The economic depth for an open pit has got me thinking I should...

The economic depth for an open pit has got me thinking I should do a rough calculation to see what the maximum open pit stripping ratio of a 20m wide vertical linear orebody with recoverable copper of 0.8% and recoverable gold of 0.1g/t might be. My calculations lead to a maximum depth of 300m (the break even point, shallower if you want profit), assuming 45 degree slopes on the pit walls, in practice the pit walls could be steeper. I am a geologist not a mining engineer and I have made a lot of assumptions in my scenario. For example vertical ore at 20m width which may be close enough for Lady Fanny and Mount Hope but is clearly not correct for Nil Desperandum. The grade may be higher but I have tried to be realistic as there are very high grade sections and lower grade sections.

I have borrowed a few figures from Hammers recent announcement about the JORC at Lakeview and adjusted the costs upward to cover contingency and possible toll treatment rather than in house processing. Hammer quote $2.5/t for ore mining and $2/t for waste stripping as well as processing cost of $20/t. The figures I have used are $5/t for both ore and waste mining and $30/t for processing. Current copper price of AUD$12096/t and $87/g Au. Total production cost is $35/t covering mining the ore and processing.

Ore value with recoverable 8kg/t Cu (0.8% Cu) and 0.1 g/t Au is: =(8/1000)x$12096 + 0.1x$87 = $96.77 + $8.7 =$105/t value of one tonne of ore (recovered).

SR = stripping ratio - I have assumed the ore and waste are of equal density so volume and weight stripping ratios are equal.
SR_max= (Value of ore − Production cost) / Stripping cost
.
SR_max = $(105 - 35)/5 = 14 meaning that at a waste: ore ratio of 14:1 there is zero profit or break even is achieved.

Mining to a depth of 100m gives a cross sectional area for the ore of 20m width x 100m depth = 2000 sq.m
Waste, assuming 45 deg pit slopes, is a cross sectional area of two right angle triangles each an area of 100m x 100m/2 = 10,000 sq.m
Strip ratio for 100m deep pit is 5:1

Mining to a depth of 200m gives a strip ratio of 10:1
Mining to a depth of 300m gives a strip ratio of 15:1

So break even is an open pit close to 300m in depth. Profit = value of ore/t - production cost - stripping cost = $105 - $35 - 14x$5 = 0
(14 tonne of waste per tonne of ore with a mining cost of $5/t).

However we want to make a profit. For a 200m pit based on my figures:
Profit = value of ore/t - production cost - stripping cost = $105 - $35 - 10x$5 = Profit of $20/t of ore mined
Assuming annual production of 25,000t copper metal sales per annum the ore production needs to 3,125,000 tpa.
So annual operating profit would be $20/t x 3,125,000t = $62,500,000

Actual net profit will need to account for the financing cost if a processing plant is built plus other overheads, depreciation etc. Toll treatment may increase operating costs but reduce overall costs because financing is not so high. Equity finance reduces the finance costs but dilutes shareholders which creates a balancing act to get right.

These figures are not investment advice in any form. DYOR and your own figures. My conclusion is that a 200m deep open pit is not an unrealistic scenario at Lady Fanny and Mount Hope. Without running the numbers on the plunging ore shoot at Nil Desperandum my guess is a similar depth may work there too.