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Contents
Unit 1 Scope of Mine Valuation...................................................................................................................6
PROSPECTING METHODS.......................................................................................................................13
Magnetic Surveys..................................................................................................................................16
Gravity Surveys......................................................................................................................................19
Radiometric Surveys..............................................................................................................................20
Electrical Surveys...................................................................................................................................21
Soil Sampling.........................................................................................................................................26
Unit 2 Sampling.........................................................................................................................................29
Sampling................................................................................................................................................29
Purpose of sampling..............................................................................................................................29
Theory of sampling...............................................................................................................................30
Methods of sampling.............................................................................................................................30
Quality Control......................................................................................................................................32
Sampling of Outcrops............................................................................................................................32
Stope sampling......................................................................................................................................35
Resource classification...........................................................................................................................43
Reserve classification.............................................................................................................................43
Reserves/Resource estimation..............................................................................................................43
Ore Reserves..........................................................................................................................................44
Grade control........................................................................................................................................52
Unit 6: Valuation of Copper, Gold, Lead, Silver, Tin, and Zinc Lode Mines................................................55
Underground Mining.............................................................................................................................67
Coal Quality...........................................................................................................................................74
Opencast Mining..............................................................................................................................80
Inpit sampling].......................................................................................................................................81
Uses of Coal...........................................................................................................................................85
Economic efficiency...............................................................................................................................94
Borehole plan........................................................................................................................................97
Drilling procedures................................................................................................................................97
General............................................................................................................................................108
Types of Shares................................................................................................................................118
Formation of Companies.....................................................................................................................119
Partnerships........................................................................................................................................119
Sole Trader..........................................................................................................................................120
Theory of Demand...............................................................................................................................121
Determinants of Demand....................................................................................................................121
Law Of Demand...................................................................................................................................121
Supply..................................................................................................................................................123
Determinants of Supply.......................................................................................................................123
Compounding......................................................................................................................................124
Payback Period....................................................................................................................................125
Income Statement...............................................................................................................................141
Mine valuation is therefore primarily concerned with the revenue earning potential of a
proposition which depends on the price obtained for the product, offset against concomitant
expenditure. The price is usually fixed by the supply of and demand for the mineral on the world
markets, such as the London Metal Exchange, or it is dependent on special contracts drawn up
between the supplier and buyer.
The factors which determine whether an ore body can be worked profitably may be summarized
as follows:
think of many good reasons why the effort should be abandoned. However, before
this decision is made, it is worthwhile to critically check through a list of the beliefs
that are held about the area. On examination, these beliefs might turn out to be mere
assumptions, and the assumptions might be wrong. To assist in this process, here is
a check-list of five negative assumptions commonly made by explorationists about
the prospectivity of an area.
• The area is not prospective because it is underlain by rock type X.
Comment: How do you know? The geological map you are using might be wrong
or insufficiently detailed. In any case, if rock type X is not prospective for your target
commodity, perhaps it is prospective for some other commodity.
• The area has already been exhaustively explored.
Comment: An area or prospect can almost never be exhaustively tested. Earlier
explorers gave up because they ran out of ideas, time or money. The best any explorationist
can ever hope to do is to exhaustively test some idea or model that they have
about mineralization using the best tools at their disposal at that time. Generate a
new model, develop a new tool or simply find new access to risk capital, and the
area may turn out to be under-explored.
The procedures carried out in this stage could include some or all of the following:
Target Drilling
This stage is aimed at achieving an intersection of ore, or potential ore. The testing
will usually be by means of carefully targeted diamond or rotary-percussion drill
holes, but more rarely trenching, pitting, sinking a shaft or driving an adit may be
employed. This is probably the most critical stage of exploration since, depending
on its results, decisions involving high costs and potential costs have to be made.
If a decision is made that a potential ore body has been located, the costs of exploration
will then dramatically escalate, often at the expense of other prospects. If it is
decided to write a prospect off after this stage, there is always the possibility that an
ore body has been missed.
Feasibility Study
This, the final stage in the process, is a desk-top due-diligence study that assesses
all factors – geological, mining, environmental, political, economic – relevant to
the decision to mine. With very large projects, the costs involved in evaluation are
such that a preliminary feasibility study is often carried out during the preceding
resource evaluation stage. The preliminary feasibility study will identify whether
the costs involved in exploration are appropriate to the returns that can be expected,
as well as identify the nature of the data that must be acquired in order to bring the
project to the final feasibility stage.
groups who explored an area and failed to find the ore body subsequently located
there by someone else, because, in spite of good ideas and good exploration programmes,
the earlier groups simply gave up too soon. Judging whether to persist
with an unsuccessful exploration programme or to cut one’s losses and try some
other province can be the most difficult decision an explorationist ever has to make.
Helping the explorationist to get smarter, at least as far as the geological field
aspects of exploration are concerned, is the aim of this book. The smart explorationist
will generate the best quality prospects and test them in the most efficient
and cost-effective manner. At the same time, she will maintain a balance between
generation and testing so as to maintain a continuous flow of directed activity leading
to ore discovery. The achievement of a good rollover rate of prospects is a sign
of a healthy exploration programme.
PROSPECTING METHODS
General Discussion
In prospective areas where outcrop is poor, or that have been subject to intense
mineral search over a long period of time (generally known as “mature” exploration
areas), the explorationist increasingly has to make use of geophysical and
geochemical methods in order to extend the search into areas of shallow cover
inaccessible to more traditional prospecting. Some of these geophysical and geochemical
methods also allow for rapid regional appraisal of areas where ground
access may be difficult – for example rain-forest terrain or Third World countries
with poor infrastructure.
Geophysical and geochemical techniques typically measure objective characteristics
that are possessed by all rocks to some degree and result in the collection of
large amounts of geographically referenced digital data. Explorationists undertake
two different kinds of survey: those that are aimed at defining regional geology and
those that aim to directly locate ore. In some cases there is an overlap between these
two types.
The first type of survey is a mapping of the areal distribution of a particular
rock or soil characteristic – it could be, for example, patterns of electromagnetic
been undertaken) is presentation of the data in a form that facilitates their qualitative
interpretation. This step normally turns the digital data into a geologist-friendly
analog form. Techniques for producing 2D and 3D analog maps, sections and form
surfaces from dense arrays of digital data are described in the next chapter.
The second type of geophysical/geochemical survey is aimed at measuring
unusual or atypical features of rocks that directly reflect, and have close spatial
relationships to, economic mineralization. Since ore bodies are in most cases small
relative to the earth’s crust, such surveys have to be based on detailed, close-spaced
measurements and are generally expensive. Ore-targeting surveys would normally
be undertaken after a prospect, or at least a prospective belt of limited area, has been
defined. The critical step in analysing the results of ore-targeting surveys is to select
those measurements that can be considered as “anomalous”. The selected anomalies
are then analysed to determine the probable nature, size, position and shape of the
causative body as a prelude to a follow-up detailed exploration programme, usually
drilling.
Defining “anomalous” is never easy. If, for example, a level of 20 ppb (parts
per billion) gold in a geochemical soil survey is selected as a cut-off number to
define anomalism, it would be hard to argue that there is some significant difference
between that assay and one of 19 ppb which falls outside the cut-off line. And if
19 is anomalous, then what about 18? And so on. The same problem applies in the
analysis of all numerical data sets of this type. Nor can one simply rank numbers
according to size – bigger in this case is not necessarily better. A moment’s reflection
should convince that a small number may reflect a very large source remote from the
sample/measuring point, whereas a large number may have come from a relatively
small source close to the sample point. And nearness to the sample point is only
one of many factors that might enhance or detract from the value of a particular
measurement.
Real data sets that provide an adequate sampling of the environment seldom
possess sharp natural cut-offs: they typically have a continuous or “fuzzy” distribution.
The science of fuzzy logic describes such systems – everything is true to a
degree and black and white are merely special cases in a continuous scale of grey.
Fuzzy logic is the way human brains work, but is incompatible with the either/or
bivalent logic of the computer. For this reason, present-day computers cannot be
programmed to select all significant anomalous numbers from a data set: only a
human expert can attempt that with any hope of success. The role of computer
processing of geochemical and geophysical data is to present it in such a way as
facilitates the human judgement process.
This problem of defining anomalous values can often be partly overcome by
looking for natural groupings and patterns within the data set and making the reasonable
assumption that such groupings reflect the operation of fundamental geological
factors, including mineralization processes. Sometimes the natural breaks like this
are apparent by simply eyeballing a print-out of the raw data. More subtle cut-offs in
the data or breaks in their trends are often definable by graphical means or by statistical
analysis. Many commercially available software programs are available which
can highlight these features. These programs are powerful and useful tools that
nowadays form an essential part of most analyses of geophysical and geochemical
surveys.
In spite of such naturally occurring patterns, if a data set represents an adequate
sampling of an area, then any realistic first-stage analysis will almost always divide
it into three basic groups.
In the first group – almost invariably the largest one – are those measurements
that are definitely not anomalous. These are known as background values and they
can be safely ignored, at least as far as the results of that survey are concerned. In
the second group – probably a rather small one, if it exists at all – are those measurements
that are so different from the background that they cannot be ignored
and demand to be explained in some way. Such numbers will generally be confidently
labelled as anomalous. The third group is a widely defined category that can
be given the distinctly “fuzzy” label of “possibles”. It comprises all the remaining
measurements that do not fit into the first two categories. They are those numbers
that are slightly above, or at the upper limit of, background values but could be readily
explained by non-mineralizing processes. They could, however, equally well be
subtle expressions of ore. Since there will probably be insufficient time and money
to exhaustively test all of the measurements of this third “possibles” group, a decision
on which ones to follow up must be made based on knowledge gained from
outside of that particular survey. This may be results from other types of geophysical
or geochemical survey or knowledge of the geology and mineralization of the
area. The input of an experienced explorationist is required at this point and no
software program can make the decision for her.
This is the main reason why no exploration technique should be conducted in
isolation. The most powerful exploration programme is normally the one that combines
data gathered from several different appropriate geological, geophysical and
geochemical surveys. Ultimately, once all processing and presentation steps have
been performed, the key to interpreting the results of geophysical and geochemical
surveys is an understanding of the geology and ore-forming processes of the area.
Combining different types of map data can be accomplished by overlaying samescale
maps on a light table but this is a clumsy process which is much more easily
done on computer using digital data sets and Geographical Information System
Magnetic Surveys
The instrument used for magnetic surveys is called a magnetometer. Magnetometers
record disturbances in the earth’s magnetic field caused by magnetically susceptible
rocks. Since all rocks are magnetically susceptible to some degree, a map of
magnetic variation at surface (called a Total Magnetic Intensity or TMI map) can
provide an image of lithology distribution – an image that to some extent reflects
the three-dimensional distribution of rocks and is not affected by thin superficial
cover. Magnetic maps are so generally useful to the explorationist that they are easily
the most widely used geophysical technique, both as an invaluable aid in regional
mapping and for the direct location of those ore bodies that have a distinct magnetic
signature.
Regional magnetic maps are usually produced by flying the magnetometer at a
low level in regular parallel passes over the ground. Aircraft positioning is nowadays
controlled by a DGPS system (Sect. 2.1.7). Data are recorded digitally and presented
as a contour or pixel map (Sect. 10.3). Flying at lower levels and decreasing
the flightline spacing increases the sensitivity of the survey. Very detailed surveys,
comparable in their resolution to ground magnetic surveys, can be carried out by
low-flying helicopter.
In ground-magnetic surveying, the sensor head of the magnetometer can be
mounted on top of a pole to keep it clear of any near-surface magnetic “noise”.
The operator usually takes close-spaced readings along a series of traverses across
the survey area. The magnetic readings and station coordinates may be recorded
in a notebook but today are more likely to be stored into an electronic memory
built into the instrument. Modern instruments can be linked to a DGPS so that map
coordinates are automatically recorded against the magnetic reading. Regular repeat
readings at a fixed base station provide data to correct for diurnal drift (with modern
systems this step is done automatically when time-coordinated data from a fixed
base station magnetometer and a mobile magnetometer are downloaded into a field
computer at the end of each day).
Processing of aeromagnetics, after editing, correction, and levelling generally
consists of a number of common enhancement and presentation techniques carried
out on Total Magnetic Intensity data. Computer processing to remove any components
of regional magnetic gradient is an important correction for regional surveys
but can generally be ignored in detailed local surveys.
If the earth’s magnetic field were everywhere normal to the surface, the symmetry
of magnetic anomalies would reflect only the symmetry of the causative body.
A symmetrical body would produce a symmetrical anomaly located directly over
it. However, the magnetic field is only normal to the earth’s surface at the magnetic
poles, and lies at increasingly lower angles to the surface with distance from
the poles, and at the equator is parallel to the surface. This means that magnetic
anomalies are all, to some degree, asymmetric. This produces anomalies consisting
of a N–S oriented paired magnetic low and high. In the northern hemisphere,
the low lies to the north of the high, in the southern hemisphere the opposite holds
true. The asymmetry becomes more pronounced the nearer to the equator the survey
format (as contours or pixels) from government survey agencies. Such maps may not
be very detailed but generally do provide a comprehensive regional overview. Large
exploration groups will often contract to fly their own aeromagnetic surveys over
their tenements at increasingly detailed scales. In some established mining camps,
geophysical survey companies have flown large areas of detailed magnetic imagery
on a speculative basis, and they offer these data (or sub-sets of them) for purchase
by mineral explorers.
Gravity Surveys
Gravity surveys measure lateral changes in the density of subsurface rocks. The
instrument used, called a gravimeter, is in effect an extremely sensitive weighing
machine. By weighing a standard mass at a series of surface stations, the gravimeter
detects minute changes in gravity caused by crustal density differences. Maps of
gravity variation can hence be used to map subsurface distribution of rocks and
structures, including the anomalous density distributions that might be associated
with concealed ore.
To provide usable data, raw gravity measurements need to be corrected. The first
correction (for short-term drift in the instrument) is provided by regular reading of
a base station in much the same manner as a magnetic survey. The second correction
compensates for the broad scale variations in the earth’s gravitational field –
this correction is only significant in regional surveys. The third correction, much
the most important one, corrects for differences in gravity caused by variation in
the elevation of the survey station above a datum, usually sea level. To make this
correction, stations need to be levelled with great precision – in the case of a very
broad regional survey to at least one metre; in the case of a detailed survey aimed at
direct ore location, to correspondingly greater accuracies, down to centimetre scale.
The costs involved in the very accurate surveying necessary for altitude correction
has, until recently, generally restricted the use of gravity surveys in mineral
exploration to low-density, broad-scale, regional coverage. However, differential
GPS (DGPS) surveying now allows rapid and relatively cheap levelling of stations
and has made detailed gravity surveys comparable in cost to that of ground-magnetic
surveys.
A good example of the successful use of a gravity survey as an aid in ore discovery
is the location of the high-grade Hishikari epithermal gold deposit of Japan
(Izawa et al., 1990). Here, a detailed gravity survey was used to define a buried
mineralized structure in an area of known mineralization. The key to the successful
use of the technique in this case was the high degree of understanding of the
local geology and mineralization, which was used in the design and interpretation
of the survey. Gravity surveys (along with regional aeromagnetic data) also played
a significant part in the discovery of the giant deeply buried Olympic Dam (Rutter
and Esdale, 1985) and Prominent Hill (Belperio et al., 2007) IOCG deposits of South
Australia.
Modelling of the gravity response for the likely range of size, depth, and SG
of targets is an important reality check before the technique is used for direct
exploration. In some Australian regolith settings, undefined geometries of variable
density material in the regolith can produce ambiguous gravity results and spurious
anomalies.
Radiometric Surveys
These surveys measure the natural radiation emitted by rocks at surface. The data
are collected and presented in a similar way to magnetic data. Radiometric measurements
are often carried out from a low-flying aircraft at the same time as air
magnetic surveys. Radiometric measurements can also be taken with land-based
instruments that can be used at ground stations or lowered down drill holes. The
instrument used is called a spectrometer.
The most abundant naturally occurring radioactive element in the crust is the
potassium isotope 40K, largely incorporated into the crystal structure of the rockforming
mineral orthoclase. Of lesser importance as a source of radiation is
thorium (found in monazite, an accessory mineral of some granite and pegmatite
bodies). The radioactive mineral normally sought by explorers – uranium – is seldom
abundant, but at low concentrations can characterize particular rocks such as
highly fractionated granites or some black shale sequences. Spectrometers provide
selectable channels so that radiation derived from these different sources can be
distinguished. Since most natural radiation comes from potassium, maps of total
radiation count provide a very effective way of mapping the distribution of alkalic
igneous rock and of sediments (such as arkose) derived from these rocks. Monazite
weathers from bedrock to form a resistant heavy detrital mineral that often accumulates
in watercourses or strand lines. For this reason, these features often stand out
on the thorium channel of radiometric maps. Maps presenting ratios of radiometric
measurements made in different channels, such as U/Th and K/U can be very useful
for discriminating different rock types. Different granite suites may have distinctive
radiometric ratios. Radiometric images have no depth penetration and depend on
signals from surface materials, so they can be particularly useful in adding value to
regolith maps.
Electrical Surveys
Electrical surveys are all ground based. In their simplest form, they put an electric
current directly into the ground and measure, by means of arrays of receivers, the
resistance of the rocks through which the current passes. Such surveys are therefore
often called resistivity surveys. Current is normally conducted through the ground
by the movement of charged ions in pore fluids. Metallic sulphides, which can conduct
electric current electronically, can often be detected as zones of anomalously
low resistance.
IP is a special type of electrical survey that utilizes the electrochemical (galvanic)
effects caused by a current passing through disseminated metal sulphides. The current
creates an electro-chemical charge on the boundaries of the sulphide grains
where the flow of current changes from ionic to electronic (and vice versa). Such rocks are said
to be chargeable. When the primary current is switched off, the decay
of this secondary voltage can be detected, and so provides a measurement of the
size and position of the chargeable body. Induced polarization is virtually the only
geophysical method that is capable of directly detecting concealed, disseminated
sulphides in the ground. After magnetic surveys, the induced polarization (IP) technique
is one of the oldest geophysical methods to be used in mineral exploration
with the first patent application (by the Frenchman Conrad Schlumberger) being
filed in 1912 (Mathews and Zonge, 2003).
In IP surveys, results are normally presented in the form of pseudo-sections.
Such “sections” are merely a convenient way of representing the electrical measurements
and the contoured shapes of the data on them reflect measurement geometry5
rather than the geometry of the causative body. Such “sections” cannot be readily
equated with a real geological section and need to be interpreted by a specialist geophysicist.
However, the use of modern inversion modelling software (see following
section) will hopefully make IP pseudo-sections a thing of the past. An example of
the successful use of an IP survey is in the discovery of the blind, sediment-hosted,
lead/zinc sulphide Gortdrurn deposit of Ireland (Hitzman and Large, 1986). The
San Nicolas VMS deposit in Mexico was also discovered as a result of an IP survey
(Johnson et al., 2000).
Electrical surveys require a generator capable of delivering a high voltage and
electrodes placed directly into the ground to transmit the input current. Arrays
of receivers laid along the ground measure resistivity or chargeability. The surveys
are relatively expensive and labour intensive techniques. They are therefore
used as direct ore-targeting tools in established prospects where the presence of
disseminated metallic sulphide ore is suspected.
Problems in using electrical surveys can be caused by the short-circuiting effects
on the input current that can be caused by salty near-surface groundwater in deeply
weathered terrain. Problems in interpretation result from the fact that many zones
within rocks, other than bodies of massive or disseminated sulphides, have low
electrical resistance or are chargeable.
Electrical methods, as with electromagnetic methods, work best in the upper few
hundred metres of the surface in areas where recent uplift and erosion, or glaciation,
has produced fresh unweathered rocks relatively close to the surface.
Soil Sampling
This technique relies on the fact that metals derived from the weathering of sub
cropping ore often form a wide, near surface dispersion halo around or adjacent
to, the deposit. With the ability of chemical analysis to detect very low element
abundance, a regularly spaced sampling grid can thus locate the surface “footprint”
of the ore body. Significant anomalies may be of the target metal or of elements that
are known to be associated with the style of mineralization sought. As a relatively expensive
technique, soil sampling is typically employed in the
detailed exploration of prospective mineral belts or established prospects, where it is
used to define specific targets for follow-up drill testing. A good recent example of
the successful use of the method is the discovery of the Century sediment-hosted
zinc deposit in the Mount Isa District of Queensland, Australia (Broadbent and
Waltho, 1998).
The sample collected for assay is usually the fine silty or clayey surface material
that results from weathering of the underlying bedrock and may contain small
fragments of bedrock. A coarse sieve (–10 mesh) may be necessary to remove overlarge
fragments before taking the sample. The sample is normally taken from just
below the organic-rich surface grass-roots layer. A small pick or mattock is used
for this job – the “pelican pick” (Fig. 9.1d) – is ideal as it allows the sample to be
collected without stooping and slid easily into a sample bag with minimum handling.
In some areas (such as rain forest) a hand auger (Fig. 9.1a) may be needed to
obtain the sample. Samples are normally stored in calico bags with draw-string tops
(Fig. 9.2a).
