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By Robert L. Bates

Definition An industrial mineral, says the Glossary of Geology, is "any rock, mineral, or other naturally occurring substance of economic value, exclusive of metallic ores, mineral fuels, and gemstones; one of the nonmetallics." Probably most geologists and engineers would accept this simple and straightforward definition, at least as a general statement. On analysis, however, certain anomalies crop up. For example, it may be considered arbitrary to include industrial diamond and corundum and to exclude their precious varieties, gem diamond and sapphire. So the present volume has a section on gems and gem materials, in spite of the definition. Another problem arises when we try to define precisely what is metallic and what is nonmetallic. Bauxite and ilmenite certainly qualify as metallic ores, but both are also raw materials of important nonmetallic substances; hence they are included in the book, A third anomaly is that, by common consent of geologists, engineers, mineral economists, and others concerned, the term industrial minerals may include not only rocks and minerals but also certain manufactured products like cement and lime, and even mixed groups of natural and artificial products, such as abrasives and refractories. Thus the central realm of the industrial minerals is clear enough, but its boundaries tend to be indefinable. Since a definition that allowed for every irregularity in the outer fringes would be excessively unwieldy, the one quoted above may be considered satisfactory. The expression industrial minerals is commonly equated with nonmetallics, and with the somewhat more precise phrase industrial minerals and rocks as in the title of this book. Characteristics of the Field The industrial minerals as broadly interpreted are a highly diverse group of materials; indeed, we may say paradoxically that diversity is about all they have in common. At one end of the spectrum are ordinary earth materials such as gravel and crushed stone, with a value of perhaps $3 per st; at the opposite end are industrial diamonds, which sell (by the carat) at the rate of roughly $18,000,000 per st. Neither the metals nor the fuels, and few if any categories of manufactured products, include items that differ in value by more than six orders of magnitude. Most gravel and stone are of no value unless close to a market; diamonds and other exotic substances possess such unique and desirable properties that their occurrence in remote corners of the earth is no deterrent to their use. The broad range of industrial minerals falls between these extremes of unit value and place value. The industrial minerals penetrate the entire fabric of modern industrialized society, from such fundamental operations as drilling for oil and smelting iron ore to the manufacture of virtually the whole array of consumer products. There is no industrial-minerals industry; there are many industries. The simple term field is convenient as an all-inclusive expression. An industry is considered to belong in the industrial-minerals field if its operations consist of extraction and processing, but not manufacturing. Thus the mining and beneficiation of feldspar is a mineral industry, but the manufacture of ceramic products is not. In the cement and lime industries, processing merges into manufacture, and the line is less distinct. It disappears altogether in a plant that extracts salt as artificial brines, and makes sodium and chlorine chemicals, all under the same roof. An aspect of some industrial minerals that differentiates them from the metals is that their physical properties carry over into ultimate use of the product. Such minerals as mica, asbes-

Jan 1, 1983

By R. M. Bird

Few persons outside of the foundry trade have any conception of the great variety of sands now regularly specified and furnished, nor of the differences in foundry practice frequently resulting from apparently minor changes in sands. Conditions in each locality where the sands are mined and prepared necessitate special equipment designed to perform the work efficiently. The description that follows of the foundry-sand producing operations is typical of the areas in New York and New Jersey, and particularly refers to the operations of the George F. Pettinos Co. A few years ago the so-called Albany sands were dug by simple methods and hauled by horsecart to railroad. Depletion of sand near railroad sidings and extended use of automotive power have appreciably extended the area from which sand is now being dug. It is not unusual to haul 5 miles to the railroad. As stripping is quite shallow, 6 to 18 in., and the banks of usable sand generally run from 12 in. to 4 ft., it is economical to work the bank by benches so narrow that the overburden can be thrown by hand shovel to the exposed bottoms. In effect the top soil goes back to where it was, but on a lower level. Consequently the general surface appearance of a mined acreage is the same as before. This condition is in fact cutomarily required when a farm owner sells his sand in the ground. After such replacement, in the course of 3 to 5 years the soil is no less fertile than it was before mining. The sand itself varies as to grain and bond vertically and also along the breast. No mechanical equipment has been developed to compete with hand shovels and no machine has as yet been devised that grades the sand as required. Uniformity of sand, as shipped, depends first, last and all the time on the man on the job. Mixing equipment can change the appearance of the sand and mask its lack of uniformity, but it will never correct wrongly graded sand, dug from the bank. Modern methods of testing are helpful in setting up standards against which the man in the bank can compare his sands, but a good bank foreman is the only assurance that the sand, as dug, matches the required sample.

Jan 1, 1926

By T. D. Murphy

This chapter deals with those types of silica raw materials that have been segregated and refined by natural processes into nearly monomineralic deposits and hence, by virtue of their high degree of purity, have become the sources of commodities having special and somewhat restricted commercial uses. In some instances, these raw materials occur in nature as unconsolidated quartzose sand or gravel and can be exploited and used with very little preparation and expense. More often, they occur as sandstone, conglomerate, quartzite, quartz mica schist, or massive igneous quartz which must be crushed, washed, screened, and sometimes chemically treated before commodities of suitable compositional and textural characteristics can be successfully prepared. The occurrence and distribution of silica raw materials is summarized and an effort has been made to bring commodity definitions, critical properties, and specifications up to date. Presentation of mining and processing methods is considered beyond the scope of this article; they are, for the most part, conventional and well known. New production techniques are currently reported in the trade journals and are later adequately described in technical publications as promptly as competitive restrictions allow. Discussion on Basis of Use ABRASIVE USES Industrial silica used for abrasive purposes falls into three main categories: (a) blasting sand; (b) glass-grinding sand; and (c) stone-sawing and rubbing sand. Blasting sand is a sound closely-sized quartz sand which, when propelled at high velocity by air, water, or controlled centrifugal force, is effective for such uses as cleaning metal castings, removing paint and rust, or renovating stone veneer. It is commonly referred to as Sand Blast sand. Multicycle quartz sand is an efficient blasting agent by merit of its survival characteristics which are soundness, toughness, and hardness. Steel grit and shot have supplanted it to a large extent but owing to their higher cost and tendency toward deterioration in storage, are still not universally used. It is conceded that angularity promotes faster cutting but this is offset by a higher loss in fines. The peening action of a rounded grain is a desirable feature in achieving a satin finish for certain light metal castings but a subangular grain is unsurpassed for fast heavy cutting. Specifications are chiefly based on size frequency distribution but it is mandatory that the grain be free of adhering clay or irony coatings. Material that dusts upon handling will not be tolerated. There is no uniform trade designation for the many blasting sand grades. Most producers sell on the basis of numbered grades; that is, No. 1, No. 2 and so on, this generally connoting fine to coarser grades. Designation of grade by the two sieve sizes between which most of the material lies, is practiced in some areas. Thus, in a No. 1220 grade, 98 pct of the material passes a 12 mesh sieve and is retained on a 20 mesh sieve. Blasting sand specifications vary according to use. Coarse grades range from 4 mesh to 12 mesh, medium grades range from 12 mesh to 30 mesh, finer grades may range from 20 mesh to 100 mesh or finer. Specifications generally call for narrow limits of gradation, requiring precise sizing methods. The fact that most blasting sands are retained

