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WHAT EXACTLY DOES REVENUE FACTOR 1 MEAN?

When I started in mine planning back in the day, everybody was talking about this Revenue Factor 1 thing. At some point I couldn't contain myself anymore, and I asked my manager what does it mean, and he explained: When doing a Whittle Open Pit Optimisation, the software generates an array of Nested Shells, or incremental shells, say in 0.25 intervals. Revenue factor is defined as: (incremental cost)/(incremental revenue). At a RF =1 pit, the incremental cost = incremental revenue, meaning for that increment there is zero profits. So even though the total pit will have PROFIT, as can be seen in the graph below, the next incremental shell will start destroying value because the costs start increasing more rapidly than the revenue, thus decaying your profits... It's like the classic example of adding trucks to a shovel: at some point the shovel will be working at max capacity, and from this point by adding more trucks to the system, the trucks will start queuing, hence cost goes NORTH, revenue remains CONSTANT, and profits go SOUTH!

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