Not all soils are in situ residual accumulations of weathered bedrock. They may,
for example, have been transported for some distance laterally from their source
by the action of gravity, wind or rain. The soils may be part of a landscape with a
long history of evolution. That history might have involved variable water tables and
cycles of chemical enrichment and depletion. To adequately interpret the results of a
soil survey it is therefore essential to have an understanding of the regolith9 of which
they are a part. Regoliths can have long and complex evolutionary histories and need
to be geologically mapped and interpreted prior to planning a soil geochemistry
survey, in order to define those areas suitable for this type of sampling.
In gold exploration, very low concentrations of the metal in soil samples can
be determined by employing the Bulk Leach Extractable Gold – or BLEG – assay
technique. In this method, a large sample (2–5 kg) of silt sized material is digested
for several days in a sodium cyanide solution to extract all contained gold. The
solution is then assayed for gold. Because all the gold from a large sample size is
extracted, it is possible to obtain an assay for the original sample at the parts per
trillion level (ppt).
quantify its mineral content (e.g. number of grains of gold). If required, the concentrate
can then be collected into a Kraft paper sample envelope for subsequent
this, some excellent videos of panning techniques can be found on the internet (just
search “gold panning” on You-Tube).
Although counting the number of grains of a particular heavy mineral can give
an immediate quantitative result from heavy mineral panning, it is more common
in mineral exploration for the entire heavy mineral concentrate sample (usually
Unit 2 Sampling
Sampling
Sampling is a process of obtaining a small representative part of a whole rock mass to represent
the whole. The sample is taken for analysis of assay values, mineral composition, texture or a
field specimen.
Economic mineral deposits are sampled to ascertain the grade of minerals, which is sometimes
decisive for the commercial evaluation of a deposit. This is achieved by taking samples from
mine openings, bore holes and natural exposures.
The results of sampling furnish the necessary information for determining the mean thickness of
mineral bodies and the average content of the useful constituent therein; they help study the
technical and technological properties of useful minerals, delineate the mineral bodies, determine
correlation of individual constituents and elements in the ore, establish the priority in mining the
minerals, their losses and dilution during exploitation.
Purpose of sampling
In order to ascertain whether an ore body is likely to prove to be a workable proposition, it is
first necessary to ascertain its size and value by exposing small portions of ore for sampling by
means of pitting, trenching, boring or mining. Assay values thus obtained are combined with
morphological information obtained from maps and surveys to arrive at an overall estimate of
the payable and unpayable mineral reserves in the orebody.
Theory of sampling
Sampling is the process of estimating the mineral content and other physical and chemical
characteristics of a mass of rock by averaging the characteristics in a number of much smaller
portions derived from this mass. The mineral content and other characteristics of the smaller
portions are obtained by assaying them individually.
Samples should be equal in mass and be taken at equal distances from one another in order to be
truly representative of their parent body; i.e. their zones of influence must be equal. It is not easy
to take samples from within an ore body and, unless diamond drilling is resorted to, samples are
usually taken from around the perimeter of blocks of ore, particularly in the case of tabular
bodies, as is the practise with most gold, platinum, chrome, antinomy and amosite asbestos
deposits within Zimbabwe
`
Methods of sampling
The following methods are generally used: point or spot, face or lump, channel or trench, drill or
shot hole, chip and bulk sampling.
1. Channel sampling: a groove is cut across the strike of the rock formation or ore body/reef
using a diamond saw-cutter. A chisel is then used to chip out the rock material in between
the groove. The samples are collected at standard sample length as governed by the mine
standard (classical geostatistics or geological).This sampling method is most preferred for
evaluation and mineral reserves/resources estimations to chip sampling because is more
effective and is auditable.
2. Chip sampling: this sampling is done by a hammer and a chisel. No groove is cut, it is
superficial. This is mainly used were quick results are needed e.g. in guiding
developments and quick grade evaluations.
3. Grab sampling: broken muck samples are collected by shovel or hand at certain time
intervals, or sampling intervals, or randomly so as to get the indication of the mineral
value of the respective ground. This method is applied on stockpiles, tramming,
drawpoints, hoists, trucks and conveyors. Grab sampling is often done for grade control
purposes.
4. Core sampling: these are samples obtained from diamond drilling. The sample is
measured along the core run and is split or not split(depending on QAQC standards and
purpose) before being sent to assay laboratory. Core samples are crucial for exploration
and evaluation exercises and are reliable.
5. Sludge sampling: sludge or pulp from jackhammer drilling is collected during drilling at
known sample intervals as the hole deepens. The pulp is assayed and results are used to
roughly indicate/delineate the ore body limits on stopes. These results are not used for
mineral reserves/resources estimation due to high possible contamination levels- not
reliable.
6. Bulk sampling: large quantities than normal are collected for analyses, mainly for
metallurgical investigation or evaluation(e.g. in alluvial deposits were mineral
distribution are random). Bulk sampling is an essential part of exploration and evaluation
of ores. Large samples are required to check the accuracy of the drill samples and to
obtain the needed information on the crushing and grinding characteristics of the ore as
well as for use in detailed and large-scale metallurgical tests. In natural ores, bulk
samples give information regarding the nature and quantities of various sized ore
products that can be shipped
7. Point or Spot Sampling consists of taking a number of equal portions of a mineral at
points distributed in a regular grid over a work face or a mineral exposure. Sampling may
be done from a pile of the mined mineral and from mine cars. These samples are, in the
main, destined for chemical assaying. The number of points making up an individual
sample depends upon the uniformity of mineralisation.
8. Face or Lump Sampling: This method of sample taking may be referred to the group of
point sampling. One to three lumps of rock are gathered in the face or taken from a pile
of broken mineral with the purpose of determining the mineral, and sometimes, also the
chemical composition. Face sampling is a very simple, quick and cheap procedure, but
the taking sample is often done subjectively and for this reason the accuracy of the
method is rather low. This type of sampling is employed in lumpwise metallometeric
surveying. Large pieces are occasionally collected for the purpose of determining the
physical properties of the mineral.
Equipment
Base map/ survey plan with pegs, pan,clinorule, chisel, diamond saw cutter (if channel
sampling), 4lb hammer, sample bags, tickets, strings, crayon, paint and brush, canvas bag,
notebook, pen and pencil
Protective clothing
Overall/ worksuit, goggles, gloves, hardhat, gumboots, caplamp belt
General procedure
Having identified the area to be sampled on plan in the office, gather the necessary
equipment and PPE. Inform the Miner in charge of the section when you get into the
section of your intention. This is done so that the area is made safe and resources made
available for sampling to proceed e.g. compressed air/ water.
Inspect the area to make sure the workplace is safe, bad hangings are barred down with
help of mining official (if any)
Identify the area to be sampled using the reference pegs
Mark out the sampling position and sample lengths using the crayon noting the strike of
the shear/ reef. Samples are taken at right-angle to the strike
Cut the groves and chip out the fragments with a chisel
Bag the samples and ticket them
Sketch the sampled area and record the ticket numbers
Securely tie the sample bags and put into the canvas bag and transport to the laboratory
Fill the sample register in duplicate and submit together with samples at the laboratory
and keep one for records
Quality Control
In order to control the quality of the assay results several practices are done which include but
not limited to the following:
Include assaying blanks on the batches
Standard samples, the low and high grade samples at known intervals
Repeats
Check assaying
Statistical Data analyses and recommendations
Core Sample splitting
Sampling standard procedure enforcement and supervision
Training
After assaying the values are plotted on the assay level plan on their rightful positions on space.
Hence x,y,z of the sample must be known. It is this assay information together with geology
model that are used for ore reserves estimations and ,mine planning and scheduling.
Errors in sampling mislead judgement of the information end user, the geologist, and hence the
entire management (mining/ exploration).Hence quality control and quality analyses measures
should be crafted , implemented and enforced to guard against making catastrophic decisions.
Sampling of Outcrops
One method of sampling is to cut grooves at right angles to the strike across the exposed strata
on surface, segregating samples according to the contrast in appearance of the stratified
minerals. If larger samples are required , or if the outcrop is partially or completely covered,
trenching will be necessary, the overburden of top soil being put on one side. In extensive areas
where the nature of the ground and soil are suitable and if expenditure is warranted, a mechanical
trencher may be employed to scoop bulk samples.
Sampling the floor of a working open pit is not popular because of debris lying on it but should
the method be used, grooves or trenches at regular intervals may be excavated in one direction at
right angles, across the bands or if no banding is apparent along the length and breadth in a
square pattern. If the outlay on continuous trenches is not justified samples could be taken from
pits at the corners only of a square grid pattern.
Also as a rule, it is not easy or safe to attempt to sample the side-walls of an open pit, and
domestic sampling for grade purposes is often therefore carried out by catching the chips and
sludge from blasting bore-holes drilled around the periphery of the pit. The taking of grab
samples from the broken ore lying on the ore body, on conveyor belts or from cars and railway
trucks is common practise.
In recent years sampling has been facilitated by the use of electronic instruments which measure
the concentration of certain minerals at the pit face, or in the assay office in the place of
labourious and more expensive assay procedures.
Assaying procedure
The ore from underground is fed to a small jaw crusher and reduced to a certain size. The sample
is then divided to reduce the amount and fed to a pulverizer where it is reduced to 100% less tha
74μ.
A 25g sample is placed in a fire clay crucible and 80 -90g of flux in the following proportions is
added:
Litharge(PbO) 30%
Borax(Na2B4O7) 25%
Maize Meal(C) 2g
The crucible is placed in a reverberatory furnace at 1100˚C. It is then poured into mould and
cooled. The lead bead is removed and hammered into a cube and placed in a cupel in the muffle
furnace. After +/- 30 minutes the cupel is removed. The Au/Ag bead is weighed and the mass
recorded.
The gold value can now be determined by subtracting 10% of the mass as silver
a* b * c * 100 = %Cu
(a + b) + (A - a)B
Where
This formula does not hold for all types of deposits. As it stands it is more suited to deposits in
veins and would if used on breccias deposits tend to give inflated values. The values and
densities of the sulphide ores found in Africa are as follows
Internal and block sampling is done by means of diamond drilling and sludge drilling. The
former is normally used where long holes are required to probe new ore bodies, whereas sludge
drilling is useful to define the extremities and values of partially opened up ore bodies.
Stope sampling
Before the sampling gang goes underground, clear and concise instructions must be given
regarding the locality of the stope face which has to be sampled. A pencil tracing should be made
on the 1:200 stope plan which shows all numbered survey pegs in the vicinity and which portion
of the face is to be sampled.
The general sampling procedure has already been outlined. In stope sampling the location of the
first section to be sampled is determined by measuring half the sampling interval from the top of
the stope face, which must be located from a numbered peg, or, if this is not possible, from
another established position such as the top or bottom of a raise winze connection in the drive.
The density of the gold bearing reefs of Zimbabwe vary from 2,6 to 2,8t/m3. The reefs and
country rock are fairly homogenous and their and their densities depend mainly on the proportion
of quartzite, sulphide, shale and lava in them, and on the depth below surface.
=0.01m2 x cm x ρ
=0.01m2 x cm x ρ x g/t
Example 1
A block of 30 claims is underlain by a gold reef dipping at 40 degrees from the horizontal and it
is estimated that the stoping width will be 100cm. assuming that the loss due to faults and dykes
will be 30 per cent and that waste sorting will amount to 10%, calculate the metric tonnage
available for milling. Assume density of rock is 2,70t/m3. (1 claim = 5948,14m2)
Method
= 628746t
= 440122t
Example 2
On a mine where 10% of the rock broken is sorted underground, planimeter readings gave an
area on the mine plan of 2786,4cm2. The scale of the plan is 1 in 1000. Two reefs with an
average dip of 33˚, are to be worked in this portion of the mine, one at an average stope width of
100cm and the other at 105cm. calculate the total tonnage available for tramming underground,
after allowing for a loss of 25% due to faulting and payability. Accept density 2,70t/m3
Method
100 x 100
= 332140m2
1378790
2. Working costs.
3. Extraction
5. Waste sorting
On the credit side of the revenue – cost balance, waste sorting which makes room at the plant for
more grade –ore, and the additional mineral product gained from an excess and from cheap,
broken tonnage such as development and other sources of ore, permit of lowering pay limit. On
the debit side losses in the extraction process reflected by the mine call factor being below 100%,
and by shortfall must be paid for by increasing the pay limit.
Example
Calculate the pay limit of a tin ore of which 91% is recovered by concentration methods. This
concentrates assays 57% tin which is sold to Tsumeb smelters. The payment for tin is at $8500
per tonne of 87.5% of the contained tin in the concentrate. Treatment costs $80 per tonne of
concentrate. Mine working costs $15 per tonne mined. MCF 90%.
Solution
Let 1 tonne of tin (Sn) be recovered, the n the quantity of ore mined will have contained .
If recovery is 91% MCF is 90% = 1.2210t of Sn ore.
Weight of concentrate containing 1tonne of Sn= =1.7544t of concentrate.
Pay
Revenue is the main item on the credit side of the pay limit calculation. The price of the product
is controlled by world markets, or ti is on a cost plus profit basis, or is subject to statutory
control. Certain deductions such as realization charges, penalties for impurities etc, will reduce
revenue.
Working Costs
Working costs are the main debit in the pay limit balance. Because of ever changing economic
conditions it is difficult to predict future costs and the valuator relies on the secretarial,
statistical, engineering and financial departments for guidance.
Extraction
Mine call factor is a sampling cum mining efficiency factor. It compares the total quantity of
recovered and unrecovered mineral product after processing with the amount estimated to be the
ore sampled in situ before mining.
Mineral accounted for is also expressed as the recovered mineral + the residues
Residues are sometimes referred to as the tailings.
MCF gives the indication of how effective mining and recovery systems are, it shows how
efficient the sampling systems, grade control, transportation, survey and recovery systems are.
A Mine call factor of 100% is ideal, but which is very anomalous and unacceptable MCF must
be investigated. Some of the areas to check include:
Question
Zamsun Gold mine recorded the following information at the end of January 2010.
Waste Sorting
ii. The amount of product recovered as more ore can be processed in its stead by the same
plant, i.e. the pay limit is lowered by the sorting of waste.
Additional ore to plant from reef development, which is already paid for, and other cheap
sources of ore (which effectually have lower pay limits than the stoping pay limit) all contribute
their modest quota of the mineral product on the credit side in the pay limit calculation.
The tonnage discrepancy is the difference between the surveyor’s estimate of ore sent to the
surface sorting plant and the reduction officer’s estimate. If the surveyors estimate by
measurement is less than that measured at the plant by massmeter or other means, this is referred
to as a shortfall and if greater the extra tonnage is referred to as excess.
Example
A medium size gold mine hoisting 8000t of stoping ore from P.M.R at an average grade of 6.2g/t.
Stope sorting at no value amounted to 6%
Development rock to the mill 1200t @ 3.50g/t
Reclamation rock to the mill 800t @2.80g/t
Surface sorting was 7% at grade of 0.65 g/t
Tonnes in mill bin on 31 December 200t@ 6.1g/t
Tonnes in mill bin30 January 2011 300t @ current month value
MCF 92%
Mill efficiency 92%
Working costs $350 per tonne milled
Gold price $ 1100
Calculate the tonnage milled and value and the working profit/loss.
In the month of February 2011, stoping tonnage broken was 8100t @ 6.00g/t.
Reclamation and development produced 1500t@ 3.00g/t.
Sorting percent at both underground and surface remained the same. Ignore any bin differences at
month end.
MCF increased to 94% and Mill efficiency @ 92%. Working cost was estimated to rise to $375
per tonne milled.
Calculate the effect of those changes on the February profit/losses.
Solution
Value
Item Tonnes (g/t) Content (g)
Stope ore (PMR) 8000 6.2 49600
Stope sort 6% 480
Tonnes ex stope 7520 6.5957447 49600
Development 1200 3.5 4200
Reclamation 800 2.8 2240
Hoisted 9520 5.8865546 56040
Surface sort 7% 666.4 0.65 433.16
In mill bin 200 6.1 1220
total 9053.6 6.276712 56826.84
less Mill bin end 300 6.276712 1883.013608
milled GCF 8753.6 6.276712 54943.82639
MCF 92%
GAF 50548.32028
Residues
Recovery 92% 46504.45466
$
Revenue 38.800705 1,804,405.65
$ $
costs 8753.6 350.00 3,063,760.00
$
profits (1,259,354.35)
Value
Item Tonnes (g/t) Content (g)
Stope ore (PMR) 8100 6 48600
Stope sort 6% 486
Tonnes ex stope 7614 6.3829787 48600
Development & Reclamation 1500 3 4500
Hoisted 9114 5.8262014 53100
Surface sort 7% 637.98 0.65 414.687
In mill bin 0
total 8476.02 6.215808 52685.313
less Mill bin end
milled GCF 8476.02 6.215808 52685.313
MCF 94%
GAF 49524.19422
Residues
Recovery 92% 45562.25868
$ $
Revenue 38.80 1,767,847.78
$ $
costs 8476.02 350.00 2,966,607.00
$
profits (1,198,759.22)
The classification of both the reserves and resources is determined by level of confidence in the
data at hand, knowledge and geological data. When looking at reserves the modifying factors are
considered in the classification process. The modifying factors include; commodity price, state
laws, market conditions, cost, social, environmental, metallurgical, geographical, political, etc.
Conditions change in any of the modifying factors may lead to down grading or upgrading of the
reserve to resource or vice versa, or change in material content of resource/reserve (e.g. change
in commodity price or paylimit)
Ore deposit is the concentration of minerals at a given location and recoverable at a profit after
considering various factors as listed above.
Resource classification
Inferred: no drilling or development has been done. A geological model is used to infer/
predict the existence of an orebody. For models with vertical continuity, an inferred block
can be said to exist below a drill indicated block
Indicated: drill holes or sampling points are widely spaced, but indicate existence of
mineralization. Continuity of the mineralization between the sampling points is not
ascertained
Measured: sufficient sampling and geological data has been acquired and the 3D
exposure of the resource has been done by developments and ore limits are defined with
confidence. High level of geological knowledge, but modifying factors are not yet
considered.
Reserve classification
Proven: being mined or ready for mining at profit.3D exposure by developments has been
done. Modifying factors have been considered and no material change is expected on this
block. Highest confidence level.
Probable: high confidence level , but lower than proved. May be due to insufficient
drilling as per reporting standard or lagging development.
Reserves/Resource estimation
It is a calculation meant to quantify the mineral reserve/resource as accurate as possible. It is
from the reserve and resource base estimation from which the life of mine is determined. The
reconciliations and short to long term production plans are derived from reserve estimations.
The ore reserve document is bankable, meaning it can be used as collateral for seeking
debentures, loans and luring shareholders, hence the importance is attached to quality control and
quality analyses in acquiring data, storage and geologist’s competence in reporting the ore
reserves. Reporting standards have been set by various professional institutions to this effect, in
order to align reporting of reserves with financial and investment ethics, e.g. SAMREC ,JORC
Code , etc.
Ore Reserves
General Historically, mineral properties were simply classified into three reserve categories:
Proven, Probable and Possible. In 1980, the USBM and USGS jointly introduced an expanded
system that separated the geological analysis (resource determination) from the subsequent
mineable analysis (reserve determination). In 1989, the AIMM of Australia expanded definitions
and introduced the concept that a reserve analysis should be carried out under the direction of
and certified by an “expert,” who is a qualified professional. Since that time, more work has been
accomplished to further refine the classification system. Most recently, the Canadian government
published “Standards for Disclosure” (National Instrument 43-101) that provides further
interpretation. Unfortunately, there is not yet an international standard that defines the terms
used, let alone a common code for the determination of the separate categories of certainty. The
good news is that an effort is underway to set international standards that will satisfy the
securities commissions of the stock exchanges that provide the great majority of equity financing
for the world’s mining industry (Johannesburg, London, New York, Sydney, and Toronto).
These new standards are more restrictive (more conservative) than the traditional standards.
In the mean time, major mining companies (who often finance new projects internally without
resorting to the equity markets) developed their own systems. These are generally similar to the
mainstream standards. One significant exception is that normally a qualified team of
professionals is responsible for determining and certifying ore reserves rather than an individual
“Expert,” “Accredited Senior Appraiser,” or “Qualified Person.” The professional team concept
appears wiser than the individual concept promoted by the published guidelines and standards,
since few, if any, individuals are expert in four disciplines (geological interpretation, statistical
analysis, mining methods, and mineral economics).
Definitions
The following are unofficial definitions intended to meet the expectations of a handbook. They
are generally representative of current industry standards.
A discovered mineralization zone will undergo three phases of identification before it is ready
for mining.
A Deposit is a mineralized zone that is examined to the extent that the mineral constituents are
identified. The examination may reveal some geological continuity and approximate grade
(tenor), but there is insufficient information to class it as a Resource.
A Resource is a mineralized zone that is sampled and studied to the extent that a credible
estimate of tonnage and grade can be made. This estimate is sufficiently definitive to divide it
into three levels of certainty: Measured, Indicated, and Inferred.
A Measured Resource is the highest order and implies that the measurements are made in three
dimensions at intervals close enough to be used as a basis for detailed mine planning, as would
be the case for stope development in an operating mine. In the instance of a new project being
contemplated, it is typical that there will be little or no measured resources.
An Indicated Resource is one that the estimate of tonnage and grade is trustworthy to the extent
that it may serve as a basis for major expenditures.
