Quiz Mining Planning University of Queensland

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1 
 
MINE PLANNING 
 
 
The University of Queensland 
Mine Planning (MINE3123), Semester 2, 2014 
22nd August 2014 
 
 
QUIZ #1 
 
STUDENT NAME_____________________________; ID___________________ 
 
TIME ALLOWED: 110 minutes 
 
INSTRUCTIONS: Answer ALL Questions on page 2. 
 
AIDS: Scientific Calculator 
 
COORDINATOR: Micah Nehring 
 
TUTORS: Edward Hay, Mansheel Kumar & Timocles Copeland 
 
Instructions 
• Normal university examination conditions apply. 
• Closed book exam. 
• Time allowed: 110 minutes. 
• Answer all (20) questions. 
• The value of each question is equal (0.5 Marks). 
• Answers must be written on the Quiz Answer Page (Page 2). 
• All pages of the quiz paper must be returned at the end of the quiz. 
• Scientific calculators permitted, all other electronic devices must be switched off. 
• Answers must be written in pencil or ink. 
 
 
PLEASE TURN PAGE TO START THE QUIZ 
2 
 
Quiz Answer Page 
 
Place an X against the answer of your choice. Only one correct answer for each question. 
 
 
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 Q1. 
 
 
 
 
 
 
 
 
 
 
 
 
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 Q20. 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 Q1. What is the value of the optimal unscheduled (open pit & underground) exploitation strategy 
for a nickel deposit whose open pit and underground economic blocks models are contained in 
Figures 1.1 and 1.2 respectively? Assume that each block is square and a pit wall angle of 45 
degrees for any open pit operation applies. No barrier pillar is required between any potential 
open pit and underground operation. 
 
a) $22.6M 
b) $23.5M 
c) $24.9M 
d) $25.3M 
e) None of the above 
 
#1 
-4.0 
#2 
-4.0 
#3 
-4.0 
#4 
-4.0 
#5 
-4.0 
#6 
-4.0 
#7 
-4.0 
#8 
-4.0 
#9 
-4.0 
#10 
-4.0 
#11 
-4.0 
Level 1 
#12 
-4.5 
#13 
-4.5 
#14 
-4.5 
#15 
-4.5 
#16 
-4.5 
#17 
16.8 
#18 
-4.5 
#19 
-4.5 
#20 
-4.5 
#21 
-4.5 
#22 
-4.5 
Level 2 
#23 
-5.0 
#24 
-5.0 
#25 
-5.0 
#26 
-5.0 
#27 
-5.0 
#28 
19.3 
#29 
-5.0 
#30 
-5.0 
#31 
-5.0 
#32 
-5.0 
#33 
-5.0 
Level 3 
#34 
-5.5 
#35 
-5.5 
#36 
-5.5 
#37 
-5.5 
#38 
-5.5 
#39 
28.3 
#40 
-5.5 
#41 
-5.5 
#42 
-5.5 
#43 
-5.5 
#44 
-5.5 
Level 4 
#45 
-6.0 
#46 
-6.0 
#47 
-6.0 
#48 
-6.0 
#49 
-6.0 
#50 
38.2 
#51 
-6.0 
#52 
-6.0 
#53 
-6.0 
#54 
-6.0 
#55 
-6.0 
Level 5 
#56 
-6.5 
#57 
-6.5 
#58 
-6.5 
#59 
-6.5 
#60 
-6.5 
#61 
47.4 
#62 
-6.5 
#63 
-6.5 
#64 
-6.5 
#65 
-6.5 
#66 
-6.5 
Level 6 
Figure 1.1. Open pit mining economic block ($M) model for nickel deposit 
 
