IDEAS home Printed from https://ideas.repec.org/a/spr/minecn/v38y2025i2d10.1007_s13563-025-00495-w.html

Capacity planning in open-pit mines under economies of scale and block sequence considerations

Author

Listed:
  • M. Balci

    (McGill University)

  • M. Kumral

    (McGill University)

Abstract

Capacity planning is a particular problem in the minerals industry because it depends on the heterogeneity and accessibility of the ore in the deposit, as well as on demand. If the ore is uniformly distributed within the deposit, capacity planning will be a function of project financing and demand. However, in many deposits, the ore is unevenly distributed, and it is not possible to access the ore as desired. Overlying ore and waste, considering slope angles, should be extracted earlier to access specific ore locations. Also, measuring the degree of EoS, the ratio of variable costs to total cost, called the “capacity factor,” also affects capacity planning. This research explores the critical relationship capacity planning, block sequencing, and economies of scale (EoS). By integrating EoS into a comprehensive cost-capacity relationship framework, a novel model that enhances traditional mine planning methodologies is proposed. A case study of an old gold deposit demonstrates the proposed model’s practical applicability. Results show that lower capacity factors (i.e., high fixed and low variable operating costs) for mining systems associated with large-capacity mining equipment significantly enhance net present value (NPV) compared to small-capacity equipment. On the other hand, the capacity factor for mineral processing systems has a less significant effect on NPV maximization when compared with the mining capacity factor. This emphasizes that the importance of EoS in mining systems is higher than in mineral processing systems. Even though the analysis suggests that the optimum capacity and the related NPV vary with different degrees of EoS, NPV is maximized with lower capacity factors for the mining system and moderate capacity factors for the mineral processing system. This observation highlights the critical need for accurate estimation of fixed and variable costs, as well as the degree of EoS, for a project.

