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By James E. Lonergan

Linear goal programming is a multi-objective optimization technique where the constraints of a linear programming formulation of a problem are considered as additional objectives. The optimal solution is the one that comes closest to satisfying all the objectives. An interactive computer program was written to utilize this technique in solving the feed blending problem faced by power plants de- pendent on multiple sources of coal supply. This program determines the amount of coal from each supplier to utilize in the blend. Examples of the use of the program in both long and short term coal procurement planning scenarios are given.

Jan 1, 1984

By Mahmood B. Mirza

The geology of the Gulf Coast Salt domes has been extensively studied by Kupfer (1,2,3,4,5), Atwater (6,7), Balk (81, Hawkins (9), and Wharton (10). dominant geological feature of Southern Louisiana is the Gulf Coast Geosyncline. The axis of this geosyncline corresponds with the present day coastline of Texas, Louisiana, Mississippi, Alabama and Florida. This geosyncline has been continually subsiding since Cretaceous times and receiving large deltaic accumulations of sediments from Central North America. These accumulations progressively thicken toward the South. In the vicinity of the Coast, these sediments are reported to be about 40,000 feet thick. Another dominant feature of the region is the large number of salt domes scattered along the Gulf Coast (fig. 1). Typically, these domes are roughly cylindrical in shape, 1 to 5 miles in diameter, and extend to more than 20,000 feet in depth. It is hypothesized that these domes are derived from the thick Louann salt formation lying below the deltaic sediments. Due to its low specific gravity and buoyancy, the salt layer protruded upwards plastically and pierced the overlying strata. As a result of this upward flow, the adjacent strata are locally lifted upwards, creating excellent traps for petroleum accumulation.

Jan 1, 1979

By A. D. Agate

In developing nations, novel mineral processing methods like bacterial leaching are gaining prominence. The principles and practices for isolation and preservation of cultures used in bacterial leaching are discussed with special reference to cultures used in leaching copper from Indian ores. In all, 145 potentially useful microorganisms such as iron- and sulfur-oxidizing bacteria were isolated from various ecosystems of the copper mining areas in the country. The major organisms isolated by enrichment culture technique belonged to T. ferrooxidans and T. thiooxidans species. In addition, thermophilic cultures like Sulfolobus sp. and thermophilic thiobacilli were also isolated. The process of copper leaching was scaled up to the 300-kg level in PVC columns. Since the preservation of efficient cultures in active state was vitally important, a new method was devised that preserved the activity of thiobacilli for a period of more than two years. The novel method of storage in sterile chalcopyrite ore at 8°C can be considered an important advance.

Jan 1, 1987

By T. van Sandwijk, G. Van Weert, E. Molleman

This paper reports on test work that explored the dissolution/precipitation reaction: ZnS + 2HCl - ZnC12 + H2S, which is part of a process used in the production of pure ZnS. The research focused on the influence of proton activity on the dissolution of zinc concentrates obtained from the Brunswick Mine No. 12 in Canada (Brunswick Mining & Smelting); the Red Dog deposit in Alaska (Cominco Ltd.); and the Tara deposit in Ireland (Outukumpu Zinc). A comparison between the results of the experimental dissolution as a function of pH and the dissolution predicted by thermodynamics suggest that the three concentrates contained sig¬nificant amounts of the more reactive mineral wurtzite, although XRD analysis showed mainly the presence of the mineral sphalerite.

Jan 1, 1999

The modelling process described in this paper was developed in order to assess the feasibility of various investments options for the exploitation of a lignite deposit located in the Prefecture of Florina, Greece. The model uses as evaluation criterion the net present value. It is based on the characteristics of the reserves and relates the decision making with numerous technical, economic and environmental factors. The examined alternatives include the construction of a new thermal power plant at the mine-mouth, the fuel supply of already existing power plants located at relatively long distances and the fuel exports in neighboring countries. Moreover, the feasibility of post-poning the exploitation of the lignite deposit and preserving its reserves for exploitation in the future is also assessed. The paper also includes a short discussion about the environmental constraints related to the supply of lignite produced from Florina mines to power plants that were designed and constructed for burning fuel mixtures with different quality characteristics.

