Modelling Stockpiles in a Mining Project


For many mining projects, the open pit/cut mining process often begins months or even years before the milling plant starts operating. The build up of stockpile requires careful treatment to ensure the right grade of the ore milled is modelled and that the right value of this stockpile is reported on the balance sheets.
In this tutorial we will cover an approach to modelling stockpiles in mining projects. We will walk through

  • How to calculate contained gold from the mining schedule
  • Creating the ore stockpile account
  • Calculating the milled ore from the ore mined
  • Modelling the contained gold stockpile account

There are some things we suggest you put in your model from the outset to make the calculations transparent and easy to follow.

Mining Schedule in Inputs Sheet

The mining schedule is a summary of the physical aspects of the mining process and is usually provided by the engineers. At its most basic level it should contain (Screenshot 1) Ore Mined (tonne) and the corresponding Ore Grade (grams / tonne) for each type of ore.

Screenshot 1: Mining Schedule of a gold project in Inputs Sheet

You would also find either strip ratio or the waste mined (tonnes) in here as well. Waste mined is outside the scope of this blog but you should know that it is a big driver for mining costs such as haulage and drill & blast.


Calculating contained gold

As a prerequisite, please set up the Period Start Dates, End Dates and the binary flags signifying the development and milling phases at the top of the worksheet. Please refer to our tutorial “How to Simplify a Project Finance Model” to find out how to create binary flags.

We will use the LOOKUP function to bring in Ore Mined and Ore Grade from the inputs sheet and the contained gold is the Ore Mined multiplied by the Ore Grade.

Screenshot 2: Calculating contained gold in Volume Sheet

  • Ore Mined (N14) = LOOKUP(N$4,Inputs!$E$22:$AB$22,Inputs!$E23:$AB23)*SUM(N$5:N$6)/Thousand
  • Grade (N15) = LOOKUP(N$4,Inputs!$E$22:$AB$22,Inputs!$E24:$AB24)*SUM(N$5:N$6)
  • Contained Gold (N16) = Ore Mined (N14) x Grade (N15)

There will be two types of accounts tracking the stockpile movements, Ore Mined and Contained Gold.

Screenshot 3: Ore Mined Stockpile Account

Being an account it has an opening and a closing balance.

  • Balance B/f (N 38) = Balance C/f of previous period (M 41)
  • Balance C/f (N 41) = Balance B/f (N 38) + Mined (N 39) – Milled (N 40)
  • Ore Mined (N39) is calculated in the Mining Section (Screenshot 2, N14)
  • Ore Milled (N 40) is calculated in the Milling section which will be discussed in the following section (Screenshot 4, N82)

You now need to calculate the ore milled (see Screenshot 4) to complete the ore stockpile account. Three factors determine the amount of ore going through the milling plant

  1. Plant capacity assumed at 70 kt (cell E71) per quarter
  2. An assumed ramp up profile (row 74) in Milling Years
  3. Amount of available ore in the stockpile (row 78)

The amount of milled high grade ore is the lesser of the available ore (row 78) vs. the applicable plant capacity (row 75). This is because if you have a higher plant capacity than available ore, you can only mill the available ore. Likewise, if you have more available ore than plant capacity, you can only mill up to the plant capacity.

Any excess capacity (row 83) we can use to further process additional lower grade ores.

Screenshot 4: Milling Process

  • Capacity (O75) = Fully Capacity (E75) x Ramp up (O74)
  • Available Ore (O78) = Ore Stockpile Opening Balance (O38) + Ore Mined (O39)
  • Throughput (O82) = minimum of available ore (O78) and capacity (O75)
  • Remaining Capacity (O83)= Capacity (O75) – Throughput (O82)

Contained Gold Stockpile Account
The final step is to complete the stockpile account for contained gold.

Screenshot 5: Contained Gold Stockpile Account

Similar to the Ore Stockpile Account in Screenshot 4, there is an opening balance and a closing balance for this account. Adding to the stockpile (row 58) is the contained gold from the ore mined.

Depleting the account (row 59) is the contained gold of the ore milled.

  • Balance B/f (N 57) = Balance C/f of previous period (M 60)
  • Balance C/f (N 60) = Balance B/f (N 57) + Mined (N 58) – Milled (N 59)
  • Contained Gold Mined (N 58) is calculated in the Mining Section (Screenshot 2, N 16)
  • Contained Gold Milled (N 59) = Average Grade (N69) x Ore Milled (N 40)

Contained Gold Milled is based on the amount of ore milled calculated in the previous section. What we need is to figure out the average grade of ore milled to work out the contained gold.

The average grade of the stockpile is a good proxy of the grade if we are to mill the ore from the stockpile irrespective of the different parcels of ore grades that were added to the stockpile over different points in time in the past. It is calculated in row 69.

  • Average Grade (N69) = Available Contained Gold (N57 + N58) / Available Ore Mined (N38 + N39)

Final Words

Modelling stockpiles is a crucial component of a financial model in a mining project, because most likely mining companies are not able to mill all the ore that they mine. Further, this stockpile of contained metal has a monetary value which needs to be reflected on the balance sheet.

In our course “Financial Modelling for Mining Projects (FMMP)” we will do a live demonstration of the calculations discussed in this blog as well as a best practice approach teaching you how to build features of a financial model that are specific to mining projects in a transparent and flexible way.

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