Suggested Citation

  • M. Balci & M. Kumral, 2025. "Capacity planning in open-pit mines under economies of scale and block sequence considerations," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 38(2), pages 425-443, June.
    • Handle: RePEc:spr:minecn:v:38:y:2025:i:2:d:10.1007_s13563-025-00495-w
    DOI: 10.1007/s13563-025-00495-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13563-025-00495-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13563-025-00495-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Balci, Mehmet & Kumral, Mustafa, 2022. "Building an innovation strategy and culture on the structural characteristics of the mining industries," Resources Policy, Elsevier, vol. 78(C).
    2. Frederick T. Moore, 1959. "Economies of Scale: Some Statistical Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(2), pages 232-245.
    3. W. Lambert & A. Newman, 2014. "Tailored Lagrangian Relaxation for the open pit block sequencing problem," Annals of Operations Research, Springer, vol. 222(1), pages 419-438, November.
    4. Levinson, Zachary & Dimitrakopoulos, Roussos, 2023. "Connecting planning horizons in mining complexes with reinforcement learning and stochastic programming," Resources Policy, Elsevier, vol. 86(PB).
    5. Parviz Sohrabi & Hesam Dehghani & Behshad Jodeiri Shokri, 2022. "Determination of optimal production rate under price uncertainty—Sari Gunay gold mine, Iran," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(2), pages 187-201, June.
    6. David Humphreys, 2020. "Mining productivity and the fourth industrial revolution," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(1), pages 115-125, July.
    7. Luis Montiel & Roussos Dimitrakopoulos, 2017. "A heuristic approach for the stochastic optimization of mine production schedules," Journal of Heuristics, Springer, vol. 23(5), pages 397-415, October.
    8. Hsu, Chaug-Ing & Li, Hui-Chieh, 2009. "An integrated plant capacity and production planning model for high-tech manufacturing firms with economies of scale," International Journal of Production Economics, Elsevier, vol. 118(2), pages 486-500, April.
    9. Crowson, Phillip, 2003. "Mine size and the structure of costs," Resources Policy, Elsevier, vol. 29(1-2), pages 15-36.
    10. Crompton, Paul & Lesourd, Jean-Baptiste, 2008. "Economies of scale in global iron-making," Resources Policy, Elsevier, vol. 33(2), pages 74-82, June.
    11. Nancel-Penard, Pierre & Morales, Nelson & Cornillier, Fabien, 2022. "A recursive time aggregation-disaggregation heuristic for the multidimensional and multiperiod precedence-constrained knapsack problem: An application to the open-pit mine block sequencing problem," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1088-1099.
    12. Jyrki Savolainen & Ramin Rakhsha & Richard Durham, 2022. "Simulation-based decision-making system for optimal mine production plan selection," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(2), pages 267-281, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samuel Kwame Atta & Tinashe Tholana, 2022. "Cost competitive analysis of large-scale gold mines in Ghana from 2007 to 2016," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(1), pages 53-65, March.
    2. Devendra Joshi & Marwan Ali Albahar & Premkumar Chithaluru & Aman Singh & Arvind Yadav & Yini Miro, 2022. "A Novel Approach to Integrating Uncertainty into a Push Re-Label Network Flow Algorithm for Pit Optimization," Mathematics, MDPI, vol. 10(24), pages 1-20, December.
    3. Ousman Gajigo & Mouma Ben Dhaou, 2015. "Working Paper 222 - Economies of Scale in Gold Mining," Working Paper Series 2161, African Development Bank.
    4. Becker, Tristan & Lier, Stefan & Werners, Brigitte, 2019. "Value of modular production concepts in future chemical industry production networks," European Journal of Operational Research, Elsevier, vol. 276(3), pages 957-970.
    5. Friedrich-Wilhelm Wellmer & Roland W. Scholz, 2018. "What Is the Optimal and Sustainable Lifetime of a Mine?," Sustainability, MDPI, vol. 10(2), pages 1-22, February.
    6. Rafał Nagaj & Bożena Gajdzik & Radosław Wolniak & Wieslaw Wes Grebski, 2024. "The Impact of Deep Decarbonization Policy on the Level of Greenhouse Gas Emissions in the European Union," Energies, MDPI, vol. 17(5), pages 1-23, March.
    7. David Humphreys, 2020. "Mining productivity and the fourth industrial revolution," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(1), pages 115-125, July.
    8. Lilia Stubrin & Anabel Marin & Diego Murguía, 2024. "Innovation opportunities and backward linkages in mining: an analysis of Argentinean knowledge-intensive mining suppliers (KIMS)," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(4), pages 965-985.
    9. Costa Lima, Gabriel A. & Suslick, Saul B., 2006. "Estimating the volatility of mining projects considering price and operating cost uncertainties," Resources Policy, Elsevier, vol. 31(2), pages 86-94, June.
    10. -, 1981. "Estudios técnicos y prognosis de costos: criterios para escoger proyectos desde el punto de vista de la empresa," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 33781, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Gholami, Alireza & Tokac, Batur & Zhang, Qian, 2024. "Knowledge synthesis on the mine life cycle and the mining value chain to address climate change," Resources Policy, Elsevier, vol. 95(C).
    12. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E., 2024. "Truthful multi-unit double auction with transaction costs and sellers’ changing marginal costs," International Journal of Production Economics, Elsevier, vol. 278(C).
    13. Fabio Magrassi & Adriana Del Borghi & Michela Gallo & Carlo Strazza & Michela Robba, 2016. "Optimal Planning of Sustainable Buildings: Integration of Life Cycle Assessment and Optimization in a Decision Support System (DSS)," Energies, MDPI, vol. 9(7), pages 1-15, June.
    14. Swart, Pilar & Dewulf, Jo, 2013. "Quantifying the impacts of primary metal resource use in life cycle assessment based on recent mining data," Resources, Conservation & Recycling, Elsevier, vol. 73(C), pages 180-187.
    15. Nancel-Penard, Pierre & Morales, Nelson & Cornillier, Fabien, 2022. "A recursive time aggregation-disaggregation heuristic for the multidimensional and multiperiod precedence-constrained knapsack problem: An application to the open-pit mine block sequencing problem," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1088-1099.
    16. Schiff, Maurice, 2025. "Migration and Population Growth's Impact on Natural Resources and Welfare: The Role of Manufacturing's Returns to Scale," GLO Discussion Paper Series 1701, Global Labor Organization (GLO).
    17. Zauresh Atakhanova, 2021. "Support services in the extractive industries and the role of innovation," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(1), pages 141-150, April.
    18. Jélvez, Enrique & Morales, Nelson & Nancel-Penard, Pierre & Cornillier, Fabien, 2020. "A new hybrid heuristic algorithm for the Precedence Constrained Production Scheduling Problem: A mining application," Omega, Elsevier, vol. 94(C).
    19. R. H. E. M. Koppelaar & H. Koppelaar, 2016. "The Ore Grade and Depth Influence on Copper Energy Inputs," Biophysical Economics and Resource Quality, Springer, vol. 1(2), pages 1-16, December.
    20. Gonzalo Muñoz & Daniel Espinoza & Marcos Goycoolea & Eduardo Moreno & Maurice Queyranne & Orlando Rivera Letelier, 2018. "A study of the Bienstock–Zuckerberg algorithm: applications in mining and resource constrained project scheduling," Computational Optimization and Applications, Springer, vol. 69(2), pages 501-534, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:minecn:v:38:y:2025:i:2:d:10.1007_s13563-025-00495-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.