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By D Fargher

BHP BillitonÆs Cannington operation began production in 1997 and is presently the largest tonnage and lowest cost single mine producer of both lead and silver in the world. The original design capacity was 1.5 Mtpa and this has progressively increased via a series of debottlenecking projects in both the mining and milling operations. In 2003, 2.39 Mt of ore was mined, whilst 2.31 Mt of ore was milled. In February 2003 Cannington received approval to expand the project to a sustainable capacity of 2.4 Mtpa. This resulted in underground development into the northern zone, upgrades to the concentrator, increased accommodation at site and power station capacity. The Cannington project development team implemented a partnership approach to the project. Fraser Osborn Engineering and Outokumpu Technology worked closely together with the Cannington team to meet all of the project constraints.

Jan 1, 2004

Late Cretaceous and early Tertiary coals in the Greymouth, Ohai and Kaitangata coalfields represent a major national energy resource comprising-up to 2500 x 106 tonnes of coal in ground. The three coalfields are closely related in terms of age and sedimentary and structural character. The most striking feature common to all is the complexity of the geology which has severely restricted exploration and mining of these coal resources. This complexity is manifest in the irregular lensoid nature of coal seams and by the incidence of unpredictable medium and small scale faulting and folding. There are many geological similarities between these coalfields which are considered to arise from a common origin which can be related to the plate tectonic evolution of the southwest Pacific region. In order to efficiently assess and exploit these coal resources it will be necessary to know their geology in great detail. This can he achieved by increasing the understanding of the sedimentary and structural evolution of the coal bearing basins. This knowledge may be gained by the application of traditional (ie drilling, field mapping) and innovative techniques (ie high resolution seismic, in seam seismic) with on going research-oriented studies (ie basin analysis, coal petrography).

Jan 1, 1987

By J Meinhart, J Rodler, I Katolicky

The ever increasing number of vehicles is leading to slow-moving and even stationary traffic sitting longer in traffic jams over extensive city areas. This traffic situation causes a sharp increase in pollutant emissions from vehicles, and high levels of pollution usually result throughout the built-up area. Reducing the pollution level by using traffic routing measures to speed up the flow of traffic in the existing street network is only possible in exceptional cases.In many cases the only option for achieving a significant improvement in traffic conditions is to shift the traffic underground using a road tunnel or underpass. Such tunnel routes suck off the traffic from large sections of the city, thereby easing the overall traffic flow. Thus on the one hand it produces a sharp reduction in pollution levels in the area of the tunnel route, but on the other hand it can result in locally increased exhaust pollution levels from longer tunnel systems that require mechanical ventilation. The air extracted by the ventilation system is blown out into the atmosphere either directly through the tunnel portal, or via a venting tower. Pollution can therefore occur in the area surrounding such exhaust air outlets.Thus if a tunnel is planned in a city, then closer investigation is required of both aspects: the reduction in pollution in the area of the tunnel route thanks to relocating the traffic and easing congestion, and the increased short-range pollution around the tunnel portals (shafts).

Jan 1, 1999

By M Dorricott

This paper describes the design, construction and performance of sill pillars using cemented development mullock at the Crusader Gold Mine. The orebody is some 35 m - 60 m in length, 5 m - 8 m wide, dipping at 60¦ - 85¦ and plunging at about 40¦ to the north. It is accessed via a footwall decline. The ore occurs at the contact between basalt and ultramafic. This contact is characterised by shearing and alteration; and is prone to unraveling failure. The cut and fill mining method at Crusader extracts 25 m high ore blocks in four flat back lifts and one 8 m thick crown pillar. To enable full recovery of these high-grade crown pillars with minimal dilution, a 5 m thick sill pillar is constructed using cemented rock fill (CRF), after mining of the bottom two lifts in each block. Uncemented development mullock is used as rock fill (RF) for subsequent lifts. Development mullock and cement/water slurry is mixed underground to produce CRF. The fill is transported to the stope in LHDs and dumped on the floor. The sill pillar is advanced progressively, with compaction provided by the loader driving over the previously placed fill. Old jumbo rods are installed as shear pins along the flat dipping hangingwall to reduce the risk of rotational failure of the pillar. A fan of cable bolts is installed into the hangingwall to prevent unraveling failure in the sheared ground. Buffer blasting is used to minimise damage to the CRF sill pillar when the crown pillar below is extracted. At the time of writing, extraction of the crown pillar underneath the CRF has taken place at the 930 stope. The crown pillar was extracted successfully with dilution from the backfill and hangingwall minimised and 98 per cent of the gold recovered. This compares with pillars that were mined beneath uncemented backfill where only 70 per cent of the gold was recovered and where there was significant dilution from the backfill and from hangingwall failures. Where no CRF was placed, there were also numerous production delays caused by large rocks from the hangingwall blocking the stope brow.

