1) introduction to operations research.pdf

MinE-303 Mine operation system BY Malhi-kau MOHAMMED ALZHRANI 2020  Main features of mining industry 1. Deal with a finite, non-renewable resource  Plans should be optimised for the whole mineral resource.  The optimum plan is the one that maxi...

MinE-303 Mine operation system BY Malhi-kau MOHAMMED ALZHRANI 2020  Main features of mining industry 1. Deal with a finite, non-renewable resource  Plans should be optimised for the whole mineral resource.  The optimum plan is the one that maximizes the net present value of the business over the whole mine life. Malhi-kau  NPV????? 2 Main features of mining industry Net Present Value (NPV) Most important of evaluation measures Measure of project value at chosen discount rate. Positive NPV - investing in project will add value to the Malhi-kau company. Calculate by discounting all cash flows to same point in time. Equal periods End of period convention. 3  Main features of mining industry NPV A project achieves economic acceptability when the sum of discounted receipts exceeds the sum of discounted expenditures. Malhi-kau The NPV of the project is the sum of all the individual period cash flows discounted to the common time datum. The formula is: Project NPV = SCF0 + CF1(1+i)-1 + CF2(1+i)-2 + … + CFn(1+i)-n 4  Main features of mining industry Malhi-kau What is the NPV of this project when using a required return on capital of 15% pa? Is this project worth pursuing? 5  Answer: $12.87M (Yes, worth pursuing) Malhi-kau 6  Main features of mining continue….. 2. Deal with a complex mineral resource This is usually modelled and estimated using a few scattered samples. Malhi-kau These models and estimations have a high degree of uncertainty concerning the shape, size, and content of the deposit. 7 Main features of mining continue….. Example: Complexity in the modelling Malhi-kau 8  Main features of mining continue….. Ore Body Orientation Malhi-kau Flat dipping vein Steeply dipping vein Medium dipping vein Massive ore deposit Dip < 10° Dip > 45° - 50° 10° < Dip < 45° the thickness of the thickness of the the thickness of the equal horizontal and the vein is very vein is very thin vein is very thin vertical extend thin compared to compared to the compared to the the horizontal 9 horizontal and horizontal and extend vertical extend vertical extend  Main features of mining continue….. 3. Business place contingent to the resource Quite often it is remote, difficult to access, and occasionally Malhi-kau inhospitable. Leads to negotiations and agreements with local authorities, which usually involves an additional political risk. 10  Main features of mining continue….. 4. Facing free and open markets  Business products usually require a costly Malhi-kau transportation to reach the destination.  The price formation is competitive and therefore very volatile.  Markets poorly structured and not very safe. 11 Stages of a typical mining project Assessment of a deposit moves through a number of stages: Prospecting Exploration Discovery of mineralisation Conceptual or scoping study Development drilling for resource definition Malhi-kau Pre-feasibility study Final feasibility study Approval of development budget Construction and preparation for mining ( Development) Mining production Grade control Reclamation ( closure) 12  Mine planning In general, planning is defined as the process that establishes how a business organization is going to achieve its goals. The process first identifies the objectives and then elaborates Malhi-kau plans to achieve them. The generation of plans is often done in three stages: Strategic Tactical Operational 13 Mine planning Malhi-kau 14  Mine planning The mine planning process is basically the same, although the difference is that it deals with a mineral resource, which is finite, non- renewable and complex. The final product of this process is a business plan for Malhi-kau the whole mine life, which should be harmonious and consistent with the business objective. 15  Mine planning stages The mine planning process can be categorized under different basis: According to the degree of detail Conceptual Malhi-kau Feasibility Operational  According to the degree of freedom Long term Medium term Short term 16  Mine planning stages As mine planning has to be performed over the whole mineral resource, the proposition here is to split the mine planning process according to the scope of action or extent to which decisions affect the value of plan: According to the scope of action Malhi-kau Strategic Tactical or operational 17  Mine planning stages Strategic mine planning is concerned with those decisions that largely determine the value of the business whereas tactical mine planning is concerned with the tasks required to actually achieve that value. Malhi-kau Both types of planning are necessary; they can be looked at separately, even discussed separately, but they cannot be separated in practice. 18  The main technical decisions Mining method selection Processing route Scale of operation (size) Mining sequence Malhi-kau Selective cut-offs (e.g. cut-off grade at the mine) 19  Market Geological Environmental Model model Mining Processing method route Malhi-kau Scale of Mining Geotechnical sequence Metallurgical operation modal model Selective cutoffs Mine plan 20 Strategic mine planning model (Camus 2002) Mine planning stages Malhi-kau 21 Mine planning stages Malhi-kau 22  The term of feasible The Oxford English Dictionary defines feasible as ‘practicable and possible’. For feasibility studies in mineral resource projects, the term feasible relates not only to the physical aspects of the project but also to the project economics. Malhi-kau At each stage, from discovery through development to production, increasing amounts of finance need to be committed – and at each stage money need to be justified. 23 Purpose of feasibility studies Provide a detailed analysis of all the factors affecting a project’s viability. Enable determination of a “go” or “no go” decision Have Malhi-kau become an aid in obtaining financial backing Feasibility phases Scoping Study Pre-Feasibility Study Final Feasibility Study 24 Feasibility phases Malhi-kau 25 Feasibility phases Malhi-kau 26 Introduction to Operations Research Malhi-kau 27 Optimize and Optimization Optimize: find the best way to perform an activity Optimization: the process to optimize Latin: optimus Indo-European origin (2,000 A.C) Malhi-kau op: produce much + tamo superlativo =optamo: the one that produces more → optimus most optimal Very good, very good, which can not be better; or the best 28  Malhi-kau 29 Why optimize? What else can potentially be Optimized? Malhi-kau 30  Malhi-kau 31  Malhi-kau 32  Malhi-kau 33  Malhi-kau 34  Operations Research What do they have in common? Malhi-kau Must select a solution from a series of limitations and/or conditions (Limited resource to satisfy stated requirements). There is a selection criterion in making decisions. 35  Operations Research How can these problems be solved?  How is it possible to evaluate many alternatives? Malhi-kau Trial and Error Mathematical Techniques  Operations Research 36  Operations Research Definition: Operations Research is a scientific approach for analysing and modelling complex problems and systems for the purpose of improved decision making. Malhi-kau The science of decision making to best serve the objectives of the organization. 37  Operations Research The Process of Decision Making 1. Defining the Problem 2. Model Construction Malhi-kau 3. Model Solution 4. Model Validation 5. Implementation & Control 38  Malhi-kau 39  The Process of Decision Making Defining the Problem What type of problem is this likely to be? Malhi-kau What are we trying to solve? What data is required? 40  The Process of Decision Making Formulation of a mathematical model  Build a model that as closely as possible represents the essence of the problem. Malhi-kau  Will generally be less complex then the real problem due to simplifications that make the problem more manageable and allow evaluation of alternative solutions more efficiently. 41 The Process of Decision Making Malhi-kau 42  The Process of Decision Making Solving the Model To determine the variables associated with the Malhi-kau system within the framework that sets out the objectives and constraints of the problem. 43  The Process of Decision Making Validation This is necessary because there is no guarantee of Malhi-kau coherence between the output and the reality being represented. 44  The Process of Decision Making Implementation & Control Malhi-kau Can use the solution to a well constructed model to provide justification for a particular decision? 45