Optimizing the transition from open-pit to underground mining by simultaneously considering price and cost uncertainties

Abstract

The economic viability of open-pit mining declines as open-pit mines deepen because of the rising costs. To extract the deep portion of the mineral reserves, the costs in open-pit mining should be reduced, or open-pit mining should be switched to underground mining. One of the important challenges for transitioning from open-pit to underground mining is determining the Optimal Transition Depth. In this paper, a scenario-based model without the limitations of previous models is presented to determine the Optimal Transition Depth. Given that the nature of the transition problem is production planning, price and operating cost uncertainties effectively determine the Optimal Transition Depth. In this study, the pyramid method is used to simultaneously quantify price and operating cost uncertainty. The Choghart iron mine is used as a case study to evaluate the proposed model. The optimal transition depth and transition zone for this mine have been calculated in a 3D block model using the proposed method. Unlike previous scenario-based models, the suggested model considers all transmission depth options. Using the proposed model, the optimal transition depth in the Choghart mine is 26 m above the ultimate pit limit. The transition from open-pit to underground at the Optimal Transition Depth obtained increases 2.06% of the net present value (NPV) of the mine compared to the initial state. Additionally, a sensitivity analysis was conducted for four parameters: Base price, base costs, annual discount rate, and price volatility. The results show that the base price is the most influential parameter on the value of NPV at the optimal depth of transition, while the price volatility parameter exhibits a non-linear relationship with the value of NPV.