Net Present Value Optimization Approach for Nickel Laterite Open Pit Mines at Southeast Sulawesi, Indonesia

Abstract

Introduction: The optimization of the mine boundary is crucial for maximizing profitability in open-pit mining operations. This study focuses on determining the optimal mine boundary for PT Makmur Lestari Primatama (MLP) in Southeast Sulawesi, Indonesia, using a Discounted Cash Flow (DCF) analysis to maximize the Net Present Value (NPV). The analysis incorporates the economic factors affecting mining, such as ore tonnage, nickel grade, market prices, and mining costs.

Objectives: The primary objective of this study is to determine the most economically viable pit design for MLP’s nickel laterite mining project by utilizing the Lerch-Grossmann pit optimization algorithm. Additionally, the study aims to assess the sensitivity of the project’s viability to fluctuations in ore prices and mining costs through a detailed sensitivity analysis.

Methods: This research employs the Lerch-Grossmann pit optimization algorithm to generate multiple pit designs and calculate their respective NPVs. An economic model incorporates key parameters, including ore tonnage, nickel grade, market prices, and mining costs. A spreadsheet-based NPV model is used to conduct sensitivity analysis, assessing the impact of varying ore prices and mining costs on the project’s financial performance.

Results: The results demonstrate that pit OPT_07 remains economically viable, even under fluctuating market conditions, with variations of up to 30% in ore prices and mining costs. This analysis highlights the robustness of the selected pit design in managing market uncertainties, emphasizing its economic sustainability in the face of external financial fluctuations.

Conclusions: The NPV-based optimization approach significantly contributes to enhancing the economic sustainability of nickel laterite mining. The study introduces a novel method to optimize mining operations by combining the Lerch-Grossmann algorithm with NPV-based economic modeling and sensitivity analysis. This approach not only maximizes profitability but also assists in managing financial risks associated with market fluctuations. The methodology can be applied to other nickel laterite mines, offering valuable insights for strategic decision-making in mine planning and enhancing overall profitability and risk management.