Jan 1, 2002

By J J. Plumb, P D. Franzmann

A study was conducted to describe the microbiology of the MICCL Monywa chalcocite heap bioleaching operation. Microorganisms were detected in the heap using culture-based techniques and cultureindependent PCR-DGGE analysis of the 16S rRNA gene. The metabolic requirements, temperature and pH optima were determined for selected strains isolated from the heap material. Six strains (BH1-BH6) were enriched and isolated from heap solids and leachate samples. Phylogenetic analysis of the 16S rRNA genes showed that strains BH3 and BH4 were closely related to the acidophilic bacterium Acidithiobacillus caldus and strains BH5 and BH6 were closely related to Leptospirillum ferriphilum. The optimum growth temperature for L. ferriphilum was 41.3¦C and the optimum pH range was 1.1 to 1.5. A new species of Archaea was isolated from the heap samples. Cells of the proposed species, Ferroplasma cyprexacervatum (æcyprusÆ L.n. meaning copper; æexacervoÆ L.v. meaning æto heap upÆ), are non-motile pleomorphic cocci, capable of chemomixotrophic growth with ferrous sulfate and yeast extract. Cells grow anaerobically on ferric iron in the presence of potassium tetrathionate and yeast extract as electron donors. Growth occurs from 14¦C to 63¦C, with an optimum temperature of 55.2¦C. The optimal pH for growth was 1.0 - 1.2. The species was phylogenetically most closely related to Ferroplasma acidiphilum with a 16S rRNA gene sequence similarity of 95 per cent. Molecular analysis of mine samples (16S rRNA PCR-DGGE) detected the above-mentioned cultured strains of microorganisms as well as species of Sulfobacillus and other unknown Proteobacteria. The microbial community of the Myanmar bioleach heaps contained similar levels of diversity to a dump bioleach operation in Chile, but contained greater amounts of biomass than another heap bioleach operation in Australia. The operating parameters of the Myanmar heaps (low pH and moderate temperature) have selected for the growth of moderately thermophilic microorganisms that are more commonly found in extremely low pH acidic mine drainage sites than in heap systems. The novel species of Ferroplasma is thought to be involved in the aerobic and anaerobic cycling of iron within the heap bioleaching environment.

Jan 1, 2004

By G Solly, P J. Leevers

Day-to-day operating practices at existing operations need provide high quality data for decisions that will impact directly on the potential value of the available resource, in addition to meeting standards of quality expected of data used in feasibility studies that will be completed to obtain additional capital required to finance operational improvements. Drill hole location, down hole survey and assay data standards of accuracy and precision have received considerable attention in recent years. The authors propose that geological descriptions of both cored and non-cored drilling warrant at least equal attention, considering their fundamental role in establishing the framework used for geological modeling and resource estimation. The iron ore deposits of the Middleback Ranges have been a major source of iron ore for almost a century. High-grade hematite-dominant ore is currently mined by OneSteel from three open pit operations supplying ore to the companyÆs integrated steelworks at Whyalla. A review of OneSteelÆs future iron ore resources, commenced in 2002, highlighted the need for more flexible and comprehensive management of all forms of geological data used in resource evaluation. Driving this program was the information needs of feasibility studies of the Iron Magnet deposit, located beneath the existing Iron Duke and Iron Duchess mines. Prior to the beginning of 2003, resource evaluation drilling data collected by OneSteel was managed using an in-house system based on industry standard relational database software. The system was demonstrably effective in ensuring the fundamental integrity of basic drilling data, but lacked necessary capabilities for the acquisition and management of geological descriptions, geotechnical and geophysical data obtained by down-hole logging. OneSteelÆs existing system for the management and interpretation of geological descriptions was restricted to storage of a single three digit code for each lithological description interval. The original logs for a large number of older drill holes could not be located, having been either poorly archived or culled from the database in the belief that they did not contribute to the understanding of the resources currently being mined. The three digit codes represented a combination of lithological and stratigraphic descriptions, including many subtle variations in iron ore colour and texture believed to be associated with variations in geochemistry, but subsequently demonstrated to be either incorrect or inconsistently applied. This resulted in the establishment of a plethora of codes for a relatively small number of distinct lithologies. Improvements implemented by OneSteel geologists addressed these shortcomings by ensuring the new data management system: facilitated the objective description of lithological characteristics; distinguished between obsevations and interpretations (eg lithology versus stratigraphy); promoted consistency between descriptions provided by different geologists; and helped to ensure data integrity by developing an audit trail for alterations made to data subsequent to its acquisition. The data used to develop interpretations of mineralisation distribution and characteristics are fundamental to the effective utilisation of a mineral resource: any mineÆs most important asset. Resource related risk is widely recognised as the principal source of technical risks affecting resource development projects, whether they are new mines or expansions of existing operations. A key lesson from this work is that most commercial or æin-houseÆ developed geological data management systems are able to handle basic data validation tasks effectively. Geologists, however, need to ensure that the data management system is appropriately structured to help promote the acquisition of objective and consistent data for interpretation.

