Cutoff grade optimization algorithm with stockpiling option for open pit mining operations of two economic minerals

Lane's theory of cutoff grade optimization maximizes the Net Present Value (NPV) of an open pit mining operation with a declining effect as the deposit moves toward exhaustion. This declining effect of NPV defines dynamic cutoff grades, i.e. higher cutoff grades in the early years of mine life and lower cutoff grades in the later years. This phenomenon allows the creation of stockpiles with material between the lowest (breakeven) and optimum cutoff grades for processing during later years, when it becomes economical. As an extension to Lane's original theory of cutoff grades in deposits of two economic minerals, the management, i.e. supplies of material from the mine to the stockpile and from the stockpile to the processing plant, is addressed through the development of a cutoff grade optimization algorithm with option to stockpile. The benefits of the methodology are elaborated in a hypothetical case study.