GOSPODARKA SUROWCAMI MINERALNYMI

Tom 24 2008 Zeszyt 4/2

A.D. AKBARI*, M. OSANLOO**, M.A. SHIRAZI***

Ultimate Pit Limit (UPL) determination through minimizing risk

costs associated with price uncertainty

Introduction

Ultimate Pit Limit (UPL) was defined from different point of views through the time.
Armstrong (1990) said the UPL is the maximum boundary of all materials meeting these
criteria: 1) A block of the material wont be mined unless it can pay all costs for its mining,
processing, and marketing and for stripping the waste above the block, and 2) For con-
servation of resources, any block meeting the first criterion will be included the pit. Whittle
(1992) said the ultimate pit gives the highest possible undiscounted cash flow without
considering the practicalities of accesses or scheduling target. Hustrulid (1995) said the pit
existing at the end of mining is called final or ultimate pit, meanwhile in between the birth and
death of an open pit mine there are a series of intermediate pits and for developing a pit, the
destination of the material of differing values within the pit must be assigned applying
economic criteria. Currently there is a popular definition about the ultimate pit. The ultimate
pit is the pit which gives the most NPV in comparison with the other potential pits. As
a result, it can be expressed the ultimate pit determination in each period of time is a function
of financial affairs and if a financial process doesnt behave as it was predicted before or in
other words if some of the concerned activities or determinative factors of a financial process
are unpredictable, risk assessment will be an inseparable part of the study and analysis.
Regarding the existing uncertainties in financial affair, specially in metal price, this study
defines the UPL determination process as a decision making process involved risk assess-

