Search Documents

In 1984/85 financial year Australia produced 529 thousand barrels per day (kbd) of crude oil. By far the major contribution (453 kbd) was light waxy oil from offshore Gippsland, Victoria. When these discoveries were made in the latter 1960s, imported oil was available in abundant supply and at low prices. Because of this, the Gippsland producers persuaded Government to control the marketing and pricing of their crude, and thus provide the required security of offtake. Political events in the middle East created supply shortages during the 1970s, and dragged up government selling prices for OPEC crude oil. Thus Arab Light crude that sold for less than US$2/barrel (bl) in 1970 reached $34/bl in 1981. Following the consequent decline in world oil demand, in 1982, Australian refiners sought to evade their obligation to lift Gippsland crude. Hence, in 1983, the Government was forced to introduce a floor quota of 385 kbd of Gippsland crude liftings and to allow producers to export any additional production refiners did not require. On expiry of the old arrangements, Government introduced a partial free market from January 1985, whereby the balance in excess of 350 kbd may be sold to Australian refiners at negotiated prices, or exported as before. In 1984/85 exports were some 90 kbd and will be higher in the current year. About half this total has been exported by BHP, providing valuable experience and lessons which are described in the paper.

Jan 1, 1986

By Gillies A. D S, Supriyadi

The landed cost of coal to the international customer is a major parameter which determines market competitiveness. Rail, port and shipping charges represent 30 to 50 per cent of landed costs for Australian mines selling to Asia. This prop

Jan 1, 1994

'Nothing happens until something is sold' This statement is not original - it is a necessary orientation for marketing industrial minerals. The most important single philosophy of marketing is that it recognises the consumer as the starting point. Production orientation is concerned with producing products that the customer might buy. Market orientation is concerned with finding the needs of the customer and how they can be satisfied. The difference between the two approaches can be recognised in company structures but the most tangible difference is in the approach by a company to selling and development. In other words, it is the market that decides what can be done with a mineral. The markets requirements dictate what mineral, what grade and what price will be paid. Therefore it follows that when pricing a product we should avoid taking the basic cost and arriving at a final selling price through a series of standard markups (unless government insists on it). We should start with the price the market can stand and work backwards to find out whether you have a profitable product or one that will fail because it is too dear. Naturally a thorough understanding of production costs is necessary particularly when marginal markets are concerned.

Jan 1, 1978

By White A. H, Gillies A. D S

In recent years the Australian gold industry has gone through a major expansion phase. The need for finance has led to adoption of different approaches such as the well known gold loan, forward selling, equity participation by suppliers and equipment leasing. During early periods of the expansion, significant new equity was raised chiefly for high risk exploration ventures. The major form of new equity finance was ordinary shares, often in 'No Liability' companies. The increasing capital requirement of the huge new development projects of the 1980s also spurred the use of debt finance. This trend was accelerated as high inflation and the taxation advantages of debt finance made borrowing attractive. This paper reviews major financing techniques used by the Australian gold industry with particular emphasis on the innovative financing techniques initiated recently. An analysis has been undertaken of the effects on the industry of issues such gold loans, forward selling, equity participation by suppliers, fly-in fly-out operations, contractor mining and equipment leasing. In order to achieve a better understanding of the innovative financing techniques, a survey of already published financial data from well known Australian gold mines was carried out. Data was collected from various published financial reports of gold mining companies. In addition, a questionnaire survey was sent to gold mining companies to assist the collection of further information. The results of this study show that there are a significant number of gold mines variously using gold loans, forward sales, contractor mining and fly-in and fly-out arrangements to finance their projects. Only four operations have vendor suppliers investing capital funds in their projects. Based on the findings of this study, conclusions and recommendations are drawn that these approaches are likely to be with Australian gold industry for some time in the future and will continue to be intensively applied to finance gold projects.