Jan 1, 1960

By C. R. King

Most of the acid volcanic glasses such as obsidian, perlite, pitchstone, pumice, and pumicite (volcanic ash) are susceptible to some expansion if suddenly subjected to a suitably high temperature in a properly designed furnace, and subsequently suddenly cooled. Expansion results from the action of chemically combined or dissolved water expanding as a vapor within the softened heated rock particles. This expansion forms countless minute bubbles within the pasty mass of the natural glass particles. If the particles are cooled before these bubbles can escape, the resulting products are cellular, more or less spherulitized glass froths or hollow glass spheres of many types. Chemically, they are essentially aluminum silicates containing about 70 to 75 pct silica, 10 to 16 pct alumina, and 2 to 7 pct sodium plus potassium oxides. They are relatively resistant to attack by acids or alkalies, are resistant to heat up to over 1000°F, and are completely inert to insect or fungus attack. These products are of great potential value in many branches of industry as insulation materials, aggregates, fillers, abrasives, and additives. By proper selection of the perlite rock type and control of processing conditions, expanded perlite of a bulk density varying from about 2 to 20 Ib per cu ft can be • made. The physical properties of the particles comprising a product of a given bulk density also may be varied within wide limits of porosity, water absorption, and crushing strength. In general, crushing strength of expanded perlite increases in direct relation to increase in bulk density, but insulating value varies in inverse ratio to bulk density. The selection of a particular grade of expanded perlite for a given use as an aggregate is therefore always a compromise between insulating value, lightness, and friability. If porosity and water absorption are factors affecting the use of the material, factors other than bulk density are important. Some types of perlite rock tend to decrepitate excessively during expansion, resulting in a highly porous or even hygroscopic product of high friability relative to the bulk density of material produced. In general, treatment of any good perlite rock below the temperature necessary for maximum expansion, or insufficient time in the hot zone of the furnace for effective heat penetration to the core of the rock particles will result in some decrepitation and high porosity in the expanded product. On the other hand, exposure of the material to the temperature required for optimum expansion for a period of time slightly longer than that necessary for proper heat absorption will result in a slightly heavier product of extremely low porosity, i. e., a glazed surface. It is beyond the scope of this paper to describe in detail the rock types and processing methods used to produce the many types of expanded perlite in present use, or that may be produced to fill the present and future needs of industry. A few phases of the economics involved in processing and selling products made from this abundant and cheap mineral raw material, plentifully distributed in large and relatively accessible deposits in most western states and in other areas within economic shipping distance of large centers of consumption, will be treated with particular reference to the Los Angeles area. Relation of Balk Density to Use and Cost of Production Perlite differs from most other lightweight aggregates and fillers in that the raw material (perlite rock) may be quarried much as rock arid sand is mined, and then shipped into consuming areas as crude rock in open gondola cars at correspondingly low freight rates and handling costs. At processing plants in or near large consuming areas the rock is converted into relatively fragile, very bulky products which in most cases are used within a short haul of the processing plant or enter into a manufactured product made at the site of the perlite processing plant.

Jan 1, 1950

By E. D. Gardner, E. M. Sipprelle

The Synthetic Liquid Fuels Act (58 Stat., 190; 30 U.S.C. Sup., Secs. 321-325) was approved by Congress April 5, 1944; it directed the Bureau of Mines to build demonstration plants to produce synthetic liquid fuels from coal, oil shale, and agricultural products. The most important oil-shale deposits in the United States are in the Green River formation of Colorado, Utah, and Wyoming. The oil shale of western Colorado generally is more amenable to exploitation, more persistent, and apparently richer than elsewhere in the Rocky Mountain Region. It occurs at the top of a high plateau surrounded by bold, nearly vertical escarpments 500 to 600 ft in height. The top 400 to 500 ft of these escarpments comprises an oil-shale measure that averages 15 gal of shale oil per ton; the bottom 70 90 100 ft of the measure, called the Mahogany Ledge, averages over 30 gal per ton. The full measure in a 1000-square-mile area is estimated to contain 300 billion barrels of shale oil;' the Mahogany Ledge is estimated to contain 100 billion barrels of oil. These estimates are based on numerous surfac,e samples and on core-drill holes drilled by the Government and by private enterprise. The oil-shale beds are undisturbed and lie nearly horizontal. The name "oil shale" is unfortunate, as the rock is a tough, strong marlstone. Organic matter named "kerogen" is a constituent of the rock. The oil-shale demonstration mine is on Naval Oil-Shale Reserve No. 1; it is about 5 1/2miles by mountain road from the plant site, which, in turn, is 2 miles from U.S. Highway 6 and 10 miles west from Rifle, Colo. The highway parallels the Colorado River, the Denver and Rio Grande Western Railroad, and a 66,000-volt public-utility power line. Early in the program it was realized that an oil-shale enterprise would have to be on a large scale to be commercial, and that unusually low mining costs would be necessary. The physical characteristics of the Mahogany Ledge and an overlying roof stone are unusually favorable both for large-scale operation and low mining costs. Quarry practices largely will be followed underground to mine the Mahogany Ledge. The aim has been toward complete mechanization of all mining operations. A mining unit would comprise a square mile containing 100,000,000 tons of oil shale with allowance for mining losses. An investment of $1,000,000 would be $0.01 a ton; such an expenditure, therefore, could be made to save, say, $0.015 per ton daily operating cost. A goal of a mining cost of $0.50 per ton was set up in 1945. Open-cut mining costs then were about $0.25 per ton of material handled; it was hoped that a cost double this amount could be obtained in mining the Mahogany Ledge. Costs of labor and supplies have increased since 1945 and so has the selling price of petroleum products. To those unacquainted with the character of the Green River deposits, the name "shale" suggested high mining costs. Others assumed that coalmining costs of $2 to $5 per ton would apply. To many, the expected mining costs appeared the principal handicap to the establishment of an oil-shale industry. The purpose of the Bureau of Mines is to demonstrate methods and to establish costs for mining the oil shale on a large scale. It is hoped this work will lead to the establishment of a large-scale, commercial oil-shale enterprise.