Jan 1, 2005

By Christian F. Baiz

A new agenda has risen. Born out of governments' policies and world economies, the years ahead will carry with them reduced growth. For inflation dependent and capital intensive industries, such as metals and mining, as well as most other natural resource industries, a period of long-term contraction in outmoded and costly capacity will evolve. This will be supplanted by new, lower cost capacity in some cases, but only if the total cost of production, including cash operating and debt service costs comes in at or below current market conditions. The industrial outlook can be characterized as bearish. As one major U.S. bank economist put it, mining companies planning their five-year forecast from 1984 out, should take the current market conditions and straight-line them to the end of the decade. With low growth and low inflation, the real price of metals will remain flat or slightly declining. As a result, capital funding will be problematic. The low cost producer, that is one with low cash costs and low principal and interest costs per unit of production, will succeed.

Jan 1, 1984

By M. C. Fuerstenau

The zero-points-of-charge of apatite, calcite, and fluorite are pH 6.4, 10.8, and 10.0, respectively. Scheelite is negatively charged above at least pH 3. Flotation responses of these minerals in the presence of potassium oleate and sodium silicate are presented and compared with electrokinetic data. Colloidal silica appears to be the species principally responsible for calcite depression, while silicate anion is the species responsible for fluorite depression. Additions as high as 1 x 10-3 mole/liter silicate have no effect on the flotation responses of apatite and scheelite. Selective flotation of nonmetallic minerals is difficult to achieve with fatty acids or soaps by themselves. As a result, specific reagents are added to aid these separations, and one of the reagents commonly employed for this purpose is sodium silicate. Flotation separations of various calcium¬ bearing minerals such as fluorite from calcite (1,2,3) and scheelite from calcite(24) and apatite(2,5) almost always involve the use of sodium silicate, for example. The mechanisms by which sodium silicate functions as a depressant are still not understood; this fact is probably due to a number of reasons. That is, the dissolution process of sodium silicate is complex, giving rise to a number of ionic and colloidal species. (6) In addition, the type and concentration of these species depend on the ratio of Na20 to Si02, the concentration of sodium silicate, and the pH of the system. (6) At the present time, it is not known which species, colloidal silica or silicate anion, is responsible for depression. If colloidal silica is the species that is adsorbing, then adsorption must occur by electrostatic attraction between the colloid and the mineral surface. Silicate anion, on the other hand, may adsorb either physically or chemically. The objective of this paper is to determine first the active species of sodium silicate and then the conditions under which this species will adsorb and function as a depressant.

Jan 1, 1968

By W. K. Utt, C. C. Woodward, W. L. Howie, G. G. Miller

The process of roof drilling and bolting is one of the most dangerous jobs in underground mining. In the United States, roof drilling and bolting results in about 1,000 accidents with injuries each year. Researchers, from the Spokane Research Laboratory of the National Institute for Occupational Safety and Health are studying the feasibility of using a drill-monitoring system to estimate the strength of successive layers of rock and assess the integrity of a mine roof. Such a system would allow roof drill operators to be warned when a weak layer is being drilled. Using measurements taken during drilling, a neural network can classify mine roof strata in terms of relative strength. The concept has been proven in principle. This research project was undertaken to increase the safety of underground miners, especially those involved in roof bolting. The system should be applicable to the mobile drills now used in underground mines, and the system would likely find wider application as well.

Jan 1, 2003

By V. Prabhu, D. Mantha, R. Reddy

Secondary copper blast furnace slag was treated with carbon to derive the conditions for maximum recovery of copper with a minimum simultaneous reduction of iron oxide. Experiments were carried out to study the effect of temperature, carbon and CaO additions to the slag on the efficient recovery of copper. A two-stage reduction process was also employed to study the efficiency of copper recovery and the results were compared with those of single-stage reduction. The maximum recovery of copper in alloy phase was obtained with 5 % initial carbon in the slag, 2% CaO addition to the slag and at a reducing temperature of 1573 K. Higher grade of the alloy phase with respect to copper was obtained by employing a two-stage reduction process. The results obtained in this study are comparable to those of the earlier research on the recovery of copper from reverberatory furnace discard slags.

Jan 1, 2004

By Dermot M. Ross-Brown

The more important factors controlling the design of pit slopes are related to the local geology over which the designer has little or no control. Nevertheless, there are some factors over which the designer does exert some control and these concern the say in which the rock is excavated and supported. They include blasting, face cleaning, water control, and the use of rock improvement techniques. The paper discusses these factors and relates the extra costs incurred to the steeper slope angles that can usually be obtained. It is demonstrated that even a modest increase in bench angle of 5° through improved excavation techniques can pay off in a single push-back.

