1. Interpreting VALP Results © 2012 Dr. B. C. Paul Note – MineSight and VALP are both trademarked names belonging to Mintec Inc. These slides suggest ways of using VALP to improve the NPV of surface mining operations. VALP was designed for this purpose by Mintec. Thus, many of the ideas in this presentation come from Mintec. The presentation also contains screen shots taken from the MineSight program. Credit is given to Mintec for development of the software and ideas associated with its use.

2. What Am I Looking to Do I will take my pit sequence to run VALPI will take my pit sequence to run VALP I will set VALP up in a multi-run to try to find the best production rate and cut-offI will set VALP up in a multi-run to try to find the best production rate and cut-off I will use my pit tonnage and mining rate to consider several basic mine livesI will use my pit tonnage and mining rate to consider several basic mine lives I will consider what happens if I size my processing to keep up with mining and what happens as I let it fall behind.I will consider what happens if I size my processing to keep up with mining and what happens as I let it fall behind.

3. I Need a Peak at My Ore and Waste I will do a single VALP run and tell it to only disclose resources to me.I will do a single VALP run and tell it to only disclose resources to me. I’ll set up VALP pretty much the way I will run it – then I’ll tell it not to really run but only to count resources.I’ll set up VALP pretty much the way I will run it – then I’ll tell it not to really run but only to count resources.

4. The Resource Count Control

5. Don’t Dirty Your Pants Yet When you run it pops up a message window that the program did not run to completion – then it just ends.When you run it pops up a message window that the program did not run to completion – then it just ends. You sit there with nothing to show and thinking you did something wrong.You sit there with nothing to show and thinking you did something wrong. Actually it ran just fineActually it ran just fine It did not run to completion because you told it to just count resources but not to schedule themIt did not run to completion because you told it to just count resources but not to schedule them VALP does not produce graphics – it produces reports – you need to read them.VALP does not produce graphics – it produces reports – you need to read them.

6. Finding Those Reports Some files just echo input. (may be useful for Documenting what you did) Some files are just ascii Dumps of codes and reserves In the block model.

7. More Review of Reports Some of the reports are Actually feed files for Graphics charting programs

8. Then there are the Ones We Want The Basic Table rptval Contains what we Normally need. If we need a detailed Break down there is a Detailed version.

9. Lets Look at that Report (Windows often does not know what program to use to open the file – Notepad works well) What you put info into in Getting ready to run the Program is a graphical user Interface. The actual program runs as A “batch file”. We start out looking at a list Of control parameters for The batch file execution. They can be useful for Advanced users – but we are Not there yet.

10. Getting to Some Better Stuff After getting past the variables and Code jibberish we see tables that Identify the size limits for our block Model. And this table that echoes our Economic input. (This is important For documenting the economic Assumptions of our run. Its also a Good thing to check to make sure You got your economic conditions Entered correctly).

11. Then We Start Getting Our Reserve Numbers This table shows how much Of each type of rock goes To each destination. In this case I have 6 ore Types that can go to a mill, The leach, or a dump. I could add things manually And get the total tonnages I want but there is another Report on tonnage that will Give me what I want.

12. Near the Bottom is the Amount of Mill, Leach and Waste in Each of My Pit Phases

13. At the Bottom is My Prize All total I will be moving 387,000,000 tons of waste and 442,000,000 tons of ore That’s 828,000,000 tons to move over the mine life The table above broke my ore down to 400,000,000 tons going to the mill and 42,000,000 tons to the leach

14. Now to Plan My Optimization Study I pick the following approximate mine livesI pick the following approximate mine lives 50 years50 years 40 years40 years 30 years30 years 25 years25 years 20 years20 years 15 years15 years My selection was a guess based on common lives for open pit mines – it was arbitrary – not magic.My selection was a guess based on common lives for open pit mines – it was arbitrary – not magic.

15. Consider Optimization of a Case With a little Excel Work I can see about what mining rates To try. (These numbers suggest annual tons of hauling capacity)

16. Woow- That’s Impressive But Where Did It Come From? I assumed the truck was a Cat 793 for which I got the tonnage capacity from the Cat HandbookI assumed the truck was a Cat 793 for which I got the tonnage capacity from the Cat Handbook (I also knew this appeared to be a big mine so I picked Cats second largest truck)(I also knew this appeared to be a big mine so I picked Cats second largest truck) I knew an average truck trip is about ½ hour and most loaders can handle 4 or 5 trucks and most mines have about 2 to 4 load points – so the guess came out a plausibleI knew an average truck trip is about ½ hour and most loaders can handle 4 or 5 trucks and most mines have about 2 to 4 load points – so the guess came out a plausible

17. I Could Do cycle time estimates (I know how to use FPC)Do cycle time estimates (I know how to use FPC) I could try several different types of trucksI could try several different types of trucks I may very well have already done some calculations in a project in which I had assumed a certain truck size – so I could draw off of that data depending on the project and what I have already done.I may very well have already done some calculations in a project in which I had assumed a certain truck size – so I could draw off of that data depending on the project and what I have already done.