Jan 1, 1950

By L. C. Raymond

Valuations in the mineral industry differ from those of other enterprises because mines and oil wells have a definite life so cannot be considered a perpetuity. This requires that in any mineral-property evaluation the recovery of invested capital is necessary during the life of the property. Capital write-offs for nonextractive industries are assumed to be continuously plowed back to sustain the operation and produce yields on the capital invested. The extractive or mineral industry, however, generally attempts to return to the investor both interest and principal during the life of a property. Normally this is done currently and the dividend includes both items. Where the mineral property possesses large reserves and the life factor approximates a perpetuity, the return on investment is generally comparable to that of industrial stocks. The valuation of a mineral property, at best, is based on educated estimates and judgment factors. This is particularly true as it relates to estimating selling prices over a long term or assessing the quality of management. Also, it is possible to make various assumptions as to rapidity of working out the deposit, varying time for start-up of operations, varying earning rates, so as to obtain different results with the same basic facts. Thus it is not surprising that two engineers, irrespective of their abilities, may not agree exactly even when given the same facts, but their results should be close enough to be used in establishing a fair value for trading purposes. The valuation is no better than the source of basic data and the soundness of judgment factors. Fundamentally the basic principles of mineral valuation are similar for base metals, sulfur, oil, or any other mineral. Each mineral, however, requires an engineer to have a knowledge of such factors as its occurrence, distribution, mining and processing methods, and marketing problems in order to gather and analyze all the facts and data that have a bearing on the earning potential of the property. Present Value of a Mineral Property In essence the present value of a mineral property is a sum of money in today's dollars that future income from the property are worth. It differs from the total anticipated earnings by the amount of the interest that the unrecouped investment could be expected to earn during the period of recoupment. Thus, if one could accurately estimate what a mineral property will earn during its life, after deducting all operating, administrative, capital, interest, and tax charges, the determination of present value would be a relatively simple mathematical calculation. Normally, where the expected life of the mineral property extends beyond 20 or 25 years, the discounted value of earnings beyond this period is relatively small. The petroleum industry generally discounts the annual cash flow of an operation rather than earnings since, for tax-saving purposes, earnings are kept

Jan 1, 1976

By Edgar F. Cruft

INTRODUCTION It is sometimes said that "mines are made, and not found." I rather doubt that the exploration geologist would be overly sympathetic to that statement, and, of course, like most one-liners it is only partly true. Access to different financial markets are important at the mineral prospect stage. The modern mine financier has a much more complex, and interesting, job than the financiers of an earlier era, for example, the Canadian financiers of the 40's and 50's who had one simple set of options; i.e. float a company, promote it, and sell an equity stock issue, and then promote it some more. QUALITIES OF A FINANCIER Because technical people are seldom taught financing in their basic training, and because they are usually not involved in it until at quite a senior level in their careers, the whole field often acquires a certain mystique. The engineering professions have too often believed financing is the province of the accountant or financial executive and just as we in the technical world are often too quick to bristle if the latter try to tread on our domain, the opposite can just as easily be true. Unfortunately, this is another example of a compartmentalized individual, and that is one thing the successful financier cannot be. However, to be a successful financier one does not need extensive training or experience in accounting or finance. In fact it can sometimes be a disadvantage to get too buried in working only from the standpoint of discounted cash-flow analyses, ROI's, etc. It must be stressed, however, that one had better know how these analyses are made, and be knowledgeable in understanding a balance sheet, and have a good understanding of financial terminology. The difference between a simple project-type debt financing with a commercial bank and a more inventive and creative financial package comes from an intuition and an experience relating to risk-reward factors. The most important element is "common-sense", based on knowledge and experience. The goal is structure a financial package that fits the project, and in so doing it is important to recognize that it must fit within the limitations of the group supplying the money. I find insensitivity to recognize these constraints the most common mistake made in the field. Put yourself in the other person's place and understand his sources of funds and financing limitations. The engineer has an advantage in financing, as he or she has (or should have) a better idea than anyone of the value of the product, be it the mine, prospect, or company i.e. the intangible or potential worth which cannot be put on a pro-forma. He also knows, or should know, the risks involved. Two projects might look the same on paper, but a good financier must have a sense of when to take whatever deal he can get, and when to hold out based on his evaluation of future developments. It is essential to have a good sense of commodity values and trends, trends affecting the general economy (money supply, interest rates, effects of energy costs, etc.), and political considerations. He must also have a good understanding of the science and art of taxation as deals can often be financed using the government as a silent and unwitting partner by proper use of the tax laws. WHEN TO SEEK FINANCE The first critical decision to make in financing a mineral prospect is "when". At the exploration level, when it is only a dream in the geologist's eye, the alternatives are more limited than when it is a fully-engineered project. The "when" decision depends on how much in internal funds the company has to play with, and how desirable it is to invite financial participation to spread the risk. Assuming that decision is not taken out of lack of money, no one can categorically say when to do it. There is

Jan 1, 1985

By Michael A. Gustafson, Fernando B. Sotelino

INTRODUCTION The degree of success of any new project will ultimately depend on two factors: (i) the underlying economic strength of the project; and (ii) how successfully the parties involved can coordinate their interests to establish a financing structure which indeed capitalizes on the project's inherent economic attractiveness. A project's underlying economic attractiveness is determined by its inherent comparative advantage in accessing the factors of production, combining these factors of production to create a product and marketing this product. Initially, the decision regarding whether to go ahead with the project - the go/no go decision - has to be based on its total ability to generate cash flow returns to project participants to compensate them for resources committed and risks undertaken. The extent to which project sponsors will actually benefit from the project's inherent economic attractiveness is fundamentally dependent on their ability to establish the long-term financing arrangement which best meets the objectives and constraints of each project participant and sources the most advantageous funding. The decision regarding the financing of the project, the "how-to-go" decision, is then an attempt to find the capital structure, consistent with market terms and conditions and sound financial management policies which will best: (i) match planned outflows with cash inflows; and (ii) maximize the return for project sponsors. This article makes use of a case study to illustrate the analytical process involved in dealing with the go/no go and the how-to-go decisions on a project. Though most commonly applied to project finance situations, the guideline described herein is equally applicable to other financing situations, such as leveraged buyouts and debt restructurings, where timely repayment of debt depends largely on the future cash flows to be generated by the entity being financed. Our case study is of a hypothetical expansion of an existing copper mining operation in Latin America. The company, Latin American Copper (LAC) currently has 147 million metric tons of proven sulphide ore reserves. The existing mine complex consists of an open pit mining operation and a conventional flotation plant with a processing capacity of 20,000 metric tons of ore per day. LAC sells copper concentrates primarily to Japanese custom smelters. The mine has been in operation for 5 years, fine copper production last year was 108,240 metric tons, and LAC currently has assets of $175 million and net worth of $135 million. Due to a recent increase in proven reserves, LAC is considering doubling the treatment capacity of its flotation plant to 40,000 tons per day, and expanding its mining capacity to meet the additional concentrator capacity (the "Project"). Project capital expenditures and incremental working capital have been estimated at approximately $210 million. The construction period is expected to cover one year, including a three-month start-up phase. The Project is to be funded by a combination of equity, senior debt, including both supplier credits and/or commercial bank term loans, and subordinated debt. LAC's shareholders are willing to commit a maximum of $50 million to the Project. A government development agency, which is also a minority shareholder, might be willing to lend approximately $40 million to LAC in the form of subordinated notes, depending on the ability of the Project to generate foreign exchange reserves. Commercial banks cannot be expected to offer loans with maturities longer than ten years. The Project is expected to increase the value of the firm because: (i) It will solidify the Company's position as a low-cost copper producer by taking advantage of economies of scale. As a result of the expansion, cash production costs are expected to decrease 7.0[c]/lb. and all-in costs 11.0[c]/lb; (ii) The potential earnings stream from the sulphide ore reserves will be realized

