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By J. E. Johnson

Charcoal-iron is quantitively so unimportant compared with coke-iron, that its qualitative importance for many industrial purposes is entirely unkriown to many coke-furnace-men, and to the great majority of the inembers of this Institute. To explain this qualitative importance, and explain some of the fact,ors that affect the quality, are the objects of this paper. A brief review of' the commercial conditions governing the charcoal-iron industry is a necessary preliminary to any adequate treatment of the subject. The advent of coke-iron, which transformed the whole iron industry commercially, left intact a limited production of charcoal-iron in the East and South, which has been conducted almays on the basis of high cost and high quality, with correspondingly high selling-price. In the Northwest, particularly in the Lake Superior district, the development has been along totally different lines, for which the close proximity of the great iron-ore deposits and the great forests of that region mere responsible. When the great white-pine forests were removed there were left behind large areas of hardwood and hemlock, to which little attention was paid in the prosperous years of the white-pine industry. But when the latter declined, the demand for lumber, and the presence of lumber-men, probably more skilled than any others in the world, caused the gradual introduction of these woods into commercial use. It was a matter of ancient knowledge that hardwood made an excellent charcoal, and to utilize the cordwood left after the saw-logs were removed, by converting it into charcoal and using it to smelt ore from the adjacent mines, mas an obvious step. In some cases the establishment of the furnace occurred in-

Jan 1, 1913

By Jack White

This paper gives details of the results - of careful testing carried out on two types of ball mills, conical trunnion overflow and cylindrical grate discharge, on identical ore. The object of the test work was to determine which ball mill was the most economical to install for future extensions to the Mufulira concentrator.

Jan 1, 1950

By H. R. Wenk

This paper describes a workshop on deformation mechanisms and texture development in rocks. Empahsis is on relating macroscopic mechanical properties with microscopic structures and the methods of their quantitative analysis.

Jan 1, 1982

By Charles Will Wright

THE HIGHLY SPECIALIZED heavy air transport services to mining regions, such as exist in the New Guinea gold fields and in northern Canada, have been even more essential in the development of mines in Peru. Few nations have been con- fronted with greater natural obstacles to transport than has Peru, and without the plane it would have been impossible to get the machinery and supplies for the construction of power plants and mills to many of these interior mines, situated as they are over high mountain ranges, with muleback the principal means of transportation. As the mines within a district become important producers and warrant the expenditure, the mule trail is being replaced by automobile roads to connect with the railway stations and with the airports.

Jan 1, 1940

By Henri V. Reibell

Deep open pit optimization supposes very long and sedious calculations in order to assign the best shape of the pit and the best bottom level, which will give the biggest profit. Computers give the possibility to make these calculations. More over, they allow to multiply trial calculations so that it is possible to obtain more reliable results. The paper does not expose the computer program but only the way in which mining engineers can use it.

Jan 1, 1969

As will be noted from the paper following, the sampling and estimating of limestone replacement deposits is entirely different from such work on a vein or disseminated ore deposit.

Jan 1, 1925

By M. B. Yung

The Fu Chuan district lies near the eastern boundary of Kwang Si province in Southern China and is connected with the coast by the West river and its branches.