* Mining Engineering dpt, Islamic Azad University, Science and Research Branch, Tehran, Iran.
** Mining, Metallurgical & Petroleum Engineering dpt, Amirkabir University of Technology, Tehran, Iran.
*** Industrial Engineering dpt, K.N. Toosi University of Technology, Tehran, Iran.
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ment; in this way the mine planner should make the decision of selecting the UPL with the
highest NPV, but simultaneously must care about the possibility of the NPV and the risk
associated with each selection.
Historically the first and the best UPL determination algorithm belongs to Lerchs and
Grossman (1965). They presented their 3D graph theory, as a methodology for ultimate pit
determination by computer and through a block model of the deposit. They modeled the
block model of a mine by a weighted directed graph in which each vertex represents for
blocks and each arc represents for the blocks interdependency from extraction point of view.
The direction of the arcs from a vertex to the other vertex shows the extraction priority of the
second block to the first block and the weights come from the blocks economic values. They
assumed the UPL determination problem is equal to finding the maximum weight of the
aforesaid weighted directed graph. Their theory is constructed on the basis of blocks
economic values which calculated regardless to the price uncertainty. Zhao and Kim (1992)
tried to improve the Lerchs and Grossmann algorithm by considering just the arcs which are
defined in the ore-waste interfaces, but again Zhao and Kim developed their algorithm
regardless to price uncertainty. Similar to Zhao and Kim, Yamtomi et al. in 1995 tried to
improve an old idea by modifying the floating cone algorithm, but they also didnt consider
the price uncertainty again.
Johnson in 1968 proposed using network flow analysis for determining the UPL, but it
was Picard (1976) who dealt with the subject and made it well-documented. A network flow
analysis model consists of a source node and a terminal node, one node for each block in the
model, links with capacities equal to the values of the corresponding blocks for connecting
source node to each positively valued block, same links for connecting each non-positively
valued block to terminal node, and links of infinite capacities connecting positively valued
blocks to the blocks with zero or negative values which must be removed in order to facilitate
mining of the positively valued blocks. The aim of network flow analysis algorithm is
maximizing the amount of flow from the source node to the terminal node in the mentioned
model. There are reports about another UPL determination algorithm which proposed by
Krobov. This algorithm operates by putting an inverse cone on every positive block in the pit
and allocating the positive values within the cone against the negative values within the cone
until no negative values remain, so that the positive blocks pay for the negative blocks. David
et al. (1974) say Korbov algorithm suffers from an inability to process overlapping cones
correctly, but Dowd and Onur (1992) claim to overcome this limitation and being capable of
finding the true optimum solution by Krobov algorithm. By the way, the Krobov algorithm
neglects the price uncertainty like the other ones.
Gradually the concept of ultimate pit determination just be used in interaction with
production planning and becomes pale against determining an optimum production plan with
regard to maximizing the NPV. It was because of the relative metal price certainty during past
decades. Obviously if the metal price follows a known trend, having some forecasts for the
pit limits during the mine life wont be so difficult. Hence all efforts of a mine planner will be
concentrated on explaining a good production planning within the forecasted limits of the
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open pit mine or determining the pit limits while defining the production planning and
through the production planning, in order to maximize the NPV of the operation. Linear
Programming approaches are good examples for these points of view. Some methodologies
of this type were presented by Gershon (1982), Cai (1989), and Huttagosol and Cameron
(1992) regardless to the problem of price uncertainty. Also most of the artificial intelligence
techniques are accounted in the methodologies of this group which deals with the UPL
determination and production planning jointly. Denby and Schofield (1995) used the genetic
algorithm but the most successful method of this type was presented by Tolwinski and
Underwood before in 1992 which recently is in use trough NPV Scheduler software by some
mine planers. Tolwinski and Underwood combined concepts from both stochastic opti-
mization and artificial neural networks to produce their algorithm for estimating the optimal
evaluation of an open-pit mine. The limitation of the most of artificial intelligence techniques
in general is that their results are not reproductible from one run to the next and from this
research point of view is that they consider price of the final product as a fixed variable.
Gershon in 1987 presented his heuristic method just for production planning but Wang and
Sevim (1992) modified it for determination of UPL and production planning simultaneously.
Gershon utilized the concept of block positional weight. The positional weight for a block is
derived by generating a cone downwards from the block to the edge of the predetermined
UPL and considering the values of all the blocks in that cone. The resulting block positional
weight provides a measure of the desirability of removing a given block at that specific time.
It reflects the quality of ore, position of the block and the quality of ore under the block. Wang
and Sevim utilized Gershons downward cone concept in their heuristic, however their
approach doesnt need the ultimate pit to be determined first. Their Heuristic begins by
determining the largest pit that will both satisfy the slope requirements and contain whole of
the deposit. It then proceeds to order an array of suitable candidate cones by their average
grades and removes enough of the lowest grade cones to satisfy the required pit size
increment. This procedure is repeated until there are no blocks remaining to be extracted. In
this way, a series of incremental pits will be generated. The mentioned heuristics suffer from
some defects such as the problem of overlapping cones and inability of maximizing the NPV
in some cases, in addition to neglect the problem of price uncertainty like the other discussed
algorithm.
Lerchs and Grossmann in 1965 just after presenting their 3D graph theory recognized that
having an optimum final contour for a pit was not of much use without having a good
production planning. To satisfy this requirement, they introduced the concept of parametric
analysis, in which the development of a pit is characterized by the gradual modification of
one or more key parameters. In doing so Lerchs and Grossmann were seeking to produce
a production planning which maximize the NPV through maximizing the integral of cash
flow with respect to the total volume mined. Their selected parameter was an amount by
which the economic value of each block in the model would be reduced. When the amount is
zero, the normal ultimate pit is produced. As it increases, when it passes the critical values,
the ultimate pit contour jumps to enclose a smaller volume. If there are not too many
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interdependencies between the ore and waste regions in the deposit and there is sufficient
variation in the economic values of the blocks, the end result is a series of nested pits which
can be used as production planning or can be defined as the UPLs suit different time
conditions. This technique is referred to as the Nested Lerchs-Grossmann algorithm. Whittle
(1988) used this algorithm in his Whittle programming 4D packages to generate a series of
nested pits in which each pit is optimal for a different set of economic conditions. Therefore
this technique could be referred as the first technique in which the economic condition
containing price, considered unstable and uncertain. But the amplitude of considered uncer-
tainty of this technique wont be enough in current economic climate and the technique
cannot be useful now as it will be discussed in the next section.
This study describes the risk associated with the procedure of open pit mine planning and
development and defines this procedure as a problem of risk assessment. Also this study will
suggest a methodology for finding the best development choice which can gives the planner
the best possible NPV with the least risk cost.