A Reserve may be divided into two categories of certainty: Proven and Probable.
A Proven Reserve is derived only from a measured resource. This category is generally limited
to a mining zone being mined or one that is already prepared for mining, to include
preproduction stope development. Typically, for most new mining projects, there will be little or
no proven reserves.
A Probable Reserve is that part of an Indicated Resource subjected to the scrutiny required of a
Detailed Feasibility Study and thereby may be found to justify the expenditure required for
mining. In a formal economic analysis, only probable and proven reserves are employed. The
sum of these two categories may be referred to as “2P.”
A Possible Reserve is an obsolete category since by current standards it may not be used in any
formal economic analysis. When reporting on a mineral property, a potential or possible zone of
mineralization best remains identified as an Inferred Resource. For purposes of a preliminary
study, a “possible reserve” may be calculated to perform an analysis only when desired to justify
additional exploration work.
A different approach was originally developed to assist with properties submitted for approval by
the Toronto Stock Exchange. The method assumes that a property is first acquired by staking
claims, the cost of which is known. The first cost is multiplied by weighed factors for items of
value (such as regional geology, proximity to infrastructure, geological data quality, executive
integrity or field manager reputation) to obtain valuation. Other approaches exist to evaluate
mineral properties, including so many dollars per ounce of “gold in the ground,” but these
methods are no longer popular.
Liabilities must be subtracted from the positive values of an exploration property. For example,
the purchaser or partner may become responsible for the cost of clean-up and restoration if the
property is later abandoned. Liabilities are not normally significant for a green field play, but if
the property is environmentally sensitive; subject to native land claims; or contains old
dumps, tailings, or mine workings, it is prudent to assess the liabilities.
A wrong value is obtained from slurry analysis carried out in a metallurgical testing laboratory.
The reason is that ore is porous and when finely ground; the density of individual particles is
approximately 20% higher than the density of a block of ore. In a Reserve calculation, resource
tons are “reduced” to account for the fact that not all the ore will be mined. Conversely, resource
tons are “increased” to account for dilution with waste rock in a contact orebody or with low-
grade material in a cut-off orebody. Nineteen different contributing factors are considered in a
comprehensive estimate of the amount of dilution
Block Factor
Block factor is the ratio expressed as a percentage, which the specific mineral content of the ore
broken from ore reserve blocks as indicated by the current sampling results bears to the content
of this ore as computed from the block estimates. This factor is based entirely on sampling
information, which may refer to a single block which has been worked to a group of blocks
worked in a mining area, on a single reef horizon or on all horizons during a particular period.
The longer the period or the greater the number of blocks worked, the steadier the block factor.
Block Factor = Mineral content of ore broken from block based on current sampling x 100
Mineral content of ore broken from block based on block estimates
The block factor may also be expressed as follows
Block Factor = Ave sampling cm.g/t value of ore broken from blocks x 100
Ave cm.g/t value of ore broken from blocks according to block estimates
The block call factor is defined as the ratio expressed as a percentage, which the total specific
mineral content of the ore broken from the ore reserve blocks as indicated by the current
sampling results adjusted by the mine call factor bears to the content of this ore as computed
from the block estimates
Block call factor = Mineral Content of ore broken from blocks based on content x MCF x100
Mineral content of ore broken from blocks based on block estimates
= Block Factor x Mine Call Factor x 100%
It can normally be assumed that the mine call factor will apply to the mineral content of ore
broken from the ore reserve blocks. Therefore:
Mine Call Factor = Mineral Content accounted for from ore blocks worked(Recovery+Residue)
Mineral Content of ore blocks worked based on current sampling
Elementary components (observations) consist of orebody sample grades and location. In hard
rock formations, these typically consist of assay results from diamond drill cuttings (sludge),
split drill core, and channel samples. Sometimes these are augmented by bulk sample assays or
cuttings from inclined percussion drilling into the walls of exploration headings. For the sample
assay grade to be correct, they must be collected properly and protected from contamination (or
salting) in transit. Except for a major mining company with in-house expertise, a recognized
independent laboratory should perform the assays. The best-recognized laboratory available
should be selected to perform periodic check assays. For foreign projects, all assays, or at least
check assays, should be performed domestically.
Note
Problems may arise when shipping sample bags to the home country unless they are double
tagged (one may be torn off by baggage handlers) and clearly labelled, “Pure mineral rock
samples” to avoid detainment in customs. Once samples are taken, ore reserves are divided into
blocks of convenient size. A grade for each block is determined from samples in and near the
block. Each sample assay used for the block grade determination is assigned a weight. The sum
of the weights is one (or 100%). Weights are dependent on the degree of variation between the
samples employed; grade resolution is determined by the application of statistical analysis to the
variations. A geostatical tool, “Variogram,” is typically used to represent the variance of samples
with respect to the distance separating them. The block grade is determined by summing the
products obtained from multiplying each sample grade by its assigned weight.
Blocks not meeting the cut-off grade are removed from the reserve ton calculation. The cut-off
grade is traditionally the breakeven point (neither profit nor loss). Recently, cut-off grade is
chosen to ensure a low cost product compared with the cost incurred at competing mines around
the world. When the mine is in production, the cut-off grade may be lowered after the pre-
production capital cost is retired. Cut-off grade may be raised or lowered at any time during mine
life depending on prevailing metal prices.
The nature and circumstance of the typical hard rock ore deposit is such that the exploration
program may not properly be completed without including exploration work from an
underground entry. This concerns open pit projects where a representative bulk sample is
required (Twin Buttes, Tyrone, Brenda, Endako, Marcopper, Palabora, Escondida); and
especially pertains to underground deposits. Numerous instances have occurred where
underground mines developed without such a program, encountered significant problems due to
unforeseen circumstances.
Those mines successfully brought into production without an exploration entry typically
involved ore bodies clearly defined from surface drilling because of the nature of the
mineralization and/or the proximity of very similar deposits already mined. Even these
circumstances are not foolproof. For example, the Randfontein mine (where the ore is
exceptionally uniform and continuous) encountered an unexpected barren area that interrupted
the ore throughout a horizontal length of over 8,000 feet along the reef.
Industry standards and good engineering practice normally require that a hard rock mining
project begin with an underground exploration program before proceeding with a definitive
(bankable) feasibility study.
‘Below ground only can the miner ‘shake hands with the ore.’ Arnold Hoffman, 1947
Listed below are the specific reasons for completing an underground exploration program.
• Confirm existing ore reserves
• Define the orebody
• Obtain geotechnical data
• Obtain a bulk sample
• Test mining methods
• Measure ground water flows
• Further exploration
actual ore configurations, outlines, continuity, fault lines, and grade distribution. For mining
engineers to select the appropriate mining methods to permit the safe and economical extraction
of the largest possible percentage of identified reserves, reliable and definitive information on
grades and widths is required. This requirement can only be met by going underground.
In addition, bulk sampling enables advance determination of whether preventive measures are
desired to reduce detrimental oxidation of wall rock and/or broken ore resulting from an
undesirable mineral component such as pyrrhotite. The bulk sample will also enable further
confirmation of ore distribution and grades.
Further Exploration
An underground exploration program is typically designed to uncover additional ore extensions
and satellite zones of mineralization that may have been missed by surface drilling.
Methods:
1. Polygonal estimation:
2. Sectional area estimation:
3. Inverse distance squared:
4. Ordinary krigging:
Polygonal estimation: based on the concept that the value of material at an unknown location is
equal to the value of the sample located closest to the location. Maximum radius used as
influence of sample.
Characteristics of the Polygonal Method: The polygonal method of ore reserve estimation has
been in use since the early 1900s (Popoff, 1966), and is still used by some companies, especially
when manually preparing ore reserve estimates.
The polygonal method is unique among the estimators discussed in this section, because the
polygons drawn around each drill hole define both the volume of ore and its grade. This aspect of
the polygonal method means that it can be used both to estimate grades and to estimate the
boundary of the mineral deposit. As an estimator of the boundary of a deposit, the polygon is
unbiased and gives sharp boundaries rather than the smooth gradational boundaries an
interpolation method such as inverse distance method would give.
Sectional area estimation: based on defining the area and length weighted grade for specific cross
section \level plan. The area is projected half way to the next section of mineralisation.
Ordinary krigging;
widely accepted method for achieving the best possible estimate
the method assigns weights such that they reflect the spatial variability of the grades
themselves.
Applies complex geostatistics to estimate the reserves/ resources
Diagram
Fast and accurate method of estimation is achieved by use of computer software
applications namely Vulcan, Surpac, Datamine, ArcView, etc
softwares are used for mine and ore body modelling in addition to the above listed, we
also have AutoCAD, stopeCAD, Didger, MapInfo etc which are mainly for 2D and 3D
modelling.
Tonnage estimation
1 ton = 1000kg
Tonnage = volume x Sg
Volume = area x height
Sg is the specific gravity
Grade estimation
Average grade =
Grade control
It is the management of mineral reserves and resources to enable sustainability and viability of
the mining operation. It involves quality control measures for the ore and waste blasting and
movement, and development and stopes monitoring. Grade control starts from planning and
scheduling and taken all the way from directing development and stoping to the plant head grade.
Example
Of effect of reducing stope width in a gold mine
Consider the following three cases
Case 1 Case 2 Case 3
Stope width 120cm 118cm 118cm
m2 74.0 74.0 75.3
Conditions Normal T milled decreased m2 T milled maintained
constant m2 increased
t g/t g t g/t g t g/t g
Stoping 239.8 15.0 3597.0 235.8 15.3 3597.0 239.8 15.3 3660.2
Development 18.8 6.0 112.8 18.8 6.0 112.8 18.8 6.0 112.8
Other sources 32.9 32.9 32.9
Shortfall 21.2 21.2 21.2
Hoisted 312.7 3709.8 308.7 3709.8 312.7 3773.0
Sorted 77.6 0.5 38.8 76.6 0.5 38.3 77.6 0.5 38.8
Milled 235.1 15.61 3671.0 232.1 15.82 3671.5 235.1 15.88 3734.2
Saving: 3t @ USD10/t Gain in grade 15.88 –
= USD30.00 for 236t 15.61 = 0.27g/t
The reduction of 2cm in the stope width in case 2 could result in a saving of 3t equivalent to
USD30.00 if cost of milling is USD10/t.
In case 3 more gold is obtained from the additional m2 mined to maintain tonnage lost by the
2cm reduction in stope width; the grade benefits accordingly but this must be offset by the cost
of mining the extra m2
Unit 6: Valuation of Copper, Gold, Lead, Silver, Tin, and Zinc Lode Mines.
The following discussion is limited to in situ deposits of copper, gold, lead, silver, tin, and
zinc. The valuation of alluvial deposits, iron, coal, and other mines is each a special science to
itself and cannot be adequately discussed in common with the type of deposits mentioned above.
The value of a metal mine of the order under discussion depends upon:—
a. The profit that may be won from ore exposed;
b. The prospective profit to be derived from extension of the ore beyond exposures;
c. The effect of a higher or lower price of metal (except in gold mines);
d. The efficiency of the management during realization.
The first may be termed the positive value, and can be approximately determined by sampling
or test-treatment runs. The second and the third may be termed the speculative values, and are
largely a matter of judgment based on geological evidence and the industrial outlook. The fourth
is a question of development, equipment, and engineering method adapted to the prospects of the
enterprise, together with capable executive control of these works.
It should be stated at the outset that it is utterly impossible to accurately value any mine, owing
to the many speculative factors involved. The best that can be done is to state that the value lies
between certain limits, and that various stages above the minimum given represent various
degrees of risk. Further, it would be but stating truisms to those engaged in valuing mines to
repeat that, because of the limited life of every mine, valuation of such investments cannot be
based upon the principle of simple interest; nor that any investment is justified without a
consideration of the management to ensue. Yet the ignorance of these essentials is so prevalent
among the public that they warrant repetition on every available occasion.
To such an extent is the realization of profits indicated from the other factors dependent upon
the subsequent management of the enterprise that the author considers a review of underground
engineering and administration from an economic point of view an essential to any essay upon
the subject. While the metallurgical treatment of ores is an essential factor in mine economics, it
is considered that a detailed discussion of the myriad of processes under hypothetic conditions
would lead too far afield. Therefore the discussion is largely limited to underground and
administrative matters.
The valuation of mines arises not only from their change of ownership, but from the necessity
in sound administration for a knowledge of some of the fundamentals of valuation, such as ore
reserves and average values, that managerial and financial policy may be guided aright. Also
with the growth of corporate ownership there is a demand from owners and stockholders for
periodic information as to the intrinsic condition of their properties.
The growth of a body of speculators and investors in mining stocks and securities who desire
professional guidance which cannot be based upon first-hand data is creating further demand on
the engineer. Opinions in these cases must be formed on casual visits or second-hand
information, and a knowledge of men and things generally. Despite the feeling of some engineers
that the latter employment is not properly based professionally, it is an expanding phase of
engineers' work, and must be taken seriously. Although it lacks satisfactory foundation for
accurate judgment, yet the engineer can, and should, give his experience to it when the call
comes, out of interest to the industry as a whole. Not only can he in a measure protect the lamb,
by insistence on no investment without the provision of properly organized data and sound
administration for his client, but he can do much to direct the industry from gambling into
industrial lines.
An examination of the factors which arise on the valuation of mines involves a wide range of
subjects. For purposes of this discussion they may be divided into the following heads:—
1. Determination of Average Metal Contents of the Ore.
2. Determination of Quantities of Ore.
3. Prospective Value.
4. Recoverable Percentage of Gross Value.
5. Price of Metals.
6. Cost of Production.
7. Redemption or Amortization of Capital and Interest.
8. Valuation of Mines without Ore in Sight.
9. General Conduct of Examination and Reports.
deposits the previous yield is often put forward as of important bearing on the value of the ore
standing, but such yield, unless it can be authentically connected with blocks of ore remaining, is
not necessarily a criterion of their contents. Except in the cases mentioned, and as a check on
other methods of determination, it has little place in final conclusions.
Test Parcels.—Treatment on a considerable scale of sufficiently regulated parcels, although
theoretically the ideal method, is, however, not often within the realm of things practical. In
examination on behalf of intending purchasers, the time, expense, or opportunity to fraud are
usually prohibitive, even where the plant and facilities for such work exist. Even in cases where
the engineer in management of producing mines is desirous of determining the value of standing
ore, with the exception of deposits of the type mentioned above, it is ordinarily done by actual
sampling, because separate mining and treatment of test lots is generally inconvenient and
expensive. As a result, the determination of the value of standing ore is, in the great majority of
cases, done by sampling and assaying.
Sampling.—The whole theory of sampling is based on the distribution of metals through the
ore-body with more or less regularity, so that if small portions, that is samples, be taken from a
sufficient number of points, their average will represent fairly closely the unit value of the ore. If
the ore is of the extreme type of irregular metal distribution mentioned under "previous yield,"
then sampling has no place.
How frequently samples must be taken, the manner of taking them, and the quantity that
constitutes a fair sample, are matters that vary with each mine. So much depends upon the proper
performance of this task that it is in fact the most critical feature of mine examination. Ten
samples properly taken are more valuable than five hundred slovenly ones, like grab samples, for
such a number of bad ones would of a surety lead to wholly wrong conclusions. Given a good
sampling and a proper assay plan, the valuation of a mine is two-thirds accomplished. It should
be an inflexible principle in examinations for purchase that every sample must be taken under the
personal supervision of the examining engineer or his trusted assistants. Aside from throwing
open the doors to fraud, the average workman will not carry out the work in a proper manner,
unless under constant supervision, because of his lack of appreciation of the issues involved.
Sampling is hard, uncongenial, manual labor. It requires a deal of conscientiousness to take
enough samples and to take them thoroughly. The engineer does not exist who, upon completion
of this task, considers that he has got too many, and most wish that they had taken more.
The accuracy of sampling as a method of determining the value of standing ore is a factor of
the number of samples taken. The average, for example, of separate samples from each square
inch would be more accurate than those from each alternate square inch. However, the
accumulated knowledge and experience as to the distribution of metals through ore has
determined approximately the manner of taking such samples, and the least number which will
still by the law of averages secure a degree of accuracy commensurate with the other factors of
estimation.
As metals are distributed through ore-bodies of fissure origin with most regularity on lines
parallel to the strike and dip, an equal portion of ore from every point along cross-sections at
right angles to the strike will represent fairly well the average values for a certain distance along
the strike either side of these cross-sections. In massive deposits, sample sections are taken in all
directions. The intervals at which sample sections must be cut is obviously dependent upon the
general character of the deposit. If the values are well distributed, a longer interval may be
employed than in one subject to marked fluctuations. As a general rule, five feet is the distance
most accepted. This, in cases of regular distribution of values, may be stretched to ten feet, or in
reverse may be diminished to two or three feet.
The width of ore which may be included for one sample is dependent not only upon the width
of the deposit, but also upon its character. Where the ore is wider than the necessary stoping
width, the sample should be regulated so as to show the possible locus of values. The metal
contents may be, and often are, particularly in deposits of the impregnation or replacement type,
greater along some streak in the ore-body, and this difference may be such as to make it desirable
to stope only a portion of the total thickness. For deposits narrower than the necessary stoping
width the full breadth of ore should be included in one sample, because usually the whole of the
deposit will require to be broken.
In order that a payable section may not possibly be diluted with material unnecessary to mine,
if the deposit is over four feet and under eight feet, the distance across the vein or lode is usually
divided into two samples. If still wider, each is confined to a span of about four feet, not only for
the reason given above, but because the more numerous the samples, the greater the accuracy.
Thus, in a deposit twenty feet wide it may be taken as a good guide that a test section across the
ore-body should be divided into five parts.
As to the physical details of sample taking, every engineer has his own methods and
safeguards against fraud and error. In a large organization of which the writer had for some years
the direction, and where sampling of mines was constantly in progress on an extensive scale, not
only in contemplation of purchase, but where it was also systematically conducted in operating
mines for working data, he adopted the above general lines and required the following details.
A fresh face of ore is first broken and then a trench cut about five inches wide and two inches
deep. This trench is cut with a hammer and moil, or, where compressed air is available and the
rock hard, a small air-drill of the hammer type is used. The spoil from the trench forms the
sample, and it is broken down upon a large canvas cloth. Afterwards it is crushed so that all
pieces will pass a half-inch screen, mixed and quartered, thus reducing the weight to half.
Whether it is again crushed and quartered depends upon what the conditions are as to assaying. If
convenient to assay office, as on a going mine, the whole of the crushing and quartering work
can be done at that office, where there are usually suitable mechanical appliances. If the samples
must be taken a long distance, the bulk for transport can be reduced by finer breaking and
repeated quartering, until there remain only a few ounces.
Precautions against Fraud.—Much has been written about the precautions to be taken
against fraud in cases of valuations for purchase. The best safeguards are an alert eye and a
strong right arm. However, certain small details help. A large leather bag, arranged to lock after
the order of a mail sack, into which samples can be put underground and which is never
unfastened except by responsible men, not only aids security but relieves the mind. A few
samples of country rock form a good check, and notes as to the probable value of the ore, from
inspection when sampling, are useful. A great help in examination is to have the assays or
analyses done coincidentally with the sampling. A doubt can then always be settled by
resampling at once, and much knowledge can be gained which may relieve so exhaustive a
program as might be necessary were results not known until after leaving the mine.
Assay of Samples.—Two assays, or as the case may be, analyses, are usually made of every
sample and their average taken. In the case of erratic differences a third determination is
necessary.
Assay Plans.—An assay plan is a plan of the workings, with the location, assay value, and
width of the sample entered upon it. In a mine with a narrow vein or ore-body, a longitudinal
section is sufficient base for such entries, but with a greater width than one sample span it is
desirable to make preliminary plans of separate levels, winzes, etc., and to average the value of
the whole payable widths on such plans before entry upon a longitudinal section. Such a
longitudinal section will, through the indicated distribution of values, show the shape of the ore-
body—a step necessary in estimating quantities and of the most fundamental importance in
estimating the probabilities of ore extension beyond the range of the openings. The final assay
plan should show the average value of the several blocks of ore, and it is from these averages
that estimates of quantities must be made up.
Page 8 Calculations of Averages.—The first step in arriving at average values is to reduce
erratic high assays to the general tenor of other adjacent samples. This point has been disputed at
some length, more often by promoters than by engineers, but the custom is very generally and
rightly adopted. Erratically high samples may indicate presence of undue metal in the assay
attributable to unconscious salting, for if the value be confined to a few large particles they may
find their way through all the quartering into the assay. Or the sample may actually indicate rich
spots of ore; but in any event experience teaches that no dependence can be put upon regular
recurrence of such abnormally rich spots. As will be discussed under percentage of error in
sampling, samples usually indicate higher than the true value, even where erratic assays have
been eliminated. There are cases of profitable mines where the values were all in spots, and an
assay plan would show 80% of the assays nil, yet these pockets were so rich as to give value to
the whole. Pocket mines, as stated before, are beyond valuation by sampling, and aside from the
previous yield recourse must be had to actual treatment runs on every block of ore separately.