Jan 1, 1994

By Gillies A. D S

Rail, port and shipping charges represent 30 to 50 per cent of landed costs for Australian coal mines selling to Asia. This proportion is higher for sales to Europe, yet it is in Europe where Australian producers are aiming for increased market share. The landed cost of coal to the international customer is the key parameter which determines market competitiveness. The objective of this study is to examine Australian export coal competitiveness in terms of transport distance. The approach used examines world coking coal and steaming coal production and the transport distances between major exporting regions and importing countries. Reference is made to the importance of land transport costs and a comparative approach for emphasising the relative magnitude of this factor is developed. Models developed are examined in terms of Australia's exports and a conclusion is reached that a reduction in rail freight costs would be an effective measure for improving the competitiveness of Australia's coal industry.

Jan 1, 1994

The words ""Uncertainty"" and ""Risk"" pervade every discussion about mining exploration and investment. Perhaps these terms are subjectively understood by industry professionals, but objective portrayal of these concepts outside the industry is a woefully undeveloped science. This paper addresses current industry understanding and practice regarding quantitative risk assessment techniques, and provides examples of the application of three of these techniques. Probabilistic techniques for financial risk assessment are valuable adjuncts to conventional financial analysis, and address a range of issues not assessable by any other means. The value of whole-of-project probabilistic risk assessment is currently debatable for decision-making purposes, but is seen as important as a mechanism to focus attention to the critical issues that ultimately impact on project success. The dissection of project capital into risk and non-risk components provides valuable insights into risk characteristics not readily quantifiable in any other way. This technique also provides a framework for more objective ""what if?"" scenario evaluation and for the capital structure of resource projects. Finally, mechanisms for the valuation of undeveloped reserves are examined, and guidelines suggested. The importance of reliability in production cost estimates is highlighted and the impact of early development on reserve valuations is discussed. The importance of economics throughout all stages of the evaluation process is fundamental.

Jan 1, 1994

This paper examines the cost and economic consequences of varying a number of key factors in the course of developing and operating new underground longwall coal mines with both shallow and deep cover in New South Wales. The economics of the project are assessed for the first 20 years of mine life using the discounted cash flow method with produc- tion and selling price being determined to provide break even costs for a range of minimum rates of return.

Jan 1, 1988

By S Matos Camacho, K G. van den Boogaart, R Tolosana Delgado, U Mueller

"The precise formulation of a geometallurgical optimisation problem is by necessity a simplification of reality. It includes implicit choices such as data availability or mining block geometry. Additional data can be orebody data, production data or market data. Often these choices are predetermined by the software, the workflow or the corporate culture, and as such are not even queried. There are several aspects that might play a role in the optimisation. They include not only the spatial model on which the selection of mining blocks and the potential mining sequence are based, but also the complexity of the processing model, the way in which uncertainty is treated, the scope of responsibility and the complexity of the model. In addition the timing of the optimisation and the availability (or lack thereof) of information will influence the outcome of any optimisation.We show that different modelling choices and different model formulations for the same mine can lead to very different processing choices, substantially different net present values (NPV), opposite investment decisions and so to overall different values for the entire operation. The selection of adequate simplifications and corresponding formulations for the optimisation problem is thus an important task in itself.For this purpose we introduce a method for quantifying the impact of certain simplifications prior to the optimisation. For example, the effect of mining block choices depends mainly on the spatial structure and the structure of the processing gain function. Both can be quantified beforehand. Based on the outcome, appropriate simplifications can be selected for the geometallurgical optimisation.CITATION:van den Boogaart, K G, Tolosana Delgado, R, Mueller, U and Matos Camacho, S, 2016. How Details of the Geometallurgical Optimisation Influence Overall Value, in Proceedings The Third AusIMM International Geometallurgy Conference (GeoMet) 2016, pp 303–312 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Jun 15, 2016