1. Finding the upl considering price uncertainty

It seems that the first one who paid attention to the price changes and the problem of price
uncertainty was Groze (1969), but the first applicable consideration to price uncertainty
belongs to Whittle (1988) in an indirect manner. Whittle after Lerchs-Grossmann nested
algorithm by his 4D package generates a series of nested pits in which each pit is optimal for
a different set of economic ratios. His primary goal was presenting a production plan in
which the nested pit show the gradual development of the open pit mine in step with the
economical growth and price increase, but in practice each nested pit could be the represen-
tative open pit mine of an certain economic condition. From Whittle point of view a block
economic value can be calculated through the following equation.

Block Economic Value = [( M R P ) - (To C p )] - (T C m ) (1)

where:
T tones of rock in the block,
To tones of ore in the block,
M is the metal content of the block,
P is the final product price (metal price),
R is the portion of recoverable metal,
Cm is the mining cost per tonne,
Cp is the processing cost of ore per tonne.

Among these seven factor T, To and M are categorized as the geological factors depending
on the geological logic of block modeling of the resource. R is the technology representative
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and just P, Cm and Cp are economical factors. As it discussed before in this paper Cm and Cp
are sensitive compared to P. Whittle thought so and focused on P and for making simple his
equation divided it by Cm which is more sensitive compared to Cp, the result was the equation
below.

Value = {[ M R ( P / C m )] - [To (C p / C m )]} - T (2)

In equation 2 Cp/Cm is dimensionless and indifferent against any inflation factor and if
P/Cm is converted to Cm/P, the calculated value will be indicative of the amount of gained
product from each tonne of ore (Equation 3).

Value = {[( M R ) / (C m / P )] - [To (C p / C m )]} - T (3)

Paying attention to the Equation 3 it could be realized that by decreasing Cm/P, the gained
value will increase where the decrease of Cm/P in its turn is depends on the increase of P.
Therefore considering 40 P from P 20%P to P + 20%P, 40 nested pit will be formed which
each one could be suitable for a certain economic condition and altogether are the incarnation
of a Time-Volume or a 4D open pit mine but in the economic climate of the last two decades
of 20th century, the time can be named the period of relative price constancy. But in
nowadays economic condition and in the age of astonishing metal price growth this metho-
dology is not capable. For example copper price from 2003 to 2005 doubled (from $1819 to
$3679) and again from 2005 to 2006 became 1.8 times more (from $3679 to $6758), it means
360% growth during just 3 years. As mater of fact the considered flexibility by Whittle
against price uncertainty which is 20% wont be enough at all. The required flexibility for
covering such a price uncertainty is about 400%. This means 800 nested pits for a time
period of just 3 years instead of 40 for at least 20 years.
Such a variation during this short period of time would be unmanageable and the
difference between the basic pit and the desired pit after price growth would be too great to
develop. Such a condition just could be managed if the price growth can be predicted;
otherwise the planner must consider the risk involved the planning without having a reliable
prediction about the price. Interposing the risk in such a problem generally consists of the
following stages:
defining the problem,
data gathering,
formulation of the problem,
evaluation.
This paper defines the problem through a comprehensive introducer example and
after describing and gathering the necessary parameters and data, will formulate the
problem.
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1.1. D e f i n i n g t h e p r o b l e m a n d d a t a g a t h e r i n g