#1 
0.0 
#2 
0.0 
#3 
0.0 
#4 
0.0 
#5 
0.0 
#6 
0.0 
#7 
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#8 
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#9 
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#10 
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#11 
0.0 
Level 1 
#12 
0.0 
#13 
0.0 
#14 
0.0 
#15 
0.0 
#16 
0.0 
#17 
4.8 
#18 
0.0 
#19 
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#20 
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#21 
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#22 
0.0 
Level 2 
#23 
0.0 
#24 
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#25 
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#26 
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#27 
0.0 
#28 
3.2 
#29 
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#30 
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#31 
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#32 
0.0 
#33 
0.0 
Level 3 
#34 
0.0 
#35 
0.0 
#36 
0.0 
#37 
0.0 
#38 
0.0 
#39 
3.5 
#40 
0.0 
#41 
0.0 
#42 
0.0 
#43 
0.0 
#44 
0.0 
Level 4 
#45 
0.0 
#46 
0.0 
#47 
0.0 
#48 
0.0 
#49 
0.0 
#50 
5.6 
#51 
0.0 
#52 
0.0 
#53 
0.0 
#54 
0.0 
#55 
0.0 
Level 5 
#56 
0.0 
#57 
0.0 
#58 
0.0 
#59 
0.0 
#60 
0.0 
#61 
6.4 
#62 
0.0 
#63 
0.0 
#64 
0.0 
#65 
0.0 
#66 
0.0 
Level 6 
Figure 1.2. Underground mining economic block ($M) model for nickel deposit 
 
 
 
 
4 
 
Q2. What annual annuity would a mining engineer need to put into superannuation savings 
during their 35 year working life if (during retirement) they wish to be able to draw-down an 
annual annuity of $100,000pa for 40 years? Funds return 8.9% pa compounded annually during 
both the accumulationand draw down-phases. (Assume no money is left over at the end of the 
40 year period). 
 
a) $6,873 
b) $4,074 
c) $4,648 
d) $3,840 
e) $5,152 
 
 
Q3. Which of the following typically reflects the anticipated level of accuracy for scoping, pre-
feasibility and final feasibility studies? 
 
a) Scoping study (+/- 15 - 30%); Pre-feasibility study (+/- 10%); Final feasibility study (+/- 5%) 
b) Scoping study (+/- 30 - 50%); Pre-feasibility study (+/- 25%); Final feasibility study (+/- 10 - 15%) 
c) Scoping study (+/- 50 - 70%); Pre-feasibility study (+/- 25%); Final feasibility study (+/- 10 - 15%) 
d) Scoping study (+/- 50%); Pre-feasibility study (+/- 20%); Final feasibility study (+/- 5%) 
e) None of the above 
 
 
Q4. The cash flows associated with 2 potential exploitation plans for the same deposit are as 
follows: 
 
Exploitation plan 1: Year 1 = -$20.0M, Years 2, 3 & 4 = +$18M 
Exploitation plan 2: Year 1 = -$12.0M, Years 2, 3, 4, 5, 6 & 7 = +$8M 
 
Which of the following exploitation plans is most viable in terms of Net Present Value (NPV) if a 
discount rate of 14% applies? 
 
a) Exploitation plan 1 as it generates $1.9M more in NPV than Exploitation plan 2 
b) Exploitation plan 1 as it generates $2.4M more in NPV than Exploitation plan 2 
c) Exploitation plan 2 as it generates $1.9M more in NPV than Exploitation plan 1 
d) Exploitation plan 2 as it generates $2.4M more in NPV than Exploitation plan 1 
e) Exploitation plan 2 as it generates $3.6M more in NPV than Exploitation plan 1 
 
 
Q5. Which of the following statements regarding the calculation of the Internal Rate of Return 
(IRR) on a series of cash flows is true? 
 
a) A change in discount rate has no bearing on the Internal Rate of Return (IRR) 
b) The Internal Rate of Return (IRR) will increase as the discount rate is increased 
c) The Internal Rate of Return (IRR) will decrease as the discount rate is decreased 
d) The Internal Rate of Return (IRR) will increase as the discount rate is decreased 
e) The Internal Rate of Return (IRR) will decrease as the discount rate is increased 
 
 
 
5 
 
Q6. When undertaking an evaluation for the mining of an orebody for the purpose of maximising 
its value which statement is most appropriate? 
 
a) All open pit opportunities should be evaluated regardless of any possible future underground 
operation 
b) A larger underground operation with a smaller open pit configuration is generally preferable 
c) A larger open pit operation with a smaller underground configuration is generally preferable 
d) All open pit and underground configurations should be evaluated together 
e) Any possible future underground operation should only be evaluated once the open pit mining 
plan has been established 
 
