Economic Effect of Ore Loss and Rock Dilution

Economic Effect of Ore Loss and Rock Dilution

This paper describes qualitatively the progressive ore losses and rock dilution in a mining project from the geological
modelling to and including the concentration. A simple theoretical model of the net present value of a deposit,
assuming a log-nonnal grade frequency junction, is used to find the pair of decisions on rate of production and
cut-off grade, which maximizes the net present value. Various degrees of ore losses and rock dilution are then
applied , on this optimum, and the resulting decreasing net present values are calculated, as well as the increasing
cost of metal and the increasing metal losses as a junction of ore losses and rock dilution.

INTRODUCTION
Due to a variety of uncertainties, to inevitable lack of precision in deposit estimation and in mine planning, and due
to production constraints, ore losses and rock dilution occur throughout the many phases of a mining project. The
phases range from the geological definition of the orebody, over the cut-off grade optimization and decision, over the
design of the mining method and the actual mining to the ore dressing, where the final loss of valuable ore into the
tailings occurs. Quantification of ore losses and rock dilution are mostly difficult if not simply impossible to obtain.
At the end-phase an estimate of the total dilution may be obtained with some degree of precision by observations of
the amounts and analysis of concentrate and tailings. It is much more difficult to estimate the total ore losses because
the uncertainty of the geological modeling in the initial phase and in the mining phase is very difficult to quantify,
despite the use of geostatistics for grade estimation.
Many attempts at quantification of ore losses and rock dilution have been made and some examples are shown in
Table 1. Although they differ widely from each other, it is obvious from these figures that ore losses and rock
dilution are significant and have considerable effects on the economical results of a mining operation. Life length,
net present value, cost of producing metal and the loss of metal are all affected.

Economic Effect of Ore Loss and Rock Dilution

The Phases of a Project

The progressive ore losses and rock dilution in a mining project are illustrated in a highly schematic way in Figure 1,
from reference (1).

Geological and Geostatistical

Modelling
The geologist delineates the deposit
and creates a geological model of the
deposit. It is a lengthy process which is
based on scarce and expensive
information and on geological
hypotheses.
This
modelling
is
supplemented by the geostatistical
modelling,
which
supplies
the
geological model with numbers.
In this context, the emphasis is on the
word modelling. Regardless of
competence and skills of the model
builder, the model will never coincide
completely with the real deposit. This
translates into, the fact that, the
delineation cuts through the "real"
contacts between ore and barren rock
and thus excludes some ore from the
deposit and includes some barren or
low grade material in the deposit.
Similarly, the numerical model will,
here and there, be incorrect. It may be
even completely erroneous depending
on the appropriateness of the sampling
pattern for the mineralization type
under study (4).

The Cut-off Grade Decision

By the cut-off grade decision, which is
made on numerical estimates affected
by errors, some ore which should have
been included in the mineable reserve
is, in fact, excluded and lost. Similarly,
some material which is really below
the cut-off grade will be classified as ore and included.

Economic Effect of Ore Loss and Rock Dilution

The Design of the Mining

Method
By the design of the mining method,
some ore may have to be blocked out
in order to create protective pillars and
will be lost if, subsequently, the pillars
cannot be extracted. In the case of
narrow veins, it may be necessary to
widen the working place and include
some waste material in the stream of
production if this material cannot be
moved separately.

The Mining Operation

During the mining operation, the rock
is drilled and blasted. Due to lack of
flexibility and precision of the drilling
machines and of the blasting, the
contact between ore and subgrade
materia1 cannot be followed in detail.
Some ore with a grade above the
decided cut-off grade will be lost and
some material below it will be drilled,
blasted, loaded and
Further intrusion of material below the
decided cut-off grade may be caused
by caving-in of the wall, damaged by the blast, or from other causes. This material also has to be loaded and trans
ported to the concentrator.

The Recovery of Ore in the Concentrator

The feed to the concentrator should preferably be as homogeneous as possible in order not to upset the balance of the
beneficiation machinery. However, material below the decided cut-off grade adds variation to the grade and other
properties of the feed and reduces the machines' Separation efficiency. In particular, material which has caved in
from the wall, irregularly and unpredictably, will cause problems in the concentrator. Although some smoothing of
the material may be obtained by blending before the benefication, excess of low grade material tends to flush some
ore with it. This ore ends up in the tailings.