After reduction of erratic assays, a preliminary study of the runs of value or shapes of the ore-
bodies is necessary before any calculation of averages. A preliminary delineation of the
boundaries of the payable areas on the assay plan will indicate the sections of the mine which are
unpayable, and from which therefore samples can be rightly excluded in arriving at an average of
the payable ore (Fig. 1). In a general way, only the ore which must be mined need be included in
averaging.
The calculation of the average assay value of standing ore from samples is one which seems to
require some statement of elementals. Although it may seem primitive, it can do no harm to
recall that if a dump of two tons of ore assaying twenty ounces per ton be added to a dump of
five tons averaging one ounce per ton, the result has not an average assay of twenty-one ounces
divided by the number of dumps. Likewise one sample over a width of two feet, assaying twenty
ounces per ton, if averaged with another sample over a width of five feet, assaying one ounce, is
no more twenty-one ounces divided by two samples than in the case of the two dumps. If
common sense were not sufficient demonstration of this, it can be shown algebraically. Were
samples equidistant from each other, and were they of equal width, the average value would be
the simple arithmetical mean of the assays. But this is seldom the case. The number of instances,
not only in practice but also in technical literature, where the fundamental distinction between an
arithmetical and a geometrical mean is lost sight of is amazing.
To arrive at the average value of samples, it is necessary, in effect, to reduce them to the actual
quantity of the metal and volume of ore represented by each. The method of calculation therefore
is one which gives every sample an importance depending upon the metal content of the volume
of ore it represents.
The volume of ore appertaining to any given sample can be considered as a prismoid, the
dimensions of which may be stated as follows:—
W = Width in feet of ore sampled.
L = Length in feet of ore represented by the sample.
D = Depth into the block to which values are assumed to penetrate.
We may also let:—
C = The number of cubic feet per ton of ore.
V = Assay value of the sample.
Then WLD/C = tonnage of the prismoid.[*]
V WLD/ =
total metal contents.
C
[Footnote *: Strictly, the prismoidal formula should be used, but it complicates the study unduly, and for practical
purposes the above may be taken as the volume.]
The average value of a number of samples is the total metal contents of their respective
prismoids, divided by the total tonnage of these prismoids. If we let W, W1, V, V1 etc., represent
different samples, we have:—
As a matter of fact, samples actually represent the value of the outer shell of the block of ore
only, and the continuity of the same values through the block is a geological assumption. From
the outer shell, all the values can be taken to penetrate equal distances into the block, and
therefore D, D1, D2 may be considered as equal and the equation becomes:—
The length of the prismoid base L for any given sample will be a distance equal to one-half the
sum of the distances to the two adjacent samples. As a matter of practice, samples are usually
taken at regular intervals, and the lengths L, L1, L2 becoming thus equal can in such case be
eliminated, and the equation becomes:—
W + W1 + W2, etc.
The name "assay foot" or "foot value" has been given to the relation VW, that is, the assay
value multiplied by the width sampled.[*] It is by this method that all samples must be averaged.
The same relation obviously can be evolved by using an inch instead of a foot, and in narrow
veins the assay inch is generally used.
[Footnote *: An error will be found in this method unless the two end samples be halved, but in a long run of
samples this may be disregarded.]
Where the payable cross-section is divided into more than one sample, the different samples in
the section must be averaged by the above formula, before being combined with the adjacent
section. Where the width sampled is narrower than the necessary stoping width, and where the
waste cannot be broken separately, the sample value must be diluted to a stoping width. To dilute
narrow samples to a stoping width, a blank value over the extra width which it is necessary to
include must be averaged with the sample from the ore on the above formula. Cases arise where,
although a certain width of waste must be broken with the ore, it subsequently can be partially
sorted out. Practically nothing but experience on the deposit itself will determine how far this
will restore the value of the ore to the average of the payable seam. In any event, no sorting can
eliminate all such waste; and it is necessary to calculate the value on the breaking width, and
then deduct from the gross tonnage to be broken a percentage from sorting. There is always an
allowance to be made in sorting for a loss of good ore with the discards.
Percentage of Error in Estimates from Sampling.—It must be remembered that the whole
theory of estimation by sampling is founded upon certain assumptions as to evenness of
continuity and transition in value and volume. It is but a basis for an estimate, and an estimate is
not a statement of fact. It cannot therefore be too forcibly repeated that an estimate is inherently
but an approximation, take what care one may in its founding. While it is possible to refine
mathematical calculation of averages to almost any nicety, beyond certain essentials it adds
nothing to accuracy and is often misleading.
It is desirable to consider where errors are most likely to creep in, assuming that all
fundamental data are both accurately taken and considered. Sampling of ore in situ in general has
a tendency to give higher average value than the actual reduction of the ore will show. On three
West Australian gold mines, in records covering a period of over two years, where sampling was
most exhaustive as a daily régime of the mines, the values indicated by sampling were 12%
higher than the mill yield plus the contents of the residues. On the Witwatersrand gold mines, the
actual extractable value is generally considered to be about 78 to 80% of the average shown by
sampling, while the mill extractions are on average about 90 to 92% of the head value coming to
the mill. In other words, there is a constant discrepancy of about 10 to 12% between the
estimated value as indicated by mine samples, and the actual value as shown by yield plus the
residues. At Broken Hill, on three lead mines, the yield is about 12% less than sampling would
indicate. This constancy of error in one direction has not been so generally acknowledged as
would be desirable, and it must be allowed for in calculating final results. The causes of the
exaggeration seem to be:—
First, inability to stope a mine to such fine limitations of width, or exclusion of unpayable
patches, as would appear practicable when sampling, that is by the inclusion when mining of a
certain amount of barren rock. Even in deposits of about normal stoping width, it is impossible to
prevent the breaking of a certain amount of waste, even if the ore occurrence is regularly
confined by walls.
If the mine be of the impregnation type, such as those at Goldfield, or Kalgoorlie, with values
like plums in a pudding, and the stopes themselves directed more by assays than by any physical
differences in the ore, the discrepancy becomes very much increased. In mines where the range
of values is narrower than the normal stoping width, some wall rock must be broken. Although it
is customary to allow for this in calculating the average value from samples, the allowance
seldom seems enough. In mines where the ore is broken on to the top of stopes filled with waste,
there is some loss underground through mixture with the filling.
Second, the metal content of ores, especially when in the form of sulphides, is usually more
friable than the matrix, and in actual breaking of samples an undue proportion of friable material
usually creeps in. This is true more in lead, copper, and zinc, than in gold ores. On several gold
mines, however, tests on accumulated samples for their sulphide percentage showed a distinctly
greater ratio than the tenor of the ore itself in the mill. As the gold is usually associated with the
sulphides, the samples showed higher values than the mill.
In general, some considerable factor of safety must be allowed after arriving at calculated
average of samples,—how much it is difficult to say, but, in any event, not less than 10%.
Assay results from a producing Chrome ore mine obtained from samples taken from various
railway trucks are recorded below
39 44.10 12.65
39 45.35 12.90
19 44.85 13.50
19 44.85 13.20
39 47.15 12.90
42 45.30 12.85
40 44.55 13.00
19 44.75 12.70
18 46.10 13.15
19 44.80 13.15
(b) Using the formula (0.8802 x Cr2O3)/ FeO and the percentage values calculate Cr:Fe ratio
of the consignment.
(c) Using the formula Cr = Cr2O3 x 0..682 and the percentage value, calculate total chromium
content of the consignment to the nearest tone.
(d) Using the formula Fe = FeO x 0.7773 and the percentage value, calculate the total iron
content of the consignment to the nearest tonne.
(f) How are the factors 0.8802; 0.6842; and 0,7773 obtained
Solution
Question
a) The broken rock from a drive 2,5m high by 2,3m wide has an average gold value of 5,0g/t. The
reef in the drive is 29cm true width fully exposed on both sidewalls and dipping at 23 o. Calculate
the reef value.
When production commences, a mining width of 90cm is maintained. Calculate the gold
stoping value.
Example
b) Using the information given on the table below:
Metres Sampled Metres payable Channel width Reef width Reef value
(m) (m) (cm) (cm) (g/t)
75 38 51 25 62.0
90 47 47 20 27.0
80 56 53 18 46.0
70 39 56 28 68.5
55 45 49 27 63.0
30 30 49 25 35.5
45 32 60 30 37.5
Calculate:
(iii) % Payability
Solution
Sampled Metres Channel width Reef width Reef value Mineral
metres payable (CW) (RW) (RV) mxcw mxRw content
(m.cm
(m) (m) (cm) (cm) (g/t) (m.cm) ) (m.RW.Rv)
T Factor
Reflects the amount of time that mining operations are projected to commence on
a given property
Values - 20, 40, 80 (years)
The result of combination of all other factors
(Trans + Mine + Well +Volatility + Environmental + Prime Seam)/3 = T (Time) Factor
20 – Projected mining in 20 yrs – Higher Values
40 – mining in 40 yrs – Lower Values
80 – mining in 80 yrs – Lowest Values
Variables
Average Coal Prices
Forward Weighted Average – 3 Year
Metallurgical vs. Steam
Discount Rate
Rate used to calculate present value of a coal property based on the time expected
before mining takes place
Present value of future income (determined by T-Factor)
Capitalization Rate
Used along with discount rate in determining present value of coal properties
Three year running average
Combines Safe Rate, Risk Rate, Non-liquidity Rate, Management Rate, and
subtracts Inflation Rate
Factor Criteria
To be evaluated biannually based on geo-statistical analysis of data
Market Interest (Transactions)
Market Mineability (Mines)
Use Conflict (Wells)
Environmental
Once all information has been associated with each parcel (per coal seam present), values can be
determined
Coal values are based on an INCOME approach
Simply put—based on future royalties, discounted by calculated Time Factor
Once the decision has been made to proceed with a detailed evaluation of the coal deposits on a
particular tract with the purpose of opening a surface mine, a data base must be generated at a
level of detail sufficient to characterize the coal and overburden. A number of geological or
geophysical techniques can be used to provide data. In areas where a blanket of unconsolidated
material was deposited on the erosional upper surface of the underlying bedrock, seismic
refraction, seismic reflection, or, in some cases, gravity surveys can reveal the configuration of
the bedrock surface. Also, faults with vertical displacements no smaller than 6.1 m (20 ft), or
under ideal conditions 4.6 m (15 ft), can be identified using seismic techniques (Daly, et al.,
1976). In the event that igneous intrusives are present, gravity or magnetic techniques can be
used to assist in definition of the igneous-sedimentary boundary.
All of the foregoing techniques can, under certain conditions, supply useful data to the coal
explorationist but, as general exploration tools, they lack the resolving power for widespread
exploration in the coal industry. The carefully planned drilling program remains the primary
exploration technique in the coal industry and provides the bulk of the raw data from which coal
and overburden characterization maps are made and upon which mining decisions are based.
At the lease tract level, drilling is used primarily to define areas of thick coal and to determine
coal quality. These data are then used to calculate measured reserves. Drill-hole density
necessary to prove reserves varies with the complexity of the geology and the degree of
consistency in coal bed thickness. In areas of structural complexity or where coal bed thickness
is highly variable, drill-hole spacing may be as close as one hole every 1.6 ha (4 acres) (Reilly,
1968). Conversely, in geologically undisturbed areas where coal bed thickness is relatively
constant, drill holes are sometimes spaced 0.4 km (0.25 mile) or more apart. Local variations in
coal-quality parameters (such as sulfur content) constitute another reason to increase drilling
density if those parameters are critical in determining the marketability of the coal. Accuracy of
the reserve estimate should be within 20% and the drilling program should be geared to produce
figures at this level of accuracy (Wier, 1976).
In planning a surface mine, coring of all the exploratory holes probably will not be required. A
sufficient number of holes should be cored to allow the geologist to determine the depositional
environment of the coal and thereby to make decisions for location of additional test holes and
for mine planning. Data from the cored holes will also be useful in determining the type of
blasthole equipment and bits as well as types of mining equipment that will be most appropriate.
Otherwise, exploratory holes can be drilled by the less expensive air-rotary method. When a coal
sample is needed in a particular area, a rotary hole is drilled to establish the elevation of the coal.
A second hole is then put down immediately adjacent to the first, still using the rotary bit but
stopping the hole just above the position of the coal bed as established by the previous hole. The
core barrel and bit is then substituted for the rotary bit and the coal bed is cored.
Systematic sample or core descriptions and recording of coal thicknesses and depths are
necessary to insure reliable integration of the data onto the various interpretive maps which are
important tools in the evaluation process.
All exploratory holes should have geophysical logs run soon after the drilling is completed.
Effective geophysical logging can reduce the number of drill holes required to evaluate a
property by maximizing the data obtained from each hole. Geophysical logs serve as a check on
written logs and provide a precise record of coal depth and thickness. Geophysical logs of cored
holes also provide a means of identifying lithologies in intervals where the core is lost by
comparing the logging tools’ response to different lithologies in other cored intervals. The basic
borehole geophysical suite (calibrated density, gamma, resistivity) can provide the following
data: (1) coal thickness and depth;(2) lithologic data; (3) depositional data—nature of contacts
and vertical stratigraphic sequences; (4) hydrologic data—aquifers, lost circulation zones, water
levels; (5) identification of structural data and stratigraphic sequences; (6) recognition and
correlation of specific coal intervals is augmented by their individual signatures; and (7)
recognition of subtle mineralogic changes, such as alteration, that are difficult to discern from
cuttings (modified from Crowder, 1986).
More sophisticated geophysical surveys can provide many more types of data such as the coal
quality parameters of ash, carbon, volatile matter, heat content, moisture, mineral matter, and
rank, at greater cost. Crowder (1986) estimates the cost of a basic geophysical logging suite at 10
to 20% of a total rotary drilling budget with more sophisticated logging suites increasing the cost
to as much as 50%. A partial list of geophysical tools and their application to coal exploration is
given in Table 2.6.2.
Once the data are assembled, the very basic task of correctly identifying and correlating the coal
beds throughout the area of interest must be performed. Extra care must be taken in areas where
multiple coal beds of varying thickness are present in close stratigraphic proximity to each other.
Incorrect identification of the beds can result in a misleading evaluation of the property, which,
in turn, can cause severe problems in the mining, preparation, or marketing aspects of the
operation. Geologists commonly use physical characteristics of the overburden, physical and
chemical characteristics of the coal bed, distinctive stratigraphic markers or sequences,
signatures on geophysical logs, and any other pertinent data to assist in the correct identification
and correlation of the coal beds. In more complex areas, additional data may have to be obtained
in certain parts of the tract by the drilling of more closely spaced holes before correlations can be
made with confidence.
When the coal bed stratigraphy has been worked out, it is useful to construct a series of maps
using data obtained from field investigations, drilling, and laboratory work that will depict coal
and overburden thickness, overburden to coal ratio, and significant analytical parameters. These
maps may be prepared as a series of registered mylar overlays to allow simultaneous viewing of
different combinations of data or they may be constructed separately. A structure contour map
with the target coal bed as the datum horizon is also an extremely useful method to depict
structural or stratigraphic features that affect the topography of the coal bed. Alternatively, the
available data can be entered into a computer data base and appropriate software programs can
be utilized to portray stratigraphic, mining, or economic conditions at desired scales.
Coal and overburden thickness maps (termed isopachs) are constructed by plotting the
appropriate thickness values on a base map and constructing contour lines (isopachs)
representing regularly increasing or decreasing thickness intervals using the plotted values as
guides for positioning the contour lines. An example of a coal isopach map is given in Fig. 2.6.7.
Similar isopach maps can be constructed showing overburden thickness. Isopleth maps can be
constructed using the same principle as the isopach maps, but substituting various coal quality
parameters for the thickness data (Fig. 2.6.8). This type of data presentation would have
application where relatively small variations in coal quality would significantly impact the
marketability of the coal.
Figure 2.6.7.
Figure 2.6.8.
Using the same coal and overburden thickness data, lines representing overburden to coal ratios
or “mining ratios” (expressed as 5:1, 10:1, etc.) can be drawn. A ratio of 5:1 means that the line
represents the limit at which 0.9 t (1 ton) of coal can be extracted by removing not more than 3.8
m3 (5 cu yd) of overburden. Strictly speaking, this is not a true ratio because it has dimensions of
overburden volume per unit weight of extracted coal. The inclusion of these units gives rise to a
difference between ratios computed in English units and ratios computed using metric units.
Ratios of thickness values alone cannot be used to deduce mine economics. These values must be
converted to cubic meters (cubic yards) of overburden per tonne (ton) of coal to provide data to
the analyst in units that can be more readily equated to mining costs. The conversion from feet
(or meters) to cubic yards (or cubic meters) per ton (or metric ton) is outlined as follows from
Wier (1976):
or
where OB is the thickness of overburden, C is the thickness of the coal, and SG is the specific
gravity of coal. Because of the differences in the units of the English and metric systems, ratios
calculated in the metric system are about 0.8 (0.842778) that of the English system. If specific
gravity is not known, but the rank of the coal is known, the following specific gravity values are
commonly used (Averitt, 1975):
Anthracite 1.47
Bituminous 1.32
Subbituminous 1.30
Lignite 1.29
It should be noted, however, that it is important to use correct specific gravity values whenever
possible because if the coal contains much mineral matter that has a higher specific gravity than
coal, it will skew the results by decreasing the ratio and increasing calculated tonnages per unit
area by a possibly significant amount.
Once the overburden lines have been established, the area can then be divided into mining units
according to the mining plan and reserves can be calculated. The terms “measured,” “indicated,”
and “inferred” are commonly used to define reserve categories with measured reserves having
the highest level of reliability and inferred reserves the lowest. The distance between points of
measurement distinguish the different reliability categories. Wood, et al. (1983) uses 0.8, 2.4,
and 9.7 km (0.5, 1.5, and 6 miles) as the maximum distance between points of measurement for
measured, indicated, and inferred coal, respectively. In mining, however, typical exploration
drill-hole spacing is sufficiently close to classify all reserves as measured.
The first reserve determination is for total coal in place. The basic calculations in metric and
English units, and using specific gravity for a given coal as determined in the laboratory, are as
follows:
where SG is specific gravity, C is thickness of coal in meters, and A is area in square meters.
In English units:
where C, A, and SG are the same terms as in the metric equation, and 1359.7 is a constant
required to establish the correct tonnage factor to use with the English units.
If average specific gravity values are used, the following values are frequently used as tonnage
factors in a simplified form of the equation.
Anthracite 2000
Bituminous 1800
Subbituminous 1770
Lignite 1750
Resource figures calculated from the preceding equations are estimates only and are not precise,
but, with a thorough exploration drilling program, should be accurate to ± 10% (Wier, 1976).
This figure must then be adjusted downward to account for losses incurred during excavating,
handling, processing, and transporting the coal. Anticipating the magnitude of these losses is
usually accomplished by drawing on previous mining experience in the area, and in the case of
processing or preparation loss, by reviewing washability studies. In some cases, cumulative loss
can approach 50% of the total in situ reserve.
Coal Quality
The determination of coal quality is an integral part of the coal exploration process. It is as
important as any of the other factors that are used to determine the mining potential of a given
tract. Unlike many of the other factors, however, certain coal quality parameters can be changed
to meet user specifications by coal cleaning technology and/or by blending with other coals. The
following discussion touches on the more commonly used types of analytical data from the
viewpoint of the information they convey to the explorationist about the suitability of his product
for certain end uses.
Analytical procedures for testing coal have been continuously refined and updated for the past
several decades by ASTM (American Society for Testing & Materials). Many major consumers
and large coal-mining companies maintain well-equipped laboratories to analyze coal. The
consumer does this to check the quality of the coal he purchases, whereas the producer must stay
abreast of the quality of the product, especially as the mining operations advance into new
territory. Analytical work is sometimes contracted out to independent laboratories either to run
the primary analyses or to serve as quality control checks on the mining company’s or
consumer’s results.
The analyses most frequently performed on coal include proximate analysis, calorific value, and
sulfur. The proximate analysis consists of the determination of moisture, volatile matter, fixed
carbon, and ash. Other types of analyses frequently performed on coal include ultimate analyses,
the determination of free swelling index, and determination of trace element content.
Moisture: Moisture occurs naturally in coal beds in a number of different forms and has been
determined by many methods. The most common method is through some procedural variant of
the measurement of weight loss upon heating. These procedures measure the surface moisture
and the inherent moisture, which is that moisture contained in the capillary system of the coal.
Moisture contained in the molecular structure of the mineral matter present in coal (water of
hydration) is not accounted for by this type of determination, nor does it include the moisture
liberated by the thermal decomposition of organic matter in the coal. The water of hydration is
commonly assigned a value of 8% of the ash value and the water of decomposition is not
considered significant in most applications. For a more detailed discussion of analytical
techniques used in this and other aspects of coal characterization, see Rees (1966). Total or “as-
received” moisture, which is the value frequently given in coal analyses, is a combination of
surface and inherent moisture and is used for calculating other parameters to the as-received
basis. Total or as-received moisture values are critical because coal contracts are often based on
as-received calorific values, usually measured in British thermal units per pound of coal, which
are obtained by converting dry calorific values to as-received calorific values using total
moisture content. Because of the tonnages involved in most contracts, and the fact that most
contain penalty clauses for coal that does not meet specifications, even a small error in the
moisture content value used to determine as-received calorific value can result in significant
financial losses. Moisture content also plays an important role in handling and processing coal.
