the cost is independent of the
number of tonnes mined, the number of tonnes processed and the time that the property
continues operating. An example of this type of excluded cost would be the cost of an access
road that will be required if the pit is 100M tonnes or 200M tonnes. Few costs qualify for this
future sunk cost exemption, because in general, each incremental pit expansion will extend
the life of the pad, mine and/or total operation and require either more pad reclamation, more
truck hours and/or more days of overhead spending.
One additional process cost component is used in mine planning to reflect the time lag
between when ounces are placed and when they are recovered. This inventory finance cost
is based on the idea that a portion of the gold will be tied up in heap moisture and will not be
recovered until many years in the future. This NPV reduction has been computed based on
assumed heap moisture content, discount rate and years until rinsing.
Below is an example set of unit costs that shows the format used for pit limit analysis and
general long term planning. These are not exact actual numbers, but are presented in order to
give a general idea of the magnitude of the components used.
Example Unit Costs:
Mining Cost for Long Term Planning Computations
Drill and Blast
$0.17 per tonne (includes $0.02 per tonne O&PS)
Load and Haul
$0.74 per tonne (includes $0.08 per tonne O&PS)
Closure Related
$0.03 per tonne (Closure and Reclamation)
Mine CAPEX
$0.11 per tonne
Mine Development
$0.15 per tonne
Mining Cost
$1.20 per tonne
Oxide Process Cost for Long Term Planning Computations
Operating
$0.41 per tonne
Closure Related
$0.18 per tonne (Rinsing, Closure and Reclamation)
Production Support
$0.07 per tonne (Allocated O&PS)
In-process Interest
$0.25 per tonne (Inventory Finance Cost)
Process CAPEX
$0.03 per tonne
Pad CAPEX
$0.44 per tonne
Oxide Process Cost
$1.38 per tonne
Overhead and Production Support Cost for Long Term Planning Computations
Operating
$17.00 per ounce (Unallocated O&PS)
Site CAPEX
$0.50 per ounce (Unallocated Capital)
OH and Support
$17.50 per ounce
Royalty Cost

3% of metal price

Discounting for pit design: Standard LG analysis gives a pit where the last increment of
material contains revenues exactly equal to costs. When the last increment requires multiple
years of stripping before getting into ore, the last increment will generate zero rate of return
on the money invested in stripping. In order to avoid this situation, MYsrl uses a discounting
procedure to generate inputs for LG analysis.
For each block in the deposit model, an undiscounted value is computed as the sum of all
expected metal revenues less all mining, processing and production support costs. Based on
the depth of a block, a discounted value is computed based on an expected maximum
number of benches that can be mined in a year:
Discounted Value = Value * 1/(1+ discount rate/benches per year)^n
Where n = number of benches below surface

Using discounted values, the LG algorithm will exclude increments for which the sum of
discounted values is less than zero. This will exclude increments that do not generate an
adequate return on investment. Depending on bench heights and expected phase sizes,
planning uses maximum advance rates of 6 to 12 benches per year. Planning uses discount
rates provided by partner management. The discount rate represents a combination of the
cost of capital plus a risk premium reflecting country risk and the extra risks of being in a
growing operation.
To illustrate the discounting concept, a simple example is presented below using a discount
rate of 15% per year and maximum vertical advance of one level per year:
Discount
Factor
1.0000
0.8696
0.7561

Undiscounted Values

Discounted Values

-$5.00 -$5.00 -$5.00 -$5.00 -$5.00 -$5.00

-$5.00 -$5.00 -$5.00 -$5.00
$55.00 $12.00

Layback sum:

$15.00

Conclusion:

Economic

-$5.00 -$5.00 -$5.00 -$5.00 -$5.00 -$5.00

-$4.35 -$4.35 -$4.35 -$4.35
$41.59 $9.07

$2.00

$3.54

Economic

Economic

-$0.27
Not economic

Ramp locations for pit design: LG analysis provides an optimal pit based on a whole block
approximation of defined slope angles. These whole block outlines must then be modified to
provide practical pit outlines including ramp designs. Adding ramps to an LG outline normally
requires adding more stripping or leaving behind ore. Minera Yanacocha uses three key
methods to minimize the economic impact of ramps.
First, ramp locations are considered
for walls with minimum height. If a
LG pit has a flat spot, then putting
a ramp below this flat spot will only
require extra stripping up the
elevation of the flat spot rather
than all the way to surface. Note that
this is true if the lesser height wall is
due to natural topography or due to
the cone geometry.