Jan 1, 1975

By Jacques Deraisme

Geostatistics has been applied in many mining feasibility studies throughout the world during the last decade. Recently geostatistics has begun to be applied to the field of mining processes by attempting to aid in the definition of the best mining policy. For a feasibility study the grade-tonnage relationships give a reasonable order of magnitude estimate of the ore reserves within the deposit. But the reserves that will actually be recovered, will vary depending upon the mining methods and the technical means used. The profit earning capacity of the mining project is determined by a great many factors, such as for instance: accessibility of reserves to extracting machines, the haulage distance between the mine and the mill, the variability of produced ore (tonnage and grades) which could necessitate stockpiles or blending areas?

Jan 1, 1979

By William E. Cutcliffe, John A. Ames, John D. MacFadyen

Webster's dictionary nearly equates portland cement with its current primary definition of cement. Although such equation may be a triumph of common usage, the confusion between the terms cement and concrete unfortunately is very widespread. Full definition of cement properly would extend to many substances, but for purposes of this chapter cement is restricted to varieties of portland cement including portland-pozzolan cement. Among the usually recited historical notes concerning cement is that it was developed by the Romans. Their use of cement in the great structures of Rome, and even in the far comers of their Empire, such as Hadrian's Wall in the north of England, testifies to the antiquity of a major cement industry. From English sources we know of John Smeaton's carefully proportioned hydraulic cement mixed in 1756 and of Joseph Aspdin's patented cement to which, in 1824, he gave the name portland cement. (He claimed that his cement mortar looked like the famous dimension limestone quarried from the Isle of Portland on England's south coast.) The year 1971 marked the centennial of portland cement manufacture in the United States. A fair historical account of the many real contributors to the cement industry since 1756 unfortunately would be too extensive for this chapter. Development of rotary kiln practice and burning at higher temperatures clearly was the major move into today's technology. Cement manufacture is the processing of selected and prepared mineral raw materials to produce the synthetic, mineral mixture (clinker) that can be ground to a powder having the specified chemical composition and physical properties of cement. Cement making incorporates a number of distinct steps, but it is characterized by the key pyroprocessing (or burning) step, which brings about the necessary changes in the raw materials. This pyroprocessing is a chemical process. Conversion of large volumes of mineral raw materials into specification-controlled cement at relatively low cost is the objective. Statistics on the cement industry are of uneven quality. The US Bureau of Mines (USBM) is the principal collector of available data. These statistics can be only as good as the quality of information supplied by the reporting companies. The data perhaps most often questioned relates to productive capacity of the industry. The questions submitted by USBM are valid, nevertheless, and the information gained from them, as good as is available, is what is generally used. The Portland Cement Association also is a source of much quality information. In analyzing cement industry production rates, it is well to keep in mind that measurement of raw materials requires the reader to recognize that approximately 1.6 t of dry raw materials are required to make 1 t of clinker. This number can vary depending on the amount of kiln dust wasted. Also that to produce 1 t of portland cement required .94 to .96 t of clinker, the remainder being gypsum or anhydrite. A ton of masonry cement or pozzolanic cement re- quires considerably less clinker.

Jan 1, 1994

By L. Yuan, J. H. Rowland III

"In 1995 and 2003, the Mine Safety Health Administration (MSHA) conducted surveys to determine the number of atmospheric monitoring systems (AMS) being used in underground coal mines in the United States. The survey reports showed data for the different AMS manufacturers, the different types of equipment monitored, and the different type of gas sensors and their locations. Since the last survey in 2003, MSHA has changed the regulation requirements for early fire detection along the belt haulage entries. As of December 31, 2009, point-type heat sensors were prohibited for use for an early fire detection system; instead carbon monoxide (CO) sensors are now required. This report will examine the number of AMS currently used in underground mines in the United States to see if there is a change in their use. The locations and parameters monitored by AMS are also discussed. INTRODUCTION The last survey conducted by the Mine Safety and Health Administration (MSHA) on atmospheric monitoring systems (AMS) used in underground coal mines in the United States (US) was in 2003 [1]. The survey report states that since 1995 there had been a steady increase in the use of AMS in underground coal mines as the technology of CO sensors was improved by manufacturers. AMS had become more reliable and some CO sensors could be purchased with the capability to discriminate between the CO produced from a fire versus CO produced from diesel equipment. This increase in reliability had reduced the number of false alarms and the response time. The faster response time to a developing fire allowed for the miners to take the necessary action to put out the fire or exit the mine. It should also be noted that at the time of last MSHA survey, some mines still used point-type heat sensors to detect the presence of a fire on conveyor belts. This detection method works by measuring the temperature of the air around the sensor. As a fire starts to develop, smoke and hot gases are produced from the combustion process, and the air is heated up. Once the air and gases reach a designated temperature detected by the point-type heat sensor, a fire alarm signal is generated. Studies have shown that the response times for detecting the presence of a fire using CO sensors are much shorter than using point-type heat sensors [2]. Finally, since the last MSHA survey, regulations have changed on the type of automatic fire detection systems permitted to be used in conveyor belt entries. As of December 31, 2009, point-type heat sensors are not permitted to be used for fire detection in underground coal mines in the US; instead CO sensors are required as a replacement (30 CFR 75.1103-4). This study will examine how the changing of the above regulations has impacted the use of CO sensors in underground coal mines in the US compared to their use based on the last MSHA survey. Importantly, in the previous MSHA survey, the data was recorded for producing and non-producing coal mines. In this study, only the data from the producing coal mines was recorded. Data was collected from a total of 235 coal mines for this study with the help of the MSHA district offices."