Jan 1, 1985

By G. E. Pralle

INTRODUCTION The decade from 1969 to 1979 saw the crest of a wave of investments by companies and investors, primarily from the major industrial nations, in the metals and minerals industries of the so-called lesser developed countries. This was brought about by two major considerations: 1). The higher ore grades and therefore the higher profit potential of the mineral deposits in the third world countries, and 2). The desire, particularly by the European countries and by Japan, to ensure a safe supply of raw materials not available in their own countries. The decade began with the start of the Toquepala mine in Peru and the major investments in the Bougainville mine in Papua New Guinea and the Ertsberg mine in Indonesia. It ended with the start-up of Southern Peru Copper Company (SPCC) Cuajone mine in Peru and Inco's Soroako mine in Indonesia and the investments in several major alumina or aluminum projects in Australia and Brazil. Concurrent with this huge flow of funds into the mineral resources industry of the developing world was the build-up of a psychological fear in the host countries of exploitation/domination by the foreign investors. This resulted in an increasing trend towards: 1). Nationalization of existing mineral ventures, and 2). Tougher legal/fiscal frameworks for new ones. NATIONALIZATION Nationalization appeared in its earliest form as "Mexicanization" of the petroleum industry in Mexico in the 1930's, followed later by Mexicanization of the mining industry in general. This was enacted with the Mexican Mining Law of 1961 which required that 51% of the equity be owned by Mexican nationals. Later in the decade the equity share for foreign investors was reduced to 33 1/3% for the developers of the Frasch sulphur operations in the Isthumus of Tehuantepec. However, the law was not fully implemented in the copper industry until late 1970 with the purchase of 51% of the ownership in the Cananea Mining Company. The trend toward nationalization of the copper industry progressed to Chile where in 1967 under the Government of Eduardo Frei the major North American copper companies were induced to sell a one-half interest in their Chilean mines to the State. Likewise, in 1970, "Zambianization" took place, when the two major operating companies Roan Selection Trust (Amax) and Zamanglo (Anglo American) were restructured into Roan Consolidated Mines (RCM) and Nchanga Consolidated Mines (NCCM) providing the government with 51% of the equity ownership. Whilst the earlier forms of nationalization in general constituted a fairly priced buy-out (El Teniente, Chile for US$80 million, RCM for US$117.8 million, NCCM for US$178.7 million), the total nationalization of the Chilean mining companies in 1970 under Salvador Allende did not. Later, "Western" countries joined this trend and on October 29, 1973, Mr. Gough Whitlam proclaimed that "overseas capital must continue... in partnership with Australian capital" and "in some special energy cases we have an objective of 100% Australian ownership". In 1974 Mr. Pierre Trudeau stated: "The Liberal Party of Canada sets as an objective that new resources projects in the natural resource field should have at least 50% and preferably 60% Canadian equity ownership". FOREIGN INVESTMENT The situation for the foreign investor in the worldwide resource industry rapidly deteriorated from then on. New features appeared in mineral exploitation and operating agreements, centering not only on local government/local companies ownership but also on increased taxation. The new tax rate (mineral tax, royalty, and income tax) for the semi-government companies NCCM and RCM in Zambia became an effective 73%. Likewise the much publicized and discussed renegotiated Bougainville agreement brought dramatic increases in the total "take" by the PNG Government. More innovative forms of indirect taxation made their appearance and were added to the normal tax burdens of the mineral industry which already

Jan 1, 1985

By Robert L. Davidoff

INTRODUCTION The impact of taxation differs substantially from state to state in a complex fashion that depends on both the physical characteristics of a mineral deposit and on the price of the mineral commodity relative to its costs of production. A comparative analysis of the tax structures of eight states (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wisconsin) showed wide variations in rates of return for any given type of mineral property, with no state having either the most burdensome or least burdensome tax structure under all circumstances. Three hypothetical mineral operations were analyzed: a producing open-pit copper property, a non-producing underground platinum operation, and a non-producing underground gold operation. None of them corresponds exactly to an existing property. Each of these property types is further defined to have ore feed grades at three different levels, leading to three potential profitability levels, referred to in this paper as "economic", "marginal" and "subeconomic". Thus the differential impact of state tax structures is measured for mineral properties of different types, as well as for different profitability levels. Montana is used as the base case. This study does not address the topic of corporate structures or tax consolidation. There are no costs assumed external to the operation of the deposit (e.g. exploration to locate additional deposits). Two types of analyses were performed for this study. The first calculates the total cumulative tax payments in each state using all applicable taxes (including U.S. federal income taxes and examines the resultant differences in discounted cash-flows rate of returns DCFROR's amoung the eight states. The second is a sensitivity analysis that examines each type of state tax separately (i.e. state income, property, and severance taxes) in order to isolate and examine the differences in tax payments that are due to the difference in rates and methods of computing specific types of taxes in each state. The results of this study serve to illustrate the complex nature of interactions among various taxes. For example, property tax is a deduction in calculating severance tax in some state. Changes in property-tax and severance-tax payments both enter into the calculation of state and federal income-tax liability. This, in turn, could change the timing and usage of tax-loss carry forward amounts and investment tax credits. Additionally, the physical characteristics of a property, the method and costs at which the mineral will be extracted, and the profitability level at which each property operates will affect tax treatment. Each mineral operation was evaluated at three different predetermined profitability levels, referred to using the terms economic, marginal and sub-economic. These three profitability levels are defined by the ore feed grades of the primary commodity that yield in constant terms, approximately an "economic" 18% DCFROR, "a marginal." 10% DCFROR, and a "sub-economic" 5% DCFROR, respectively, under the Montana tax structure. In the analyses, the mining and processing parameters for each of the three types of properties were assumed to be identical for each of the eight states. It was assumed that each operation produces at full operating capacity throughout its life. This implies the level of mineral commodity demand will support the inferred commodity price, such that each operation will be able to sell all its output. The analyses performed for this study were done using a comprehensive economic evaluation simulator that is used in the Bureau of Mines, Division of Minerals Availability MAS program to perform DCFROR analyses. All economic evaluations performed upon these data (see appendix 2) were in constant January 1981 dollars. By-product prices used for the analyses were: [Gold $425.00/troy ounce Palladium$200.00/troy ounce Silver $ 10.00/troy ounce] Typical cash-flow calculation layout is given in Appendix 3. The initial step for each evaluation is to define an "economic" profitability level scenario. An 18% DCFROR rate in Montana was considered the