LG Outline

Less Economic
Ramp Location
More Economic
Ramp Location

In the adjacent drawing of a

schematic cross section, the solid
line represents a LG outline and the
dotted lines represent two possible ramp location alternatives. Assuming that everything
outside of the LG outline is waste with a constant mining cost, the alternative on the left
represents a significantly lower cost alternative.
Second, repeated LG analyses are performed in order to identify whether the pit economics
support mining more waste or leaving ore in the ground. Typically, the first LG pit is generated
using geotechnical inter-ramp slope angles as inputs. Then, based on design ramp width and
initial cone depth, additional pits are generated with flatter slopes that allow for the expected
number of ramps in each wall. If these cones show a wall with generally the same crest
location, then the ramp is designed to cover ore. If the cones show a wall with generally the
same toe location, then the ramp is designed to mine more waste.
Third, alternative ramp concepts are designed and tested. Incremental cost and revenue
computations are used to identify the most economic alternative. Where differences are large,
more alternatives are tested to give more confidence in the selected alternative. Sometimes,
tradeoff studies are performed to compare the cost of extra stripping and/or ore loss against
expected differences in haulage costs.

Pit design sensitivity: A final component of pit design is to gain some understanding of the
sensitivity of the pit design to different economic and ore reserve parameters. Pit design
sensitivity is examined by repeated LG analyses using varying input parameters. MYsrl
typically examines four main sensitivities: sensitivity to gold price (equivalent to sensitivity to
metallurgical recovery), sensitivity to mining cost, sensitivity to inferred material and sensitivity
to discount rate. These analyses are used to insure that access is kept to gold price sensitive
walls, to identify mining cost sensitive walls which need very careful ramp design, to prioritize
drilling of mineralization that drives inferred sensitive walls and to identify phases that are very
sensitive to rate of vertical advance.
Pit design software: Deposit model creation, revenue modeling and discounting, LG
computations, pit design and grade/tonnage reporting are performed using TSS software
provided by MYsrls managing partner, Newmont Mining Corporation. Cost data management
and analyses are performed using Excel.
PHASE DESIGN
The key goal for phase design is to subdivide the material inside the ultimate pits so that the
best material can be mined as quickly as possible. By doing so, the net present value of the
resource can be maximized.
Identification of phases: At Minera Yanacocha, the primary constraint to the overall
operation is mining capacity. Consequently, the definition of the best material is the material
that provides the greatest profit per tonne of total material mined. In order to identify the best
material, a series of nested LG pit limits are generated by repeatedly increasing mining costs.
This generates a graph of pit size vs. minimum profit per tonne mined. Pit phases are typically
designed based on pit sizes just before a sudden change in the slope of this graph.
Because mining is the key constraint for MYsrl, profit per tonne mined has been the key
variable used to create nested LG pit limits. For some of MYsrls deposits, nesting with profit
per tonne mined gives different results than nesting on profit per ounce mined. By designing
the phases based on profit per tonne mined, the schedule will maximize the profit that can be
produced with a fixed amount of mining capacity. Below is an example cross section through
a deposit where nested pits on profit per ounce are different from nested pits on profit per
tonne mined:
Topography

Ore
Increasing Grade

Example deposit

Nested pits: profit/tonne mined

Nested pits: profit/ounce

In this example, when creating nested pits on profit per tonne mined, the leftmost part of the
orebody has the highest profit per tonne mined, but when creating nested pits on profit per
ounce, the rightmost part of the orebody has the highest profit per ounce. In this example,
mining the most profitable tonnes first
Design of phases: In designing phases, similar considerations are used as in designing
ultimate pits. Some additional considerations are required. Ramps must be designed to be
compatible with the preceding and following phasesif not, haulage costs will be increased.
Phase geometry and widths must permit a high rate of vertical advanceif not, the best
material will not be mined as quickly as possible.
Prioritization of phases: Once phases have been designed for all pits, phases are prioritized
on the basis of profit per tonne mined. MYsrl planning is currently working with 21 phases for
7 deposits. For understanding sensitivity, phase priorities are also reviewed in terms of profit

