Optimizing the Cutoff Grade for an Operational Underground Mine

Abstract

An important strategic decision for any operational mine is the differentiation between ore and waste material; this differentiation is referred to as the cutoff grade. In underground mining, material classified as ore is extracted, while waste is left in situ. Our mixed-integer programming optimization framework determines the cutoff grades in three different, predetermined zones for a soon-to-be-operational underground mine. We fix all cutoff grades a priori to optimize the periods in which to complete each mining activity to maximize the net present value for this restricted problem. We then use an enumerative optimization framework that relaxes the fixed cutoff-grade assumption and constructs a schedule for each cutoff-grade combination for all three zones. This framework both exploits an underlying mathematical structure and identifies an optimum set of grades that unconditionally maximizes net present value under the existing zone configuration, thereby providing objective, repeatable, and superior solutions, verified by our industry partner, a major gold producer, for large-scale problems in a matter of days; current industry practice would produce solutions with lower net present value and based only on detailed analysis for a single zone, would require six to eight weeks and would preclude scenario analysis.