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By Thomas D. Kaufmann

Whether pursuing hedging or speculative strategies, gold miners can increase sales revenues 1 % to 6% by constantly pricing production forward. Unlike other commodities, gold futures prices are consistently higher than spot prices. A Colorado School of Mines study showed theoretically and empirically that in the 15 years since the price of gold was released from government control, the forward price for gold has been higher than the current price almost 100% of the time. The reason why Metal traders know that holders of metal earn a bonus selling forward when the metal is in "contango." "Contango" is a mysterious word that crept into the trading vocabulary a century ago. It designates a situation when the price of a metal on the futures markets is higher than the price in the immediate or spot market. If the spectrum of spot and futures prices remains static over time, the forward seller who has contracted at a higher than spot price can make a profit equal to the contango by redeeming his commitment at the lower spot price when the contract matures. Consequently, when a seller in a contango market hedges, he makes a profit on the transaction in addition to avoiding a price change risk. On the other hand, buyers of the metal who hedge in a contango situation will sustain a loss equal to the contango. Producers of gold, however, are sellers of gold. For most metals and oil, there is no inherent reason why futures prices should be higher than present prices. Buyers and sellers decide that the price of the commodity will be lower or higher than present values for a variety of reasons.

Jan 1, 1991

By William K. Burriss

Computer technology was applied to solve three problems in the selling of certain industrial minerals to the glass and foundry industries. The computer solutions provide for better service to customers and have helped increase sales. II. Summary Electronic data processing techniques were applied: 1. To automatically and continuously "trace" rail car shipments of bentonite. 2. To aid our sales people in recommending to glass plant purchasing agents which of several possible feldspathic materials is the best value at any of about 100 glass plants and to give guidance on the amount of value difference. 3. To help in locating plant sites for three blending or pre-mixing stations to serve the foundry industry at minimum cost and with maximum tonnage and maximum profitability.

Jan 1, 1968

By John R. Bogert

The title of this session is "Wall Street Looks at the Mining Industry," and I am going to attempt to answer the question: Shouldn't Mining Stocks Sell at Higher Price Levels? Or, What Does Wall Street See When Looking at the Mining Industry? Well, it sees a capital intensive business, a technical industry, and a growing industry becoming more vertically integrated. But, at the same time, Wall Street sees a cyclical industry, a fragmented industry of erratic earnings, spotty public relations, a feast-or-famine business where the public usually does not differentiate between coal mining or metal mining, and does not appreciate either the risks or the rewards. As a result, mining stocks generally sell at relatively low price learnings ratios in comparison to other industrial groups. This PIE ratio, the current market price of the capital stock divided by annual earnings per share, is probably the most popular index of a stock's value. The average of the price/ earnings ratios of the 30 stocks comprising the Dow Jones Industrial Average is over 14. This diverse group of stocks is widely regarded as being a cross-section and representative of the industrial companies listed on the New York Stock Exchange. However, in comparison to 14, Asarco and Kennecott shares are currently available for about 8 times annual earnings. Even discounting earnings from South America, the stock of these two companies sells at only 10 times earnings. Of course, Peruvian politics is currently preventing Cerro shares from selling above 6 times earnings, and Chilean politics keeps Anaconda shares at a PIE multiple of 7. However, even in better times, these companies rarely sell above 10 times earnings. American Metal Climax and Newmont sell at only 11 times earnings as does Phelps Dodge and St. Joseph Lead. Few mining companies then have what can be considered a high PIE ratio-a figure higher than