Jan 1, 1915

By C. D. Michaelson

Bridging the gap between have and have-not nations is one of the necessities of the present era. The responsibility for accomplishing this must be assumed by the affluent industrial societies of the world, both through their governments and through private enterprise. Despite a discouraging number of instances where companies established in underdeveloped countries have been expropriated, U.S. industry must not abandon such ventures. Instead, it should tailor them to the needs and aspirations of the host nations. One way in which industry can minimize the danger of expropnation is to enter into partnership with the government of the host nation. Kennecott Copper has recently done this in Chile, becoming 49% owner of a company formed to expand and operate the El Teniente mine. So far, the partnership has produced marked benefits not only for Chile, but also for Kennecott. The memory of D.C. Jackling serves chiefly to remind us how much we owe to the pioneers of our industry. Jackling was one of the giants. Orphaned at the age of two, he made his way through sheer persistence and plain hard work. His brilliance gave rise to a vision, and his tenacity made his vision a reality. Foreseeing that economies of scale would make the handling of low-grade ore profitable, he introduced the revolutionary concept of open-pit copper mining. During World War I, the defense effort of the United States was irnrneasurably strengthened by the tremendous supplies of copper from the western mines that Jackling had made possible. Again in World War 11, the demands for copper were supplied, and the nation once more had profound reason to be grateful to this rugged, stubborn man who had long ago ventured into the mountains and unlocked their wealth. We are now embarked upon another great era of change, and we must devise new concepts to meet it. The task is not only to create new techniques of mining, but to forge better ties between men and institutions which will let us work in harmony with the techniques we have. We might recall that while Jackling was a man of towering pride and formidable will, he was also adept at getting others to share his vision and join his purpose. Today our reach for cooperative endeavor must go far beyond our own shores as we seek to develop the buried riches of distant lands. And we would do well to remember that Jackling's remarkable insight would have come to nothing had not British investors been willing to provide much of the initial capital. As was true of so many early enterprises in America, European capital was absolutely essential. CORPORATIONS ABROAD - AN EXPANDING ROLE Today the situation is quite different. The United States is now a capital-surpIus nation and looks abroad for opportunities to employ its capital profitably. On the other hand, we have become dependent on foreign sources for supplies of vital raw materials, while we seek

Jan 1, 1970

By AIME AIME

SIR HENRY CORT HAROLD CARPENTER, F. R. S. professor of metallurgy at the Royal School of Mines, was presented with his Honorary Membership certificate in the A.I.M.E. on Oct. 18, at a luncheon in his honor in the Abraham Lincoln room of the Savoy Hotel in London. The presentation luncheon was attended by some thirty distinguished representatives of the academic and industrial British metallurgical world, all friends and acquaintances of Sir Harold. Frank W. Harbord and

Jan 1, 1938

William P. Blake, TUCSON, Ariz. (communication to the Secretary): As one who in youth, now nearly half a century ago, had the privilege of participating in the initial explorations which have alreacly resulted, within a single lifetime, in the establishment and Development of a vast continental empire, so well described by Dr. Douglas, I may be permitted to supplement with some additional details the comprehensive sketch given in his paper. Before the War Department, in 1853, sent out the Pacific railroad exploring parties, Fremont had already made his memorable expeditions, exploring the Great Basin and the passes into California; Sitgreaves had traversed, from east to west, the Zuni and Moqui country; and, still later, Emory had examined the region along the boundary-line between the United States and Mexico. The services of these pioneers deserve to be mentioned in even an outline of the history of continental development. Concerning the five practicable railroad-routes, suggested in the Reports of Explorations aid Surveys," etc., as published

Jan 1, 1900

By G. B. Walker, S. J. Swainson, S. A. Falconer

DURING the past few years much interest and attention has been focused on a relatively new method of ore concentration, which utilizes the principles of sink and float and employs as the heavy medium a suspension in water of a finely ground solid, such as galena or ferrosilicon. Although a relatively recent development, much progress has already been made in applying heavy-media separation processes to a considerable number of ores. Eight plants in this country and abroad -are now treating approximately 10 million tons of ore annually by heavy-media separation (sink-float) processes, including lead-zinc, lead, iron, garnet, tin and tungsten. At the annual meeting of the A.I.M.E. in 1941, three interesting papers (unpublished) dealing with heavy-media separation (sink-float) processes of ore concentration as practiced in four commercial units in the United States were presented by Victor Rakowsky, Grover Holt, Elmer Isern and Robert Ammon. These papers gave an excellent exposition of the principles of sink and float, as well as the operating practice in two iron-ore-beneficiation plants, the Harrison and the Merritt, of Butler Brothers, in Minnesota; the Central mill of the Eagle Picher Mining and Smelting Co.; and the Mascot mill, of the American Zinc, Lead and Smelting Co. Augmented by pictorial descriptions and a working model demonstrating the processes, these papers evoked a great deal of interest and discussion. In fact, in reporting the high lights of the meeting in the April 1941 issue Of MINING AND METALLURGY, Professor Taggart made the statement that "preconcentration by heavy suspension was Miss A.I.M.E. 1941 so far as milling is concerned." Although to date the greatest application of heavy-media separation from the tonnage point of view has been for the treatment of lead, zinc and iron ores, these processes have a much wider field of usefulness. In this regard, it is to be noted that recently new heavy-media separation plants for treating cassiterite ore and garnet ore have been placed in successful operation. Moreover, numerous other types of ores have been found to respond well to these processes when tested on a semi-commercial scale, and it is expected that in the near future a considerable number of new plants will be erected. In view of the fact that heavy-media separation processes offer such attractive possibilities, particularly now, when the mining industry is being called on for an even larger production than ever before has been attempted, despite shortages of labor and supplies, it was felt that a description of some of the successful separations that have been worked out during the past year in the Ore Dressing Laboratory of the American Cyanamid Co. on a variety of ores of strategic importance would be of interest. The purpose of this paper, therefore, is to present the essential data relating to investigations of heavy-