 
Q7. Based on Hotelling’s r per cent rule, which of the following discount rates applies if the 
value of the extracted resource in years 7 and 11 is $17.75M and $23.530M respectively? 
Assume a single commodity price over the life of the operation. 
 
a) 7.30% 
b) 8.40% 
c) 9.50% 
d) 10.60% 
e) 11.70% 
 
 
Q8. Which of the following statements is most correct? 
 
a) Whether to use a rail road or a conveyor in the transportation of ore is considered a tactical 
planning decision 
b) Strategic planning is most prominent in the prospecting and exploration phase of an orebody 
c) The optimum mine plan is the one that maximizes the Net Present Value (NPV) over the whole 
mine life. 
d) Mine planning is an iterative process 
e) All of the above 
 
 
Q9. When viewing a typical marginal and average cost curve, between what two points will be 
the optimal rate of extraction for a firm consuming a non-renewable resource? 
 
a) Lowest average cost and lowest marginal cost 
b) Lowest marginal cost and the intersection of the marginal cost / marginal revenue curves 
c) Lowest variable cost and lowest fixed cost 
d) Lowest variable cost and the intersection of the marginal cost / marginal revenue curves 
e) None of the above 
 
 
 
 
 
 
 
 
6 
 
Q10. The following data applies to a mineral block: 
 
� 24,780 tonnes of rock/ore 
� Metallurgical recovery 81.0% 
� Selling price of copper $5,153.0/t Cu 
� Mining cost = $6.86/t 
� Processing cost = $12.62/t 
 
Which of the following grade (% Cu) will just offset all costs associated with the mining and 
processing of this block? 
 
a) 0.531% Cu 
b) 0.467% Cu 
c) 0.498% Cu 
d) 0.387% Cu 
e) None of the above 
 
 
Q11. What is the Total Shareholder Return (TSR) for a shareholding in a mining company with 
the following characteristics? 
 
Purchase price: $3.50 
Current price: $6.20 
Total sum of dividends received since purchase: $0.42 
 
a) 0.43 
b) 0.76 
c) 1.03 
d) 1.27 
e) None of the above 
 
 
Q12. Which of the following statements is correct? 
a) The time value of money is a function of Interest Rates 
b) Net cash flow is the measure of profit from the project 
c) Profit is related to revenue and expenditure 
d) An increase in capital costs will decrease NPV 
e) All of the above 
 
 
Q13. Which of the following statements is true? 
 
a) Commodity price is a controllable market driver 
b) Commodity price is an uncontrollable business lever 
c) Selection of process route is a controllable business lever 
d) Selection of process route is an uncontrollable metallurgical driver 
e) All of the above 
 
 
7 
 
Q14. Which of the following is the most appropriate starting seed value V for commencing 
iterations in order to determine the optimal depletion (extraction) rate for a mine with a resource 
of 200Mt with the cost structure shown in Figure 14.1 and information contained in Table 14.1, 
using a discount rate of 12%? 
 
a) $5,897.2M 
b) $6,134.9M 
c) $6,382.8M 
d) $6,673.1M 
e) $6,904.7M 
 
 
Figure 14.1. Cost structure for mining operation 
 
Table 14.1. Information relating to mine with a 200Mt resource 
Yearly 
Extraction 
Rate 
(Mtpa) 
Margin 
($/t) 
Yearly cash 
flow ($M) 
Mine 
Life 
(years) 
25 50.0 1250.0 8.00 
30 48.0 1440.0 6.67 
35 46.0 1610.0 5.71 
40 44.0 1760.0 5.00 
45 42.0 1890.0 4.44 
50 40.0 2000.0 4.00 
 
 
Q15. Within the value chain for primary activities in mining, ‘Mineral Resources Management’ 
relates to….. 
 
a) The upstream resource related activities of Exploration and Operations & Logistics 
b) The upstream resource related activities of Exploration and Sales & Marketing 
c) The upstream resource related activities of Exploration and Engineering & Construction 
d) The upstream resource related activities of Exploration and Operations Management 
e) None of the above 
8 
 