As little as 0.5% surface moisture can cause coal to stick in a chute. Higher moisture contents
also cause a decreased coke yield in coke ovens.
Volatile Matter: Volatile matter measurements do not reflect the actual amount of a given
substance present in a coal sample but rather are measures of thermal decomposition products
that form during the heating of a coal sample under rigidly specified conditions. Examples of
volatile materials driven off in the heating process include water, hydrogen, carbon dioxide,
carbon monoxide, hydrogen sulfide, chlorine, tar, ammonia, and a variety of organic compounds.
Volatile matter is a parameter used in some coal classification systems. It is used indirectly in the
ASTM system for distinguishing between coals of medium volatile bituminous and higher rank.
Volatile matter values provide useful information in matching specific coals to appropriate
combustion equipment and are also of importance in selecting processes and conditions for the
gasification and liquefaction of coal. As a general rule, the best metallurgical grade coking coals
contain between 15 and 31% volatile matter and are ranked low- to medium-volatile bituminous
in the ASTM system.
Fixed Carbon: Fixed carbon is the carbon that remains in the sample after determination of the
volatile matter. The numerical value of fixed carbon is obtained by subtracting the sum of
moisture, ash, and volatile matter from 100.
Fixed carbon values are used on a dry, mineral-matter-free basis as boundaries between coals
ranked as medium-volatile bituminous and higher in the ASTM system. Because the amount of
fixed carbon and ash is an approximation of the amount of coke produced, the fixed carbon value
is used to estimate coke yield. It is also used in calculating the efficiencies of combustion
equipment.
Ash: Ash is the noncombustible residue that is left when coal is burned. This ash residue derives
from two basic sources within the coal bed including: (1) extraneous detrital particles of shale,
clay, etc., and secondary mineral material such as calcite, pyrite, and marcasite; and (2) inorganic
elements chemically bound in the organic compounds making up the coal. The detritus and
secondary minerals make up the most significant part of the ash content. It should be noted that
the terms ash and mineral matter are not synonymous. Ash, as stated previously, is the residue
left after burning a quantity of coal in the presence of air. The amount of mineral matter present
in a coal can be determined by a point count performed on a specially prepared coal sample
using a petrographic microscope. A simpler method for determining mineral matter if the ash and
total sulfur values are known is by using the Parr formula as follows:
where MM is mineral matter, A is percentage of ash in the sample, and S is the percentage of
total sulfur in the sample. The Parr formula is probably the method most widely used in the
United States for determining mineral matter content.
The amount of ash contained in a coal, as well as the ash’s composition, affect the coal’s
performance and therefore its success in the marketplace. Even in very clean coals the ash
content may be 2 to 3% and ash contents of 10% or more are not uncommon in many productive
coal beds. Carbonaceous material in the coal bed that contains excessive ash is frequently termed
bone, bone coal, carbonaceous shale, black shale, rash, or any of a number of other locally used
terms. The greater the ash content of a coal bed the lower is the heating value per unit weight of
the coal, so that, in higher ash coal, more coal is required to produce a given amount of heat and
disposal of the ash residue also becomes a problem. The ash content of a coal usually can be
lessened by “washing” the coal in coal preparation plants. This usually entails grinding the coal
to a specified size, then suspending it in a liquid with a specific gravity intermediate between that
of coal and the mineral matter so that the mineral matter tends to sink in the solution and the coal
tends to float. By repeating this procedure several times, a significant part of the mineral matter
content can be removed from the coal.
Ash varies greatly in composition. It may contain varying amounts of silica and alumina derived
from detrital minerals; iron oxides from siderite,pyrite, and marcasite; calcium oxides and
carbonates from siderite; iron sulfide from pyrite and marcasite; and magnesium, sodium,
potassium, phosphorus, and a wide range of trace elements (Tieman, 1973). Ash fusion
temperatures, a measure of the temperatures at which coal ash begins to deform, softens, and
becomes fluid, are important coal quality parameters that determine how the ash residue from a
given coal will react when it is burned. Ash begins to deform at temperatures that range from
950° to 1700°C (1750° to 3100°F). Ash with fusion temperatures at the lower end of this
spectrum is desirable in certain types of furnaces where ash is removed from the bottom in a
liquid state but is undesirable in static fuel bed furnaces where removal of the residue is a
difficult and costly process. Pyrite and marcasite (FeS2), siderite (FeCO3), calcite (CaCO3), and
other carbonate minerals are frequently responsible for low fusion temperatures in ash, whereas
high silica or alumina contents are associated with higher fusion temperatures.
Calorific Value: In the ASTM system, calorific value is one of the primary rank-defining
parameters for bituminous, subbituminous, and lignitic coals. Calorific value is usually reported
in British thermal units per pound, or calories per gram, and can be easily converted from one
system to the other.
Coal used for steam electric generation is sometimes sold at a fixed rate per million British
thermal units with penalties for excess ash or sulfur (Wier, 1976). Because many contracts
specify calorific value on an “as-received” basis and most analytical results are reported on a
“dry” basis, dry values must be converted to “as-received” values by means of the following
formula:
The conversion formula contains percent moisture as a term, so the importance of accurate
moisture values cannot be overstated.
Sulfur: Sulfur presents numerous problems in coal utilization. In combustion applications it can
cause corrosion in the boiler or the buildup of heavy fouling in the boiler tubes. Large amounts
of SO2 are also generated upon combustion and may contribute to atmospheric pollution unless
removed by limestone-based stack scrubbers. The same potential corrosion and pollution
problems also apply to the liquefaction, gasification, and coking processes with the additional
concern that unacceptably high levels of sulfur might be passed along through the coke to the
iron and steel resulting in an inferior product (Ward, 1984).
Three commonly recognized forms of sulfur in coal are sulfate sulfur, pyritic sulfur, and organic
sulfur. Of these, sulfate is the least important. In fact, sulfate sulfur contents are frequently on the
order of 0. 1%. Large sulfate values are sometimes indicative of a weathered sample. Relative
amounts of pyritic and organic sulfur vary widely; in some coals total sulfur content is almost all
organic whereas in other coals it is virtually all pyritic. It is important to analytically distinguish
between organic and pyritic sulfur in coal because at least some of the pyritic sulfur can be
removed by specific gravity separation methods. Pyritic sulfur occurs in the minerals pyrite and
marcasite and, depending on the particle size of these minerals and the size to which the coal is
crushed, half or more of this sulfur can be eliminated. That portion of the pyritic sulfur that
occurs in finely disseminated form throughout the coal cannot be removed by specific gravity
separation methods. The organic sulfur constituent is part of the hydrocarbon structure of the
coal and cannot be removed by conventional coal cleaning technology. Although promising
laboratory techniques designed to remove organic sulfur are under investigation, no
commercially feasible process currently is available. Until washability tests are performed which
can provide specific data, Wier (1976) advocates taking the sum of the organic sulfur content and
one-half the pyritic sulfur content as a preliminary indicator of the final total sulfur content of the
cleaned coal. Generally, only coals with low sulfur contents are used for steam electric
generation. Average sulfur contents of coals received at U.S. power plants of 50 MW or greater
generating capacity for the months October through December 1986 ranged from 0.16 to 5.6%.
The overall average sulfur content of coal received at these same plants during the same period
was 1.36% (U.S. Dept. of Energy, 1987). Variations in maximum allowable sulfur contents in
different areas are due primarily to differences in local regulations and to the presence of stack
scrubbers at some facilities. The practice of blending different coals to achieve required
specifications allows the use of some higher sulfur coals that would not otherwise be suitable for
steam-electric generation.
Likewise, in coke production, the use of a high sulfur coal results in a decrease in the amount of
coke that can be produced from a given amount of coal. Coal that cannot be cleaned to a sulfur
content of less than 1.5% is not likely to be used, even as a blend, for coke production.
Free Swelling Index: Another commonly performed analytical procedure for coal is the
determination of the free swelling index (FSI). The FSI is considered useful, although not
definitive, in evaluating the coking properties of a coal. It is a measure of the volume increase of
a coal when it is heated under specific conditions and is reported in numbers from 0 to 9, with
the higher values considered superior from a coking standpoint. FSI values generally increase
with rank up to the anthracite rank but values within a given rank may vary widely. Generally
speaking, coals with FSI values of 2 or less probably are not suitable for coke production and
various users may require higher minimum FSI values for their specific equipment than others.
Other tests that are used to predict the coking potential of a given coal include the Audibert-Arnu
dilatometer, Gieseler plastometer, and Gray-King coke type, but the FSI is still the most
commonly reported procedure of its type.
Ultimate Analysis: Ultimate analysis determines the percentages of the major constituent
elements of coal. Determinations of hydrogen, carbon, nitrogen, oxygen, and total sulfur are
reported. Typically, ultimate analyses are not performed on all coal samples but only on a
representative number of samples. Data from ultimate analyses are used principally for research
purposes and in certain classification systems, although there are commercial and industrial
applications of the data. Specifically, ratios of carbon, hydrogen, and oxygen values are used to
determine coal rank and as an aid in determining a coal’s suitability for coke manufacture,
gasification, or liquefaction. Data on oxygen content also are used in calculating boiler
efficiencies.
Nitrogen present in the coal may react to form ammonium compounds when coal is carbonized
in the coking process. These compounds can be extracted and marketed as fertilizer or for use in
the manufacture of nitric acid. Ammonium compounds are also formed in the gasification and
liquefaction processes. Their formation, however, utilizes some of the available hydrogen that
would otherwise be used in the formation of the more valuable hydrocarbon end products. Also,
during coal combustion, nitrogen forms oxides which become atmospheric pollutants when
released. For these reasons, low nitrogen contents are usually preferred in coal (Ward, 1984).
Other elements for which analyses are commonly sought include chlorine and phosphorus.
Chlorine contributes to corrosion and fouling problems and possibly to atmospheric pollution. A
knowledge of the chlorine content is also essential in determining other parameters, including
total sulfur. Phosphorus, which is concentrated primarily in the mineral matter, is undesirable in
coking coals because, like sulfur, it can contaminate the steel end product.
Trace Elements: Most coals contain a wide range of trace elements, some of which tend to
concentrate in the organic faction of the coal, while others have an inorganic affinity and are
concentrated in the mineral matter. In some cases, trace element suites are distinctive enough to
serve as aids in seam correlation or as indicators of the depositional environment. Boron, in
particular, is more strongly associated with coals formed under marine influences. Some trace
elements may act as catalysts or inhibitors during the complex reactions involved in coal
conversion and may be transferred to the end products of those processes. Trace elements may
also be released to the environment through combustion or through the weathering of the coal
ash. Not all of the elements released into the environment are harmful but concentrations of toxic
elements such as lead, arsenic, cadmium, or mercury might preclude the use of certain coals rich
in those elements. Alternatively, other trace elements may be considered as potentially
marketable byproducts of coal utilization.
Years of
Name Of Company Period
Operation
No.1 Colliery Circa 1901 – 1958 57
No.2 Colliery 1927 – 1972 45
No.1 North Colliery 1969 – 1974 5
No.4 Colliery 1974 – 1981 7
No.3 Colliery 1953 – 1999 46
M-Block Mine 1998 – 2004 6
No.3 Main 2005 – to date
In the old mines, prior to 1998, Electro/hydraulic arc-wall coal cutters were used to cut a slot into
the coal face 900mm from the floor. Blast holes are drilled above and below the free face (slot)
before charging the holes with “permitted” (special safety) explosives. The face is blasted to
liberate fragmented coal.
The coal is then loaded by load-haul-dump vehicles which deposit the coal onto a hopper or
feeder breaker which in turn crushes and sizes the coal before discharging it onto a conveyor belt
network to surface. The coal is loaded and transported onto a face conveyor which then transfers
the coal via a system of gate and trunk conveyors to the incline shaft, and then finally up to the
surface crushing and screening plant.
Underground coal mines are classified as fiery mines requiring specially designed electrical and
blasting systems to prevent the possibility of methane gas and coal dust explosions. Fiery mines
are operated under specific mining laws.
The No.3 Colliery mining technology was superceded by the new continuous miner and shuttle
car assisted system. The Continuous Miner has replaced the need for blasting as it uses a three
{3}metre wide rotating pick drum to rip through the coal face.
The machine, which is computer controlled and remotely operated, loads the cut coal onto a
chain conveyor which runs through its belly to discharge into 20 tonne shuttle cars. The shuttle
cars then deposit the coal onto a feeder breaker for sizing before discharging the coal onto the
conveyor system. The on-board computer on the Continuous Miner controls all machine
activities, including gas testing, dust suppression and equipment monitoring systems.
Roof support in the mine is effected by an electric ram roof bolter while section cleaning is
carried out by a load-haul-dump unit. This is the underground mining system for next
millennium particularly because it is flexible and can be upgraded as situations demand.
NO.3 Main Underground Project
The Millennium underground mining system still continues at the new No.3 Main Project.
Opencast Mining
Opencast mining started on an experimental basis in the late 1960s but really established itself in
1972 following the Kamandama Mine Disaster, when a quick replacement source of coal was
urgently needed by the Company.
Mining was done by conventional shovel and truck methods until 1983 when strip mining using
a dragline was introduced. During that time, the ZESA Power Station was commissioned at
Hwange and Hwange Colliery commissioned the Opencast Expansion Project to meet the
increased demand.
Opencast Mining involves the clearing, blasting and removal on land that covers the coal seam
which generally lies between 25 and 70 metres below the surface.
Pit Layout
Mining activities take place on different levels within the mine, known as mining benches.
The Opencast Mine layout demands that these separate benches are all mined simultaneously.
There are four very distinct mining activities which take place:
Supplementary Stripping Overburden Mining
Overburden Stripping by the Dragline
Power and Coking Coal mining
Rehabilitation of the mined out areas
The Supplementary Stripping mining operation is the start of the mining sequence. The land is
first bush cleared by bulldozers so that drilling and blasting operations can take place. All the
undulating terrain is mined by shovel and truck to create a level working bench that the dragline
can operate efficiently from. In all, about a third of the total overburden is mined by this method.
Overburden is loaded by Bucyrus Erie Rope Shovels into Caterpillar 50 tonne haul trucks. This
material is transported and dumped onto the old dragline spoil dumps via cross-pit ramps. This
methodology is also the first stage in the rehabilitation of the mined out areas.
Drilling and Blasting
All material has to be drilled and blasted in order to fragment it sufficiently so that mining can
take place. This is the key step in all the phases of efficient Opencast mining.
Fleets of drills, capable of drilling various sized holes, ranging from 150-311 mm in diameter,
are used on all the different benches.
The main explosive used is ANFO, which is manufactured on site using a tar based by-product,
from the Processing Coke Works, as the fuel additive. Water resistant explosives are used,
mainly in the coal benches, in wet conditions.
Dragline Stripping
The Dragline bench is maintained at a constant height of 26 metres above the top of the coal
seam, which combined with an optimum strip width of 42 metres, allows for the most efficient
Dragline stripping operation.
The Bucyrus Erie 1570W Dragline strips the overburden directly above the coal seam in what is
known as a simple side-casting operation. This overburden is dumped into the adjacent empty
strip where the coal has previously been mined out. In this way the coal is exposed as a new strip
ready for mining.
About 10.5 million bcms of overburden are stripped per year.
Throw Blasting
Normal blasting practice on the Dragline bench is defined as “buffer type” blasting where the
overburden is fragmented but stays in-situ.
The Opencast introduced the mining method known as Throw blasting with Bulldozer Pushover
in 1998. Here the overburden material is deliberately cast by explosive energy into the adjacent
empty strip, before being pushed and leveled by giant Caterpillar D11 bulldozer.
This means that the dragline has to move far less material in order to expose the same amount of
coal, which ultimately results in increased productivity and lower mining costs.
This will also assist as the Opencast Mine gradually moves, as planned, into the deeper areas of
overburden in the Concession area.
Coal Mining
The coal seam is exposed as a single bench ranging in depth from 7 -12 metres. This is split and
mined as two separate benches comprising the HPS (Hwange Power Station Coal) and HCC
(Hwange Coking Coal), The distinction between the two types of coal is mainly based on ash
quality analyses.
Access to the coal faces is maintained by ramps through the spoil dumps. Coal is loaded by
Bucyrus Erie Rope Shovel into Caterpillar 91 tonnes bottom dump coal haulers and transported
to the centralized Primary Tip, where the coal is dumped into specific bins dependant upon the
type of coal being mined.
A total of 4.8-5 million tones of raw coal is mined per year comprising of 2.4 million tones of
HPS coal, the balance being HCC coal.
Coal Transportation
Breakers initially crush all the coal to -150mm sized material before feeding the two grades of
coal onto separate conveyors.
The HCC coal is then screened to remove the –6mm size range product, which is diverted as a
blend feed to the HPS coal, before being stockpiled in elevated concrete bunkers. The HPS coal
is further crushed to a –35mm sized product before also being stockpiled in the bunkers
Coal is recovered from the base of the bunkers by a ploughing action which removes horizontal
slices, thus blending the raw coal product, which is then transported by overland conveyor to
either the Hwange Power Station or the Processing Plant.
Rehabilitation
The final stage of opencast mining involves the rehabilitation of mined out areas. The
supplementary stripping overburden is leveled over the dragline spoil heaps by bulldozers to
create a contoured final profile.
At this stage, the land is considered ready for the final re-vegetation aspects of the mine
reclamation process.
Coal Processing
Coal from Opencast and Underground mines is received at No.2 Processing Plant onto the raw
coal stockpile. Alternatively coal from the Opencast can also be received directly into the plant.
Coal fed into the plant passes through a primary crusher which reduces the raw coal product to
-150mm before screening.
Two sets of screens, the dry and wet screens, produce dry and washed grades for sale. Various
grades namely: Rounds, Large Cobbles, Small Cobbles, Nuts, Peas, Nut/Pea/Duff are produced
for sale from these screens. Any excess large and small cobble fractions are crushed in the
secondary and tertiary crushers in a closed circuit system with the wet screens.
Hand picking of waste material removes large lumps of shale from the rounds and large cobble
fractions.
Any coal not loaded out from the screens in the size range from +0.5 mm to -50 mm goes to the
raw coking coal stockpile for washing in the coking coal plant.
The coking coal plant consists of Norwalt bath washer and dense medium cyclones. The feed to
these washing units is screened at 30 mm mesh size and de-slimed at 0.5 mm with the large +30
mm size material being washed in the Norwalt bath washers and smaller -30 to +0.5 mm sized
product in the dense media cyclones.
A mixture of finely ground magnetite and water is used as the washing medium. In the Norwalt
bath washer the coal floats in the medium, whilst the heavier shale sinks to the bottom of the
vessel and is removed by a waste bucket elevator system. Both waste and clean coal are washed
on drain and rinse screens to recover the medium for recycling. The waste is then discharged
onto the waste dumps and the washed coal is conveyed to the clean coking coal stockpile.
The -30 mm to +0.5 mm size coal together with the medium, is pumped to the high gravity dense
medium cyclones where the floats and sinks fractions are separated. Both fractions are drained
and rinsed to recover the medium.
The sinks fractions is discarded to the waste dump, whilst the floats fraction may be collected as
clean coking coal.
Some raw coking coal is also washed in the Baum Jigs, which use water and induced air
pulsations to produce clean coking coal.
Coke Manufacture
To capitalize on the excellent coking properties of Hwange coal, the Colliery has been making
coke since 1913. The technology used for coke making has generally followed worldwide trends,
starting with bee hive ovens, followed by the Copper recuperative ovens, leading up to the
modern OSC twin flue underjet type ovens, originally constructed in 1971 and subsequently
rebuilt in 1987. The current coke battery capacity is 18 100 tonnes per month.
The modern coke ovens have an associated by-products plant which cleans the coke oven gas of
tar, ammonia, benzol and naphthalene. Cleaned coke oven gas provides the fuel for the coke
battery as well as for steam raising requirements for the plant.
Gas Plant
The Hwange coke oven gas usage profile was, up to 1995 as follows:-
Coke Battery Under firing 50%
Boilers – Steam Raising 25%
Flared Excess Gas 35%
With the commissioning of the ZESA Hwange Power Station in 1983, the possibility of routing
the excess flared gas to ZESA as a marketable product was recognized and pursued.
OSC Processing Engineering were contracted to design, build and commission a gas plant to
pipe excess coke oven gas from the coke ovens directly to the Power Station. This turnkey
project was commissioned in November 1995, saving Zimbabwe millions of dollars in foreign
currency since this gas is a viable substitute for diesel fuel which the Power Station had been
using for boiler start ups and flame stabilization. Current annual gas requirements are +/- 30 000
kNm3 and are projected to increase as other boilers are converted to utilize coke oven gas.
Services
Processing
coal from Opencast and Underground mines is received at No.2 Processing Plant onto the raw
coal stockpile. Alternatively coal from the Opencast can also be received directly into the plant.
Coal fed into the plant passes through a primary crusher which reduces the raw coal product to
The -30 mm to +0.5 mm size coal together with the medium, is pumped to the high gravity dense
medium cyclones where the floats and sinks fractions are separated. Both fractions are drained
and rinsed to recover the medium.
The sinks fractions is discarded to the waste dump, whilst the floats fraction may be collected as
clean coking coal.
Some raw coking coal is also washed in the Baum Jigs, which use water and induced air
pulsations to produce clean coking coal.