Jan 1, 1943

By Harry M. Bendler, W. A. Wood

Electron metallography has been applied to the study of the torsional fatigue of polycrystalline OFHC* copper. The development of slip bands, fis- sures, and microcracks has been followed as a function of strain amplitude and number of cycles. Those factors that have been found to be relevant to a geometrical theory of the fatigue process are described. From the point of view of this theory it is important to distinguish between the effects of cycling at large amplitudes and at small amplitudes (true fatigue deformation). EARLY investigations showed metal fatigue cracking is caused by continued reversal of a small plastic strain. Fundamental study of fatigue, therefore, has been largely concerned with the cumulative effects of these plastic reversals on the metal structure. In particular, recent work has shown that the plastic reversals produce slip movements that are finer than the slip movements produced by unidirectional increments of plastic strain; individual slip movements in fatigue, for instance, are too fine to see by optical microscopy.2 It has also been shown that the fine slip movements of fatigue tend to concentrate in bands and that in this way they can build up, after enough cycles, a progressive surface disturbance. It is this disturbance which, in effect, makes the slip movement visible. It is also in this disturbance that the first cracks appear to form. From this point of view, therefore, the problem of fatigue becomes one of finding why the fine slip movements should concentrate in bands and why the. bands should finally open into cracks. Thus far, study of the slip bands has been limited to the changes they produce at the surface only. These studies have given interesting results. Ewing and Humfrey3 many years ago showed that the bands in iron could extrude debris. Forsyth found that bands in aluminum alloys could extrude thin tongues of material. Thompson showed that, after lightly dissolving away the surface of copper specimens, some bands persisted as superficial cracks might, and that the life of a specimen under fatigue deformation might be prolonged by dissolving away the surface at intervals. Thus these and related results have suggested that the metal structure in fatigue bands may disintegrate and that this may happen long before obvious cracking. These surface studies, however, have not shown definitely how cracking may begin, for they do not show sufficiently what is happening in depth. However, some advance in this direction has been made recently by a new approach, summarized later, which reveals slip bands and their surface disturbances in section. In the work done thus far, the sections have been studied by optical microscopy only. In the present work they have also been studied by electron microscopy with extended results. This paper also describes some observations on the surface disturbances prior to sectioning. These observations are relevant to a suggested theory of fatigue cracking. REVERSED SLIP MOVEMENTS Slip movements in fatigue deformation must reverse direction in each cycle. The question arises: DO the "backward" and "forward" movements take