By K Morrison

Australia’s ageing population means that by 2050 there will be 2.7 people of working age to support each Australian aged 65 years and over compared with five working people per retiree today and compared with 7.5 in 1970 (Swan, 2010). This means that there is going to be a greater demand on social services – for medical and aged care – from a smaller private income base. How will this gap be met? Australia is fortunate in that it has vast resources of mineral wealth; from iron ore, nickel and gas in Western Australia to the giant copper and uranium deposits at Olympic Dam in South Australia.The prospect of a meaningful profit based tax on this vast mineral wealth has been lost through Australian government’s handling of the issue in 2010 and with an industry fiercely opposed to the prospect of a mining tax. Hence, new ways of thinking are required. This paper looks at the issues facing the implementation of a novel scheme whereby Australia leases the mineral resources it extracts and thus derives income over the decades the metals are in-use in pipes, wires and structures with a premium paid for unreturned material or that used in dissipative applications. Applicable minerals could include copper, aluminium, nickel and rare earths. If Australia simply digs up and sells the metals once, the buyer becomes custodian of that resource and they benefit from controlling the future ‘above-ground’ resource stock.A complementary driver for a leasing scheme is the increasing importance of chain-of-custody following initiatives of the Responsible Jewellery Council with gold and diamonds, now with the potential to extend across commodities. The Australian minerals sector could thus position itself as a premium supplier with high social and environmental credentials.Recognising the implementation challenges, this paper includes a review of how such a system could be enforced to ensure that the metal is tracked throughout its life. It concludes with a discussion of the rates and terms should such agreements hold and suggestions for institutional arrangements for enforcing compliance.

Nov 22, 2011

The mining industry is quite often faced with declining selling prices for its products in the face of rising prices for the input cost resources that it uses. Blasting is a key activity within the mining system and has a vital role to play within the Mine to MillTM concept. It is therefore important that blasting makes a positive contribution to mine profit and productivity. There are several variables involved in considering the profitability and productivity of blasting. The rock types and structures, the bench height, the blast hole drill rig specifications, hole diameter, spacing and burden, explosive loading and initiation and blast size fragmentation. Productivity accounting is a methodology which is used elsewhere to give additional insights into the productivity and pricing factors that drive the financial performance of a business. Miners know intuitively that productivity and pricing influence costs and profit, but only with productivity accounting can the dollars involved be calculated. Drilling and blasting are part of a chain of unit operations in a mine. For an owner-miner, drilling and blasting would be considered as cost centres and a productivity accounting cost model approach would be relevant. On the other hand a contractor is likely to consider drilling and blasting as a profit centre, in which case a productivity accounting profit model approach would be appropriate. Both of these will be explained. The paper provides a basic outline of deterministic productivity accounting and demonstrates its application to blasting. Drilling and blasting data from a mine was obtained for a two-month period. The change in productivity and prices was calculated to obtain the dollar contributions from them towards the change in cost. It was determined that although there had been productivity dollar gains these were offset by larger pricing dollar losses, the net effect being that total drilling and blasting costs increased. The productivity accounting analysis gives the facts and the mine is in a position to establish priorities based on knowing the dollar contributions of each input used.

Jan 1, 2001

By S Watson, L Martinez

Mine projects are complex opportunities that demand a constant assessment of uncertainty, ie risk and upside potential. This is because the value of a mine project is typically influenced by many underlying economic and physical uncertainties, such as metal/mineral prices, metal/mineral grades, costs, schedules, quantities, and environmental issues, amongst others, which are not known with much certainty at the beginning of the project. But, is uncertainty an enemy or an ally of the mine planner/analyst? To answer this question, this paper first assesses and elaborates upon the general concept of uncertainty. It then looks at the different sources of uncertainty in a mining project, such as the orebody, costs and product price uncertainties, and their effect on the final project value. Next, a general?review?of current mine evaluation techniques highlighting their limitations when dealing with uncertainty is made. Finally, an extended evaluation and risk management framework that addresses the existing uncertainty in the (greenfield/brownfield) mine evaluation process is proposed. One important characteristic of this framework is that it uses and manages uncertainty in order to generate additional value to the project; this is done through operational and managerial flexibility, which allow mine planners to minimise/maximise project risk/upside-potential giving a more realistic estimate of the projectÆs market value - this is shown in practical and simple examples occurring at different stages of a mine project, such as exploration and operation. Final conclusions are provided at the end.CITATION:Martinez, L and Watson, S, 2012. Uncertainty - An important source of (additional) value for mine projects, in Proceedings Project Evaluation 2012 , pp 131-140 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 24, 2012

