The determination of the optimum production rate for an open cut mine in Ombilin, Indonesia

Supriyadi (1991). The determination of the optimum production rate for an open cut mine in Ombilin, Indonesia Master's Thesis, School of Engineering, The University of Queensland.

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Author Supriyadi
Thesis Title The determination of the optimum production rate for an open cut mine in Ombilin, Indonesia
School, Centre or Institute School of Engineering
Institution The University of Queensland
Publication date 1991
Thesis type Master's Thesis
Supervisor A.D.S. Gillies
G.D. Just
Total pages 87
Language eng
Subjects 09 Engineering
Formatted abstract

A problem facing the management of mineral resources in Indonesia is the lack of tools for detailed evaluation of the resource economics, in particular the economic consequences of various rates of resource exploitation. This research is intended to provide a model for the evaluation of the optimum production rate for a coal mine. The approach has been applied to an individual mine although it could be used widely throughout the industry.

The model has been applied to the evaluation of an open cut mining prospect in the Ombilin area to provide coal for domestic and export markets. The profitability is measured by the surplus value of the project.

The literature review contains a theoretical background which is essential in five areas : reserve estimation; cost estimation; net present value; discounted cash flow rate of return; and market share analysis.

Mine technical and financial data were collected on a field visit to Indonesia and utilised in the model.

The discounted cash flow technique has been applied to determine the surplus value for various production rates. Calculation of surplus value was done using PROFIT - PROGRAM which was developed by applying BASIC language programming. The application of the PROFIT - PROGRAM requires the following data : coal reserves , total investment, production cost, coal price, taxation regulations and scale factors for expenditure and investment.

The application of geostatistical techniques was applied successfully to estimate reserves in the Tanah Hitam area. Unfortunately the same technique was not successful in the Kandi and Sapandalam fields as insufficient information was available. In these cases, the polygonal method was used. Final results indicate an estimated measured reserve of 21,600,000 tonnes for the three areas studied.

Geostatistical techniques could not successfully estimate the quality of the coal in the study areas. This lack of success in quality estimation is attributed to the lack of information with too few samples being available for analysis. Six new drill hole locations in the Kandi field are suggested to increase the number of samples available for evaluation.
The United States Bureau of Mines Cost Estimation System was applied successfully to estimate the cost of run of mine coal and cost of coal preparation. The total production cost is calculated by adding these costs to estimates of miscellaneous costs.

The optimum production rate is measured by the surplus value Expressed in US $, December 1990 and the market share available 1n the following years. The maximum surplus value with the highest internal rate of return is reached at a level of production of 5,000,000 tonnes of saleable coal per annum. This production figure has been compared to the forecast demand. As a result the optimum production of the study area Is estimated by subtracting the sum of the production of the existing producers In the two Ombilin area from the forecast demand. The forecast demand in the next 12 years is estimated using linear function techniques. The result shows that the forecast demand increases sharply. For example, the optimum market production for Tanah Hitam, Kandi and Sapandalam fields was calculated at 610,000 tonnes for the year 1992 and 1,321,000 tonnes for 2000 from this mine study, optimum production is dictated by the market analysis result and not by optimum surplus value.
Keyword Strip mining -- Indonesia

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