Jan 1, 1962

By F.S. Norcross

Manganese has long been considered one of the United States' most important strategic raw materials. Its indispensabil-ity in steel manufacture makes it vital to the nation's industrial life. Coupled with this indispensability is the fact that domestic producers have not been able as yet to supply more than a small part of the nation's manganese needs; consequently the United States has had to depend upon such distant foreign sources as the U.S.S.R., British India, the African Gold Coast and Brazil for the major portion of its ore. The great bulk of the mineral is consumed in the form of ferromanganese, an alloy that averages 80 per cent manganese and 20 per cent mainly iron and carbon. Manganese is used as a deoxidizer and desulphurizer in steel manufacture. By combination with the residual oxygen and sulphur of the bath, it helps to produce a clean, sound metal. Approximately 14 lb. of manganese, it is estimated, is used in making one ton of steel. For standard-grade ferromanganese, the ore should have a minimum of about 48 per cent Mn and preferably more. Beneficiation methods have not yet been developed for making the immense low-grade deposits in the United States salable at prevailing prices. Dependence upon foreign sources thrust the United States into serious difficulties during the World War. At the start of hostilities in 1914, the nation was obtaining about four-fifths of its ore from the Eastern Hemisphere. Domestic production had been negligible, amounting to only 3000 to 7000 tons a year. As the war continued, shipments from the East, endangered by sea attack and blockade, dwindled rapidly. Imports from Brazil mounted. In this grave emergency, the United States, starting almost from scratch and under the stimulus of high prices, succeeded by 1918 in producing a peak of 3II,000 tons, about 35 per cent of its consumption that year. Since the war, the United States has depended upon foreign sources for more than nine-tenths of its high-grade ore. During 1936, 1937 and 1938, imports for consumption averaged 736,000 tons a year. During the same period, domestic shipments averaged 21,000 tons a year. Of the imports, the U.S.S.R. accounted for an annual average of 280,000 tons, the Gold Coast 208,000 tons, India 74,000 tons, and Brazil 72,500 tons. But India and Brazil, which in 1936 ranked third and fourth in the list of importers, were displaced in 1937 and 1938 by a new and much nearer source—Cuba. From less than I per cent of United States imports in 1931, the island republic increased its shipments to more than 27 per cent in 1938. Cuba's average for this three-year period was 97,000 tons, and its total for 1938 was 131,000 tons. History The story of the economic development of manganese in Cuba dates back to the Spanish-American War days. John Green-way, then one of Theodore Roosevelt's

Jan 1, 1943

By F. S. Norcross

Manganese has long been considered one of the United States' most important strategic raw materials. Its indispensabil-ity in steel manufacture makes it vital to the nation's industrial life. Coupled with this indispensability is the fact that domestic producers have not been able as yet to supply more than a small part of the nation's manganese needs; consequently the United States has had to depend upon such distant foreign sources as the U.S.S.R., British India, the African Gold Coast and Brazil for the major portion of its ore. The great bulk of the mineral is consumed in the form of ferromanganese, an alloy that averages 80 per cent manganese and 20 per cent mainly iron and carbon. Manganese is used as a deoxidizer and desulphurizer in steel manufacture. By combination with the residual oxygen and sulphur of the bath, it helps to produce a clean, sound metal. Approximately 14 lb. of manganese, it is estimated, is used in making one ton of steel. For standard-grade ferromanganese, the ore should have a minimum of about 48 per cent Mn and preferably more. Beneficiation methods have not yet been developed for making the immense low-grade deposits in the United States salable at prevailing prices. Dependence upon foreign sources thrust the United States into serious difficulties during the World War. At the start of hostilities in 1914, the nation was obtaining about four-fifths of its ore from the Eastern Hemisphere. Domestic production had been negligible, amounting to only 3000 to 7000 tons a year. As the war continued, shipments from the East, endangered by sea attack and blockade, dwindled rapidly. Imports from Brazil mounted. In this grave emergency, the United States, starting almost from scratch and under the stimulus of high prices, succeeded by 1918 in producing a peak of 3II,000 tons, about 35 per cent of its consumption that year. Since the war, the United States has depended upon foreign sources for more than nine-tenths of its high-grade ore. During 1936, 1937 and 1938, imports for consumption averaged 736,000 tons a year. During the same period, domestic shipments averaged 21,000 tons a year. Of the imports, the U.S.S.R. accounted for an annual average of 280,000 tons, the Gold Coast 208,000 tons, India 74,000 tons, and Brazil 72,500 tons. But India and Brazil, which in 1936 ranked third and fourth in the list of importers, were displaced in 1937 and 1938 by a new and much nearer source—Cuba. From less than I per cent of United States imports in 1931, the island republic increased its shipments to more than 27 per cent in 1938. Cuba's average for this three-year period was 97,000 tons, and its total for 1938 was 131,000 tons. History The story of the economic development of manganese in Cuba dates back to the Spanish-American War days. John Green-way, then one of Theodore Roosevelt's

