Week 5 Senior Design

1. Week 5 Senior Design 2014

2. Work on Coal Preparation • You have determined that you will use a heavy media plant • Plus ½ inch will go to heavy media baths • ½ inch to 1 mm will go to heavy media cyclones • Minus 1 mm goes to spirals or floatation • You have a matrix of coal contracts and prices • Where applicable put coal quality limits on each of the contracts

3. Prepare A Preparation Plant Flow Sheet • Use either a simulator (software) or hand calculations to show what kind of product you can produce from each of the 3 steam coal seams (#2 is met coal) • This will likely be grade recovery curves for ash and sulfur. • For your contracts that have quality specifications • Which seams can meet the specs? • What kind of recovery will you get? • Are there any contracts you cannot meet because of quality constraints?

4. For Markets Without Clear Specs • Look around about 80% recovery for performance (most prep plants don’t hit 80% recovery but they are also dealing with out of seam dilution which you are not considering here) • What is the BTU content of your product? • Assume if a coal is 50% ash and 6000 BTU per pound then at 0% ash it would be 12,000 BTU per pound – ie assume coal BTU is a linear function with ash content • For each of the 3 coal seams assume buyers are paying for BTU’s. If coal brings $46/ton assume it must meet 12,000 BTU/lb. • Suppose it has only 10,000 BTU/lb • 10,000/12,000 *$46 = adjusted price • Ie assume price is a linear function of BTU content • Get the price each of the 3 steam coal seams will bring on each contract (assuming it can meet the spec – some contracts have BTU, chlorine, or sulfur specs on them).

5. Next Work on the Sulfur • Assume that any coal with more than 0.2 lbs/MMBTU SO2 emission will be penalized • Calculate your SO2 emissions for each of the 3 steam coal seams • How many lbs of coal does it take to get 1 million BTU? • Get this number for each of the 3 steam coal seams • Using your washed sulfur content how many lbs of sulfur is there in this 1 million BTU worth of coal? • Get this number for each of the 3 steam coal seams • Multiply the number of lbs of sulfur by 2 and then by 0.97 – this is the number of lbs SO2 per million BTU • Get this number for each of the 3 steam coal seams • For every 0.1 lbs/MMBTU over 0.2 lbs reduce the sales price by 10 cents • Adjust the price of your coal from each seam for each contract by the sulfur penalty on top of the BTU penalty.

6. Result • For Each coal seam sold on each market you should have a sales price • That is adjusted for BTU content • And sulfur • Measured in the washed product

7. #7 Coal • Will the #7 coal roof conditions allow for longwall? (your #6 conditions did not) • Your #7 coal lacks the continuity of some of your other seams – even though it is not cut by faults and channels • Can the #7 coal be set out with logical size longwall panels or does its geometry demand room and pillar?

8. Estimate Mining Costs • You have a detailed plan for #6 room and pillar roof support • Estimate the cost of your roof support system • You have estimated crews sizes and manpower costs and estimated advance rates • What is you manpower cost for your room and pillar • Use other general estimates to get your cost per ton to mine #6 (do the same for #7 if you determined it had to be room and pillared) • Use general estimates for the cost of mining your longwalls (including #7 if it is not room and pillar)

9. Add in Preparation Costs • You have a crude Profit per ton on each coal seam • (Sales price – mining costs) • Now estimate what coal washing will cost • Use rules of thumb unless your designs allow you to get an exact cost now • Increase that cost by 25% as a rough adjustment for dilution tonnages and coal losses • Now you have Sales price – mining costs – washing costs • Now double your mining costs as a rough estimate of your outby and surface operations costs • (unless you have a better estimation method you want to use) • Now you have a rough profit per ton for each of your 4 coal seams.

10. An Adventure In Economics • Develop an annual cash flow for your mine assuming you mine top down starting with the #7 coal seam and ending with the #2 coal seam (likely about 90 years in the future) • The cash flow will probably be about the same each year except when you change coal seams • Get the NPV of this scenario using a 15% discount rate

11. More Adventure • Get what % of your steam coal comes from each of the 3 steam coal seams (leaving #7 out of this is not acceptable) • Assume that proportional amounts of the steam coal comes from the 3 steam coal seams each year • You have a met coal market each year • Develop an annual cash flow for the life of mine • It will likely be about the same number each year • Get the NPV of this second scenario

12. More Adventure • Now do a top down cash flow similar to exercise #1 only this time go ahead and drop the #7 seam out • Get the NPV • Now do a top down cash flow similar to exercise #1 but leave out both the #7 and #6 seams • Get the NPV • Now just mine the #2 coal seam by itself • Get the NPV

13. Look at Your 5 NPVs • They will likely show • Best NPV is all 4 seams mined together – case 2 • Likely the winner by a large margin • 2nd place will likely go to met coal only • 3rd place to #5 and #2 • 4th place to #6, #5 and #2 • 5th place to #7, #6, #5, and then #2 • (if the expected happens what does it mean?) • The loss of NPV from discounting your met coal by delaying mining to the extreme future is greater than the earning potential from your steam coal

14. Now try one more thing • Assume all 4 coal seams are mined at the same time by room and pillar • This will knock down your extraction ratio • Develop the cash flow • Do the NPV at 15% • Assume all 4 coal seams are mined by room and pillar at the same time but with pillar recovery • Some boosting of extraction ration • What is the cash flow now?

