Incorporation price uncertainty into open-pit to underground mine transition

Hesam Dehghani (), Reza Sakinezhad, Zohre Nabavi and Nima Babanouri
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Hesam Dehghani: Hamedan University of Technology
Reza Sakinezhad: Hamedan University of Technology
Zohre Nabavi: Tarbiat Modares University
Nima Babanouri: Hamedan University of Technology

Mineral Economics, 2024, vol. 37, issue 1, No 8, 89-99

Abstract: Abstract The growing demand for primary mineral resources and the finite nature of mineral reserves necessitate their efficient utilization while minimizing losses. To extend mine life and increase economic reserves, transitioning from open-pit to underground mining has proven to be a viable strategy. Identifying this critical transition depth is pivotal, as it significantly impacts mining profitability. Therefore, in this paper we propose a method to determine the open-pit/underground transition depth based on an economic block model, accounting for the final pit limit and considering the inherent uncertainty in mineral prices. To achieve our research aim, a hypothetical grade model was constructed initially, and we used @Risk software to perform Monte Carlo simulation of copper prices based on historical data. By generating 200 different mineral price scenarios, we created 200 economic block models. Subsequently, nine mining sequences were designed, and seven distinct scenarios were established to ascertain the final open-pit limit and the depth of the transition point between mining methods, contingent on fluctuating mineral prices. Based on the outcomes derived from the seven scenarios, the depth at which the mining method transition from open-pit to underground is recommended to be 375 m from the surface, under the aforementioned uncertainties. This recommendation is based on the cumulative net present value of open-pit/underground mining, as illustrated in scenario number 7. Our findings provide valuable insights for mining companies seeking to optimize resource utilization and maximize profitability while navigating uncertain mineral price environments.

Keywords: Transition depth; Price uncertainty; Monte Carlo simulation; Open-pit mining; Underground mining (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13563-023-00408-9

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