Jan 1, 1943

By J. H Lightfoot, Stuart E. Buckley

Deep drilling has led to the development of numerous pools which yield products consisting predominantly of natural gas accompanied by high-gravity water-white or slightly straw-colored liquid. Yields of this "condensate" or "distillate," as it is commonly called, vary from traces to over a hundred barrels per million cubic feet of gas. The fact that this liquid exists in the reservoir as an integral part of the gas phase and is formed by condensation attending simultaneous reduction of pressure and temperature after its entry into the well was apparently first recognized about 1932.l The nature of the physical phenomena involved in this condensation was clarified for the petroleum industry in 1933 by a report by Sage, Schaafsma, and Lacey2 of the results of an experimental investigation of the behavior of mixtures of methane and propane. Search of the literature has revealed that the condensation of liquid from gaseous mixtures by isothermal pressure reduction is not a new discovery. Kuenen was led by theoretical considerations to expect such a phenomenon, and in 1892 reported3 the results of experimental verification of his deductions. This was followed by a considerable amount of work on the phase relations of mixtures by Kuenen 4,5,6 and by 0thers,7,8 mostly in European universities. Since 1930 investigators in this country have reported experimental data on the properties and behavior of a number of hydrocarbon systems."' It is now generally known that in the presence of natural gas the solubility in the gas phase of the heavier and normally liquid hydrocarbons increases rapidly with increasing pressure above 500 to 1000 Ib. per sq. in. Thus, at pressures of 2500 Ib. per sq. in. or higher a gas may contain appreciable quantities of hydrocarbons with normal boiling points as high as 6o0°F., which in turn may be condensed from the gas phase by the reduction of their solubility therein attending pressure reduc-tion. The combined effects of pressure and temperature on condensation and vaporiza-tioi of mixtures are most readily visualized by the study of phase diagrams. Since the construction, application, and interpreta-tion of such diagrams have been described fully in readily available literature, 18-20 this paper will not review the theoretical aspects of this subject. While the behavior of gas-distillate sys tems is now clearly understood, at least in a qualitative way, most of the published work deals with the results of laboratory studies of binary systems or of synthetic mixtures of hydrocarbons, and although several systematic investigations of the effects of separator pressure and temperature on the yields of liquid product from gas-distillate wells have been made21,12z it appears that in all cases the limitations have precluded the construction of even approximately complete phase diagrams for naturally occurring systems. There has 2

Jan 1, 1941

By J. H. Lightfoot, Stuart E. Buckley

Deep drilling has led to the development of numerous pools which yield products consisting predominantly of natural gas accompanied by high-gravity water-white or slightly straw-colored liquid. Yields of this "condensate" or "distillate," as it is commonly called, vary from traces to over a hundred barrels per million cubic feet of gas. The fact that this liquid exists in the reservoir as an integral part of the gas phase and is formed by condensation attending simultaneous reduction of pressure and temperature after its entry into the well was apparently first recognized about 1932.l The nature of the physical phenomena involved in this condensation was clarified for the petroleum industry in 1933 by a report by Sage, Schaafsma, and Lacey2 of the results of an experimental investigation of the behavior of mixtures of methane and propane. Search of the literature has revealed that the condensation of liquid from gaseous mixtures by isothermal pressure reduction is not a new discovery. Kuenen was led by theoretical considerations to expect such a phenomenon, and in 1892 reported3 the results of experimental verification of his deductions. This was followed by a considerable amount of work on the phase relations of mixtures by Kuenen 4,5,6 and by 0thers,7,8 mostly in European universities. Since 1930 investigators in this country have reported experimental data on the properties and behavior of a number of hydrocarbon systems."' It is now generally known that in the presence of natural gas the solubility in the gas phase of the heavier and normally liquid hydrocarbons increases rapidly with increasing pressure above 500 to 1000 Ib. per sq. in. Thus, at pressures of 2500 Ib. per sq. in. or higher a gas may contain appreciable quantities of hydrocarbons with normal boiling points as high as 6o0°F., which in turn may be condensed from the gas phase by the reduction of their solubility therein attending pressure reduc-tion. The combined effects of pressure and temperature on condensation and vaporiza-tioi of mixtures are most readily visualized by the study of phase diagrams. Since the construction, application, and interpreta-tion of such diagrams have been described fully in readily available literature, 18-20 this paper will not review the theoretical aspects of this subject. While the behavior of gas-distillate sys tems is now clearly understood, at least in a qualitative way, most of the published work deals with the results of laboratory studies of binary systems or of synthetic mixtures of hydrocarbons, and although several systematic investigations of the effects of separator pressure and temperature on the yields of liquid product from gas-distillate wells have been made21,12z it appears that in all cases the limitations have precluded the construction of even approximately complete phase diagrams for naturally occurring systems. There has 2