Coke Manufacture
To capitalize on the excellent coking properties of Hwange coal, the Colliery has been making
coke since 1913. The technology used for coke making has generally followed worldwide trends,
starting with bee hive ovens, followed by the Copper recuperative ovens, leading up to the
modern OSC twin flue underjet type ovens, originally constructed in 1971 and subsequently
rebuilt in 1987. The current coke battery capacity is 18 100 tonnes per month.
The modern coke ovens have an associated by-products plant which cleans the coke oven gas of
tar, ammonia, benzol and naphthalene. Cleaned coke oven gas provides the fuel for the coke
battery as well as for steam raising requirements for the plant
Uses of Coal
Access to modern energy services not only contributes to economic growth and household
incomes but also to the improved quality of life that comes with better education and health
services. All sources of energy will be needed to meet future energy demand, including coal.
Coal has many important uses worldwide. The most significant uses are in electricity generation,
steel production, cement manufacturing and as a liquid fuel. Around 5.9 billion tonnes of hard
coal were used worldwide last year and 909 million tonnes of brown coal. Since 2000, global
coal consumption has grown faster than any other fuel. The five largest coal users - China, USA,
India, Japan and South Africa - account for 82% of total global coal use.
Different types of coal have different uses. Steam coal - also known as thermal coal - is mainly
used in power generation. Coking coal - also known as metallurgical coal - is mainly used in
steel production.
The biggest market for coal is Asia, which currently accounts for over 65% of global coal
consumption; although China is responsible for a significant proportion of this. Many countries
do not have natural energy resources sufficient to cover their energy needs, and therefore need to
import energy to help meet their requirements. Japan, Chinese Taipei and Korea, for example,
import significant quantities of steam coal for electricity generation and coking coal for steel
production.
Other important users of coal include alumina refineries, paper manufacturers, and the chemical
and pharmaceutical industries. Several chemical products can be produced from the by-products
of coal. Refined coal tar is used in the manufacture of chemicals, such as creosote oil,
naphthalene, phenol, and benzene. Ammonia gas recovered from coke ovens is used to
manufacture ammonia salts, nitric acid and agricultural fertilisers. Thousands of different
products have coal or coal by-products as components: soap, aspirins, solvents, dyes, plastics and
fibres, such as rayon and nylon. Coal is also an essential ingredient in the production of specialist
products:
Activated carbon - used in filters for water and air purification and in kidney dialysis
machines.
Carbon fibre - an extremely strong but light weight reinforcement material used in
construction, mountain bikes and tennis rackets.
Silicon metal - used to produce silicones and silanes, which are in turn used to make
lubricants, water repellents, resins, cosmetics, hair shampoos and toothpastes.
Suppose the feed material, assaying f% metal, separates into a concentrate assaying c% metal,
and a tailing assaying t% metal, and that C is the fraction of the total feed weight that reports to
the
concentrate, then:
i.e. recovery of valuable mineral to the concentrate is equal to metal recovery, assuming that all
the
valuable metal is contained in the same mineral. The gangue content of the concentrate =100−
(100c/m)%, where m is the percentage metal content of the valuable mineral,
Example 1.1
A tin concentrator treats a feed containing 1% tin, and three possible combinations of
concentrate
grade and recovery are:
High grade 63% tin at 62% recovery
Medium grade 42% tin at 72% recovery
Low grade 21% tin at 78% recovery
Determine which of these combinations of grade and recovery produce the highest separation
efficiency.
Solution
Assuming that the tin is totally contained in the mineral cassiterite (SnO2), which, when pure,
contains 78.6% tin, and since mineral recovery (Equation 1.2) is 100×C× concentrate grade/feed
grade, for the high-grade concentrate:
Since the purpose of mineral processing is to increase the economic value of the ore, the
importance of the recovery-grade relationship is in determining the most economic combination
of recovery and grade which will produce the greatest financial return per tonne of ore treated in
the plant. This will depend primarily on the current price of the valuable product, transportation
costs to the smelter, refinery, or other further treatment plant, and the cost of such further
treatment, the latter being very dependent on the grade of concentrate supplied. A high grade
concentrate will incur lower smelting costs, but the lower recovery means lower returns of final
product. A low grade concentrate may achieve greater recovery of the values, but incur greater
smelting and transportation costs due to the included gangue minerals. Also of importance are
impurities in the concentrate which may be penalized by the smelter, although precious metals
may produce a bonus.
The net return from the smelter (NSR) can be calculated for any recovery-grade combination
from:
as possible to this target grade. Although the effect of moving slightly away from the optimum
may
only be of the order of a few pence per tones treated, this can amount to very large financial
losses, particularly on high-capacity plants treating thousands of tonnes per day. Changes in
metal
price, smelter terms, etc. obviously affect the NSR– concentrate grade curve, and the value of the
optimum concentrate grade. For instance, if the metal price increases, then the optimum grade
will
be lower, allowing higher recoveries to be attained (Figure 1.11).
It is evident that the terms agreed between the concentrator and smelter are of paramount
importance in the economics of mining and milling operations. Such smelter contracts are
usually fairly complex. Concentrates are sold under contract to “custom smelters” at prices based
on quotations on metal markets such as the London Metal Exchange (LME). The smelter, having
processed the concentrates, disposes of the finished metal to the consumers. The proportion of
the “free market” price of the metal received by the mine is determined by the terms of the
contract negotiated between mine and smelter, and these terms can vary considerably. Table 1.4
summarises a typical low-grade smelter contract for the purchase of tin concentrates. As is usual
in many contracts, one assay unit is deducted from the concentrate assay in assessing the value of
the concentrates, and arsenic present in the concentrate is penalised. The concentrate assay is of
prime importance in determining the valuation, and the value of the assay is usually agreed on
the result of independent sampling and assaying performed by the mine and smelter. The
assays are compared, and if the difference is no more than an agreed value, the mean of the two
results may be taken as the agreed assay. In the case of a greater difference, an “umpire” sample
is
assayed at an independent laboratory. This umpire assay may be used as the agreed assay, or the
mean of this assay and that of the party which is nearer to the umpire assay may be chosen.
The use of smelter contracts, and the importance of the by-products and changing metal prices,
can be seen by briefly examining the economics of processing two base metals – tin and copper –
whose fortunes have fluctuated over the years for markedly different reasons.
Unlike copper, zinc and lead, production of tin has not risen dramatically over the years and has
rarely exceeded 250,000 t/yr. The real price of tin spent most of the first
half of the twentieth century in a relatively narrow band between US$10 and US$15/t (1998$),
with
some excursions (Figure 1.12; USGS, 2005). From 1956 its price was regulated by a series of
international agreements between producers and consumers under the auspices of the
International
Tin Council (ITC), which mirrored the highly successful policy of De Beers in controlling the
gem diamond trade. Price stability was sought through selling from the ITC’s huge stockpiles
when the price rose and buying into the stockpile when the price fell.
From the mid-1970s, however, the price of tin was driven artificially higher at a time of
world recession, expanding production and falling consumption, the latter due mainly to the
increasing use of aluminium, rather than tin-plated steel, cans. ontaining over 70% tin (i.e. over
90% cassiterite) from alluvial ores, such as those worked in South- East Asia. Such concentrates
present little problem in smelting and hence treatment charges are relatively low. Production of
high-grade concentrates also incurs relatively low freight charges, which is important if the
smelter is remote.
For these reasons it has been traditional in the past for hard-rock, lode tin concentrators to
produce
high-grade concentrates, but high tin prices and the development of profitable low-grade
smelting
processes changed the policy of many mines towards the production of lower-grade concentrates.
The advantage of this is that the recovery of tin into the concentrate is increased, thus increasing
smelter payments. However, the treatment of lowgrade concentrates produces much greater
problems for the smelter, and hence the treatment charges at “low-grade smelters” are normally
much higher than those at the high-grade smelters. Freight charges are also correspondingly
higher.
Suppose that a tin concentrator treats a feed containing 1% tin, and that three possible
combinations
of concentrate grade and recovery are (as in Example 1.1):
High grade 63% tin at 62% recovery
Medium grade 42% tin at 72% recovery
Low grade 21% tin at 78% recovery
Assuming that the concentrates are free of arsenic, and that the cost of transportation to the
smelter is £20/t of dry concentrate, then the return on each tonne of ore treated can be simply
calculated, using the low-grade smelter terms set out in the contract in Table 1.4.
For instance, at a grade of 42% tin and 72% recovery, the weight of concentrate produced from
1 t of ore is 17.14 kg (from Example 1.1). The smelter payment for tin in this concentrate is
P ×17.14×(42−1)/100.000 where P = tin price in £/t
Assuming a tin price of £8500/t, then the net smelter payment is £59.73.
The smelter treatment charge is £385×concentrate weight =£6.59, and the transportation cost is
£0.34. The net smelter return for the processing of 1 t of concentrator feed is thus
£59.73−(6.59+0.34)= £52.80. Therefore, although the ore contains, at free market price, £85
worth of tin per tonne, the mine realises only 62% of the ore value in payments received.
Production of a lower-grade concentrate incurs higher smelter and freight charges, but increases
the payment for contained metal, due to the higher recovery. Similar calculations show that at a
grade of 21% tin and 78% recovery, the payment for tin is increased to £63.14, but the total
deductions also increase to £15.04, producing a net smelter return of £48.10/t of ore treated.
Clearly, lowering the concentrate grade to 21% tin, in order to increase recovery, has increased
the separating efficiency (Example 1.1), but has adversely affected the economic return from the
smelter, the increased charges being more important than the increase in revenue from the metal.
Increasing the grade to 63% tin can obviously reduce charges even further, particularly if the
concentrate can be sent to a higher-grade smelter with lower treatment charges.
Assuming a treatment charge of £50/t of concentrate, and identical payments and freight charges,
the payment for metal in such a concentrate would be only £51.86, but the charges are reduced to
£0.69/t. The NSR per tonne of ore treated is thus £51.17. In this case, therefore, the return is
highest
from the low-grade smelter treating a mediumgrade concentrate. This situation may change,
however, if the metal price changes markedly. If the tin price falls and the terms of the smelter
contracts remain the same, then the mine profits will suffer due to the reduction in payments.
Rarely
does a smelter share the risks of changing metal price, as it performs a service role, changes in
smelter terms being made more on the basis of changing smelter costs rather than metal price.
The
mine does, however, reap the benefits of increasing metal price.
At a tin price of £6500/t, the NSR per tone of ore from the low-grade smelter treating the
42% tin concentrate is £38.75, while the return from the high-grade smelter, treating a 63% Sn
concentrate, is £38.96. Although this is a difference of only 21/t of ore, to a small 500 t d−1
tin concentrator this change in policy from relatively low- to high-grade concentrate, together
with the subsequent change in concentrate market, would expect to increase the revenue by
£0.21× 500×365=£38 325 per annum. The concentrator management must always be prepared to
change its policies, both metallurgical and marketing, in this way if maximum returns are to be
made, although production of a reliable grade–recovery relationship is often difficult due to the
complexity of operation of lode tin concentrators and variations in feed characteristics.
It is, of course, necessary to deduct the costs of mining and processing from the NSR in order
to deduce the profit achieved by the mine. Some of these costs will be indirect, such as salaries,
administration, research and development, medical and safety, as well as direct costs, such as
operating and maintenance, supplies and energy. The breakdown of milling costs varies
enormously from mine to mine, depending very much on the size and complexity of the
operations. Mines with very large ore reserves tend to have very high throughputs, and so
although the capital outlay is higher, the operating and labour costs tend to be much lower than
those on smaller plants, such as those treating lode tin ores. Mining costs also vary enormously,
and are very much higher for underground than for open-pit operations.
If mining and milling costs of £40 and £8 respectively per tonne of ore are typical of
underground
tin operations, then it can be seen that at a tin price of £8500 the mine, producing a concentrate
of 42% tin, which is sold to a low-grade smelter, makes a profit of £52.80 − 48 = £4.80/t of ore,
which at a throughput of 500 t d−1 corresponds to a gross annual profit of £867 000. It is also
clear
that if the tin price falls to £6500/t, the mine loses £48-38.96=£9/04 for every tonne of ore
treated.
The breakdown of revenue and costs at a tin price of £8500/t is summarised in Figure 1.13.
The mine profit per tonne of ore treated can be summarised as:
Contained value of ore−(costs+losses) =£(85−(40+8+23.80+8.40))=4.80/t
Since 1 t of ore produces 0.0072 t of tin in concentrates, and the free market value of this
contained metal is £61.20, the total effective cost of producing 1 t of tin in concentrates is
£(61.20− 4.80)/0.0072=£7833.
The importance of metal losses in tailings is shown clearly in Figure 1.13. With ore of relatively
high contained value, the recovery is often more important than the cost of promoting that
recovery.
Hence relatively high-cost unit processes can be justified if significant improvements in recovery
are
possible, and efforts to improve recoveries should always be made. For instance, suppose the
concentrator, maintaining a concentrate grade of 42% tin, improves the recovery by 1% to 73%
with no change in actual operating costs. The NSR will be £53.53/t and after deducting mining
and milling
costs, the profit realised by the mine is £5.53/t of ore. Since 1 t of ore now produces 0.0073 t of
tin, having a contained value of £62.05, the cost of producing 1 t of tin in concentrates is thereby
reduced to £(62.05−5.53)/0.0073=£7742.
Assuming a freight cost of £20/t of concentrate, the total deductions are £(0.61 + 0.56 + 0.41) =
£1.58, and the NSR per tonne of ore treated is thus £(4.80−1.58)=£3.22.
As mining, milling and other costs must be deducted from this figure, it is apparent that only
those mines with very low operating costs can have any hope of profiting from such low-grade
operations.
Assuming a typical large open-pit mining cost of £1.25/t of ore, a milling cost of £2/t and
indirect costs of £2/t, the mine will lose £2.03 for every tonne of ore treated. The breakdown of
costs
and revenue is summarised in Figure 1.15. As each tonne of ore produces 0.0051 t of copper
in concentrates, with a free market value of £5.00, the total effective production costs are £(5.00
+ 2.03)/0.0051=£1378/t of copper in concentrates. However, if the ore contains appreciable
byproducts, the effective production costs are reduced. Assuming the concentrate contains
25gt−1 of gold and 70 g t−1 of silver, then the payment for gold, at a LME price of £230/troy oz
(1 troy oz=31.1035 g),
The net smelter return is thus increased to £6.99/t of ore, and the mine makes a profit
of £1.74/t of ore treated. The effective cost of producing 1 t of copper is thus reduced to £(5.00−
1.74)/0.0051=£639.22.
By-products are thus extremely important in the economics of copper production, particularly
for very low-grade operations. In this example, 42% of the mine’s revenue is from gold, copper
contributing 56%. This compares with the contributions to revenue realised at Bougainville
Copper
Ltd (Sassos, 1983).
Economic efficiency
Example
Calculate the economic efficiency of a tin concentrator, treating an ore grading 1% tin producing
a concentrate grading 42% tin at 72% recovery, under the conditions of the smelter contract
shown
in Table 1.4. The cost of transportation to the smelter is £20/t of concentrate. Assume a tin price
of £8500/t.
Solution
It was shown in the section on tin processing that this concentrate would realize a net smelter
return
of £52.80. Assuming perfect milling, 100% recovery of the tin would be achieved, into a
concentrate grading 78.6% tin (i.e. pure cassiterite).
The weight of concentrate produced from 1 tonne of feed = 12.72 kg.
concentrate. Metals misplaced into the wrong concentrate are rarely paid for by the specialist
smelter, and are sometimes penalised. There is, therefore, an optimum “degree of contamination”
that can be tolerated. The most important reagent controlling this factor is often the depressant,
which inhibits flotation of the zinc minerals. Increase in the addition of this reagent not only
produces a cleaner copper concentrate but also reduces copper recovery into this concentrate, as
it also has a lesser depressing effect on the copper minerals. The depressed copper minerals are
likely to report to the zinc concentrate, so the addition rate of depressant needs to be carefully
monitored and controlled to produce an optimum compromise. This should occur when the
economic efficiency is maximised.
Example 1.3
The following assay data was collected from a copper–zinc concentrator:
Mass flow measurement showed that 2.6% of the feed weight reported to the copper concentrate,
and 3.5% to the zinc concentrate.
Calculate the overall economic efficiency under the following simplified smelter terms:
Copper:
Copper price : £1000/t
Smelter payment : 90% of Cu content
Smelter treatment charge : £30/t of concentrate
Transport cost : £20/t of concentrate
Zinc:
Zinc price : £400/t
Smelter payment : 85% of zinc content
Smelter treatment charge : £100/t of concentrate
Transport cost : £20/t of concentrate
Solution
1. Assuming Perfect milling
(a) Copper
Assuming that all the copper is contained in the mineral chalcopyrite, then maximum copper
grade is 34.6% Cu (pure chalcopyrite).
If C is weight of copper concentrate per 1000 kg of feed, then for 100% recovery of copper into
this concentrate:
Borehole plan
Each borehole is engineered prior to drilling. Topography, lithology, stratigraphy, depth and
deviation constraints effect the choice of equipment, borehole sizes, casing points and inhole
tools necessary to confidently complete the project. The need for deflections to gain additional
reef intersections and the required separation of these from the motherhole can have a major
effect upon overall costs and completion times.
Drilling procedures
The following notes are included to explain typical parameters and methods used for successful
project completion
Establishment
The majority of the Zimbabwean gold fields are situated in undulating countryside with cool dry
winters and warm wet summers. Sites are generally located so that excavation or backfilling is
rarely necessary to accommodate the rig. Water for drilling and the crew’s consumption is drawn
from wells drilled on site. These have to provide sufficient water for drilling as circulation losses
are common and must be protected from contamination by drilling fluids.
Excavations for rig foundations, fluid pits and drainage; access roads, fencing and electrical
installations are undertaken by sub-contractors to the drilling company’s specifications
Drilling Methods
Borehole diameters and casing programmes vary with stratigraphy, anticipated inhole conditions
and locality. Typically pilot boreholes will be drilled using percussion rigs to penetrate the
weathered zone and barren overburden. percussion drilling is cheaper and quicker than diamond
drilling. The disadvantages of percussion are that the costs to the contractor rapidly escalate
when water bearing fissures are intersected. Yields of over 40000l/hr are not uncommon.
Percussion boreholes tend to deviate more than diamond drilled borehole; reducing penetration
rates to control deviation soon becomes unattractive as daily revenue decreases. In such cases the
percussion method is replaced by diamond drilling.
A B
d˚ C˚
D˚
D C
In the figure ABCD represents an inclined plane and EFCD represents a horizontal plane. A and
B are on the same elevation therefore AB is the strike of the plane. Suppose an indefinite number
of angles were measured from the direction BD approaching the direction BC. It is noted that BF
is constant for all of them and as the distance FD decreases, so the angle d would increase until it
reached a maximum, that would be when FD = FC i.e. when FC is at right angles to FE or BC at
right angles to the strike of the plane. This angle is known as the dip of the plane, also true dip;
major dip is represented by D˚ in contradistinction to the minor dip(d) of which there is an
infinite number measured between direction of major dip and strike.
To prove the launder formula which states than tan minor dip = tan major dip x cosine angle
between the minor and major dips.
Tan d = tanDcosC
Let C˚ be the angle between dips on the horizontal plane (i.e. the measured angle or difference in
bearings)
Therefore DFC = C˚
C + H =90˚
.’. C = 90˚ - H
Cos C = Sin H
I. When the bore is vertical, it presents little problem, the true width Tw is equal to the
borehole length cosine true dip of reef (see diagram I)
Tw = BHcosD˚
II. When the borehole is inclined in a known direction through the reef dipping at D˚ (see
diagram II)
C˚ the horizontal angle between this minor dip direction and the major dip direction
III. When the deflection is in a direction against the dip of the reef the formula becomes
Or alternatively
True Width
Tw = BHcos(d+ /-x)Cos D
cosd˚
Tw = true width
Example
i. State the formula for obtaining minor dip d˚ given the major dip D˚ and the horizontal
angle between them, C˚.
ii. The cosine formula to find the true width Tw, when a deflection has taken place by x˚.
Three vertical boreholes are put down to intersect a reef known to be dipping at 35˚ on a bearing
of 140˚(zero S). the intersected boreholes lengths are
Number 1 67cm
Number 2 75cm
Number 3 59cm
Averaging 6,70g/t; 7,8g/t; and 8.2g/t respectively. On surveying the holes it was found that
deflection of the holes had taken place in each case. Number 1 borehole dipped at 82˚ on a
bearing 165˚, Number 2 a deflection of 8˚ on a bearing 335˚ and Number 3 dipped at 80˚ on a
bearing of 310˚
Calculate the true width of the intersections and combine them to find the average width and
value.