In this stage when the answer of the question of is the existing circumstances make it
necessary to interposing the risk in the analysis? is positive, The planner has to define her/his
own specific problem. This study does it using a copper cylindrical deposit which is suitable
for open pit mining and its general shape and design parameters can be seen in Figure 1. It
should be noted that the high grade ore zone is located in the central cylinder and whatever it
goes to the outer periderms, it is poorer. In Figure 1 some design parameters are shown. They
are R, r, h, H, ha, and a which are the radius of the biggest section of the pit, the radius of the
horizontal section of cylindrical deposit, the height of the cylindrical deposit, the height of
the upside down cone which pit is a part of it in an unfinished manner, height of the out of pit
section of upside down cone, and the stable slope of the pit wall respectively. Except r and h
which are the assumptions, the other parameters are calculated as follows:

ha = r tan a (4)

H = h + ha + Over Burden Thickness (5)

H (6)
R=
tan a

Fig. 1. The design parameters of a cylindrical deposit for open pit mining

Rys. 1. Parametry projektowe zoa cylindrycznego w grnictwie odkrywkowym

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The Overall Stripping Ratio (OSR) of such a deposit for open pit mining can be calculated
through Equation 7.

[ 1 pR 2 H - 1 pr 2 ha ] - pr 2 h (7)
OSR = 3 3
pr 2 h

As it can be seen through equations 4 to 7, all the above mentioned design parameters
which are the design parameters of such a deposit for open pit mining will change if r (radius
of the horizontal section of cylindrical deposit) changes, while r is continuously changing
based on price fluctuations. The effect of price fluctuation can be described through the
concept of cut-off grade (see Equation 8).

( b + c1 ) (8)
gc =
y( p - c 2 )

Where gc is the cut-off grade (decimal fraction), b and c1 are the mining and concen-
trating costs respectively (USD per tonne of ore), c2 is the further treatment cost (USD per
tonne of metal), p is the metal price (USD per tonne of metal), and y is the coefficient of total
recovery (decimal fraction). Equation 8 reveals whatever the metal price goes up, the cut-off
grade falls down. In such a condition assuming centralization of high grade ores, increasing
price decreases the cut-off grade, hence the cylindrical deposit will be thicker and con-
sequently radius of r will be larger and vice versa. Therefore the risk associated with the price
uncertainty might be interposed in the modeling procedure through effects of the price
fluctuations on the cut-off grade and the minable ore tonnage.
What make the price uncertain are the defects of the prediction methods. Before recent
jumps in metal prices, the customary method of metal price prediction was trend analysis.
Currently some efforts are taking place to predict metal price by some new methods such as
using artificial intelligence or cyclic description of the metal prices time series, but there
arent any report of a finalized new effective method of metal price prediction. By the way,
prediction even by any efficient method will have some error and consequently imposes
a degree of uncertainty while the goal of this study is just giving an explanation of the
proposed risk assessment base method of UPL determination, not dealing with the problem
of metal price prediction. Hence this research assumes 3 different types of predicted metal
prices by customary trend analysis based on 3 different metal price time series and defines the
problem considering the occurred uncertainty through the observed results of predictions.
These time series are monthly, quarterly, and yearly copper price time series. These 3
prediction models are shown in Figure 2 to 4.
Considering the above prediction models, if a planner wants to work with the deposit
shown in Figure 1, she/he is actually faced with 3 different probable projects. These projects
are described in Table 2. It should be noted that the assumed tonnage-grade configuration of
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Fig. 2. Trend analysis of recent monthly copper price data

Rys. 2. Analiza trendw niedawnych miesicznych cen miedzi

Fig. 3. Trend analysis of recent quarterly copper price data

Rys. 3. Analiza trendw niedawnych kwartalnych cen miedzi

Fig. 4. Trend analysis of recent yearly copper price data

Rys. 4. Analiza trendw niedawnych rocznych cen miedzi

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the aforesaid deposit is included in Table 1. Also it is interesting to note that the mining and
waste removal costs are equally assumed 2 USD per tonne, the concentrating cost and the
further treatment cost are assumed 4 USD per tonne of ore and 300 USD per tonne of metal
respectively.
TABLE 1
Tonnage-grade configuration of the deposit
TABELA 1
Tonaowa konfiguracja zoa