Jan 1, 2003

By M Simanjuntak, A M. Supomo

PT Freeport IndonesiaÆs copper/gold operation disposes of approximately 222 000 dry metric tonnes of tailings per day via two thickeners. Reduction of the flocculant dosage rates in each of the tailing thickeners has been achieved with the installation of Clarometers«, modifications to the existing operating DCS control strategy and a change in plant flocculant. This has reduced the flocculant consumption rate in the last twelve months by approximately 20 per cent. It has also highlighted the disparity in the settling rates of the two thickeners. Collaborative efforts between Cytec technical site engineers and Freeport operational personnel have made possible the overall gains achieved in the tailings thickener optimisation.

Jan 1, 2003

By C Xu, B Li

Multi-sensor fusion visual perception technology significantly enhances visual perception capabilities in complex and harsh environments by combining visual data from different sensors. This technology is especially useful for scenarios where traditional single visible light sensors, such as standard cameras, struggle due to poor lighting, adverse visual conditions, or other visual obstructions. In environments with low light, smoke, or dust, the performance of conventional visible light sensors degrades, limiting their application. By integrating data from various sensors like radar, infrared thermal imaging, and others, multi-sensor fusion technology provides a more comprehensive and complementary visual solution. This fusion not only enhances the robustness of visual systems but also greatly expands their potential applications in fields like visual surveillance. In recent years, deep learning methods have become the mainstream technology for addressing multi-sensor fusion issues, demonstrating significant advantages in adaptive feature selection compared to traditional machine learning methods. However, deep learning-based multi-sensor fusion algorithms still face several challenges. The design of network structures is often redundant, lacking effective screening of useful components within multimodal information. Mainstream fusion algorithms focus excessively on improving display effects without adequately considering the needs of downstream applications and tasks. Existing fusion perception algorithms are generally designed for open visual scenes and lack targeted design for complex visual degradation factors present in tunnel environments of mines. Current deep learning methods for designing multi-sensor fusion networks heavily rely on manual experience to create fusion modules. This reliance increases the complexity of network design and can lead to redundancy. Redundant network modules are difficult to identify in end-to-end learning tasks at this stage, significantly slowing down network inference and potentially interfering with the output of fusion perception. Additionally, training these fusion modules typically requires large amounts of well-annotated multimodal data, further increasing implementation difficulty and cost. For instance, the fusion network design proposed by Li and Wu (2018) focuses on extracting multimodal fusion features, while Zhao et al (2020) introduced a feature decomposition mechanism in the feature fusion and extraction modules. Researchers like Zhang and Ma (2021), Xu et al (2020), and Liu et al (2017) have attempted to improve network structures through dense cascades and the introduction of residual connections. Although these methods have improved the handling of multimodal information to some extent, they still face limitations in distinguishing between useful and redundant information, with redundancy persisting in network designs. Ideally, the design of fusion networks should be more intelligent, guiding network structure design heuristically based on the importance of different modal information for the current task. This would reduce information redundancy and network weights, requiring the development of new algorithms or frameworks capable of automatically identifying and optimising fusion strategies, thereby reducing dependence on manual experience while improving fusion efficiency and network performance. Current deep learning designs for multi-sensor fusion algorithms often overlook the

Sep 1, 2024

By Moon N. T, Torrance A. C

This study has considered the effect of mechanical shock on the resilience of the glass microspheres commonly used to sensitize an explosive emulsion. The damage to the glass microspheres caused by detonating cord, emulsion manufacture and the manufacture of the glass microspheres were considered along with the effect of sensitizer concentration on explosive performance. Reductions of up to 50% in the glass microsphere concentration of an emulsion explosive can result from poor initiation practice, such as the use of high strength detonating cord as downlines during initiation. Laboratory results suggest that detonating cords of strength greater than 3.5 g/metre should not be used as this can seriously affect explosive performance, particularly in small diameter charges. This reduced performance results from damage to the sensitizer elements and recrystallization of part of the emulsion phase.