per ounce sold, profit per tonne leached and profit per truck hour. For phases with similar
ranking in one measure, an alternative measure may change priorities. An example: two
phases have similar profit per tonne mined, but one of the phases has much longer haul
distances. The long haul phase would have higher priority during times when the overall mine
is limited by loading capacity. The long haul phase would have lower priority during times
when the overall mine is limited by hauling capacity.
Waste dump and leach pad stages: Once pit designs have been prepared, leach and waste
tonnages are computed. From these tonnages, waste dump and leach pad designs can be
prepared. Dumps and pads are subdivided into stages in the same manner that pits are
subdivided into phases. In order to minimize the inventory of constructed pad/dump
foundation, stages typically represent one year of capacity. Subject to geotechnical
constraints on loading sequence, dump and pad stage priorities are set to utilize the lowest
cost locations first. Main cost considerations are minimizing haul distance and minimizing
construction costs which are a function of foundation conditions and the ratio of base area to
pad/dump volume.
PRODUCTION SCHEDULING
The goal of production scheduling is to plan for the orderly development of the property in a
way that maximizes the value of the resource. Alternative plans have typically been compared
using net present value measures.
Production scheduling constraints: In the short term, MYsrl is constrained by loading and
hauling capacity, by leach pad capacity and leach solution treatment capacity. Additionally, the
drill/blast/load cycle creates a constraint for how many benches can be mined in a year.
Currently, MYsrl is planning based on the assumption that leach pads and solution treatment
capacity will be expanded as needed. Production scheduling then becomes a process of
examining alternative loading and hauling capacities.
In the medium term, mining capacity and leach pad capacity can be expanded quite easily.
This has been MYsrls history: mining and leach pad capacity have been expanded at a two
to three year lag behind reserve additionsgenerally the time required to engineer and
construct additional leach pad capacity. Now that the pace of reserve additions has stabilized,
MYsrl has shifted focus from growth to production efficiency. Consequently, production
schedules are based on the idea of no new net additions to mining equipment.
Mine production scheduling computations: Normally, a production schedule starts with an
assumed schedule of loading equipment. Based on projected equipment life, availability,
usage and productivity, tonnes per time period are computed for each piece of loading
equipment. Equipment is assigned to the highest priority phase until either there is no more
space to fit equipment into the phase or until the phase reaches a rate of 10 to 12 benches
per year. Then equipment is assigned to the next highest priority phase and so on until all
loading equipment is assigned.
Next, ore and waste tonnages are computed and leach pad / waste dump tonnages are
determined according to pad / dump stage priorities. Tonnes to a particular leach pad stage
will be constrained by the time duration that each lift needs to be leached. Allowing 60 days
for leaching and several days for dumping the material and placing leaching pipes means that
each pad can grow at a rate no greater than 5 lifts per year. New leach pad phases are
started up before the lifts per year rate can no longer be kept low enough.
Next, truck hour requirements are computed for hauling the ore and waste tonnages between
the pits and the leach pad / waste dump locations. Required hours are compared to the
available hours as a function of number of trucks, availability, usage and productivity. If
insufficient truck hours are available, then truck capacity additions will be considered, or
loading capacity will be removed from the lowest priority phase.
Equipment scheduling has involved two special challenges. First, because of MYsrls history
of growth, the site has five different types of haul trucks and five different types of loading
equipment. Keeping track of the variation in loading times as haul distances increase has
been a data management challenge. Second, as larger trucks and loading equipment have

been introduced, there has been a productivity ramp up curve to progress through. From a
planning perspective, it has been challenging to predict what productivity can ultimately be
attained. Productivity targets have been developed through a combination of trend projection,
benchmarking, manufacturer provided numbers and management goal setting.
Equipment computations are managed in a series of Excel spreadsheets. Haulage simulation
programs Talpac and FPC are used for computing ideal cycle times.
Process production scheduling computations: With the leaching process, there is a
significant time lag between when ounces are placed and when ounces recovered. This
consists of time for the gold to dissolve into solution, time for solution to flow to the bottom of
the pad and time for residual solution to be rinsed from the pad. The Process Department has
provided equations to model how much gold is recovered in the time periods after placement,
how much gold goes to long term solution inventory and the timing of rinsing gold from long
term solution inventory. These predictions are adjusted using expected results from planned
inventory reduction programs. Process computations and adjustments are managed in Excel
spreadsheets.
Management review of production schedules often leads to additional iterations. Additional
iterations have included review of permitting/construction timelines, adding additional
metallurgical processes, reviewing potential underground resources and review of alternative
mining rates.
LONG TERM PLANNING ORGANIZATION
Within the Planning Department, short term planners are responsible for the current year and
the following year of the mine plan and long term planners are responsible for pit and phase
designs, equipment plans and the life of mine plan. As the plan is implemented, short term
planners will focus on maximizing tonnages mined from the highest priority phases, while long
term planners will provide a quality control function to make sure that phase and pit limits are
followed. Both areas will focus on monitoring actual performance of the deposit model and
equipment productivity so that deviations can be identified and understood as soon as
possible and, if appropriate, factored into plan updates.
Interaction with other departments: The Planning Department serves primarily in a
coordinating function. Planning is very much dependent on Geology for drill assays and
geologic interpretations, Mine Operations and Mine Maintenance for compiling equipment
productivity estimates, Business Planning for assembling historical cost information and
financial evaluation criteria and Process for creating recovery estimates. Planning works with
Projects, Mine Development and Process to identify leach pad, waste dump and process
expansion timing. Planning works with Environmental to understand environmental impacts
and with Projects, Process and Mine Development to plan dewatering, surface drainage,
water treatment plants, sediment control structures and reclamation work. Coordination with
Legal and Environmental departments is critical for acquiring and maintaining permits while
coordination with External Affairs and Rural Development is critical for maintaining a social
license to operate. With the support of all of these departments, Planning works with MYsrl
and partner management to identify and evaluate strategic options in order to create a value
maximizing long-term plan.
The long-term plan forms the basis for projecting revenues and the basis for forecasting costs
for the Mine Operations, Mine Maintenance, Process, Projects and all production support
departments. Based on feedback from MYsrl and partner management, the mine plan is
frequently fine tuned and revised to pursue the goal of maximizing the value of the resource.
Long term planning is a key component of MYsrls goal of being the worlds best heap
leaching operation.
Acknowledgements: The authors appreciate the support of MYsrl management in creating
and publishing this paper. The methods described in this paper have been developed by a
large number of MYsrl and Newmont engineers.