Grade Tonnage
0.00.1 1,000,000
0.10.2 1,000,000
0.20.3 1,000,000
0.30.4 1,000,000
0.40.5 1,000,000
0.50.6 1,000,000
0.60.7 1,000,000
0.70.8 1,000,000
0.80.9 1,000,000
0.91.0 1,000,000

TABLE 2
Three probable projects for the deposit shown in Figure 1, regarding three different types of price prediction
TABELA 2
Trzy prawdopodobne projekty zoa pokazane na rysunku 1, odnonie trzech rnych rodzajw
przewidywania ceny

Ore (mt) Cut-off Probability Forecasted price (p) Case

8.52 0.148 P(A) 3 500 A
9.18 0.082 P(B) 7 550 B
9.43 0.057 P(C) 10 950 C

Confrontation with these 3 projects is because of the different predicted prices and their
related cut-offs which cause different radiuses of the horizontal section of cylindrical deposit
(r). The open pit mining design parameters for this deposit are included in Table 3 according
to the three different projects. Some of these parameters are calculated by Equation 4 to 7 and
some of them are the outcomes of these calculated parameters.
In Table 3 there isnt any difference between r and ha, and also between H and R, because
the sable slope of pit wall is assumed 45 degrees. Considering Table 3, the aforesaid
assumptions about different involved costs and also 14% interest rate and 7% tax rate, the
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TABLE 3
The open pit mining design parameters for the assumed deposit
TABELA 3
Parametry projektowe w grnictwie odkrywkowym dla zakadanego zoa

Ore Average Waste Taylor's Life

Plan r ha H R h OSR BESR
(mt) grade (mt) of Mine

A 73.87 73.87 290.87 290.87 217 8.52 0.57 5.81:1 49.55 6.18:1 11

B 76.65 76.65 293.65 293.65 217 9.18 0.54 5.50:1 50.49 16.62:1 11

C 77.70 77.70 294.70 294.70 217 9.43 0.53 5.39:1 50.84 25.15:1 11

financial results of these three projects are included in Table 4. It should be noted that the
capital cost calculations were done by modified OHara estimator (Akbari, Osanloo 2005).

TABLE 4
The financial results of the assumed projects
TABELA 4
Wyniki finansowe zakadanych projektw

Capital cost Operating cos Further treatment cost Production per NPV
Plan Probability
[USD/t] [USD/t] [USD/tonne of metal] year (mt) [USD]

A P(A) 77,801,926 17.63 300 0.775 5,490,000

B P(B) 81,329,667 17.01 300 0.834 190,000,000

C P(C) 82,666,881 16.79 300 0.857 347,000,000

Here the point is the probabilities which make the projects incomparable. As a matter of
fact some sort of probabilities can be imputed through error analysis of the predicted prices of
each model, but it will be shown in the next section that the problem is more complicated than
comparing the NPVs of the possible plans regarding their related probabilities.

1.2. F o r m u l a t i o n o f t h e p r o b l e m a n d e v a l u a t i o n

An open pit mine isnt a simple and flexible structure and it cannot be modified when the
metal price changes. If the assumed price by the planner is underestimated, the project will be
faced with some lost benefits, because it cant be immediately expanded when price for-
wardation. The worst case of such a condition will take place when the most possible price
happens instead of the least one. If the case A is the least possible price and the case C is the
most one, the lost benefit can be shown by Equation 9.

Lost benefit = P ( A C ) ( NPVC - NPVA ) (9)

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Also in case of being overestimated about the price, the related extra development cannot
be pull back when price backwardation and the project will be faced with some loss because
of spending some inopportune capital cost, but simultaneously the project may achieve some
more NPV since the extra development brings some more income willingly or unwillingly.
As a matter of fact the actual loss is the difference of that inopportune capital cost and this
possible extra NPV in consequence of extra development. The worst case of such a loss can
be show by Equation 10, if the case A is the least possible price and the case C is the most one.