Jan 1, 1990

By Heesteman LJL, Turvey DJ

The Mangani mine in West Sumatra is historically one of the most important precious metal mines in Indonesia, although the past production by World standards is small, totall- ing 5.66 tonnes gold and 242 tonnes silver. The geology is dominated by a distinctive NW-SE graben structure formed by dextral splay faults from the Sumatran Fault System. Quartz- rhodochrosite-rhodonite-Ag-Au veins are hosted by Tertiary pyroxene andesite volcanics and quartz-phyllite conglomerates, on N-S tensional fractures which intersect the Mangani graben. Intrusive rocks include andesitic dykes, pyroxene microdiorite, and hornblende granodiorite. Quartz-epidote-pyrrhotite alteration is related to concealed intrusions. Precious metal vein mineralization is characterized by: high Ag/Au ratio (>25); complex sulphide mineralogy of Fe, Mn, Ag, Cu, Pb, Zn, As, Se and the occurrence of Sn as stannite; low total sulphide content (

Jan 1, 1987

By J Hadjigeorgiou, T R. Stacey

A ground support system is a combination of individual reinforcement and surface support elements that work together to retain and contain the rock mass. The various elements are subjected to external loads and to interactive loading between individual ground support system components. This paper focuses on the challenges in determining the capacity and behaviour of mesh, recognizing that installed mesh can be subjected to several loading mechanisms. Field observations from underground hard rock mines demonstrate that there are multiple types of damage and modes of failure of mesh. However, these are difficult to reproduce in a laboratory environment. A critical review has shown that existing mesh laboratory testing rigs reproduce very limited loading conditions that may not be representative of underground conditions. This has significant implications in quantifying and extrapolating the performance of mesh to ground conditions. CITATION:Hadjigeorgiou, J and Stacey, T R, 2018. Challenges in determining the capacity of mesh, in Proceedings The Fourth Australasian Ground Control in Mining Conference (AusRock), pp 280–290 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Nov 30, 2018

By S Pontual

Compact and field portable infrared spectrometers have been increasingly used over the past few years by an exploration industry constantly searching for a technological edge and the ability to more accurately and rapidly assess project areas. In particular, this technology allows large amounts of data to be rapidly collected on-site and sample mineralogy, mineral crystallinity and mineral composition to be quickly assessed. In recent years, short wave infrared (SWIR) reflectance spectroscopy has proved useful in a wide range of geological environments and at various stages of exploration programs, from grass roots reconnaissance through drilling programs and resource evaluation. Unfortunately these data have frequently been analysed and interpreted in isolation using time consuming data analysis techniques removed from the realities of a fast moving exploration industry. This paper presents new analysis techniques which allow these data to be efficiently integrated in the exploration program. Although SWIR data contain a wealth of mineral information it is impractical to use this information in its raw form. A more effective approach involves the extraction of key characteristics of these data (ie mineralogy, mineral composition and crystallinity) as numerical values, and the integration of this ædigital mineralogyÆ with more conventional exploration datasets (eg geochemistry, coordinate data, etc). This paper demonstrates that the integrated analysis of sound geological observations, geochemical, spatial and spectral data can quickly lead to a greater understanding of the nature and distribution of target mineralisation. As a first step, software driven pattern matching routines enable the identification of the major clay mineral species in a series of samples (eg kaolinite, montmorillonite and sericite). This allows the major alteration facies and their spatial distribution to be identified. Quantification of diagnostic absorption feature characteristics then allows more accurate determinations of mineralogy to be made (eg mineral composition and crystallinity). Examples of the application of SWIR analysis for alteration mapping from selected porphyry and epithermal systems from around the Pacific Rim are discussed. The data presented are derived from a variety of locations and sample types including drill core, ridge and spur rock chip samples, soil samples and geochemical pulps. In these large alteration systems, the spectral data can be used to describe and map the distribution of various alteration facies as many of these are characterised by clay and phyllosilicate mineral assemblages and are detected by SWIR analysis (eg smectite, chlorite, biotite, illite, muscovite, kaolinite, dickite, pyrophyllite, alunite, etc). In addition, the ability to evaluate even subtle trends in mineral crystallinity and composition is often vital in these systems when looking for vectors towards higher temperature parts of the system. In addition to detailed evaluation of mineralogy, the integration of digital mineralogy data with geochemical data leads to the ability to describe not only geochemically anomalous intersections or regions but also to recognise associations between subtle changes in mineralogy and target mineralisation. This is often important because understanding these mineralogical associations can lead to more accurate targeting and rapid assessment of the project.

