Ultimate Pit Size Selection, Where Is The Optimum Point?

A major step in open pit mine planning and design is to define ultimate expansion of the mine, often called final or ultimate pit. When it comes to final pit selection there is usually more than one option to choose from. Most deposits support a range of pit sizes that all are technically mineable and economically profitable. The size of final pit greatly affects other aspects of project such as life of mine, capital requirement, scale of operation, equipment size, profitability and resource utilization. Pit size selection is technically, financially and socially a complex, multivariable function. Due to contradicting factors, this process often becomes complex and turns into a decision-making paradox. Therefore, to reduce the risk and to make sure that all aspects are fulfilled, a holistic approach should be adopted in the analysis. This approach not only takes into account technical aspects of mining but also considers aspects of mining that are difficult to measure such as operation, social licensing, as well as financing. It is also important to understand and discuss, among all parties, the conditions and consequence of choosing a particular size of pit.

Companies often target the highest net present value (NPV) when planning for a mining project including final pit selection. When this is the case, long-term/low production rate projects cannot compete with short-term/high production rate projects. This is due to the time value of money, reflected by the project’s discount rate. However, NPV is not the only way to evaluate projects. There are some influential factors that are difficult to quantify such as the outlook of commodity prices and interests of communities and other stakeholders. By using several examples in this paper, the author demonstrates the challenges that many mining projects are facing to select the right final pit.