Economic Effect of Ore Loss and Rock Dilution

The End Result

This sequence of ore losses leaves preciously little of the initial ore to produce the concentrate and the production
system has to carry a large amount of extra material without value and with detrimental effects on costs. However, it
should be pointed out that some of the losses and rock dilutions contributed by a particular step may be compensated
by a succeeding step, so this is not a completely cumulative process.

Evaluation
The economical evaluation, from reference (2), of the effects of ore losses and rock dilution presented in this paper is
an extension of reference (3). For the purpose of the evaluation of the effects of ore losses and rock dilution on the
net present value, on the cost of producing the metal and on the loss of metal, a simple model for the optimization of
rate of production and cut-off grade has been adapted. It is the classical initial static approach by which various
alternatives of decisions on rate of production and cut-off grade are examined and compared, and the alternative with
the highest net present value is found. The size of the initial investment is a function of the rate of production. The
ore body is given by its size, its average grade and grade distribution (Fig. 2). Quantity and average grade above and
below the cut-off grade are shown in Figure 3. The cost of mining and concentration per ton of material and the cost
of smelting per ton of concentrate are given, as well as, the metal price and the concentrator and smelter recoveries.
The losses of metal due to the cut-off grade decision and due to the loss of recovery in the concentrator are
calculated. For the purpose of calculating the total cost of producing the metal, the investment is treated as an
annuity being paid during the length of life of the mine and at the interest rate used for calculating the net present
value (Figs. 4 and 5).
In the subsequent examination, the optimal pair of decisions on rate of production and on cut-off grade found in the
base case is applied on orebodies which deviate from that of the base case by various degrees of ore loss and rock
dilution. The ore loss is . assumed simply to reduce the amount of are in the orebody without altering its average
grade or the grade distribution. The dilution is assumed to add zero-grade material uniformly to the orebody, thus
reducing its average grade but modifying the grade distribution only . by reducing the initially assumed grade
variation in the proportion of the grade reduction. In a new case the amount of ore is thus altered as well as the grade
and and grade distribution (Fig. 6 and Table 2). The pair of decisions on rate of production and cut-off grade on this
new orebody conducts to a new net present value, to new metal losses, now including the metal loss caused by the
ore loss, and to a new cost of producing the metal. In the cost calculation the annuity of the investment of the optimal
case has been used.

Economic Effect of Ore Loss and Rock Dilution

Economic Effect of Ore Loss and Rock Dilution

Results
The net present value (Fig. 7) drops to half of that of the base case by an ore loss of 20% alone, or by a rock dilution
of 10% alone, or by a combined 10% ore loss and 5% rock dilution. The cost of producing the metal (FIg. 8)
increases by 75% by an ore loss of 20% alone or by a rock dilution of 10% alone or by a combined 10% ore loss and
5% rock dilution.
The total metal losses (Fig. 9) increases by 20% by an ore loss of 20% alone, or by a rock dilution of 10% alone, or
by a combined 10% ore loss and 5% rock dilution.
Figure 10 shows the development of the total metal losses com- posed of the cut-off grade metal loss, of the loss of
recovery metal loss and of the metal loss caused directly by the ore loss, by increasing combined ore loss and rock
dilution.

Conclusion
Ore losses and rock dilution constitute severe constraints on the economical result of a mine by increasing
production cost and by reducing the mineral base and the net present value. Production ore losses and rock dilution
that are larger than foreseen may, in addition, jeopardize the feasibility of the mining investment decision.

REFERENCES
1. ELBROND, J., Ore Losses, Rock Dilution and Recovery in Estima tion, Design and Operation; Proc.ea:Iings
CIM Ore Reserve Symposium, pp. 130-34, 1986. .
2. ELBROND, J., and DEMERS, J., Les peites de metal d'une exploitation minib:e; In Les Innovations dans Ie
monde minier quebecois, by Gilles St-Pierre, Gratien G. Gelinas and Marcel Vallee; Gaetan Morin, ed., Chap. 12,
pp. 217-239, 1991.
3. WHITE, L;, BoIiden Cut and Fill; Engineering Mining Journal, Aug. 1984.

Economic Effect of Ore Loss and Rock Dilution

4. VALLEE, M. et aI., Guide to the Evaluation of Gold Deposits; CIM Special Volume 45, 1992.

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