18. How Did I Know the Cost? After assuming a basic truck shovel match I took the specifications to Western Mine Cost ServiceAfter assuming a basic truck shovel match I took the specifications to Western Mine Cost Service Western Mine Cost Service has tables of equipment costsWestern Mine Cost Service has tables of equipment costs

19. The Result I assumed we scaled up to Cat 797s at 41.5 million tons per year.

20. Now I Need to Go After the Mill More Excel work was done to interpolate and estimate the size and cost Of mills for various mine lives and 400,000,000 metric tonnes of mill ore.

21. It Was Based Off Western Mine Cost Service Models of Typical Mill Costs

22. We Now Deal With the Leach We assume the ore will be crushed and stacked on leaching pads.We assume the ore will be crushed and stacked on leaching pads. Need Costs for CrushersNeed Costs for Crushers Assume a 200 tph jaw crusher for $170000Assume a 200 tph jaw crusher for $170000 Assume costs double for other equipmentAssume costs double for other equipment We will do two sizesWe will do two sizes 200 tph for $340000200 tph for $340000 400 tph for $680000400 tph for $680000

23. Matching Equipment Sets We could assume we have balanced on average mining, milling, leaching capacityWe could assume we have balanced on average mining, milling, leaching capacity

24. We can also try to optimize by allowing mining to outstrip milling This allows us to use artificially high cut-off grades and move revenue forward in time.This allows us to use artificially high cut-off grades and move revenue forward in time. Consider Mine Outstrips Mill byConsider Mine Outstrips Mill by 10%10% 25%25% 40%40% 60%60% 75%75% Again these selection are arbitraryAgain these selection are arbitrary

25. Compiling Capital Cost Results These are figures for Milling at 90% of Mining Capacity

26. With Milling at 75% of Mining

27. Milling at 60% of Mining Capacity

28. With Milling at 40% of Mining Capacity

29. With Milling at 25% of Mining Capacity

30. A Comment on Costs The costs here are clearly rather unsophisticated in their compilationThe costs here are clearly rather unsophisticated in their compilation Specific costs were done for trucks and loaders with a rough allowance for support roads and equipment and service centersSpecific costs were done for trucks and loaders with a rough allowance for support roads and equipment and service centers Mills were costed inMills were costed in Leaches were specifically costs with crushers with rough estimates for pads and stacking conveyorsLeaches were specifically costs with crushers with rough estimates for pads and stacking conveyors Much general support and service for a mine has been ignoredMuch general support and service for a mine has been ignored The point of these slides is not detailed cost estimates but rather how VALP can be used to optimize mine size and capacity.The point of these slides is not detailed cost estimates but rather how VALP can be used to optimize mine size and capacity.

31. Go to Compass and Setup a New Multi-Run After selecting new Click on the open file Icon.

32. We Name Our Package, Pick the Routines to Run and Say How Many Time to Run Them Note – to put the routine in this field place the curser in This field and in another window look at the menu of Routines and click on the one you want – in this case MS-VALP. Next enter setup to give your inputs to the program.

33. My First Panel I wanted to look at the whole block model. I did need to make sure I selected the Block model that was used to run MSOPIT when my pit shells were developed.

34. Make Sure I Select the File 13 That Contains My Pit Shells

35. Input My Sequence of Pit Shells Note my first pit should be the undisturbed topo. The pit shells are then listed in Expanding order. Just in case a rounding error causes a smaller pit not to be fully Contained in a larger pit I select “Rationalize the pits” – it will correct the larger pit to Contain the smaller.

36. I Need to Identify the Block Model Item that tells me what % of a block is rock.

37. I Input My Economics In this case I simply imported the same economics file I had used to run MSOPIT For the Ultimate Pit.

38. I Make One Change I add Valpt (where I stored my value per ton into the block model when I ran MSOPIT) I need to do this because I will use this variable to adjust my cut-off grade (since it Accounts for all my polymetalic ore values).

39. The Program Will Try Different Cut- Off Grades – Note VALPT is my Cut- off Grade Control Item. I tell it to start with blocks of 0 value (just barely enough to pay processing cost) and Then try increasing the cut-off grade by $2 increments for 50 tries (ie up to $100/ per Ton).

40. I Fill In the Remaining Items Schedule tons Is about 1 weeks Production at The smallest Mine Size I will Try. The program runs in iterations to find a Solution. I pick a nice big number To let it find a solution. I need to identify the discount Rate I will use for the NPV (15% is common in mining).

41. This is the Panel Where I Put in My Variable Process and Mine Size Limits. Note that I enter a number that will change each time The program runs in the Multi-Run as a question mark And two character identifier (usually 01, 02 ect.)

42. VALP has a maximum run of 99 periods (usually 99 years) Warning – time 0 is an instant in time when an investment is started. If you claim You can start a mine as soon as you make an investment decision before you build, Buy or prepare anything the program will fail the run. Make that first number at least 1. I will optimize on PVR (Present Value Ratio) – if I keep my capital investment Numbers to myself and hold them back from the program the program will report the NPV of the earnings which is the numerator in a PVR calculation.