Jan 1, 1941

By Robert H. Richards

Jan 1, 1883

The Enquirer of October 13, 1835 carried a letter signed "G," calling attention to the great number of Virginians who were leaving the state and to the lack of enterprise shown in not developing the ample natural resources available. He mentioned coal in particular and in closing said: "Besides the coal mines owned by individuals, the Black Heath company of colliers are carrying on extensive operations. Owing to the derangement of the currency, and the immense expenses incurred in boring and sinking new shafts, I understand that their dividends have not yet been so large, as they may be confidently expected in future.-Another company, under the title of the Midlothian Coal Mining Company, is now about being organized by the Messrs. Wooldridges of Chesterfield, for the purpose of establishing an extensive coal business. Having examined the lands embraced in the charter and the principles upon which the company is designed to be organized, I am persuaded that more productive stock can no where be found. The charter embraces a space nearly equal to a mile square, adjoining the mines of the Black Heath company, those of Mr. N. Mills, and those of Stone Henge, which space must contain coal of great thickness of excellent quality, as the strata of coal of those other mines pass through it; exhibiting a field so extensive, that centuries may elapse before it is exhausted. A shaft has been sunk on these lands, from which a very large quantity of the best coal is being raised. The terms of the charter require the Proprietors to sell one-half of these lands and mines, from the sale of which they will appropriate $100,000 as permanent capital, to purchase hands and engines, and to sink other shafts to work the property and thus going into operation with such decided advantages, as to produce a profit as great as a reasonable man should desire. Here is an opportunity for investing capital, which I think should satisfy the wishes of many Virginians who speak of emigrating. Will they not embrace it?-I have confined my remarks to the coal mines, because they are in the heart of our State, and their operations are familiar to many who can verify the statements. I might extend them to the other mineral treasures of our State; but if I do so, they must be reserved for another number, this being longer than I intended, and perhaps longer than you can conveniently find room for in your crowded columns. G." In January 1828 the Tuckahoe Canal Company was authorized to construct a canal along Tuckahoe Creek, from the James River up the stream about five miles; later this was amended to allow the use of the stream with a depth of water of two feet, no tow path was required, or provided: A toll of one cent per bushel was collected and the canal company made large profits. The service was so poor that in December 18, 1835, John G.,