Solution
ii. Tw = BHcos(d+ /-x)Cos D
cosd˚
Tw = true width
Tan d1 = tan35cos25
d1 = 32.40˚
Tan d2 = tan35cos15
d2= 34.07˚
Tan d3 = tan35cos10
d3 = 34.59˚
= 49.50cm
= 66.59cm
= 53.40cm
Example
Two vertical boreholes and one horizontal one are drilled from an inderground chamber to
intersect a footwall reef assumed to be dipping at 45˚ on a bearing 300˚(zero south). The reef
intersection lengths and values are listed below. Combine the individual true widths and obtain
an average value.
i. Vertical, recovered length 120cm. hole dipped at 82˚ on a bearing 128˚, value 10.80g/t
ii. Horizontal hole, recovered length 103cm, horizontal bearing 110˚, value 7.80g/t
iii. Vertical, recovered length 87cm. deflection 10˚ on a bearing 280˚ value 11.00g/t
Solution
Tan d1 = tan45cos8
d1 = 44.70˚
Tan d2 = tan45cos10
d2= 44.60˚
Tan d3 = tan45cos20
d3 = 43.20˚
= 95.71cm
= 71.82cm
= 50.55cm
Definitions
A discovered mineralization zone will undergo three phases of identification before it is ready
for mining.
A Deposit is a mineralized zone that is examined to the extent that the mineral constituents are
identified. The examination may reveal some geological continuity and approximate grade, but
there is insufficient information to class it as a Resource.
A Resource is a mineralized zone that is sampled and studied to give a credible estimate of
tonnage and grade. A resource is divided into three categories: Measured, Indicated, and
Inferred.
Measured Resource is the highest order; the measurements are made in three dimensions at
intervals close enough to be used as a basis for detailed mine planning, as would be the case for
stope development in an operating mine. In the instance of a new project being contemplated, it
is typical that there will be little or no measured resources.
Indicated Resource is one that the estimate of tonnage and grade is trustworthy to the extent
that it may serve as a basis for major expenditures.
A Reserve is the portion of a mineral resource that may be extracted at a profit. While a resource
is based upon geological interpretation, a reserve has been analyzed further to take actual mining
into account. A more precise definition is, “That part
of a mineral resource that has been analytically demonstrated to justify mining, taking into
account, at the time of determination, mining, metallurgical, marketing, legal, environmental,
social, economic and other applicable conditions.”
(Extracted from the Johannesburg Stock Exchange listing requirements: Mineral Companies,
Chapter 12.)
A reserve may be divided into two categories of certainty: Proven and Probable.
Proven Reserve is derived only from a measured resource. This category is generally limited to
a mining zone being mined or one that is already prepared for mining, to include preproduction
stope development.
Probable Reserve is that part of an Indicated Resource subjected to the scrutiny required of a
Detailed Feasibility Study and thereby may be found to justify the expenditure required for
mining. In a formal economic analysis, only probable and proven reserves are employed.
Feasibility Studies
A feasibility study is an evaluation of a proposed project to determine whether and how it can be
mined economically. Detailed Feasibility Studies extend the evaluation to determine the
maximum profit or most secure profit to be obtained and provide a blue print for implementation.
Three types of feasibility studies are described in the following paragraphs; however, the
remainder of this chapter is mainly devoted to the preparation, execution, and appraisal of the
Detailed Feasibility Study.
Order-of-Magnitude
Order-of-Magnitude Feasibility Studies constitute an initial financial appraisal and are often
carried out by a single individual. To be effective, this study should include an elementary mine
plan. Order-of-Magnitude Studies may evaluate whether to initiate or proceed further with an
exploration project that has an indicated mineral resource.
Preliminary Feasibility
Preliminary Feasibility or “Pre-feasibility” Studies are the second order and are useful in the
following cases.
Detailed Feasibility
Detailed Feasibility Studies are normally the highest order and most important because they are
the litmus test for proceeding with a project. Typically, Detailed Studies are the basis for capital
appropriation and provide the budget figures for the project.
Political
Social
Legal
Geographical
Topographical
Geographical & topographical to include, topography, ground conditions, water aspects,
weather & seasonal variations e.g. 1 in 100-year floods, 1 in 1000-year floods
Slope stability
Cost of mining & stripping
Location of waste dumps
Tailings disposal
Impact of footprint
Dewatering system
Tailings stability
Surface mining in rainy season, winter for cold areas, etc
Once the local setting of the ore body has been ascertained, its general nature should be studied
to determine: 1) placer deposit, open or confined area; 2) rippable waste and/ or ore; 3) hard rock
waste and/or ore; and 4) geological vs. mineable ore body.
Geological Ore Body: The geological ore body generally includes all the body of material that
contains the valuable mineral to be mined. The geological ore body may contain high and low
grade ore zones that are not physically or economically mineable, because of depth, isolation, or
amount of included or covering waste.
Mineable Ore Body: The mineable ore body is that portion of the geological ore body that can
be extracted at a profit. The limitations to the mineable ore body may be stripping ratio, grade of
ore, alteration of ore, depth, excessive water, or environmental considerations.
At the beginning of an operation, the mineable ore body may not be completely delineated and,
as operations proceed, more of the geological ore body becomes mineable because of the
learning curve, improved methods and equipment, and increases in the prices of the mineral
product being mined.
Overall changes in technology and economics may also cause the removal of ore from the
mineable category.
Ore Reserves and Waste to Ore Ratios: In order to make a meaningful feasibility study of a
site-specific mining operation, it is necessary to have as much data as possible concerning ore
reserves and the waste to ore ratio. While ore reserves are often based on surface trenching and
pitting and at times indirect geophysical surveys, the most common exploration methods usually
involve core drilling or air hole drilling.
A surface mining operation may produce any combination of the following products: ore,
stripped waste, included waste that occurs between distinct bodies of ore, low grade material to
be stockpiled for future treatment or treatment by a separate process.
It is, of course, necessary to quantify the amounts of each material to be mined and handled.
Selection of Mining Methods: While this subject is discussed in greater depth elsewhere in this
volume, it is of course important to emphasize that the mining methods must be defined before a
feasibility study can be undertaken. In some cases, for example in many placer operations, it is
difficult to separate mining from concentration. A bucket line dredge, cutterhead dredge, bucket
wheel dredge, or simple dragline operation usually dredges the material directly to the processing
plant, which is frequently on board the dredge or floating alongside in the dredge pond.
Stripping: Stripping is discussed in more detail elsewhere in this volume. Most ore bodies
require the removal of a waste covering of various depth; frequently the stripping operation
involves different methods and equipment. Many coal and phosphate deposits are stripped by a
large dragline or shovel which casts the overburden in windrows to the side of the exposed ore.
Many uranium deposits in the West, particularly in Wyoming, can be stripped by ripper and
scraper. The general objective of stripping is to expose the ore with minimum transport of
stripping material, if transportation is required. Removal can be accomplished by conveyor
systems, diesel, diesel-electric or trolley trucks, or even scrapers at times. Pit slurrying and
pipeline systems can be used where conditions are favourable. It is generally undesirable to crush
and wet overburden material because of the slime problem. In the early days of California placer
mining, hydraulic methods were employed for the removal of overburden but the resulting slime
problem in river waters ultimately closed down these mines.
Ore Mining: The excavation of ore and its transportation to processing plant facilities may
involve quite different methods and equipment than those employed in stripping. In the
feasibility study, the ore mining portion may be considered separately if the amount of stripping
is considerable and the nature of stripping waste is quite different than the ore.
Production Scheduling: The extent to which mining is planned and scheduled will depend upon
the end use of the feasibility study. If the study is destined to aid in the decision to accept or
reject a property, a conceptual plan can be developed to arrive at quantities of ore and waste for
costing purposes. On the other hand, if the study will be used to obtain funding, detailed plans
should be prepared. For feasibility studies, this may involve computer-assisted calculation of ore
reserves and computer-prepared plans and sections of the pit at various stages in the life of the
surface mine. Computer modelling might be used to develop production schedules on a yearly
basis for the first five years of the mine and on a five-year basis thereafter.
There appears to be a misconception by some in the industry about what a feasibility study is and
the steps required to generate one. Yes, when someone says feasibility we all know what people
are talking about, but as companies try to expedite the process of bringing projects on-line these
steps are being skipped. Unfortunately, skipping these steps can end up delaying the project and
costing
more money. In some cases it also means projects that should have been eliminated from
consideration at an early phase are evaluated in too much detail costing companies time and
money. This article is meant to provide a simple reminder of what a feasibility study is, the
recommended steps to get to the
feasibility stage, and the pitfalls of not following all the steps.
What is a Feasibility Study?
Let us start at the very beginning with the definition of a feasibility study. A feasibility study is
an engineering study based on test work and engineering analysis, which presents enough
information to determine whether or not the project should be advanced to the final engineering
and construction stage.
This is a “go/no-go” decision point … thereby implying that sometimes the answer is NO.
Unfortunately, once a project is advanced to the feasibility study stage, companies often have
committed considerable capital and professional reputation and therefore assume the answer will
be that the project is feasible.
Bankable Feasibility Study
The possibility that the answer could be that the project is not feasible is often forgotten. Often
the term “bankable” proceeds the term feasibility study. Adding this term simply means that the
level of effort that has been incorporated into the study is sufficient for outside financing,
provided the
project is feasible. Typically “bankable” means an overall accuracy level of +/- 15 percent on the
feasibility study. A “bankable” feasibility study can be compared to the level of effort a company
might expend if the project is to be internally financed. For internally-financed projects,
companies have their own requirements which may or may not meet an accuracy level of +/- 15
percent, and in
some cases may exceed this standard. To some in the industry, the act of commissioning a
”bankable” feasibility study with a consultant has come to mean that the project is feasible. As a
result, they assume if they ask for a “bankable” feasibility study they will get a study, which
shows the project is feasible. Thus, somewhere the possibility that the answer could be “it is not
feasible” or currently uneconomic gets lost and is not presented to the investor, conveniently
forgetting that “bankable” describes only the level of accuracy of the analysis … not necessarily
the outcome.
There is the potential for a feasibility study to show that the project would make money, thus
meeting the definition of feasible so that a reserve could be declared; however, the return on
investment could be low enough that the company would not want to advance the project.
Essentially, in this case the project is feasible but is neither economically attractive nor
financable. Banks are often more interested in cash flow during the loan repayment period not
overall project economics. A project may appear economically feasible to a company but not be
structured or scheduled optimally for bank financing In order to declare a reserve on a new
project, the U.S. Securities and Exchange Commission (SEC) is requiring that a feasibility study
be completed for the project and that permitting be in process. Having both of these requirements
in place implies that the company is going forward with the project. This has increased the
importance of the feasibility study, thus increasing the pressure to skip steps in getting to the
feasibility level. The likelihood of a failed bankable feasibility studyincreases if preliminary
steps to a feasibility study are not taken. Recommended Steps to Reach the Feasibility Study
Stage
A conceptual study, also referred to as a scoping study, is the first study that should be
completed on a project. This is the preliminary evaluation of a project and is based on
assumptions and factors. There should be a sufficient level of drilling and sampling to define a
resource, simple flow sheet, and mining method. Production schedules, and cost estimates are
based on limited data and test work and as a result rely more on experience and industry
standards. Therefore, the accuracy of these initial studies is typically +/35 to 40 percent.
Conceptual studies typically identify technical issues that will require additional examination or
test work. Generally, the end result of the study is a description of the general features and
parameters of the project and an order of magnitude estimate of capital and operating costs. A
study of this level is valid to determine whether a project is worth pursuing further but the
economic parameters are not sufficient for reserve definition.
Preliminary feasibility (prefeasibility) studies are the intermediate step in the project evaluation.
At this stage there is sufficient drilling and process test work for basic engineering. Typically,
the accuracy of these projects is in the +/- 25 percent range. The goal of these studies is to
determine the mining and milling extraction methods and rates, the product recoveries,
environmental and permitting issues, and preliminary capital and operating cost estimates. As
part of this process areas of concern that need further research during the feasibility stage should
be identified. These areas often include geotechnical studies for mine, waste dumps, and tailings
facilities design, metallurgical testing for refining estimates of product recoveries, and waste
characterization studies including acid base accounting. The identification of critical issues is
key, identifying them at this stage can avoid costly delays during the feasibility stage.
Depending upon the level of detail in these studies, and the securities exchange that is involved,
reserves can in some cases be declared at this point. In essence, the feasibility is simply a
refinement of the prefeasibility study, which evolved from the conceptual study. Key
components in the feasibility study are the mine design, production schedule, a detailed process
flow sheet, product recoveries, a detailed plant design, consideration of the environmental issues,
detailed capital and operating costs estimates, and an economic model of the project. General
industry standards are that the level of effort will result in estimates of +/15 percent. The final
study provides the basis for the decision on whether further study is required or whether the
project is worth pursuing or whether to advance the project to design and construction. At this
point there should be sufficient information to declare reserves, provided the project has positive
economics.
The increasingly stringent steps create a Darwinian process in project development. Few projects
survive even the conceptual study. Prefeasibility studies generally only produce positive results
in say half of the cases. At the feasibility level, roughly 20% will fail, and of these most fail as a
result of either overly optimistic assumptions or skipped steps. For this iterative process to be
successful, conceptual and prefeasibility studies must use reasonable and rational assumptions.
Pitfalls of Avoiding Steps
Basically the main pitfalls resulting from not following these steps are project delays and costs,
including lost opportunity costs. Experience has shown that skipping the prefeasibility study
does not save time and money because issues that should have been identified early in the
process are not, creating delays while these issues are analyzed and addressed, which results in
increased costs. Delays are typically caused by the need for additional exploration drilling for
everything from ore body definition, to geotechnical studies, to metallurgical sampling. Many
times it is the need for additional sampling, including bulk samples, for metallurgical testing that
delays the process. This need appears to evolve from those rose colored glasses that lead
companies to the more optimistic interpretation of the results, ignoring subtle things that point to
it not being so rosey. As a result of delays, the feasibility study costs increase mainly as a result
of doing work over again but also just due to the fact the time for completing the project is
longer. Without a prefeasibility study, the more costly and time consuming final feasibility study
may focus on a less optimum mine design or process plan. There are some cases where the
project is not feasible because additional exploration drilling is needed to better define the ore
body.
Conducting a scoping or prefeasibility quickly identifies such problems and further work on the
project can be suspended until the additional exploration drilling is completed thus saving time,
effort, and expense. An additional issue is that once a company states they are doing a feasibility
study there is pressure to pursue the feasibility to the end, even if at an early stage there is
evidence it is not worth pursuing. As a result companies spend time and money pursuing
multiple options just to find a way to make the project work. In some cases this effort includes
using optimistic metal prices, which may show the project to be feasible but ultimately does not
work due to the restrictive approach the exchanges are using on prices or lower prices required in
a bank review. For example the U.S. SEC tends to require the three-year rolling average for
reserve statements more than forecast or current prices. This additional effort results in a more
costly study not only because the feasibility study should be stopped before completion but also
the effort to find a way to make it work.
Perhaps the greatest pitfall is the lost opportunity costs that results from companies pursuing a
project for too long. When a company goes straight to the feasibility stage, the chances to
eliminate projects in the early stages are lost. As a result companies focus time and effort
evaluating projects that are not worth currently pursuing which means that there are reduced
resources available to pursue more worthwhile projects, thus lost opportunities.
Conclusions and Recommendations
A feasibility study is a detailed study to determine the economic viability of a project. Thus
sometimes the answer is NO, the project is not feasible. Adding “bankable” to the title does not
guarantee it is feasible, but merely dictates a level of accuracy.
Take the time to do a conceptual study and a prefeasibility study so that a project can be stopped
in the early stages or key issues can be identified so additional work including sampling can be
done. In some cases, companies have skipped the preliminary studies and gone straight to the
feasibility study stage because they could get financing for a feasibility study but not the other
studies. For these instances, there should be project milestones, which effectively are the
completion of these preliminary studies as part of the overall feasibility study.
Skipping steps can delay projects and increase costs. These cost are not only the actual monetary
cost but also the opportunity cost of not allocating resources to more worthwhile projects.
Regardless of where the study phases begin and end or how many phases are recognised, and
even regardless of whether a study recommends proceeding to the next stage of the
development cycle or not, each study phase creates value for the project owner. This value can
arise either directly – by ensuring that viable opportunities are identified and developed, and by
aiding in the identification of the optimal configuration if a project is developed, or indirectly –
by halting or redirecting further effort on a project that is either technically infeasible or
economically unviable in its proposed configuration.
It also follows that once a decision to proceed is made, and design, procurement and construction
efforts commence, there is little opportunity to create value no matter how good the project
execution is. Excellence in project execution is required just to maintain the value opportunity
created from a good feasibility study, and excellence in project operation is required to deliver
the value. A poorly defined project will not deliver the same outcome as a well defined project
no matter how well executed and operated. Little scope exists to add or create value during
project execution. This is illustrated in Figure 2. There is a compelling case for the feasibility
study process to be of the highest quality.
the project. Capital and operating costs are estimated to an accuracy of 10–15%, including
realistic contingencies, based on the level of engineering completed.
The full feasibility study should determine:
Ore reserves as per standard definition (i.e. SAMREC, JORC, etc.)
Scale of the project
Construction budget and schedule for the project
Cost estimate for operating and capital
Contingency; there are many approaches to the inclusion of a contingency. The
contingency may be an estimate of costs that will arise subsequent to the study or it may
be a hedge against improper or incomplete estimates
Market estimates; the most significant variable in a feasibility study is often commodity
price and currency exchange rate
Cash flow study; an appropriate discount rate should be agreed by all concerned and used
to calculate the NPV
Risk and sensitivity analysis; risk and sensitivity analysis are commonly used to assess
the upside and downside potential of the project.
Share Capital
Shares may be considered to be transferable units of ownership, issued to the shareholders of a
company. Capital contributed by shareholders comes from the sale of shares of stock. In order to
appeal to a large number of investors, a corporation may issue more than one class of shares.
Authorized Share Capital is the maximum number of shares that may be issued to the
shareholders of the company.
Issue Share Capital is the actual number of shares already issued to shareholders.
Bonds payable are a popular form of long-term financing. Bonds payable may be secured by
specific property or may be unsecured. An unsecured bond is referred to as a debenture.
Debentures
Debentures are long-term loans used as a source of capital. Companies can sell them to the
public, like shares. They have a fixed return to the investor, are interest bearing and have to be
paid whether profits are made or not.
Equity Financing does not require collateral and offers the investor some form of ownership
position in the venture. The investor shares in the profits of the venture, as well as any
disposition of its assets on a pro rata basis. Key factors favoring the use of one type of financing
over another type are the availability of funds, the assets of the venture, and the prevailing
interest rates.
Usually, an entrepreneur meets financially needs by employing a combination of debt and equity
financing. This equity funding provides the basis for debt financing, which makes up the capital
structure of the venture.
Types of Shares
Shares may be classified into different types of shares in accordance to the rights and privileges
attached to the shares. The various types cater for the preferences of investors for investments
with different levels of risk.
Ordinary Shares
These shares are held by ordinary shareholders who are the effective owners of the company.
Ordinary shareholders have the right to vote at general meetings of the company and therefore
control the company. They may receive dividends out of current or accumulated profits only
when the preference dividend has been paid. Similarly on the liquidation or winding up of the
company, ordinary shareholders may only claim when creditors and the preference shareholders
have been settled.
Preference Shares
These shares are owned by preference shareholders and have preferential rights over ordinary
shareholders. Preference shareholders receive a dividend before the ordinary shareholders
normally at a fixed rate each year. If the company is liquidated, the preference shareholders
usually receive their capital investment before ordinary shareholders, subject to the original
terms of issue. Preferential shareholders do not normally have voting rights unless their
dividends fall in arrears.
Deferred Shares
These types of shares have deferred their rights to a share of profits and net assets on liquidation
of the company, beyond those of the ordinary shares. Deferred shareholders will therefore only
receive their dividends, or capital payment on liquidation of the company, after the claims of the
ordinary shareholders are met.
Dividends
Dividends are a distribution of profits from the company to the shareholders in the same ratio in
which shares are held. They may only be paid from profits, which are legally available for
distribution. The company should be financially sound and have adequate cash to pay the
dividends. The directors of the company normally propose the dividend, which is then approved
by a general meeting of shareholders.
Formation of Companies
Three most common forms of business entities are sole proprietorships, partnerships and
corporations. A sole proprietor is a business owned by one individual, a partnership is a business
owned by two or more people who have agreed to act as partners and a corporation is a business
granted a certificate of incorporation or a charter by the provincial or federal government and
owned by shareholders. Ownership of corporations is evidenced by shares of capital stock, which
may be sold by one investor to another.
Partnerships
Advantages of Partnerships
1. It brings together sufficient capital to carry on a business
2. It combines special skills of the several
3. It offers freedom and flexibility of action
4. It may result in income tax advantage to the partners.
Disadvantages of Partnerships
1. A partnership may be terminated upon death or withdrawal of a partner.
2. Each partner is personally responsible for partnership debts.
3. The partnership is bound by the acts of any partner as long as these acts are when the
scope of normal operations.
4. The partnership is less effective than a corporation for raising large amounts of capital.
Corporations
Transferable shares of stock evidence ownership in a corporation, and owners are called
shareholders. Corporate shareholders have certain basic rights:
(a) To vote for directors (voting rights generally are granted only to shareholders of
common stock).
(b) To share in income by receiving dividends (distributions of earnings to the
shareholders) declared by the board of directors.
(c) To share in the distribution of assets if the corporation is liquidated.
(d) To subscribes to additional shares of stock when the corporation decides to
increase the amount of stock outstanding.
Advantages
1. The liability of individual shareholders for the debts of a corporation is limited to the
amount of their investment.