Jan 1, 2017

By J. D. Miller, C. L. Lin, J. Dong

Nano clay mineral particles such as kaolinite — with primary particles typically smaller than 2 μm in size — can cause significant problems in flotation processes and tailings disposal, including the processing of Florida phosphate rock and Canadian oil sands. In this study, the consolidated state of flocculated kaolinite sediment was examined, and high-resolution X-ray microtomography (HRXMT) was applied to describe the structure of the consolidated sediment. Using this tomographic information, the complex geometry of the channel network structure for the consolidated flocs was established for the first time. With the establishment of the experimental channel network structure, permeabilities were estimated by flow simulation using the Lattice Boltzmann method. Results for kaolinite sediment with and without polymer are compared and discussed. Results for flocculated kaolinite sediment in a gravitational field are also presented and discussed. The results show that as polymer dosage increases, the permeability of flocculated kaolinite sediment increases, and as suspension pH increases, the permeability of flocculated kaolinite sediment decreases.

By A. D. Hammond

"INTRODUCTION The recent drop in iron ore prices has claimed an unwitting casualty in vanadium. Vanadium is dominantly produced as a co-product of steel production. The recent shutdown at EVRAZ’s Mapochs steel-vanadium operations in South Africa has cut-off 10% of the world’s vanadium output. Earlier in February, 2015, Australia’s Atlantic Ltd. suspended operations at its Windimurra iron-vanadium complex after a fire caused severe damage at the plant. Since then, challenging market conditions has resulted in the permanent closure of this operation. This decoupling of vanadium production from integrated iron ore producers presents an opportunity for vanadium exploration companies to target single-product deposits. This trend is manifested in the increasing number of pure-play vanadium ventures around the world.The mine production of vanadium is dominated by three countries namely, China, South Africa and Russia, which collectively produce 98% of the world’s vanadium. While the use of vanadium as an alloy in the steel industry remains by far the largest application for this metal, growth in demand is expected to come from the renewable energy industry in the form of batteries for energy storage. This paper summarizes the current state of vanadium exploration, briefly describes the vanadium market and lists sources of future demand for the metal. TREND IN VANADIUM EXPLORATION The most active participants in the current vanadium exploration are pure-play vanadium ventures in Brazil, South Africa and Australia. These ventures are targeting deposits with higher vanadium grade than those typically mined in titaniferous magnetite operated by integrated steel-vanadium producers. The 10% shortfall in vanadium production resulting from the shutdown at EVRAZ’s Mapochs is expected to be partially compensated by Largo Resources’ Maracás Menchen vanadium operation located in the State of Bahia in Brazil, which commenced operation in August 2014 and is expected to reach design capacity of 11,400 tonnes of vanadium pentaoxide (V2O5) by the end of 2015. The estimated production1 for 2015 is 6,500 tonnes of V2O5 at a target production cost of $3.60/lb. This is the first vanadium operation to be placed in production in the Western Hemisphere in over 35 years."

Jan 1, 2016

By M. T. Errington, P. C. Miller, W. E. Hardwick

Paper discusses in general terms the techno economic merits of various types of aerated biological reaction systems. The current status of the technology leaves many questions unanswered and hence the choice of the best system to employ is open to discussion. Reasons are given for the choice of the reactor system to be built and operated by Davy McKee. The pilot plant has been designed to provide answers to a number of the questions posed by this technology.