Jan 1, 1999

As this district is so far distant from the other mining centres and its mode of approach so circuitous, I am afraid that many residents of other portions of the Commonwealth never think of paying this" Australia's Silver City" a visit, to learn personally the many and various lessons everywhere available, and to become familiar with the really wonderful and interesting features and deposits (which pature has so lavishly bestowed in the mineralogical world) yet seemed to almost ignore or overlook when disposing of topogr,aphical beauties of landscape and vegetation) unless professional or business duties require their presence here. So it is to those whose life is necessarily spent in other parts of the States where they answer their call of duty, and yet feel an interest, either for business or other reasons, that my paper is specially addressed and prepared, and for that reason I witl endeavour to make my remarks more of an explanatory than a dictatorial nature. I feel sure that there. are many members of our Institute who are much more familiar, and have had many more years' experience in the various methods of timbering, filling, and ore extraction, etc., than myself, but I hope that over I6 years' experience in connection with mines and engineering works, the last six of which have been spent in Broken Hill, where, I have been very closely connected.

Jan 1, 1903

In recent years a number of explosive blends including ANFO, emulsion and watergel products have been used in a variety of ground types and applications. These `standard' explosives' technologies are not new, but out of the uses and applications, have sprung a new generation of tailored explosives that match the ground type and the operating environment. This is in stark contrast to the norm, where various patterns and loading configurations have traditionally been designed to accommodate the explosive. This paper discusses these tailored explosives and the explosives' technology behind why they work. Active tailoring of explosive formulations can save mining dollars while essentially leaving the explosive price unchanged. Tailoring explosives may lead to increased rock breakage, heave, digging rates; lower digging maintenance costs and in some cases replacing earth moving machinery altogether. Tailored explosives may have other benefits such as reduced over pressure compared with standard alternatives. The tailoring of explosive performance generally involves three major methods (other than changing the bulk density and sensitivity): (i) replacing fast burning reactants with slower burning reactants or vice versa; or (ii) leaving the explosive intact and diluting the entire explosive with slow burning or `inert' material; or (iii) changing the concentration of the fuel/oxidiser mix. When tailoring explosives for particular applications, authorising, testing, costing, manufacturing, and delivery systems must also be taken into account.

Jan 1, 1995

Vaal Reefs Mine annually produces some 75 tonnes of gold. Stoping operations, using a scattered mining method, are conducted on several reef horizons within Witwatersrand Supergroup metasediments of the Klerksdorp Goldfield. Current grades average 7.19 g/t Au over a 133cm stoping width. The reef horizons, of which the Vaal Reef is the most important, consists of 2.9Ga palaeoplacer deposits at the base of low angle unconformities. Typically, a reef comprises a mature quartz and chert conglomerate with a siliceous matrix and intergranular pyrite and carbon. Geologists are primarily responsible for underground mapping and supervising of drilling programs. To a lesser extent they are involved with sampling, grade control, ore reserve estimation, mine planning and rock mechanics. Due to a general decline in grades of gold mines, an escalation of production costs, and with the current weak gold price, it has become essential to improve production efficiencies. Consequently the role of the mine geologist has moved away from that of simply keeping the mining people "on reef'. Greater emphasis is being placed on refining geological models to assist in selective mining of the reef and investigations of secondary reef horizons are encouraged. Exploration within fault losses and re-evaluation of pillars is important, and geologists are becoming more involved with sampling and grade control exercises.

Jan 1, 1990

The hoisting system at the Newcrest Telfer mine is designed for a final duty of 7.35 million tonnes per annum at a hoisting distance of 1450 m. In terms of hoisting capacity (t/h) times hoisting distance it is one of the largest friction hoist installations. Initially, the hoist will be equipped for hoisting 6.5 Mtpa from 1100 m depth. This new drive technology is now well proven by ABB for mine hoist applications with the first installation in commercial operation since July 2001. To date 17 systems for medium voltage drives and another five for low voltage drives have been purchased from ABB for mine hoists. This paper will also deal with skip design and powerful data loggers with diagnostics for local and remote monitoring that are installed in the Telfer mine hoist.