15. Analyze and Draw Conclusions • You are contractually required to maximize recovery and mine all coal seams above 4 ft in thickness • As a corporation you are obligated to your share holders to maximize investment return • If you must fullfill both mandates • What is the best way to proceed • What is the worst

16. Do a Recovery – Geometry Exercise • You have a draft plan to longwall the #5 and #2 coal seams • What over-all % recovery will that plan get? • Divide that by seam • You left out areas of #2 coal in your longwall plan because the coal was not in large enough blocks to longwall • Do a quick layout for room and pillar with pillar extraction (which will allow you to get to those areas) • What % extraction do you get • Try the same exercise with #5

17. Analyze • Given differences in recoveries between room and pillar and longwall • Given also the mandate to mine coal from all seams unless there is a design constraint (other than “but I don’t want to”) • Are there any places that looked ideal for longwall originally, but maybe are not given your mandates and desire to maximize NPV?

18. Beefing Up the Rock Mechanics • You sized pillars based on coal strength assuming weak floor would half your safety factor • Speck, Vesic, and Gadey worked on equations for sizing of pillars on weak floor • These methods were not used last week because of a lack of moisture data. – use 10 to 12% moisture • Check your pillar sizing (the web site does have a spreadsheet for Vesic – Speck and a slide presentation on how to use it)

19. Some Floor Cutting Issues • You proposed to cut all underclay out of your entries • While I expected the clay would just squeeze out our rock mechanics specialists tell me you might get away with it – BUT • Your pillar dimensions need to be based on weak floor calculations (you’ll see whether the 2 to 1 rule works for you) • As happens in nature – when a weak layer and a strong layer are both exposed the weak layer erodes out first – undercutting the stronger layer above • This reduces pillar bearing area • Can produce subsidence stresses in the roof • Can cause coal to sluff into the entries • Some mines have had success by shotcreting the undercut as it forms • (of course that is an extra expense) • What might shotcreting the exposed underclays cost?

20. Mohrs Circle and Shear Stress • Your current draft plans call for mining east-west and north south even though your principle stresses are horizontal and off 23 degrees • You already calculated the shear stress in the roof • Plot a graph of magnitude of shear stress as a function of orientation. • Start assuming you mine east-west • Rotate systematically to 90 degrees counter clockwise (so you mine north-south) • Where do you minimize shear stress in the roof? • By what percentage could you lower your shear stress compared to what you are doing now? • Warning – roof shear stress produces cutter roof – I am consulting with rock mechanics guru’s on how much cutter roof problems increase with roof shear stress • Note I am delaying having you work on detailed mine layout this week because I suspect some realities of economics and roof stresses may cause you to rethink your sequence and orientation – your getting a look at the data before you make decisions.

21. Work Up Dilution Maps • In the #6 coal you specified you would consistently mine 6 ft high and cut out the underclay and that you would mine all coal 4 feet of more thick • Since the underclay beneath #6 is not usually 2 feet thick this means cutting roof rock in some areas • Throw in this assumption – if you have a weak gray shale such as energy or dykersburgh and it is less than 2.5 feet thick it will fall in during mining before you can bolt it. • Make a map with contours of out of seam dilution for the #6 coal (refinement of your average out of seam dilution last week)

22. Out of Seam Dilution #5 • Assuming nothing you have seen changes the idea of longwalling #5 • You indicated you had a 61 inch cutting head on your shearer • You indicated you would mine coal down to 4 ft • You indicated you would not cut clay on the longwall face • Map contours showing out of seam dilution on your longwall.

23. We are holding out on this exercise • For coal seam #7 and #2 • We don’t know for sure whether you can longwall #7 • We don’t know whether your longwall plan for #2 produces better recovery than room and pillar with pillar recovery given your plans inability to mine smaller blocks of coal • This weeks exercises should help clarify this.

24. Some Plan and Design Work for This Week • You have a basic surface works plan • Detail your surface buildings, and rail loops. • Estimate the cost of the facilities • (Means cost estimation handbooks for construction costs will likely become your friend)

25. Metal Miners • MineSight Clean-up work from last week • The waste and leach dumps are built assuming flat terrain • The leach dump may have a flat bottom since you may put down clay and a geomembrane first • Recontour the leach pad area to the flat surface you desire to work with • Show your adjusted topo • Calculate the cut and fill needed to make that happen • Next adjust the topo to show what it will be like when the leach pad is filled (probably fairly easy for you to do) • Show your adjusted topo

26. The Dump Problem • It is unlikely that you will get lots of material rehandle to create a level pad for a dump • Using the pit expansion tool build a tiered waste dump • Use the merge surfaces tool to put the finished dump into the topography • Also use the merge surface tool to make a solid and verify that the dump volume meets the requirement.