43. If You Check the Top Box then that Process Must be Fed all it can eat. You must have 1 such process to pace the mine. Checks down here indicate the process is available for the time period. ?01 and ?02 indicate there is limited capacity for the processes. I am making Them variables in this multi-run because I want to see what the best size is.

44. I Define My Mining Capacity (Obviously this too is a variable when I’m doing a multi- run to right size the mine) Total mining capacity is The total materials Handling fleet capacity For how much material Can be moved. Ore Mining Capacity is The subset of total Mining capacity devoted To ore – it often (and in This case does) match Mill capacity.

45. I Indicate that Stockpiles for both Mill and Leach Exist. I have identified my rehandle cost as 45 cents per ton.

46. When I’m Going to Run 36 Times there is little point in Over-writing Audit File Repeatedly

47. I Will Give Each Report a Unique Number Identifier so I can match each of the 36 runs to their conditions.

48. I Then Save My Responses and Exit the Multi-Run Set-Up

49. Multi-Run Now Wants Me to Provide the Numeric Values to Use In Each Run Note it has returned Me to the variables Tab. Note that it has a Blank for every Variable I defined During my set-up.

50. I Enter My Report Names and Capacities for the First Run Note that I am putting In capacities in 1000’s of tons because That is the unit of VALP. After that I click the Add value tab to add The values for the Second and later runs Of the multi-run.

51. In the Comment Field I Put Identifiers for What the Variable Values Are I don’t have to do this but I will have a much better ability To keep track of what I’m doing if I do.

52. Eventually I’ll have Entered the Values for All 36 Runs. It can be tedious but not nearly as tedious as manually running 36 times. Multi-runs Also provide a documented history of what you did in developing your mine plans. This is vary helpful in making work consistent and reproducible.

53. I Will Then Save My Multi-Run Plan and All My Responses Then click Run to execute the Multi-Run

54. The Multi-Run Begins to Execute

55. VALP’s Product Is Reports Remember – You run a graphic Interface that fills in parameters for A batch run program. The first part of The basic Rptval is a list of variables That have meaning mostly to Programmers looking at the deep Architecture of the program.

56. After Echoing Input the First Meat Reports Gives the Destination and Value of the Material Mined.

57. The First Table is Summary of Destination Assignment Note that both the Mill and Leach Processes have two categories M and O M means the block had enough value to pay for processing it but not enough to Pay for the mining. You would never go dig up this rock to make money – but if It was in the way and you had dug it up to get to profitable ore you would of course Get what you could out of it. O means it pays for both mining and processing. You Would go out to get this material. Note the report tells you how Many blocks were mined And the tonnage

58. I Also Get the Total Value, The Value Per Ton and the Average Grade.

59. I Get the Same Break-Down By Ore Type Under “Summary By Material and Destination”

60. I Get A Break-Down Next for Each of My Nested Pit Shells Table is “Reserve Summary by Pushback and Process”

61. Near The Bottom Is What We Were After. We get the Cash Flow Present Value Of our Earnings Under 3 different Mining strategies.

62. The Three Strategies Base Case – Mine Each Phase from the top down and use break-even cut-off grades to determine where material went.Base Case – Mine Each Phase from the top down and use break-even cut-off grades to determine where material went. Constant Cut-Off – Try different cut-off grades and pick the one that gets the highest NPV. Process only ore above that grade until you run-out and then process the left overs in the stock-pile.Constant Cut-Off – Try different cut-off grades and pick the one that gets the highest NPV. Process only ore above that grade until you run-out and then process the left overs in the stock-pile. Best Case – Similar to Constant Cut-Off only drop the cut-off grade over time to optimize NPVBest Case – Similar to Constant Cut-Off only drop the cut-off grade over time to optimize NPV

63. Closing In On My PVR My Optimized NPV earnings is $3,084,138,240. For this report I know I mined for a 50 year rate with my mill undersized to 75% of The average ore for my mining capacity. My capital cost was $155,840,000.

64. And There Is the Result – Our Best Mine Life is 40 years Remember – PVR is The dollars of earnings Per dollar of investment After your investment Has been paid the Required rate of interest.

65. Commentary on Results We had only the capital cost for the truck fleet, the mill and the crushers and pads for the leach.We had only the capital cost for the truck fleet, the mill and the crushers and pads for the leach. There are many other costs which is why we appear to make so much moneyThere are many other costs which is why we appear to make so much money Usually these other costs will be somewhat fixed and tend to make the mine life optimize at a shorter time span.Usually these other costs will be somewhat fixed and tend to make the mine life optimize at a shorter time span.

66. Now What the Crap is that Double Hump? Remember when the mine Got so big I switched up to A larger more cost effective Truck? The jump is where I sized the truck up. (Of course some people will Want to go back and consider Different truck sizes).