Jan 1, 1985

By C. O. Dale, W. J. Rundle

THE upper Mississippi Valley zinc-lead area was the first major lead-producing section in the United States. The lead ore, found near the surface in crevices, was relatively pure galena that could be smelted directly into lead, at first in log hearth furnaces and later in more efficient blast type furnaces. French Canadian fur traders encouraged the Indians to mine the lead ore and showed them how to smelt it into lead that had a high value for bullets1 Nicholas Perrot found lead ore on the Mississippi River bluffs near the junction of Wisconsin and Illinois and in 1690 established a trading post on the Wisconsin side of the river opposite the present site of Dubuque, Iowa.2 Shortly after 1720 discovery of Mine La Mott in Missouri diverted considerable attention from the Upper Mississippi area. Mining continued on a desultory basis with operations concentrated in the Galena, Illinois-Dubuque, area. In 1740 at least 20 miners were at work in the Fever River area around Galena and are reported to have shipped 2500 70-lb pigs of lead to Kaskaskia in 1741." Julien Dubuque established a mining and smelting operation in 1790 near the city that bears his name and was granted sole right to exploit the mining operations on the lands of the Sauk and the Fox Indians. He is reported to have produced 30,000 70-lb pigs of lead in 1805. Following the death of Dubuque in 1810 the Indians refused to let the white miners enter their lands, and little was done on the Iowa side of the river until the Indians were removed by treaty with the United States government in 1832." Early mining was entirely for lead but as the crevices were followed down, increasing percentages of zinc sulphide and zinc carbonate were encountered and at first discarded. Later a market became available for the zinc ores, and hand jigging devices were made to separate the lead, the zinc, and the rock or waste materials. The first record of zinc production from the area is for 1860. Production of zinc passed that of lead before 1900, reached a peak of 64,000 short tons in 1917, fell off rapidly and continually to about 2000 short tons in 1938, and since 1940 has ranged from 11,000 to 19,000 short tons. Lead has been of considerably less importance since 1900, and at present only about 10 pct as much lead as zinc is produced. Practically all of the zinc ore has come from orebodies that are rather flat and wide with considerable length as compared to width. Most of the early lead came from the crevice type deposit, but present production is from the predominately flat zinc orebodies. The Graham-Snyder orebody, scene of Eagle Picher operations, is practically all zinc with little or no lead being recovered. Marcasite, present in varying amounts, makes production of finished concentrates by gravity separation impractical. Satisfactory lead and zinc concentrates have been produced since flotation was introduced in the area in 1927. An acid recovery plant was operated for about 20 years after World War I, but it has been dismantled, and no recovery of the iron sulphides in the ores of the district is being made at the present time. In June 1950 there were three companies operating mines and mills, Tri-State Zinc Co., Calumet & Hecla Consolidated Copper Co., and Eagle Picher Mining and Smelting Co. The Vinegar Hill Zinc Co. had completed a shaft at a new orebody and had started to develop the mine which will supply the Cuba City mill. The Cuba Mining Co. was holding the Andrews Mine inactive. The Dodgeville Mining Co. was not operating but was exploring for additional reserves. Several small mines were selling ore to the Eagle Picher mill. A general area map is given in Fig. 1. The Eagle Picher Mining and Smelting Co. entered the area in 1946 with an active exploration campaign. Leases on a block basis were secured for the area south from the Wisconsin-Illinois line near

Jan 1, 1953

By C. O. Dale, W. J. Rundle

THE upper Mississippi Valley zinc-lead area was the first major lead-producing section in the United States. The lead ore, found near the surface in crevices, was relatively pure galena that could be smelted directly into lead, at first in log hearth furnaces and later in more efficient blast type furnaces. French Canadian fur traders encouraged the Indians to mine the lead ore and showed them how to smelt it into lead that had a high value for bullets1 Nicholas Perrot found lead ore on the Mississippi River bluffs near the junction of Wisconsin and Illinois and in 1690 established a trading post on the Wisconsin side of the river opposite the present site of Dubuque, Iowa.2 Shortly after 1720 discovery of Mine La Mott in Missouri diverted considerable attention from the Upper Mississippi area. Mining continued on a desultory basis with operations concentrated in the Galena, Illinois-Dubuque, area. In 1740 at least 20 miners were at work in the Fever River area around Galena and are reported to have shipped 2500 70-lb pigs of lead to Kaskaskia in 1741." Julien Dubuque established a mining and smelting operation in 1790 near the city that bears his name and was granted sole right to exploit the mining operations on the lands of the Sauk and the Fox Indians. He is reported to have produced 30,000 70-lb pigs of lead in 1805. Following the death of Dubuque in 1810 the Indians refused to let the white miners enter their lands, and little was done on the Iowa side of the river until the Indians were removed by treaty with the United States government in 1832." Early mining was entirely for lead but as the crevices were followed down, increasing percentages of zinc sulphide and zinc carbonate were encountered and at first discarded. Later a market became available for the zinc ores, and hand jigging devices were made to separate the lead, the zinc, and the rock or waste materials. The first record of zinc production from the area is for 1860. Production of zinc passed that of lead before 1900, reached a peak of 64,000 short tons in 1917, fell off rapidly and continually to about 2000 short tons in 1938, and since 1940 has ranged from 11,000 to 19,000 short tons. Lead has been of considerably less importance since 1900, and at present only about 10 pct as much lead as zinc is produced. Practically all of the zinc ore has come from orebodies that are rather flat and wide with considerable length as compared to width. Most of the early lead came from the crevice type deposit, but present production is from the predominately flat zinc orebodies. The Graham-Snyder orebody, scene of Eagle Picher operations, is practically all zinc with little or no lead being recovered. Marcasite, present in varying amounts, makes production of finished concentrates by gravity separation impractical. Satisfactory lead and zinc concentrates have been produced since flotation was introduced in the area in 1927. An acid recovery plant was operated for about 20 years after World War I, but it has been dismantled, and no recovery of the iron sulphides in the ores of the district is being made at the present time. In June 1950 there were three companies operating mines and mills, Tri-State Zinc Co., Calumet & Hecla Consolidated Copper Co., and Eagle Picher Mining and Smelting Co. The Vinegar Hill Zinc Co. had completed a shaft at a new orebody and had started to develop the mine which will supply the Cuba City mill. The Cuba Mining Co. was holding the Andrews Mine inactive. The Dodgeville Mining Co. was not operating but was exploring for additional reserves. Several small mines were selling ore to the Eagle Picher mill. A general area map is given in Fig. 1. The Eagle Picher Mining and Smelting Co. entered the area in 1946 with an active exploration campaign. Leases on a block basis were secured for the area south from the Wisconsin-Illinois line near