Loss = P (C A ) {( Cost C - Cost A ) - [( NPVC p A ) - NPVA ]} (10)

Apart from these marginal situations, there can be middle situations. The risk cost in these
middle situations consists of both above mentioned lost benefits and loss, because in a middle
situation the considered metal price by a planner could be overestimated while it also could
be underestimated. The associated risk cost of planning in such a condition is revealed by
Equation 11, when the case A is the least possible price, the case C is the most one and B is
a middle one.

Loss = P ( B C ) ( NPVC - NPVB ) + P ( B A )

(11)
( Cost B - Cost A ) - [( NPVB p A ) - NPVA ]}

Table 5 is presented for adding up the presented formulation and regarding the exampled
deposit.

TABLE 5
The proposed formulation for the problem of UPL determination through minimizing risk costs associated
with price uncertainty with regard to exampled deposit
TABELA 5
Proponowane sformuowanie problemu okrelenia UPL poprzez minimalizacj kosztw ryzyka zwizanych
z niepewnoci ceny w odniesieniu do przykadowego zoa

NPV Risk cost of planning in the condition of price uncertainty

Plan Probability
[USD] Lost benefit [USD] Loss [USD)]
A P(A) 5,490,000 P (A C ) ( NPVC - NPV A ) 0

P (B C ) ( NPVC - NPVB ) P (B A ) {(Cost B - Cost A ) -

B P(B) 190,000,000
- [( NPVB p A ) - NPV A ]}
P (C A ) {(Cost C - Cost A ) -
C P(C) 347,000,000 0
- [( NPVC p A ) - NPV A ]}

The formulation is completed here but paying attention to Table 5, it is understood that for
evaluation, apart from the NPVs of the marginal cases of A and C, and the middle case B, and
the capital costs of these three cases which all of them are calculated before, it is needed to
have the NPVs of the project when its developed based on the higher prices, but the lowest
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price takes place (NPVB p A and NPVC p A ). They are 2,890,000 USD and 1,420,000 USD
respectively. It is interesting to note that the NPVB p A is more than NPVC p A , while Plan B
is more expanded than Plan C and more ore will be mined by plan B. It is because of greater
inopportune capital cost of plan B in comparison with plan C.
Although the goal of this study was just the formulation of the problem, Table 6 shows the
frame of using the methodology and the calculated data in order to evaluate the exampled
deposit considering the risk cost of price uncertainty.
TABLE 6
The proposed formulation for the problem of UPL determination through minimizing risk costs associated
with price uncertainty with regard to exampled deposit
TABELA 6
Proponowane sformuowanie problemu okrelenia UPL poprzez minimalizacj kosztw ryzyka zwizanych
z niepewnoci ceny w odniesieniu do przykadowego zoa

Plan Probability Risk free NPV [USD]

A P(A) 5 490 000 [P (A C ) (347 000 000 5 490 000)]
190 000 000 [P (B C ) (347 000 000 190 000 000)]
B P(B)
{P (B A ) [(81 329 667 77 801 926) (2 890 000 5 490 000)]}
C P(C) 347 000 000 {P (C A ) [(82 666 881 77 801 926) (1 420 000 5 490 000)]}

This table makes it clear that in continuation and for doing the evaluation, its just needed
to find the probabilities of P ( A C ), P ( B C ), P ( B A ) and P (C A ). Obviously after
evaluation of the risk costs associated with each plan, the selected plan for developing the
mine and determining the UPL will be the plan which has the most remainder of subtraction
of NPV and the evaluated risk cost or in other word the risk free NPV.