2. Large amounts of capital may be gathered by issuing stock to many investors.
3. Shares are transferable.
4. Corporations are usually run by professionals.
Disadvantages
1. A corporation is a taxable entity and may pay a high rate of tax on its net income.
2. Corporations are subject to a considerable degree of regulation and disclosure of their
business and financial affairs.
3. The separation of ownership and management (effective control of corporate affairs) may
result in management practices that are detrimental to shareholders.
Sole Trader
This is a business carried out by an individual on his / her own accord.
Advantages
It is easy to start.
It is not registered nor controlled by statute law.
It does not need a great capital outlay to start operations.
There is no need legally to take the interests of outsiders into consideration when running
the business.
No meetings are required to be held nor the need to make any formal appointments of any
officials such as directors, secretaries or auditors.
Disadvantages
No separate legal personality expert from its members.
The owner has no limited liability. The owners properly may be sold to meet the debt of
the business.
The business cannot own property separate from the property of the owner.
The sole trading business is risky to the owner. He has less security against financial ruin
to himself.
This business, because of its nature is difficult to expand as raising capital is difficult.
Theory of Demand
Determinants of Demand
1. Quality
2. Price
3. Technological changes
4. Demographic changes
5. Nature of the good (e.g. scarce resources)
6. Degree of substitutability
7. Consumer income
8. Consumer tests/preferences
9. Expectations of the future
10. Acts of nature (e.g. natural disasters, drought etc.)
11. Acts of the state
12. Seasons
Law Of Demand
It states that there is an inverse relationship between (Quantity demand) Qd and price i.e.
Qd 1/price
The Demand Curve
It is a curve that defines the complete relationship between Qd and price, ceteris paribus (all
things being equal).
P0
P1
Q0 Q1
Fig 1 The Demand Curve
P1
P2
Q1 Q2 Q3
EOD = % in Qd
% in P
EOD measures the slope of the demand curve. For example;
P= 20 Qd= 100
P= 25 Qd= 80
EOD = % in Qd
% in P
% in P = 20 – 25 x 100 = 25%
20
Therefore EOD = 0.2/025 = -0.8
This means that a 1% increase in price will result in a fall of 0.8% demand.
Supply
Quantity Supplied Qs
Is the amount of a good sellers are willing to sell in the some period at a specific price. Qs
depend on the price of a good and other factors;
Determinants of Supply
(a) Price
(b) Cost of production
(c) Change in taste
(d) Acts of the state
(e) Price of related goods – prices must be reviewed relative to one another, when the
price of x falls while that of y remains constant, then we say x has become
relatively cheaper while y has become relatively expensive as relative prices
change. What matters on supply side is the substitutability in production. When
considering the effects of a change in the price of other goods on the supplies of a
product, we consider price changes of those goods, which can be produced with
the resources at a firm’s disposal.
(f) Expectations of the future (in terms of the price or supply in the future)
(g) Producers’ income (a mine with more capital will supply more to the market than
one with less capital.
(h) Whether conditions
Supply Curve
P0
Q0
Supply Elasticity
The responsiveness of Qs due to changes in price; Elasticity Of Supply
EOS = % in Qs
% in P
the more elastic supply is, the easier it is for sellers to increase output to take advantages of the
increase in price.
FV = PV (1 + i)n
Where;
PV – Present Value
i – interest rate factor
n – number of years
FV = 1,000 (1+0.1) 1 = $ 1,100
Q: Suppose you deposited $15,000 into an account that pays compound interest rate at 22% per
year payable once a year. How much will u have in 7 years?
FV = PV (1 + i)n
= 15,000 (1.22) 7 = $6,0341
Discounting
It is a technique used for calculating the Present Value of a future stream of net income. It is the
opposite of compounding.
PV = FV
(1 + i)n
Q: Find the Present Value of $170,000 which is to be received at the end of 8years when the
interest rate of 22.67%/yr is compounded once per year.
PV = FV
(1 + i) n
= 170,000
(1+0.2267) 8
= $33,154
Semi-Annual and other compounding
PV = FV
(1 + i/m) nm
FV = PV (1 + i/m) nm
Where
i = discount rate
m= number of compounding periods
Suppose an investment of $100 earns interest at a rate of 10% compounded annually. Since
interest is paid every 6 months, this means that the annual interest rate is divided by 2 but twice
as many compounding periods are used because interest is paid twice a year.
FV = PV (1 + i/m) nm
= 100 (1 + 0.1/2) 1x2
= $ 110.25
The results above show that you get more money (FV) for compounding more than once a year.
Q: You deposit $10,000 into an investment that promises a return of 22.24%/yr. How much will
you have at end of 5years if the interest is compounded,
(a) Semi-annually
(b) Quarterly
A: (a) FV = PV (1 + i/m) nm
=10,000 (1+0.2224/2) 2x5
=$28,706.67
Example:
You invest $10,000. During the first year the investment earned 20% for the year.
During the second year, you earned only 4% for that year. How much is your
original deposit worth at the end of the two years?
FV = PV x (1+i1) x (1+i2)
Payback Period
This is the number of years required to recover the Initial Cash Outlay (ICO) from the project
cashflows i.e. it is the breakeven for the project (project cashflows are assumed to occur at the
end of the year, the cashflow at the beginning of the year is the ICO).
Table 1 below shows the Net Cashflows and Table 2 the Cumulative Net Cashflows (CNCF)
projects A and B in the first four years.
Net Cashflows
Year A B
0 -1000 -1000
1 500 100
2 400 300
3 300 400
4 100 600
Table 1
Net Cashflows
B = 3 + 200
300
= 3.333 years
Supposing annuity, then payback is the cost of the project divided by annual inflows.
NB
NCFA- Net Cashflows for project A
PVIF – Present Value Interest Factor (PVIF = 1/ (1+i) n
DNCF – Discounted Net Cashflows
CDCF – Cumulative Discounted Net Cashflows
is 3.88. B is a long-term project because the cashflows are increasing over time
while for A the cashflows are decreasing over time; therefore it is a short-term
project.
(b) Relying on the PBM jeopardizes the strategic plan for the business by taking a
short-term view.
The payback provides information on how long funds will be up in the project, therefore the
shorter the project the greater the liquidity of the project since the cashflow expected in the
distant future are riskier than with short-term cashflows. The payback is a measure of risk.
However this is not a proper measure of risk. This measurement must take into account the
magnitude and timing of variation between actual cashflows and the expected cashflows and for
this we use standard deviation ().
If the NPV is positive the project should be accept and if negative the project should be reject. If
the two projects are mutually exclusive then the one with a high NPV should be chosen. If
projects A and B are mutually inclusive we can reject both but cannot accept both. Both projects
should be accepted if they are independent because they have a positive NPV, but A must be
accepted and B rejected if they are mutually exclusive.
Rational Of The NPV Method
A NPV of zero signifies that the project cashflows are exactly sufficient to pay the invested
capital and to provide for the Required Rate of Return (RRR). If the NPV is positive then the
cashflows generally will be more than the RRR. Since the cost of debit is fixed the extra accrues
solely to the shareholders. If a company takes a zero NPV project, then the position of the
shareholders remains unchanged i.e. the firm grows larger by the project but the wealth of the
shareholders remains unchanged. A NPV of $78.82 increases the wealth of the shareholder by
$78.82.
IRR = A + (a/(a+b)) B – A
Where:
A – a lower discount rate
B – a higher discount rate
a – positive NPV associated with a lower discount rate A
b – negative NPV associated with a higher discount rate B
Annulus
It is a series of equal payments made at fixed intervals for a specified number of periods e.g. a
promise to pay $1000/yr for 3 years is a 3yr annuity. There are two types of annuities;
(a) Annuity Due, if payments are made at the beginning of the year and
(b) Ordinary Annuity where payments are made at the end of the year.
1 2 3
105
110.25
315.25
The future value annuity of $1 for a period of n years at an interest rate of I is given by
FVIFA = (1 + i) n – 1
i
Thus for the example above;
FVIFA = (1.05) 3 – 1
0.05
= 3.1525
The Future Value Of An Annuity Due
If the $100 payments had been made at the beginning of the year this would be an annuity due
and the future value can be shown below
1 2 3
105
110.25
115.76
$ 331.01
Since the payments occur earlier, more interest is also paid thus the FV of annuity due is larger
than that of an ordinary annuity. To get the future value of an annuity due, we compound the FV
of an ordinary annuity by an extra one period.
Therefore
FV of Annuity Due = (AP)(FVIFA)(1 + i)
= 100(3.1525)(1.05)
= $331.01
Where
AP – Annual Payment
Q: Find the future value of an annuity of $12,000, the amounts are deposited at the beginning of
the year for 6years and an interest rate of 14% payable at the end of each year.
A: FV = (AP)(FVIFA)(1 + i)
= 12,000 x 1.14 x 8.535
= $116,765.90
1. How much can be invested now at 6.25% for 5years compounded to $600 the end of that
time?
2. What is the interest payable monthly if $10,000 is borrowed at 7.75% per annum if the
interest added monthly?
3. To how much would $100 amount to in 10years at 6% per annum
(i) Interest added yearly and
(ii) Interest added monthly?
4. Assuming that interest on capital is 9% p.a., a fleet of underground locomotives is costing
$15,000 a year to maintain. Will it be cheaper to them operating for another 5years or to
buy a new fleet for $50,000 which the suppliers have guaranteed to maintain for $3,000 a
year. Scrap value of the fleet $2000 (now)
5. A mining engineer estimates that a certain mine will pay its first dividend of 12% on a
capital of $2million in 5years time and a similar dividend will be paid for 15years. What
is the P.V. of these dividends allowing a purchaser 13% per annum on his outlay and
redeeming the purchase money at 6%.
6. The present value of $4,000 received sometime in the future is $654 today using a 10%
interest rate. How many years in the future will the money be received?
1. How much must you deposit today in a bank account paying interest compounded quarterly:
a. if you wish to have $10,000 at the end of 3 months, if the bank pays 5.0% APR?
Answer: $9,877
b. if you wish to have $50,000 at the end of 24months, if the bank pays 8.0%APR?
Answer: $42,675
c. if you wish to have $6,000 at the end of 12 months, if the bank pays 9.0% APR?
Answer: $5,489
2. a. What rate of interest [APR] is the bank charging you if you borrow $77,650 and must
repay
$80,000 at the end of 2 quarters, if interest is compounded quarterly?
Answer: 6.0% APR
b. What rate of interest [APR] is the bank charging you if you borrow $49,000 and must repay
3. How much must you deposit today in a bank account paying interest compounded monthly:
a. if you wish to have: $10,000 at the end of 1 months, if the bank pays 5.0% APR ?
Answer: $9,959
b. if you wish to have: £6,000 at the end of 6 months, if the bank pays 9.0% APR ?
Answer: £5,737
c. if you wish to have: $12,000 at the end of 12 months, if the bank pays 6.0% APR ?
Answer: $11,303
4. If interest is compounded quarterly, how much will you have in a bank account:
a. if you deposit today £8,000 at the end of 3 months, if the bank pays 5.0% APR ?
Answer: £8,100
b. if you deposit today $10,000 at the end of 6 months, if the bank pays 9.0% APR ?
Answer: $10,455
c. if you deposit today ¥80,000 at the end of 12 months, if the bank pays 8.0% APR ?
Answer: ¥86,595
d. if you deposit today $5,000 at the end of 24 months, if the bank pays 5.0% APR ?
Answer: $5,522
5. If interest is compounded monthly, how much will you have in a bank account,
a. if you deposit today £8,000 at the end of 3 months, if the bank pays 5.0% APR ?
Answer: £8,100
b. if you deposit today $10,000 at the end of 6 months, if the bank pays 9.0% APR ?
Answer: $10,459
c. if you deposit today ¥80,000 at the end of 12 months, if the bank pays 8.0% APR ?
Answer: ¥86,640
d. if you deposit today £5,000 at the end of 24 months, if the bank pays 5.0% APR ?
Answer: £5,525
6. You borrowed $1,584 and must repay $2,000 in exactly 4 years from today. Interest is
compounded annually.
a. What is the interest rate [APR] of the loan?
Answer 6.0%
b. What effective annual rate [EAR] are you paying?
Answer 6.0%
7. You now have $8,000 in a bank account in which you made one single deposit $8,000
monthly of $148.97 exactly 40 years ago. Interest is compounded monthly.
a. What rate of interest [APR] is the bank paying?
Answer 10.0%
b. What effective annual rate [EAR] is the bank paying?
Answer 10.47%
8. Suppose you make an investment of $1,000. This first year the investment returns 12%, the
second year it returns 6%, and the third year in returns 8%. How much would this investment
be worth, assuming no withdrawals are made?
Answer:
1000*(1.12) x (1.06) x (1.08)
= $1,282
9. Why is (1+i) called an interest factor?
Factoring the expression $10,000 + 10,000 x i = 10,000 x (1+i)
Thus (1+i) is an interest factor.
10. Suppose you make an investment of $1,000. This first year the investment returns 5%, the
second year it returns i. Write an expression, using i, that represents the future value of the
investment at the end of two years.
Answer:
FV=1,000 x (1.05) x (1+i)
11. An investment is worth $50,000 today. This first year the investment returns 9%, the second
year it returns i. Write an expression using i that represents the original value of the investment.
Answer:
PV=50,000÷[(1.09) x (1+i)]
12. Suppose you make an investment of $A. This first year the investment returns 10%, the
second year it returns 16%, and the third year in returns 2%. How much would this investment
be worth, assuming no withdrawals are made?
Answer:
A*(1.10) x (1.16) x (1.02)
11. Suppose you make an investment of $10,000. This first year the investment returns 15%, the
second year it returns 2%, and the third year in returns 10%. How much would this investment
be worth at the end of three years, assuming no withdrawals are made?
$12,903
12. Refer to the above problem. What is the geometric average rate of return?
8.9%
Review Problems
1. Suppose you are trying to find the present value of two different cash flows. One is $100 two
periods from now, the other a $100 flow three periods from now. Which of the following
is/are true about the discount factors used to value the cash flows?
a. The factor for the flow three periods away is always less than the factor for the flow that is
received two periods from now.
b. The factor for the flow three periods away is always more than the factor for the flow that
is received two periods from now.
c. Whether one factor is larger than the other will depend on the interest rate.
d. Since the payments are for the same amount, the factors will yield present values that are
the same.
2. What is the present value of a stream of $2,500 semiannual payments received at the end of
each period for the next 10 years? The APR is 6%.
a. 37,194
b. 38,310
c. 35,810
d. 36,885
3. What is the future value in 10 years of $1,500 payments received at the end of each year for
the next 10 years? Assume an interest rate of 8%.
a. $25,260
b. $23,470
c. $21,730
d. $18,395
e. $15,000
4. You are given the option of receiving $1,000 now or an annuity of $85 per month for 12
months. Which of the following is correct?
a. You cannot choose between the two without computing present values.
b. You cannot choose between the two without computing future values.
e. The choice you would make when comparing the future value of each would be the
same as the choice you would make when comparing present values.
5. You open a savings account that pays 4.5% annually. How much must you deposit each
year in order to have $50,000 five years from now?
a. $8,321
b. $9,629
c. $8,636
d. $9,140
e. $6,569
6. You are considering an investment in a 6-year annuity. At the end of each year for the
next six years you will receive cash flows of $90. The initial investment is $414.30. To
the nearest percent, what rate of return are you expecting from this investment? (Annual
Compounding)
a. 8%
b. 9%
c. 12%
d. 21%
e. 10%
7. You are saving up for a down payment on a house. You will deposit $600 a month for the
next 24 months in a money market fund. How much will you have for your down
payment in 24 months if the fund earns 10% APR compounded monthly?
a. $14,480
b. $15,870
c. $12,930
d. $10,560
e. $ 9,890
8. Your mortgage payment is $600 per month. There is exactly 180 payments remaining on
the mortgage. The interest rate s 8.0%, compounded monthly. The first payment is due
in exactly one month. What is the balance of the loan? [Balance = PV of remaining
payments.]
a. $62,784
b. $77,205
c. $63,203
d. $82,502
e. $85,107
a. $93,800
b. $97,200
c. $92,500
d. $85,100
e. $89,400
10. What is the value of the following set of cash flows today? The interest rate is 8.5%.
a. $ 800
b. $ 571
c. $1072
d. $ 987
e. $ 520
11. The present value interest factor of an annuity due for 3 years at 8% equals:
a. 1/(1.08)3
b. 1/(1.24)
c. [1 + 1/(1.08) + 1/(1.08)2]
12. What is the present value of $2,500 semiannual payments received at the beginning of each
period for the next 10 years? The APR is 6%.
a. 37,194.70
b. 38,309.50
c. 35,809.50
d. 36,884.80
13. Your mortgage payment is $600 per month. There are exactly 180 payments remaining on
the mortgage. The interest rate s 8.0%, compounded monthly. The next payment is due
immediately. What is the balance of the loan? [Hint: This is an annuity due.]
a. $63,203
b. $77,205
c. $62,784
d. $82,502
e. $85,107
14. Your mortgage payment is $600 per month. There are exactly 180 payments remaining on
the mortgage. The interest rate s 8.0%, compounded monthly. The next payment is due in
15 days. What is the balance of the loan? [Hint: Assume 30 days per month.]
a $62,993
b $76,949
c $62,576
d $82,228
e $84,825
15. The present value interest factor of an annual ordinary annuity for 3 years at 8% equals:
a. 1/(1.08)3
b. 1/(1.24)
c. [1 + 1/(1.08) + 1/(1.08)2]
16. The present value interest factor of a semiannual ordinary annuity for 3 years at 8% equals:
17. The future value interest factor of an ordinary annuity for 3 years at 8% equals:
a. (1.08)3
b. (1.24)
c. [1 + (1.08) + 1.08)2]
18. Suppose an annuity costs $40,000 and produces cash flows of $10,000 over each of the
following eight years. What is the rate of return on the annuity?
a. 0%
b. 10.5%
c. 18.6%
d. 25.0%
e. 50.0%
Key: 1. A 2. A 3. C 4. E 5. D 6. A 7. B 8. A 9. A 10. B
Income Statement is a financial statement that shows the amount of net income or loss for a
given accounting period.
Net loss is a decrease in owner’s equity resulting from unprofitable operations.
Net Income = Revenue – Expenses
Revenue is the price of goods sold and services rendered during a given period. Revenue comes
into existence when the goods are sold or services are rendered, even though cash is not collected
until some time later.
Expenses are the cost of goods and services used up in the process of obtaining revenue.
The income statement for a trading company is divided into three subsections;
(a) The Trading section, where the gross profit is calculated.
(b) The profit and loss section, where expenses and other income are deducted or
added respectively to calculate the net profit before taxation.
(c) The approximation section, where the net profit is allocated to dividends, taxation,
or retained reserves.
The Statement of Owner’s Equity summarizes changes in owner’s equity during the accounting
period. Increases in owner’s equity result from net income, and from additional investment by
the owner.
The Balance Sheet summarizes the projected assets, liabilities, and net worth of the company. It
reflects the position of the business at the end of the first year.
Cash Flow
Cash flow may be described in general terms as the cash generated from operations in a specified
period of time (month, quarter, or year). For evaluation purposes, it is the net of estimated cash
inflows and outflows for operations. The cash flow determination for an evaluation can be
simpler than for actual on-going operations. In the context of a financial evaluation for a mine,
cash flow may be generally defined by the following computation.
Gross Revenue
= Net revenue
= Gross profit
= Depletable income
Less Depletion allowance
= Taxable income
= Net profit
= Cash Flow
Assets
Represents items that are owned or available to be used in the venture operations. These
represent everything of value that is owned by the business. Assets are categorized as current or
fixed.
Current Assets include cash and anything else that is expected to be converted into cash or
consumed in the operation of the business during the period of 1year or less. Current assets are
often dominated by receivables or money that is owed to the new venture from customers.
Fixed Assets are those that are tangible and will be used over a long period of time.
Liabilities
These accounts represent everything owed to the creditors. Some of these amounts may be due
within a year (current liabilities), and others may be long-term debts (long-term liabilities)
Debit Credit
$ $
Sales 18,462
Purchases 14,629
Salaries 2,150
Rent 670
Insurance 111
Premises 1,500
Debtors 1,950
Creditors 1,538
Cash in hand 40
Drawings 895
Capital 5,424
25,424 25,424
Answer
B Webb
Trading & Profit & Loss Account for the year ended 31 December 2007
Sales $ 18,462
Purchases $ 14,629
Less Expenses
Salaries 2,150
Rent 670
Insurance 111
B Webb
Balance Sheet As At 31 December 2007
Fixed Assets
Premises
1,500
Motors 1,200
2,700
Current Assets
Stock 2,548
Debtors 1,950
Bank 1,654
Cash 40 6,192
8,892
Capital
8,249
Current Liabilities
Creditors 1,538
8,892
Q 5.2 from the following trial balance of C Worth, extracted after one year’s trading, prepare a
trading and profit and loss account and a balance sheet for the year ended 31 December 2007
Credit
Debit
$ $
Sales 28,794
Purchases 23,803
Rent 854
Insurance 105
Buildings 50,000
Fixtures 1,000
Debtors 3,166
Creditors 1,206
Drawings 2,400
Capital 65,900
95,900 95,900