Jan 1, 1953

By C. O. Dale, W. J. Rundle

THE upper Mississippi Valley zinc-lead area was the first major lead producing section in the United States. The lead ore, found near the surface in crevices, was relatively pure galena that could be smelted directly into lead, at first in log hearth furnaces and later in more efficient blast type furnaces. French Canadian fur traders encouraged the Indians to mine the lead ore and showed them how to smelt it into lead that had a high value for bullets.1 Nicholas Perrot found lead ore on the Mississippi River bluffs near the junction of Wisconsin and Illinois and in 1690 established a trading post on the Wisconsin side of the river opposite the present site of Dubuque, Iowa.2 Shortly after 1720 discovery of Mine La Mott in Missouri diverted considerable attention from the Upper Mississippi area. Mining continued on a desultory basis with operations concentrated in the Galena, Illinois-Dubuque, area. In 1740 at least 20 miners were at work in the Fever River area around Galena and are reported to have shipped 2500 70-lb pigs of lead to Kaskaskia in 1741.3 Julien Dubuque established a mining and smelting operation in 1790 near the city that bears his name 'and was granted sole right to exploit the mining operations on the lands of the Sauk and the Fox Indians. He is reported to have produced 30,000 70-lb pigs of lead in 1805. Following the death of Dubuque in 1810 the Indians refused to let the white miners enter their lands, and little was done on the Iowa side of the river until the Indians were removed by treaty with the United States government in 1832.4 Early mining was entirely for lead but as the crevices were followed down, increasing percentages of zinc sulphide and zinc carbonate were encountered and at first discarded. Later a market became available for the zinc ores, and hand jigging devices were made to separate the lead," the zinc, and the rock or waste materials. The first record of zinc production from -the area is for 1860. Production of zinc passed that of lead before 1900, reached a peak of 64,000 short tons' in 1917, fell off rapidly and continually to about 2000 short tons in 1938, and since 1940 has ranged from 11,000 to 19,000 short tons. Lead has been of considerably less importance since 1900, and at present only about 10 pct as much lead as zinc is produced. Practically all of the zinc ore has come from orebodies that are rather flat and wide with, considerable length as compared to width. Most of the early lead came from the crevice type deposit, but present production is from the predominately flat zinc orebodies. The Graham-Snyder orebody, scene of Eagle Picher operations, is practically all zinc with little or no lead being recovered. Marcasite, present in varying amounts, makes production of finished concentrates by gravity separation impractical. Satisfactory lead and zinc concentrates have been produced since flotation was introduced in the area in 1927. An acid recovery plant was operated for about 20 years after World War I, but it has been dismantled, and no recovery of the iron sulphides in the ores of the district is being made at the present time. In June 1950 there were three companies operating mines and mills, Tri-State Zinc Co., Calumet & Hecla Consolidated Copper Co., and Eagle Picher Mining and Smelting Co. The Vinegar Hill Zinc Co. had completed a shaft at a new orebody and had started to develop the mine which will supply the Cuba City mill. The Cuba Mining Co. was holding the Andrews Mine inactive. The Dodgeville Mining Co. was not operating but was exploring for additional reserves. Several small mines were selling ore to the Eagle Picher mill. A general area map is given in Fig. 1. The Eagle Picher Mining and Smelting Co. entered the area in 1946 with an active exploration campaign. Leases on a block basis were secured for the area south from the Wisconsin-Illinois line near

Jan 1, 1952

By W. M. Phillips

Processing kaolin clays from the sedimentary deposits of Georgia and South Carolina is described in this article. While the major processing steps are touched on briefly, emphasis is given to the dewater-ing of the clay-water slurries (slips) formed in the processing of kaolin clays. The dewatering steps discussed include gravity settling, centrifugal dewatering, vacuum filtration and thermal drying. Particular attention is given to vacuum filtration and the variables affecting filtration of these kaolin clays. Kaolin consists essentially of the mineral kaolinite, which is a hydrated aluminum silicate (Al2O3 . 2SiO,). Commercial deposits of kaolin occur in several areas of the U. S., but approximately 90% of the kaolin produced in this country comes from Georgia and South Carolina. These deposits are of sedimentary nature and occur in a geological fall line in the Tuscaloosa formation at elevations between 300 and 450 ft above sea level. Over two million tons of kaolin clays are used by industry in the U. S. each year. A big percentage of this tonnage is used in the paper industry for coatings in making glossy and high quality grades of printing papers. In addition, large tonnages are used as pigments; as fillers for rubber, plastic and fertilizers; and in ceramics. Properties of kaolin that make it widely used in the above applications are its particle size fineness, natural whiteness, chemical stability and non-abrasiveness. In addition to these desirable properties, it is relatively inexpensive. The finer coating grades of clays range in price from $15 to $28 per ton while the coarser filler grades sell within a range of $7 to $13.50 per ton. Pure kaolin particles are small hexagonal flat platelets. Above the 2-p size, the particles usually consist of stacks of plates, while below the 2-p particle size they occur as individual flat, hexagonal plates. Since these individual platelet particles provide the most desirable coating and flow characteristics, major importance is given to particle size fractions of 2 p and smaller. Generally, coating grade clays are those with all particles smaller than 15 p and at least 70% of the particles less than 2p. These coating grades also have 50% or more of the particles smaller than 1 µ in size. The extremely fine grades of coating clay currently being produced approach the range of 100% smaller than 2p. The filler grades of kaolin have 100% of the particles passing 325 mesh but have less than 70% of their particles below the 2-p range. Fig. 1 is a schematic representation of the major processing steps involved in preparing kaolin clays for marketing. MINING All kaolin mining is open pit. The ratio of overburden to clay will average 3:1, but this ratio can, of course, be much higher depending upon the grade of the clay and the size of the deposit. Most of the commercially mineable deposits occur from 20 to 120 ft below the ground surface. Both draglines and pans are used in removing the overburden and mining the clay deposit itself. After mining, the most common method of transporting the clay to the processing plant is by blunging or re pulp-

Jan 1, 1963

By W. R. Bull, J. R. Roos

A method is described whereby the true financial value of each constituent of each concentrate can be calculated. Each value is then compared with what this value would be in a perfect separation. The difference in each case represents the loss incurred by each aspect of an inefficient separation. The relative magnitudes of these losses indicate those avenues of plant investigation and research that offer the highest potential reward. The metallurgical efficiency of a concentration operation is difficult to express because there are two criteria of performance, namely, grade and recovery. Neither of these alone gives any indication of the effectiveness of an operation and, if they are combined in some formula, it must be empirical and unreliable because of many external factors. Since milling is an operation performed as one step in the most profitable overall method of producing a metal or other end product, the main objective of mill operation should be to make a maximum contribution to this maximum profit. When concentrates are sold to custom smelters, the income from the operation, and the costs, may be calculated. When concentrates are further processed by another division of the same company, and there is no formal financial relationship between, say, the milling and smelting divisions of the company, the mill superintendent's job is less well defined. But even so, if the mill superintendent works as though he were selling his concentrates, and uses reasonable, if fictitious, conditions of sale, then he can get a good indication of the effectiveness of his operation by calculating his "Economic Recovery". ECONOMIC RECOVERY This is a method used as a basis of operation by several mills and has been described in the literature. Very briefly, the "standard" of operation is taken as that of a mill separating the ore into perfectly pure concentrates with 100% recovery of each mineral in its respective concentrate. For example, a 4%Pb, 4% Zn ore (galena and sphalerite), would provide a lead concentrate weighing 4.62% of the feed and assaying 86.6% Pb and a zinc concentrate weighing 5.97% of the feed and assaying 67.1 % zinc. These perfect concentrates are (hypothetically) shipped to the appropriate smelters, freight and treatment charges and payments calculated, and the net return obtained. This is the optimum financial return for the operation of the mill and is used as the standard. Now the return for the actual, real-life, mill operation is calculated in the same way, and the ratio of the two is termed the Economic Recovery. Many additions and modifications may be made in any particular case. For example, if the zinc mineral is marmatite, the optimum grade of the zinc concentrate may be set lower than 67.1%. If silver is present, it will be recovered 100% in the lead concentrate in the perfect operation. Similarly, cadmium will be recovered 100% with the sphalerite. Mr. Weiss' paper' mentions a case where, because of extremely fine intergrowth between the valuable mineral, chalcocite, and pyrite, the optimum grade of copper concentrate was taken as 45% Cu instead of the theoretical 80%. Each operation will present its own possibilities in this way.

