Mine Optimisation

Most mining companies have publicly stated goals of maximising valuable risk
shareholder value or similar. Most mining companies then attempt to management
achieve those goals by cost reduction programmes and increasing the tool. As well
production rate. Together these initiatives will often lead to a reduc- as showing
tion in the cut-off grade, making more ore tonnes available. how value
m a y b e m a x i-
What is generally not appreciated is that the goal that was implicit in mised for a given set
the derivation of the cut-off is the de facto corporate goal, regardless of conditions, the value surfaces will also show what would be
of what is stated publicly. Most operations use a cut-off that is some achieved if the mining strategy is optimised for one set of possible
form of cost breakeven grade. This merely ensures that every tonne external conditions but another set of conditions actually occurs. It
of ore that is mined pays for itself, and that is then the underlying may be that the more prudent decision is to optimise the mine strat-
but unrecognised goal of those operations. egy for a pessimistic scenario, which may also deliver most of the
upside of an optimistic scenario, whereas optimising for the optimistic
Studies by AMCs Mine Optimisation Group have shown that these scenario may generate substantial losses if the pessimistic scenario
common policies usually do NOT lead to value maximisation. eventuates.
Typically, increasing cut-offs by 30% - 50% will deliver improvements
in NPV of 10% - 25% or more. By discovering how the value of the Cut-off and associated mining strategy policies derived by technical
operation responds to simultaneous changes in a number of the key staff far removed from current corporate policy makers by geograph-
parameters over which the ical or hierarchical consider-
company has control and is Finding and Climbing the Hill of Value ations, are
or the passage of time,
highly unlikely to deliver
able to specify, as illustrated
the company s corporate
by the Hill of Value", oper- Typical improvement
proposal: ValMax Ideal improvement proposal: goals of maximising value for
ating policies that are truly
Arbitrary production Hill Change production rate & shareholders while at the
aligned with the companys rate increase; May or cutoff grade (& mining
method?) to maximise value
same time minimising down-
stated goals can be dev may not improve value
side risk.
eloped. Most mining feasibil-
ity studies and improvement AMCs Mine Optimisation
studies evaluate only a few Capex
Increasing Group has developed a
isolated options, and are Gully Value number of techniques that
unable to point decision OptRate are able to provide corporate
Ridge Typical state of
makers towards optimal current operation:
decision makers with much
policies. A long way from better information than has
optimum
traditionally been available.
Hills of Value can be derived Increasing These techniques are fully
for all the various Key Production
Rate Increasing Cutoff Grade compatible with latest devel-
Performance Indicators of opments in cut-off theory as
interest to the company, including, but not limited to, such things as developed by Ken Lane and others. Unfortunately, it is apparent that
Net Present Value, annual metal production, unit cost of production, in many cases, both the decision makers and their technical advisors
reserve tonnages and mine life. This then enables decision makers to dont know that they dont know what drives their companies value,
identify policies that will satisfy a number of corporate goals, and the and how to go about finding out!
tradeoffs that may be required to meet some goals at the expense of
Are you sure that your mine operating policies are fully aligned with
others.
the corporate goals that your company has announced publicly to its
Comparison of Hills of Value for various scenarios beyond the com- shareholders? Can you demonstrate that this is the case? If not, you
panys control, such as variations in metal prices, can also become a need to talk to AMCs Mine Optimisation Group!

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