Simultaneous stochastic optimization of production sequence and dynamic cut-off grades in an open pit mining operation

Abstract An open pit mining operation is a complex system that constitutes several components or processes. An optimal production sequence that defines timing of extraction and a dynamic cut-off grade policy that defines the supply of materials from sources to destinations within the system are crucial to the success of an operation. In current practice, separate sequencing and cut-off grade models achieve these important milestones as part of strategic planning. This paper presents a mathematical model that derives the optimal extraction sequence and cut-off grade policy simultaneously considering grade uncertainty and stockpiling. A framework of genetic, maximum flow and cut-off grade algorithms solves this complex non-linear problem. An application of the method at realistic copper and gold mining operations reveals the value (up to 29% increase in discounted value) of stockpiling as well as risk quantification under uncertainty.