Jan 1, 1970

By Fernando A. Buttazzoni, Jorge C. Munita

INTRODUCTION To provide a background for discussing long-range financial and operational planning in the mining industry, we would like to begin by describing the role of planning in Codelco. Having taken part in Codelco's planning process since its inception in 1976, we believe that useful conclusions may be drawn for the experience we shall relate. Although Codelco is a state-owned copper producer with an important role in the Chilean economy, and is consequently very much at the core of national economic planning, the following discussion is not related to government planning but to planning in an operationally and commercially autonomous business concern with all the characteristics of a private enterprise. The only way in which Codelco differs from private business is that its financial successes or failures have a more direct impact on the countryls ability to participate in international trade, to meet its international financial commitments and to achieve economic and social growth. Thus, what follows is a presentation of the conceptual features of the planning process at Codelco and a description of the current state of planning in the company. It is understood that certain conceptual components are basic to any formal strategic planning process, and that the components of Codelco's planning process are therefore generally applicable in similar companies. First, the mission and scope of operation of the company must be defined, and goals must be set to achieve leadership in the business activities in which it engages. Having set this framework, the company must constantly scrutinize those internal elements and conditions that are essential to fulfill its mission and achieve leadership. In Codelco this means considering the actions which can best serve to define future capacities, taking into account declining ore grades and determining optimal production levels; watching over the productivity and skills of its labor force, and; keeping abreast of technological developments in non-ferrous mining and processing. If the company is proficient in these three areas, it will be cost efficient and there- fore competitive. Codelco must also watch over the business environment in which it operates. The company sells concentrate, blister and fire-refined copper, wirebar, cathodes and wire rod and must study the behavior of the market to attune its product mix to the demand existing for these various commodities in the international market and the copper consuming industries in general. By examining the internal and external environment in which the company conducts its production and commercial operations, it is able to diagnose its strengths and weaknesses, to identify the hazards it must overcome to stay ahead in the copper trade, and to take full advantage of business opportunities as they arise. CHARACTERISTICS OF CODELCO-CHILE Although our subject is Codelco, readers should keep in mind that there are many other copper producing operations in Chile, all in the private sector, and many valuable deposits that may be exploited in the future. Codelco is the only public sector copper producer, although there is one other state enterprise that operates smelting and refining facilities principally to serve a large number of very small producers of copper concentrate. In the mid-19801s, Codelco is the largest copper mining company of the world and the largest producer and exporter of copper with yearly sales totalling close to US$ 1.8 billion in 1983. Moreover, it is a highly profitable copper company at a time when the world copper industry as a whole has reported losses for several years. Codelco-Chile is a fairly new organization. The history of the four mining operations it manages is much longer: El Teniente was opened in 1912, Chuquicamata in 1915, Salavador in 1959 -- with installations of the old Potrerillos mine dating from 1927 -- and Andina in 1970. Having had separate owners, the management systems of the

Jan 1, 1985

By Edward Hanrahan

September 1981 I'm here today to report on a revolution -- a revolution in the way the Federal Government looks at energy. I'm not talking about a simple change in the relative emphasis on sources -- such as more recognition for coal and nuclear power, with less rhetoric about "soft- technology." Nor am I describing a mere change in focus -- from the demand side to the supply side. And I am not referring exclusively to our obvious goal of budget cuts. No, I'm here to discuss a fundamental change in Federal direction -- one that started as soon as President Reagan was inaugurated, and one that is articulated in the National Energy Policy Plan he sent to Congress in July. That brief policy document was backed up by three volumes of supporting data; but I think I can catch it's flavor for you in just three phrases: * First, various energy forms complete with each other and complement one another. * Second, fair competition among them (which includes honest pricing) will give us the best "energy mix." • And, finally there may be ligitimate arguments about where Federal responsibility in regard to energy spills over into Federal interference; but it's about time we drew the distinction -- and eliminated the latter. This Administration's national energy policy is quite different from any we have had in recent years. It is tuned to human nature and changing times. We are seeking the best practical solutions in the energy -a lot better than the ones we have been offered before, but still something less than perfection. One way we do that is by counting on a fully informed public to guide it's own destiny. And, instead of treating energy as an isolated entity, we recognize it as part of the overall economy. The President's Program for Economic Recovery is as much a factor in energy policy as the specific actions of the Department of Energy. One striking difference from the past energy policy 1s that this policy plan does not say: "In 1985 we will -produce so many hundreds of millions of tons of coal: . . . or . . . "By the end of this century the Nation will be deriving X percent of it's electricity from wind generators." Unfortunately, targets like these are what many people have come to expect from the Federal Government -- and what they think of as energy policy, whether the figures hold up in the long run or not. But . . . think about it! Nether the Department of Energy nor any other part of the Federal Government produces coal, or mines uranium, or manufactures solar collectors. There are only a few sections of the country where the Federal Government generates and sells electricity. So it does not take any great insight to recognize that the amount of energy we will produce or consume as a Nation In the future depends on many factors beyond direct government action. And those future totals cannot be predicted precisely, anyway -- by the Government or by anybody else. According to our way of thinking, the choices should be up to the people. When the free market works within a healthy economy, individuals express their preferences in the marketplace -- adjusting the balance of all energy factors continually in a way that no computer could be programmed to reflect perfectly. So, instead of having the Government issue a rigid set of numerical goals, our main concern simply is that there be enough energy. We want the Nation itself to decide how much that should be, what form it should take, and how that energy should reach consumers. The marketplace decides. Considering the recent past, this is indeed a revolutionary idea. It has some pitfalls, and we won't reach this ideal of free choice overnight. But that is where we are headed. And I'll offer some evidence in a few minutes that the policy has already started working. First, let me give you some of it's highlights: 1) Nobody who appreciates the philosophical underpinnings of this Administration will be surprised that the energy policy shows faith In domestic energy production and the supply side of the economy; but it also recognizes the important role of energy conservation -- the wise and efficient use of energy resources.