Production sharing and cost apportionment in joint ventures is commonplace in Australasia today and elsewhere. It is a recognised convention that, with the exception of a free carry situation, joint venture participants usually share the proceeds of the joint venture in direct proportion to their respective participating interest, after having first paid its respective cash calls, in advance, to cover the projectÆs ongoing operating and capital cost requirements.In surface mines, the parties simply pay their way and take their proceeds in this manner. In underground mines, the situation is no different, though treatment of capital, depreciation and tax may differ between the parties. A common feature in many cases is the creation of a joint venture entity to conduct the business. This entity then collects cash from the parties, banks it, employs the staff, runs the operation, provides reports and pays out the proceeds. This convention appears to be relatively simple in application. In practice, it has been known to be complicated in the situation where the participants take their product at the mine gate and undertake their own marketing and selling arrangements. A more complex situation presents itself where the joint venture tenement boundary with an unrelated third party straddles an economic deposit. In this scenario, both the joint venture parties and the third party may wish to mine the deposit, sharing some infrastructure and costs, yet taking their own product as it is produced. A case study outlining such a situation is presented in the paper, outlining firstly how the major cost categories were identified and treated for cost apportionment purposes. Secondly, a mechanism for the equitable apportionment of product is suggested. Finally, issues such as timing and cost reporting are dealt with, together with a checklist of points which should be considered when a similar situation might arise in the future.

Jan 1, 2002

By R Razanatsimba, A Galli

A mining company has entered into contractual commitments to supply certain quantities of its product to clients in each time period. Failure to fulfil its obligations would damage its reputation as a reliable supplier. The planned production would normally be sufficient unless major problems such as highwall failures, roof falls, natural disaster, or strikes that interrupt production or delays in obtaining environmental permits, occur. To overcome these difficulties, the company may be able to obtain more of the commodity: from its strategic stockpile (if there is sufficient there); by buying it on the spot market; or for some commodities such as gold and uranium, by leasing it. Two sources of uncertainty, the spot price of the commodity and the occurrence of serious incidents that interrupt production, are considered. For simplicity it is assumed that the commodity price follows a geometric Brownian motion, that productions incidents have a binomial distribution, that they are independent from one time period to another and that they do not affect prices. A branching tree structure is used to model the joint evolution of prices and production incidents. The aim of this research project was to evaluate the companyÆs options for fulfilling its contractual commitments. When evaluating these options, multi-stage stochastic programming with recourse was used to solve this problem because in addition to providing the dollar value of the project, it gives decision-makers the æroadmapÆ to reach the optimal value. That is, how much material should be bought/sold on the spot market, how much to add to/subtract from the stockpile, how much to lease and in the worst case what the shortfall would be, for each time period as a function of the current spot price and breakdown status. A case-study over a five-year period is used to illustrate the proposed procedure. In this study the production would be sufficient to cover the companyÆs contractual commitments unless production incidents occur. Focus is on evaluating the impact of the quantity initially in the stockpile on the value of the project when the commodity market is tight, that is, when only small quantities can be bought on the spot market or by leasing.

Sep 26, 2011

Preparing for automated sample preparation has two facets; the need for better procedures as seen by the laboratory Manager and the approach to be adopted as envisaged by the equipment manufacturer. Both have many options and during the 1990s some at least of these options will be tried. As automation of sample preparation is only just beginning, can it be said that there is a real need for better procedures. What does automated sample preparation have to offer? Does it have real advantages or is it just a marketing tool to sell equipment?