Q16. Which of the following is the optimal unscheduled open pit limit for the open pit mining 
economic block model (vertical cross-section) shown in Figure 16.1 for a silver deposit whose 
values are expressed in ($M)? Assume that each block is square and a pit wall angle of 45 
degrees for any open pit operation applies. 
 
a) 
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 
 
Level 1 
#12 #13 #14 #15 #16 #17 #18 #19 #20 #21 #22 
 
Level 2 
#23 #24 #25 #26 #27 #28 #29 #30 #31 #32 #33 
 
Level 3 
#34 #35 #36 #37 #38 #39 #40 #41 #42 #43 #44 
 
Level 4 
#45 #46 #47 #48 #49 #50 #51 #52 #53 #54 #55 
 
Level 5 
#56 #57 #58 #59 #60 #61 #62 #63 #64 #65 #66 
 
Level 6 
 
b) 
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 
 
Level 1 
#12 #13 #14 #15 #16 #17 #18 #19 #20 #21 #22 
 
Level 2 
#23 #24 #25 #26 #27 #28 #29 #30 #31 #32 #33 
 
Level 3 
#34 #35 #36 #37 #38 #39 #40 #41 #42 #43 #44 
 
Level 4 
#45 #46 #47 #48 #49 #50 #51 #52 #53 #54 #55 
 
Level 5 
#56 #57 #58 #59 #60 #61 #62 #63 #64 #65 #66 
 
Level 6 
 
c) 
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 
 
Level 1 
#12#13 #14 #15 #16 #17 #18 #19 #20 #21 #22 
 
Level 2 
#23 #24 #25 #26 #27 #28 #29 #30 #31 #32 #33 
 
Level 3 
#34 #35 #36 #37 #38 #39 #40 #41 #42 #43 #44 
 
Level 4 
#45 #46 #47 #48 #49 #50 #51 #52 #53 #54 #55 
 
Level 5 
#56 #57 #58 #59 #60 #61 #62 #63 #64 #65 #66 
 
Level 6 
 
 
 
 
 
 
 
 
 
 
9 
 
d) 
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 
 
Level 1 
#12 #13 #14 #15 #16 #17 #18 #19 #20 #21 #22 
 
Level 2 
#23 #24 #25 #26 #27 #28 #29 #30 #31 #32 #33 
 
Level 3 
#34 #35 #36 #37 #38 #39 #40 #41 #42 #43 #44 
 
Level 4 
#45 #46 #47 #48 #49 #50 #51 #52 #53 #54 #55 
 
Level 5 
#56 #57 #58 #59 #60 #61 #62 #63 #64 #65 #66 
 
Level 6 
 
e) None of the above 
 
 
#1 
-3.3 
#2 
-3.3 
#3 
-3.3 
#4 
-3.3 
#5 
-3.3 
#6 
-3.3 
#7 
-3.3 
#8 
-3.3 
#9 
-3.3 
#10 
-3.3 
#11 
-3.3 
Level 1 
#12 
-3.8 
#13 
-3.8 
#14 
-3.8 
#15 
7.6 
#16 
-3.8 
#17 
11.8 
#18 
9.3 
#19 
-3.8 
#20 
-3.8 
#21 
-3.8 
#22 
-3.8 
Level 2 
#23 
-4.3 
#24 
-4.3 
#25 
-4.3 
#26 
-4.3 
#27 
-4.3 
#28 
-4.3 
#29 
-4.3 
#30 
-4.3 
#31 
-4.3 
#32 
-4.3 
#33 
-4.3 
Level 3 
#34 
-4.8 
#35 
-4.8 
#36 
-4.8 
#37 
-4.8 
#38 
14.1 
#39 
18.3 
#40 
-4.8 
#41 
-4.8 
#42 
-4.8 
#43 
-4.8 
#44 
-4.8 
Level 4 
#45 
-5.3 
#46 
-5.3 
#47 
-5.3 
#48 
-5.3 
#49 
-5.3 
#50 
18.2 
#51 
9.7 
#52 
-5.3 
#53 
-5.3 
#54 
-5.3 
#55 
-5.3 
Level 5 
#56 
-5.8 
#57 
-5.8 
#58 
-5.8 
#59 
-5.8 
#60 
-5.8 
#61 
27.4 
#62 
-5.8 
#63 
-5.8 
#64 
-5.8 
#65 
-5.8 
#66 
-5.8 
Level 6 
Figure 16.1. Open pit mining economic block model for silver deposit 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 
 
Q17. Which of the following discount rates represents the Internal Rate of Return (IRR) for the 
series of cash flows shows below? 
 