Jan 1, 1982

By Anthony Tuke

Members of the Society of Mining Engineers may well regard it as rather unusual that a paper on this subject is being presented by someone whose first taste of mining came at the age of 60 or so - someone who last heard of cathodes and anodes in 1938. On the other hand, the title does refer to the financing of a mine and at least I can claim to have spent all my business life since the war until 1981 in the world of banking, though this inevitably means that I have been used to looking at these and other problems through what you might regard as the wrong end of the telescope. The lending of money, and more particularly the provision of finance for commerce and industry, is the central job of a banker and I have been involved in this in various ways over many years, but regrettably only very marginally in the world of mining. As you will see from what follows, the rather specialised form of finance which RTZ required was, to my regret, not provided by the British banking community since the great majority of the finance came from American banks and, to a lesser extent, from German banks. I am most indebted to Mr. Roy Wright for a great deal of the nuts and bolts in this paper. He was one of the three central figures in the growth and expansion of RTZ during the 1950's and 1960's and was right at the centre of the negotiations with bankers, with governments and with many others. The going, as you will see, was far from easy. The essential basis for the financing of each of the RTZ group's mining projects was a firm long-term sales contract for sufficient of the output of the particular mine to produce the cash flow necessary to service the loans. Wherever possible, loans were raised in the same currency as the sales contracts were made. Each sales contract was designed to give the customer the product he wanted with a long-term assurance of supply and at the same time to give the bankers the protection they required. Thus the marketing concept and the financing concept for a particular mine formed one overall plan, and talks with the customers and the bankers were conducted in parallel until a satisfactory marketing/financial package was agreed in principle. Preliminary talks were begun soon after the discovery of a potentially viable orebody. As confidence about a discovery increased, customers were persuaded to enter into contingent sales contracts before the very detailed and costly business of the economic and technical feasibility study of the mine was launched; such a study might cost 10% or more of the estimated total capital cost. At the same time provisional understandings were reached with the bankers. The contingent sales contracts usually gave a period of grace of eighteen months to two years, during which time the decision whether or not to continue with the mine had to be made. This decision rested mainly on the result of the feasibility study and also on coming to a firm agreement with the bankers. If all went well and the mine went ahead, then the contingent sales contracts became firm, but they fell away if the decision was negative. The Company was fortunate that during the whole period when its major mines were being developed, world trade was increasing rapidly and Japan was becoming a dominant industrial power. The Japanese supported many of the mines, including Hamersley Iron Ore, Lornex Copper, Bougainville Copper to name a few, with the basic long-term sales contracts that enabled their development. The Germans supported Palabora and to a lesser extent Bougainville. The mines were financed as individual projects generally with a loan/equity ratio of about 65/35, without legal recourse to RTZ for the loans. RTZ was, however, responsible for providing any capital overruns required to bring the mines into commercial operations. Nevertheless, the RTZ management regarded itself as morally responsible to the lenders because, Palabora aside, the sales contracts had either a fixed selling price (like Hamersley), an indexed price (like the Elliot Lake Uranium Mines and Mary Kathleen), or a floor price (as in Lornex, Bougainville and Rossing). Thus the Company believed that any financial failure would have been due to poor management or technical

Jan 1, 1985

By E. Topanelian

In recent years considerable progress has been made in the development and application of mathematical techniques for the solution of certain problems involving economic "strategies". Such a problem might involve, for example, the scheduling of shipments of a commodity from a number of sources to a number of destinations. The object would be to schedule the shipments in a manner so as to satisfy the destination requirements and at the same time minimize the transportation costs. The solution to such a problem is not necessarily intuitively obvious. The "obvious" solution is frequently far from optimum. If the shipments are to be made from, for example, only two sources to four destinations, the optimum schedule is readily found. However, if shipments are to be made from, say, 10 sources to several hundred destinations, even a competent and experienced scheduler may spend considerable time in finding a reasonable answer. Even then he is not sure that he has the optimum solution. Furthermore, he has no way of knowing how far from optimum the answer is. Consequently, he does not know whether he should accept this solution or seek a better one. Prior to the advent of large high-speed digital computers, little more could be done with such problems because of their great size and multiplicity of possible solutions. A problem involving 20 sources and 50 destinations would require choosing, from a very large number of possible combinations, the optimum combination of 1,000 variables. The best one could do was to utilize intuition, extrapolation from past experience, and other non-exact approaches. With a high-speed computer, however, such problems can be solved providing a reasonable computational procedure (or algorithm) can be utilized. The purpose of this paper is to describe such a procedure (linear programming) and to apply this procedure to a production scheduling problem. THE RESERVOIR PROBLEM A simple reservoir model is used throughout this analysis to illustrate the use of linear programming. Even the simplest reservoir behavior problem is nonlinear in both space and time, but if the geometry is fixed for a particular study and the time variable is quantized, the resultant system may be described by linear constraints on the variable production rates. Crude oil is available from five separate sources and is delivered to a pipeline. Sources 1, 2, 3 and 4 are ideal reservoirs and therefore are subjected to reservoir flow restrictions. Source 5 is labeled "Outside Source" and crude oil from this source is assumed to be available in unlimited quantities without considering reservoir conditions. The general problem is to determine the schedule of crude oil production from five sources which, over an eight-year period and subject to certain restrictions, will result in maximum profit. "Profit" is defined to encompass all economic factors and expenses involved in producing and selling crude oil to a pipeline facility. Such economic factors are lumped to the extent that the term represents the dollars profit from one barrel of crude oil from any of the five sources entering the pipeline system. Table 1 presents the assumed profit per barrel for oil from any of the five sources over each of the four time periods. In this chart the eight years is broken into four equal intervals of two years. The selection of four time periods of two years each and the values representing the potential profit are completely arbitrary selections for the purpose of illustrating this idealized reservoir problem. In any practical application of this work a careful economic study would have to be made in order to estimate potential unit profits for time periods as far in the future as eight years. In this particular study it is assumed that all of the potential unit profits (C) are known and fixed before the production schedule is attempted. For each reservoir arbitrary values are assigned for

By Kenneth K. Humphreys

INTRODUCTION What is automation? Why automate? Webster's New Collegiate Dictionary defines automation as "the automatically controlled operation of an apparatus, process or system by mechanical or electronic devices that take the place of human organs of observation, effort, and decision." This definition gives an implied answer to the second question, )"Why automate?" Automation, automatic control devices and process control equipment receive their justification in supplementing or replacing manpower, which results in decreased operating costs. In the past, processes were operated with a minimum of instruments for the purpose of merely guiding the operators. Processes were manually controlled by the operator on the basis of simple temperature, pressure, flow and level indications on a panel. Today the tendency is to design a new plant to operate in a fully automatic manner according to a preset pro- gram utilizing a minimum of manpower. In addition to this direct cost reduction savings in manual labor, increased equipment capacity results from uniformity of flow and uniform control of process variables. This control eliminates or minimizes surges and permits equipment to be operated at or near its ultimate capacity and, for a given material through- put, permits the use of smaller process equipment. Automatic control, therefore, be it in the field of coal processing or in any industrial field, is simply a problem of economics. Control equipment is justified in terms of its contribution toward increasing productivity, increasing profit margins or producing a new and saleable product at a profit. Instruments and control devices can be divided into two general groups: (1) units which measure, and (2) units which both measure and control a process variable. In coal processing, the first class of instruments, those which measure only, include analytical devices such as automatic ash, moisture and sulfur measuring units and the simple pressure, temperature, flow and level indicating devices mentioned previously. The second group of instruments, those which both measure and control, include a wide variety of units such as continuous weighing devices on conveyor belts and photoelectric cells which gauge the position of railroad cars on the track and insure that the cars are in the proper location for loading (see Chapter 15). The latter types of units as used in the coal industry differ from those used in other industries in one significant point. In coal processing these instruments need not be as highly sophisticated and accurate as in other industries; hence their cost is proportionately lower than in other industries. Because of the economic fact that coal sells for only a fraction of a cent per pound compared to dollars per pound for many chemical products, and

Jan 1, 1968