Jan 1, 2005

Underground measurements, observations and computed simulations, started a long time ago were concerning the study of : - occurence of typical rockburst, - inducing, stretching of main fractures in the roof of caved longwalls. They made obvious a foundamental phenomenon of inducing of strata fractures involving contact be- tween two layers quite different in their elastic characteristics : coalseam and rocklayer.. The start of primary cracks in maximum abutment zone takes place in the rock near the contact surface. It is opening of crevasses induced by traction stress component resulting of difference of rigidity of both materials and no sliding on in- terface. Occurence and stretching of these crevas- ses are a rheological phenomenon so that the rate of advance and stops of the face influence the distance between the crevasses and the stretching of these ones. The characteristics of these cracks in space and time affect mining conditions. So it is for fractures proximity and expan- sion inducing eventual blocks formation in longwall roofs in front of faces, for depth and delay of road- ways ribsides fracturing, inducing some rockbursts. In longwalls roofs, cracks initiated in front of a face can be either quite close or quite distant each from the other one, according to the depth of crushed coal in front of the face, which af- fects also extension of the cracks.

Jan 1, 1988

By B Oostendorp, R van der Merwe, P

In order to assess whether polysaccharide depressants are strongly or weakly and reversibly bound to the surface of talc, a series of experiments was conducted on New York talc in which the floatability of the talc in a microflotation cell was determined. The talc was conditioned in solutions of carboxymethyl cellulose (CMC) or guar gum in 10-2 ionic strength Ca(NO3)2 or Mg(NO3)2. The talc was then washed with four successive aliquots of water, or cation solution, to try to remove the polymer and the flotation response of the talc was assessed. CMCs of different charge (DS) were used to assess the effect of charge on the strength of bonding. The results show that CMC and guar gum could be removed to a large extent from the talc surface by washing with water (the floatability was restored), however very little could be removed from the surface by washing with cation solution. The higher charge CMC was easier to remove from the talc planes in the absence of cations than the lower charge CMC. Thus CMC bonding to talc has been shown to be irreversible or very slowly reversible only if cations are present, implying that cations are necessary to keep the polymer bound to the surface of the planes to effect depression. The presence of ions in solution also had the effect of maintaining surface coverage of the talc by guar gum.

Jan 1, 2005

By M.J. Mitchell

Platinum-group minerals (PGM) are recorded from a number of localities along the Waiau River, western Southland, and the south coast of the South Island, New Zealand. At each locality, small amounts of PGMs were recovered as by-products of historical gold mining operations. During the period 1890-1950 an estimated 1000-2000 oz. of "platinum" were recovered from the region, the only area within New Zealand where PGM have been commercially exploited. The PGM suite of southern New Zealand consists of Pt-Fe alloys, IPGE (iridium subgroup, platinum-group elements) alloys, sperrylite (PtAs2), cooperite (PtS)and braggite ((Pt,Pd)S). The composition of Pt-Fe alloy exhibits considerable variation and two compositional populations are recognised. Some Pt-Fe alloy grains are chemically zoned. Iridium is the most abundant IPGE alloy phase and often contains considerable Pt, in contrast to osmium and ruthenium alloys. Cooperite and braggite grains are characterised by extremely low concentrations of Ni. R^~

Jan 1, 1995

By G A. Davis, D G. Laughton

The great variability of mineral and energy prices has motivated some governments to incorporate a windfall profits tax into their mineral taxation regimes. Windfall profits taxes are a means for governments to capture additional mineral revenue when mineral prices are considered higher than some historic level. Governments need to be aware of the effects of such contingent taxes on the exploration, development and operating decisions of mining companies. Mining companies need to be able to calculate the full impact of windfall profits taxes on the economics of their projects. This paper examines the valuation of a multi-phase copper-gold project in the presence of a windfall profits tax. Real options Monte Carlo simulation is used to characterise the different exposures of the mine owner and of the government to the risky cash flow streams that they receive from the project. The results highlight that Monte Carlo simulation paired with the real option valuation method is able to account appropriately for the differing risk exposures, while the traditional discounted cash flow valuation model is not. Our key conclusion for governments and mining companies is that the impact of contingent tax and royalty terms can and should be assessed using advanced valuation techniques, and the results used to improve contract designs under the constraint of actual and perceived fiscal system stability.

Jan 1, 2007