Evaluating capital investment timing with stochastic modeling of time-dependent variables in open pit optimization

A new approach to optimizing the timing of capital investment in open pit mines is suggested and demonstrated in an application at a large copper deposit. The approach considers explicitly the uncertain nature of the commodity price cycle and operating costs that can be modelled via stochastic simulation techniques. The stochastic models of prices and costs are fed directly into either a set of nested pits or a direct net present value (NPV) optimization algorithm. This avoids divorcing the delineation of an open mine’s pit limit from calculating the related NPV that is common in traditional approaches.