Jan 1, 1942

By J. W. Stewart

THE aim of this paper is to point out the various ways in which design is taught in standard four-year mining engineering curricula in American colleges and universities; to discuss the reasons apparently justifying the great diversity of procedure that exists along this line; and to indicate possible solutions to the difficulties now attending the teaching of design. A study was made of typical four-year mining engineering curricula in 15 colleges and universities of the United States (Table I). Great diversity in content of the various design courses, if taught as described, became apparent immediately. It appeared that it might be both interesting and instructive if the cause for this colorful variety could be found. Was the cause local mining conditions, departmental individuality, or actual necessity? Study of the school catalogues revealed that the various design courses could be classified into two fairly distinct types; namely, (I) those dealing with mine equipment or structures, and (2) those dealing with underground layout of mine workings. It seemed reasonable to label the first type of course "mining design" and the second type "mine design." Some such distinction must have been in the minds of mining educators, for we find both names (i.e., mine design and mining design) used to designate the design courses included in the various mining curricula. Unhappily, the name and the apparent content of such courses do not, in all instances, conform to the classification made here, although in most instances such conformation does obtain (Table I). It is possible that in the exceptional case the method of teaching a design course, and consequently the content of it, may have been changed at some time without change in the name of the course. Apparently only 3 of the 15 schools made an effort to cover both types of design in their curricula (Table I). Two other schools did not list or describe any course of study that could with certainty be taken as a design course. Of the remain¬ing to schools, 9 gave a mining-design type of course and one gave a strictly mine-design type. Obviously, the preponderance of design courses afforded are of the mining-design type. Why? To answer this question, it is necessary to make a study of the prerequisites for the two types of design courses taught. In all schools the design courses were taught in the senior year; in eight, design was taught throughout both semesters; in two, it was taught during the first semester only; and in three it was taught during the second semester only. Consequently, excepting the last three cases noted, it is obvious that all prerequisites for a design course should be completed by the end of the junior year. PREREQUISITES What are the probable prerequisites for the different kinds of design courses as they appear to be taught? Let us take first the case of the mine-design type of course, having to do with layout of underground workings. Here it would seem that logical

Jan 1, 1941

By Phillip Crowson

INTRODUCTION This discusses some of the economic risks and uncertainties which face any company investing in new mineral ventures. These differ mainly in degree rather than kind from other large capital intensive projects, except that economic risks are compounded with technical risks. Mines face a wide variety of physical risks, and in addition the ore reserves may not prove as ample, nor as amenable to treatment as the feasibility studies indicate. On the economic front, mineral projects are subject to risks of fluctuating prices and sales volumes, no matter where they are located, or how they are financed. Typically, they are heavy users of capital compared with their owners' internally generated funds. Long term debt of various types is still the favoured form of finance. A project's currencies and cost often differ from each other and from those of the parent company. Facing up to the various risks associated with fluctuating and uncertain revenues, interest rates and exchange rates are amongst the hardest tasks for natural resource companies. ATTITUDES TO THE MINING INDUSTRY Some have questioned whether the game itself is now worth playing. They have argued that the mining industry's mediocre rewards in the past decade have been insufficient, compared with the risks involved. They can see no prospect of dramatic improvement in the next decade. Demand is highly cyclical and tends to grow less rapidly than economic activity, as a whole. Barriers to entry are low in most mineral markets, but impediments to exit can be substantial. Exit is especially problematic in those minerals where there are large state shareholdings and/or where less developed countries are major producers. The consequence is claimed to be an endemic tendency to excess capacity, and prices barely adequate to cover marginal cash costs. Many of the petroleum companies that moved into mining with such high expectations in the late 1970s have retreated, often bearing the scars of heavy losses. Individual shareholders, taken collectively, place low valuations on their investments in mining companies. The price/earnings ratios of the major mineral producing companies are low compared with their historical averages and with those of other industries. PRICE: EARNINGS RATIOS (October 1988) [UK Industrials 12.0 RTZ 8.4 Cons Gold 12.2 US Industrials 13 - 13.4 Alcan Alcoa Amax Asarco Cyprus Minerals Freeport Copper Inco Inspiration Magma Copper Newmont Mining Nord Resources Phelps Dodge Reynolds Metal Canada TSE 300 10.6 Cominco 8.7 Falconbridge 5.3 Noranda 7.0 Rio Algom 7.2 Teck Corporation 17.] NOTE: Mining companies' p/e based on prospective 1988 earnings, from Kleinwort Benson Securities' weekly Mining World, October 1988. Until 1987, it was argued that share prices correctly reflected the companies' poor earnings potential. Subsequently, the argument has been that earnings have been unnaturally boosted by cyclically high metal prices. The stock market valuations, therefore, correctly reflect future earnings, or at least expected earnings. This seems to be a case of Heads, I win; Tails, you lose. The underlying analysis of metal markets appears

Jan 1, 1990