Jan 1, 1976

By Dodd SF

Valuation of mining companies and their underlying assets prepared by brokers' analysts are, by necessity, approximations. The reliability of the valuations is entirely proportional to the quality of available data, the reliability of forecasts and the nature of underlying commodity price assumptions. The latter is perhaps the greatest single cause of gross variations in company and asset earnings estimates and- valuations. Assumptions are often necessary regarding commodity price achievement based on commodity hedge positions. Public disclosure from listed companies provides a sound base from which to project earnings, cashflows and balance sheets. The uncommon disclosure of projected production and cost schedules often reduces the reliability of future estimates. The application of reserve and resource estimates is contentious with practitioners applying differing weightings to importance of resources in estimating mine lives (and therefore cashflow streams). Valuation methods applied in equity markets usually focus on relative value and the identification of pricing anomalies. The commonest ""rules of thumb"" applied in the valuation of mining companies (and therefore their underlying assets) is with the use of year specific price/earnings (P/E) and price/cashflow (P/CF) ratios, with low multiples suggesting undervalued assets, high multiples overvalued situations (but these rules can often be clouded by market expectations of underlying commodity price movements). Another simply applied valuation tool is to examine the examine the value placed on reserves and resources by the market. Inexpensive gold in the ground (expressed as $ of market capitalisation per ounce of reserves or resources) might indicate a buying opportunity, but the market does discount the value of gold in the ground prior to mine development and where development risk is perceived.

Jan 1, 1994

This paper has been developed for æThe Race for SpaceÆ conference. It ranges over various aspects, all of which are within the umbrella of marketing. The question is posed because many engineers, tunnelling and other specialisations, frequently demonstrate an unwillingness to embrace marketing. The accurate reply is probably à ænot an engineer!Æ The paper identifies some of the possible explanations for this reply. The vast majority of the themes, ideas and principles are based on more than 25 years actual experience for the author with Engineers, Tunnelling and other disciplines. This experience has been gained with leading consulting engineering practices; some of the worldÆs largest construction contractors together with other organisations employing engineers in the public, private and tertiary sectors in the UK; US; Europe; the Middle East and throughout Australia and New Zealand. Experience has been gained in design offices; head offices and construction job sites in four contrasting continents. The most significant themes developed throughout this paper are as follows:æLetÆs go and do some ærealÆ work and leave the marketing to others!ÆæMarketing is just a æsoftÆ option and neither technically based nor true management!ÆNIMBY-ism (Not In My Back Yard) so leave well alone!Engineers regularly confuse services marketing -v- product marketing à a useful cop out, or a genuine cry for help?Marketing databasesæLetÆs get rid of the term æsellingÆ and replace it with the more acceptable à and less distracting for tunnelling engineers à 'marketingÆDistinction between benefits and features à in The Race for SpaceSales Comprehension Test, Benchmarking TestJack WelshÆs æmost difficult decision for a CEOÆHarvard Business ReviewÆs (HBRÆs) formula for performanceMany engineers are losing the balance in their lives Sustainable development and engineering æQuality work doesnÆt mean quality serviceÆMajor recommendationsRecommended references

Jan 1, 1999

By Y G. Anoman

This paper discusses the operating model within Endeavour Mining Corporation regarding the options of owner mining against contract mining. It’s based on the concept of ‘are we carrying out the most efficient mining’ regarding cost and performance. This question can only be answered through an extensive contract mining tender process and conducting a comprehensive comparison to evaluate the transition viability. Karma mine, located in Burkina Faso, is the subject of this paper. The Tender model included sales of equipment, parts and tooling associated with the traditional Load and Haul Schedule of Rates (SOR). The methodology focused on the structure of the tender process, which consists in the development of a SOR based on haulage profiles and mining schedule. This is a new Endeavour framework that allowed the bidders to compete on an even level. This was performed using a systemic analysis which encompassed all the elements involved in a transition such as the Human Resources (HR), taxes and customs implications, directs and non-direct costs (Finance and interest on assets, depreciation, insurance), contractor risk profiling. It was assessed against the normalised internal pricing tender-based. This paper gives an insight into how a West African mining operation addressed the sensitivities of the HR functions against the commercial aspects. This was one of the most successful transitions in West Africa and was carried out during the COVID crisis. The outcome of this project has created value by detailing a lesson learned model for both commercial and HR aspects. This discusses the commercial comparisons along with the internal model with the underlying HR functions as a risk factor that could have jeopardised the continuation of the operation. This resulted in a smooth transition with the additional cash flow generated by the sale of the parts and equipment turned Karma into a viable operation.