Year 1: -$12.0M, Year 2: +$4.0M, Year 3: +$19.0M. Year 4: -$8.0M 
 
a) 9.3%pa 
b) 12.7% pa 
c) 16.1%pa 
d) 19.2%pa 
e) 23.8% pa 
 
 
Q18. At what level does the optimal unscheduled transition point between open pit and 
underground mining occur for the predetermined values associated with each method for each 
level, as shown in Figure 18.1? Assume that all levels must be exploited and that no crown pillar 
must be left between the open pit and underground operations. 
 
Open Pit Pushback Values ($M) Underground Mining Values ($M) 
 
Figure 18.1. Open pit pushback and underground mining values for levels 1 - 10 
 
a) Level 3 and above open pit: level 4 and below underground 
b) Level 4 and above open pit: level 5 and below underground 
c) Level 5 and above open pit: level 6 and below underground 
d) Level 6 and above open pit: level 7 and below underground 
e) Level 7 and above open pit: level 8 and below underground 
 
 
 
 
 
 
 
 
 
 
 
11 
 
Q19. After multiple iterations to determine the optimal annual extraction rates for a mineral 
deposit, convergence between the starting seed value and the summation of all yearly value 
added components is achieved, yielding $476.4M. The owner of the deposit has subsequently 
completed negotiations for a price that is $1.6/t of ore above what had been initially assumed for 
the first two years. Which of the following would be the most appropriate new starting seed 
value to commence a new round of iterations to determine the optimal extraction strategy taking 
into account the new price for the first two years if the previous optimal extraction strategy 
yielded a production rate of 37Mtpa and 34Mtpa for years 1 and 2 respectively? A discount rate 
of 17% pa applies. 
 
a) $84.08M 
b) $90.34M 
c) $71.00M 
d) $113.60M 
e) None of the above 
 
 
Q20. Using an initial seed value of $742.37M a mine planning engineer wants to calculate the 
optimal depletion (extraction) rate for a coal deposit using 30Mt segments for a total resource of 
120Mt of coal at a discount rate of 25%pa. Using the information contained in Table 20.1, which 
of the following value added (v) for the first 30Mt segment corresponds to the appropriate rate 
of extraction to be used in the first year as part of the first full iteration? 
 
Table 20.1. Information for coal deposit 
Yearly Extraction 
Rate (Mtpa) 
Margin ($/t) 
Yearly cash 
flow ($M) 
Mine Life 
(years) 
PV using 
25% ($M) 
20 12.50 250.0 6.00 737.86 
21 12.25 257.3 5.71 739.70 
22 12.00 264.0 5.45 741.11 
23 11.75 270.3 5.22 742.37 
24 11.50 276.0 5.00 742.24 
25 11.25 281.3 4.80 737.93 
26 11.00 286.0 4.62 733.52 
27 10.75 290.3 4.44 727.30 
28 10.50 294.0 4.29 722.25 
29 10.25 297.3 4.14 715.62 
30 10.00 300.0 4.00 708.48 
 
a) A value added (v) of $109.73 corresponding to a 26Mtpa extraction rate 
b) A value added (v) of $116.29 corresponding to a 27Mtpa extraction rate 
c) A value added (v) of $121.80 corresponding to a 27Mtpa extraction rate 
d) A value added (v) of $124.56 corresponding to a 28Mtpa extraction rate 
e) None of the above 
 
 
12 
 
Relevant Formula 
 
 
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	(1 + 	)� � 
 
�� = � 
(1 + 	)
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	 � 
 
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� = �(1 + 	) − � 
 
��� =	�� − ���� + ∑ �	������ 		
BV	=	R	–	MC	–	PC	
	
R	=	P	x	r	x	g	x	T	
	
MC	=	mc	x	T	
	
PC	=	pc	x	T