27. Roads and Beltways • Material coming out of the pit will have to go to • The dump • The leach • Or the conveyor loading stockpile area to be sent down to the mill (which you decided would be down in the valley) • Check with the pit planners. • Find where they will have roads exit the pit • It is possible that different materials will exit the pit at different points • Lay out the road from the pit to each destination • Impose the road into the topography and show the road • Determine the cut and fill volumes in your road • Show the slope on your road segments (use the center polyline) to show that the grade is reasonable for your truck traffic

28. The Beltway • From the belt loading point to the edge of your given topography impose the route into the topography • Will you have a service road parallel to the beltway? • If you do it will impact the width and the slope of the route you can build • Conveyors can go up and down much steeper terrain than vehicles

29. Planning Your Beltway • How wide will you make the route? • Conveyors usually don’t like lots of twists, turns and switch backs so you will need to make a much straighter route for your beltway • Make your beltway like you did a road and impose it into the topography • Measure your cut and fill to build the belt travelway.

30. You Will Have An Exercise Running VALP repeatedly • Before running valp check to make sure your costs for running your concentrator are correct • I think you got them from the Bureau of Mines cost estimating system. • Verify and check with me • You will need the costs for different processing rates

31. Run VALP • Use your stage pit surfaces to run various economic scenarios • (I think right now you are set for about a 40 year mine life) • Variables for your VALP runs • What should the mine life be? • Does the price of metals change the answer? • Should the mining rate exceed the concentrator capacity? • If it does, how should the cut-off grade change with time? • Should the mine have a low grade stockpile? • Does metal price change any of these answers?

32. Suggested VALP Mechanics • Make 3 copies of your project • In copy one run MSOPIT in resource mode and save the value per ton into the block model using your expected price structure • Do the same for another copy using the high price structure • Do the same for another copy using the low price structure

33. Check Mine Life • Run Valp on each model for the following mine lives • 25 years • 30 years • 40 years • What ever you are assuming • 50 years • 70 years • Tricks • Your processing costs might vary based on mill size • Make sure you know why you changed the processing costs the way you did • The output will be the NPV of the mines earnings under each case • Note this is 18 different scenarios

34. Do a Rough Pass at the Economics • Estimate the capital cost of your crushing, floatation, dewatering and other processing facilities. • For now multiply this cost by 2.5 • (assume the other mine infrastructure will cost about the same as the process plant and the mine equipment and shops about 50% of the process plant) • You now have 6 different capital costs • (for six different size mines)

35. Plot Present Value Ratio as a Function of Mine Life • Remember present value ratio is NPV of output (which you got out of VALP) divided by capital cost (which you just calculated) • Your graph will have data points for six mine lives • You will have a graph for high price, likely price and low price • Your graphs will likely look like upside down U’s • The high PVR measures optimum mine life • What is that optimum life and does the price scenario change it? • Lets stop here for this week.

36. A Decision About Inpit Crushing • Your decision to put the mill in the valley and convey ore to it has a side effect • Normally trucks dump into a gyratory crusher at the mill • But you can’t put run of mine rock on a belt • You will have to put the gyratory before the belt • You could have a permanent gyratory crusher at the conveyor loading point and truck to that point • You could put a mobile crusher in the pit and have the trucks haul shorter distances in the pit to the crusher – crush the ore – and then convey it out of the pit and then on to the mill without an itermediate point • This is called in-pit crushing and conveying and it makes economic sense some times.

37. Study Whether it Works for You • Conveying material is almost always cheaper than trucking • Your stage pits appear to indicate you will be almost top down mining • Thus you will not have to reroute your conveyors a lot • The truck hauls for ore would be distinctly shorter

38. Get Costs • What will a single fixed crusher station cost? • What will mobile crushers cost? • What is the life of a mobile crusher? • What will it cost to move the mobile crusher and set it up at the next location? • What will the conveyor belt and structure cost to go from deep in the pit to the point where your beltway designer started the beltway? • Use FPC to estimate how many trucks you would need with inpit crushing and conveying • How many trucks could you save? • How does the capital cost of the trucks you saved and the permanent crusher station you avoided compare to the cost of the mobile crusher, multiple set-ups, and the conveyor belt. • If In-pit won on capital cost it will beat trucks • If it lost on capital cost consider about a 40 year life with your truck operating costs to truck to the permanent crusher station vs. about 25 cents per ton for conveying • What is the most economic choice?

39. Some Fun Drawing • Your stage 1 pit is less than 1 year • Your stage 2 pit is for 14 years • Use the pit expansion tool • Put in roads and benches for your phase 1 pit • Now consider how you will expand out of that phase one pit • Draw your pit with roads and benches 3 years later • Do the same for another 3 years later. • That is enough drawing for right now.