Jun 22, 2022

By R K. A Taylor

The growth in production of beneficiated ilmenite products has been one of the most significant trends in the titanium feedstock industry over the past 30 years. In this period, the production of titanium slag and synthetic rutile has grown five-fold to the point where these products represented 56 per cent of total feedstock production in 2000. Additional production capacity is being proposed as the core component of new feedstock supply projects presently under consideration. A high proportion of these products is based on technologies for which the inherent quality of the is an essential factor. Location specific factors also play a large part in determining the cost of production. As the demand for such products grows, and the availability of favourably located sources of ilmenite of suitable quality declines, it can be expected that existing beneficiation technologies will become increasingly constrained. Existing beneficiation technologies, and those which have been developed, but are not yet commercially applied, are reviewed. Future issues which are likely to impact on the cost effectiveness of these technologies, or the quality of final products, are identified. These factors suggest directions for development of ilmenite beneficiation technologies to achieve economic production of the quality of feedstocks which will be demanded by the TiO2 pigment industry in the future.

Jan 1, 2001

By R Dimitrakopoulos, C Paduraru

The optimisation of mine complexes and related value chains is a challenging problem due to the simultaneous presence of a highly-dimensional decision space, integer decision variables, non-linear constraints and recovery functions, as well as geological and market uncertainty. In addition, if the uncertainty is revealed progressively, then decisions need to continuously adapt to new information, which poses additional challenges. Stochastic dynamic programming is a well-known class of methods for addressing problems where a decision-maker reacts to new information. While simplistic applications of dynamic programming using exact representations would be intractable for any realistic mine planning problem, new dynamic programming methods using approximate value function representations have been successfully implemented in the past to address problems of similar complexity. This work formulates the problem of mine complex optimisation as an approximate dynamic program and presents an application of the resulting method to a gold-copper deposit.CITATION:Paduraru, C and Dimitrakopoulos, R, 2014. Mineral supply chain optimisation under uncertainty using approximate dynamic programming, in Proceedings Orebody Modelling and Strategic Mine Planning Symposium 2014 , pp 415–422 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Nov 24, 2014

The long-term outlook Tor Australla's traditional mining products is for flat demand and continuing low prices. This has come about because of three far-reaching changes since earlier boom days: 1. Continuing declines in intensity of usage of basic mine products; 2. The failure of newer western and third world developing countries to realise growth expectations; and 3. Continued production pressure from third world countries (and first-world primary producers) in an effort to earn foreign exchange and rectify trade balances. These trends have led to a general situation of excess supply and weak demand. In this environment, the prerequisites for survival in the mining sector are first-class mines, modern and efficient production methods, low unit costs, aggressive marketing, and products with reasonable operating margins. Many of Australia's mines meet these prerequisites. Following the A$ depreciation and widespread unit cost reductions, most of these mines will be moderately profitable at current depressed commodity prices. They are well placed to benefit from price rises if these eventuate. A new generation of mines is concentrating on a more profitable product range (gold, diamonds, uranium, mineral sands). Australia's balance of trade remains firmly dependent on the primary mining and agricultural industries (Fig. 1). Despite optimistic talk of high-tech developments, tourism and a resurgence of manufacturing, these will remain a small component of Australia's export structure.

Jan 1, 1987