Jan 1, 1998

By John Marsden

JIM ARNOLD: Our next speaker is John Marsden. John runs the concentrator complex at La Candelaria Project in Chile. John's a Royal School of Mines graduate and he wrote the book on gold metallurgy, The Chemistry of Gold Extraction, which, by the way, he dedicated to me-at least that's what my copy says. [laughter] John, go ahead. (Message shown on Projection screen) ‘Raulerson’s Rules Plant operators and maintenance personnel should be asked to participate early in the design process. This ensures that the plant will never be completed on time or within budget.’ JOHN MARSDEN: Good afternoon, everybody. My presentation this afternoon is going to be very short. It won't be as funny as Joe Keane's, but I guarantee you it will be a lot quicker. [laughter] That transparency isn't mine, actually. [laughter] You're trying to throw me off.

Jan 1, 1998

By Lewis L. Oriard

INTRODUCTION In recent years, there has been a trend in the direction of larger drilling equipment and larger diameter blastholes. Although this change has improved the efficiencies and reduced the costs in many operations, it has increased the potential for damage to underground openings. In addition, in many instances one now finds more sophisticated delicate instruments, automated control facilities, and a large variety of structures in proximity to blasting activity. The combined effect of larger-scale blasting activity and its proximity to various features of interest is such that there is an increased need for a more refined analysis of blasting effects and their control. BLASTING EFFECTS ON ROCK SURFACES The Breakage Mechanism In order to develop techniques for controlled blasting, one must first understand the features of the mechanisms by which blasting causes rock breakage to occur. These features have not been easy to demonstrate, mostly due to the difficulty in making tests and observations at the high stress levels and short time durations involved. When an explosive charge is detonated, the material surrounding the charge is subjected to a nearly instantaneous, very high pressure [on the order of 1.4 to 13.8 GPa (0.2 to 2.0 X 106 psi), depending on the explosive]. If the charge is coupled to "average" rock, this pressure will pulverize the surrounding rock for a distance on the order of 1 to 3 charge radii in hard rock, and to a greater distance in softer rock (this is also dependent on the type of explosive). As the pressure wave passes into the rock, high tangential stresses cause radial cracks to appear, and the nearly discontinuous radial stress zones gen¬erated by the shock front may cause tangential cracks to appear. The extent of these cracks depends on the energy available in the explosive, how quickly the energy is transmitted to the rock, and the strength properties of the rock. The discontinuous shock front is quickly dis¬sipated, but the expanding gases generate a longer-acting pressure. A compressive pulse travels to the nearest face or internal rock boundary where it is reflected in tension. The tensile strengths of most rocks are roughly 40 to %o of their compressive strengths, so the rock may now fail in tension whereas it may have been able to support the diminished compressive phase without failure. The ten¬sile deflection typically produces a failure described as tensile slabbing or scabbing. Laboratory experiments and field experience have pretty well established that several mechanisms are involved. These include (1) the classical case of tensile parallel slabbing when the pressure pulse is reflected at a free surface; (2) failure under quasi-static compressive loading (the shape is normally irregular due to discontinuities in the rock); (3) radial cracking under the action of tangential stresses at the periphery of the expanding pressure pulse; (4) peripheral cracking at the discontinuous shock front which is quickly dissipated; and (5) additional mass shifting due to the venting of the explosive gases. The first three items have received much attention in the laboratory and the literature. The complex effects of gas venting are difficult to test in the laboratory because of the difficulty in reproducing the many weak planes and discontinuities typical of most field conditions, which play such a prominent role in determining the behavior of the rock mass subjected to blasting. Unfortunately, gas venting effects can be pro¬jected to significant distances under certain field conditions, and are sometimes difficult to control. It is not unusual for gas venting to be the overriding factor in determining the final geometric shape and physical condition of the finished excavation. Sources of Damage For the purposes of this discussion, damage includes not only the breaking and rupturing of rock beyond the desired limits of excavation but also an unwanted loosening, dislocation, and disturbance of the rock mass the integrity of which one wishes to preserve (such as mine pillars, underground openings, etc.). The sources of damage include, of course, all those physical features of the rock breakage mechanism. Each of these effects must be limited to the desired zone of breakage and excavation if the integrity of the remaining rock mass is to remain undiminished. The primary zone of rock breakage usually can be controlled in the normal process of field experimentation to determine proper charge sizes and location for primary excavation. However, it frequently happens that there is damage from sources which are more difficult to account for in the design process, which are often overlooked. These are (1) the overbreak due to poor drilling control, (2) dislocation of rock (mass shifting) due to venting of explosive gases, and (3) loosening or dislocation due to the influence of seismic waves (ground vibrations). CONTROL OF ROCK BREAKAGE Importance of Geometry In studying the rock mass and blasting design con¬siderations, it is important to keep in mind the geometric relationships among charge size, shape, and position, and the physical features of the rock mass to be preserved. The features of principal interest are the external shape and position of the rock mass relative to blasting, and the position and attitude of any weak planes in the rock mass. The Sequence of Blasting and Excavation Events Unfortunately, there are too many times when the task of preserving delicate rock is considered hopeless, and because of this attitude, no further effort is ex¬pended towards caution or control. In such cases there is often a failure to recognize the importance of the se¬quence of the procedures. Attention to this can greatly reduce unwanted effects at minimum cost. Perimeter Control The requirements for perimeter control are highly dependent on the special needs of each particular proj¬ect. The desirable degree of control is a highly variable