Conclusions

It was said that an open pit mine is an inflexible structure that cannot be immediately
expanded when price increase and also cannot be pull back when price decrease. On the other
hand all of the price prediction methods are somehow defective and cause some uncertainty
in the planning procedure. Hence it is obligatory to utilize a mine planning strategy that deals
with the risk of price uncertainty in the planning process.
The marginal cases of such a condition will take place when the most possible price
happens instead of the least possible price and vice versa. In middle cases there will be
a combination of both overestimation risk cost and underestimation risk cost.
The price cases of A (the least possible price), C (the most possible price) and B (the
representative of middle possible prices) were assumed as some samples of a sample space which
its possible limitations could be defined by A and C and the risk assessment modeling were
carried out for these three possible cases (lower margin, upper margin, and the middle condition).
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Data gathering and parameter description were done through an exampled deposit and
after formulation of the problem; the achieved equations were arranged in the form of
a methodology for risk assessment in order to find the best plan and the best UPL.
This heuristic methodology includes three main types of formulae for the lower and upper
boundaries and also for in the middle circumstances which their combination is capable of
finding the UPL in different situations.

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OKRELENIE OSTATECZNEJ GRANICY ODKRYWKI (UPL) POPRZEZ MINIMALIZACJ KOSZTW RYZYKA ZWIZANYCH
Z NIEPEWNOCI CENY

Sowa kluczowe

Zbieranie danych, parametry, niepewno ceny, Ostateczna Granica Kopalni [red.]

Streszczenie

Natychmiastowe otwarcie kopalni, podobnie jak jej ograniczenie, jest praktycznie niemoliwe, jeeli planista
kopalni tego nie przewidzia. Ze skutki finansowe nieodpowiedniego opracowania kopalni rwnie mog za-
szkodzi projektowi. Niedostateczne prace spowoduj utrat korzyci, natomiast zbyt intensywne prace spo-
woduj straty. Ponadto, oszacowanie waciwej floty potrzebnych maszyn, siy roboczej i inwestycji kapitaowej
zale od okrelenia Ostatecznej Granicy Kopalni (UPL). Rozwaanie tej analizy wykazao, e najwaniejszym
czynnikiem pord czynnikw majcych istotny wpyw na okrelenie UPL jest cena metalu. Dalsze rozwaania
wykazay, e szeregi czasowe ceny metalu s niestacjonarne, a ich zachowanie jest trudno przewidywalne,
natomiast cao algorytmw okrelenia UPL nie uwzgldnia czynnika niepewnoci ceny metalu do tej chwili.
Dlatego te badanie to prbuje sformuowa problem poprzez model oceny ryzyka. Wzory powstae w tym badaniu
cznie tworz model okrelenia UPL na podstawie strategii minimalizacji kosztw ryzyka. Ta heurystyczna
metodologia obejmuje trzy gwne rodzaje wzorw dla dolnej i grnej granicy i rwnie dla okolicznoci
rodkowych, dla jakich ich poczenie jest w stanie poda UPL w rnych sytuacjach.

ULTIMATE PIT LIMIT (UPL) DETERMINATION THROUGH MINIMIZING RISK COSTS ASSOCIATED WITH PRICE
UNCERTAINTY

Key words

Data gathering, parameters, price uncertainty, Ultimate Pit Limit [red.]

Abstract

Instant development of a pit as same as confining the pit extra development would be practically impossible, if
the mine planner didnt have a provision before. Also the bad financial effects of inadequate development will harm
the project. Under-development will cause lost benefit while over-development will cause loss. Furthermore
estimating the correct fleet of needed machinery, human workforce, and capital investment depend on determining
the Ultimate Pit Limit (UPL). The deliberations in this study showed that the most important factor among
impressive factors in the UPL determination is the metal price. Further deliberations showed the metal price time
series are non-stationary time series and their behaviors are difficult to predict, whereas the entire UPL deter-
mination algorithms havent noted to the factor of metal price uncertainty until now. Hence this study tried to
formulate the problem through a risk assessment model. The resultant formulae of this study altogether form a UPL
determination model based on a risk costs minimizing strategy. This heuristic methodology includes three main
types of formulae for the lower and upper boundaries and also for in the middle circumstances which their
combination is capable of finding the UPL in different situations.