Jan 1, 1982

By M. Pawlik

Canadian sylvinites contain over 90% of KCl and NaCl and a few percent of water-insoluble minerals. Cationic flotation is used to produce KCl concentrates. Since water-insoluble minerals appear in the pulp as slimes, and since long-chain primary amines are utilized as a collector, desliming is essential. The potash industry utilizes different desliming methods. This may involve selective flocculation of the slimes with polyacrylamide and removal of the flocculated product by flotation, or mechanical desliming with the use of classifying cyclones. Whichever method is applied, desliming is never complete; the flotation feed after desliming still contains about one percent of the slimes which heavily affect collector consumption and flotation selectivity. Therefore, the remaining slimes have to be rendered inactive by “blinding” them with polymers such as carboxymethyl cellulose or guar gum. The commercial blinders used by the potash industry include natural and synthetic polysaccharides. The most common is the use of carboxymethyl cellulose (CMC) and guar gum (GG). These are quite different polymers, while CMC is anionic, GG is non-ionic; while the applied CMCs are of relatively low molecular weight (about 300,000) GGs have much higher molecular weight. Guar gums are also heavily used as the depressants of naturally floatable gangue in the processing of platinum-bearing ores, and according to Harris et al. (1999) quite a large variety of modified guar gums are available in South Africa for this application. Cheng et al. (2002) claim that natural guar gum’s molecular weight is 1.935 • 106. Robinson et al. (1982) found that the molecular weights of five grades of commercial guar gums ranged from 4.4 • 105 to 16.5 • 105. The highest molecular weight sample is then very close to the natural guar gum studied by Cheng et al. (2002). According to the manufacturer, the Rantec KP4000 guar gum which is used by the Canadian potash industry has a molecular weight of about 1.5 x 106. Since both KCl and NaCl are soluble in water, the flotation process is carried out in saturated brine. At 20 oC, 1450 kg of NaCl-KCl-H2O saturated solution contains about 0.300 kg of NaCl, 0.150 kg of KCl, and 1 kg of water (Gaska et al., 1965). Thus, in the saturated NaCl-KCl brine there are about 5.1 kmole of NaCl and 2 kmole KCl per 55.5 kmole of water. This gives 3.9 molecules of water per each ion assuming complete dissociation of NaCl and KCl. Thus, it is obvious that all water molecules in the saturated brine must be bound in the hydration shells around the hydrated ions. The surface tension of the NaCl-KCl saturated brine was recently measured to be 85 mN/m (Laskowski et al., 2003).

Jan 1, 2004

By D. Harris, M. Osterberg

This paper examines the economics of acquiring mineral exploration rights by royalty-rate bidding when the royalty basis does not provide for full cost recovery. Bidding takes place prior to exploration and the documentation of actual tonnage and grade. Consequently, it increases considerably the risk to exploration capital when the fraction of cost recovered is small and the product price exhibits large fluctuations. Price and grade risk are demonstrated on a 360-Mt (400-million-st) porphyry copper deposit by Monte Carlo simulation of discounted-cash-flow analysis. Copper price is modeled as a stochastic price process, and costs are based on US Bureau of Mines cost models. When both grade and price risk are considered, the probability for a negative NPV is 0.54, given a royalty rate of 5% applied to a basis that allows the recovery of costs up to 50% of product price. Investment risk could be considerably reduced by defining the royalty basis to allow greater cost recovery. Although such a basis would require society to share in the risk, society would benefit from greater resource development.

Jan 1, 2000