Jan 1, 1970

By Felicia F. Peng

An economic analysis for evaluating coal preparation plants in the Appalachian Region is presented. A complete coal preparation plant which includes multi-streams and/or multi-stages coal cleaning circuits, complete closed water circuits, environmentally acceptable refuse disposal and reclamation systems is used to determine the capital and operating costs. The plant is capable of producing metallurgical grade clean coal or deep cleaned steam grade coal for future power generating plants use. Utilizing a profit maximization as a decision criterion, an optimal yield, and optimal coal clean¬ing circuits, closed water circuits, and disposal and reclamation systems for a given coal characteristic may be selected among the process alternatives by using a process simulation-economic model of the coal preparation plant. A deterministic analysis is used to calculate the discounted-cash-flow interest rate of return (DCFIROR) and project the selling prices, and determine the Return on Investment (ROI) for the cases of 32.65% and 52.74% plant utilization with producing two cleaned products. Sensitivity analyses are performed to quantify the effect of total capital investment, operating cost, run-of-mine cost and yield on an economic criterion-ROI and selling prices. A probabilistic evaluation using the Monte Carlo simulation technique is further made to quantify the risk involved in obtaining the desired profit levels. The results of the economic analysis for a given coal preparation plant configuration and characteristics of raw coal indicates that the selling prices of producing two cleaned products are greatly affected by the change in percent of plant utilization (production schedule), yield, and run-of-mine cost, and total capital cost. The sensitivity analysis also shows that the total capital investments has a three times greater effect on required selling prices than operating costs. The risk analysis shown that the overall economics look very attractive with current coal sale prices and 52.74% plant utilization.

Jan 1, 1979

By John F. Clarkson

White Pine Copper Company built and operated, from August, 1962 through May, 1963, a pilot plant to recover copper using a cyanide percolation leach of the sand fraction (+400 mesh) of the mill tailings (1, 2, 3). The pilot plant runs were metallurgically successful and preliminary engineering studies for a full scale operation were completed under contract by an outside engineering firm. Unfortunately, the net return projected at that time did not justify the proposed capital' investment. In the summer of 1973 the project was revived. The rise in selling price of copper over the previous ten years, compared to the projected operating cost of the leach plant, increased the calculated net return on investment with the most recent figures showing a 30% DCF. Basically, the reason for this favorable shift in profitability was that the cost for many of the reagents did not go up as fast in the previous ten years as did the selling price of copper. Using the Chemical Marketing Reporter costs, NaCN sold for 18.3¢/lb in 1963 and 20.75¢/lb in August, 1973. During this same period H2S04 went from $23.50 per ton to $35.90 per ton. In comparison, producer's prices for electrolytic copper were 31¢/lb in 1963 and 619 in 1973. Thus the price of copper went up 97% while the two reagents only increased 13% and 53%, respectively. The capital investment also escalated but, again, not to the same extent as the selling price of copper. These price differences no longer are valid' but they did provide justification for reexamining the project.

Jan 1, 1975

By D. Eyde

The zeolites review arrived too late for the June issue. The natural zeolite industry continues to grow even as some companies look for the exits. Production for 1993 was estimated at between 42 and 44 kt (46,000 and 48,000 st). That is between 7 and 9 kt (7700 and 9900 st) above 1992 production. GSA Resources, Saint Cloud Mining, Steelhead Specialty Minerals, Teague Minerals, UOP and Zeotech all reported continued growth last year. At the same time the East-West Minerals' Eastgate mordenite mine, and American Resources' Ash Meadows clinoptilolite operations both shut down their processing plants and are attempting to sell the mines and facilities. In addition, Tenneco Minerals continued its attempt to sell the Mud Hills clinoptilolite deposit. Unimin entered the natural zeolite industry through its acquisition of several properties of Aimcor. The properties included the Ben-Jel bentonite and Castle Creek clinoptilolite deposits and processing facilities near Caldwell, ID

Jan 1, 1994

By K. P. Pavlich

Strategic planning, including the process of developing competitive strategy, is an integral part of all organizational management; from one person operations to multi-national Fortune 100 firms. The structure of that process varies from decisions and direction based upon one person's intuition to the integration of multiple strategic planning groups from each of a firm's many business units. Everyone has heard interesting strategic planning stories such as the railroad industry's long term failure to realize that they were in the transportation business and not the railroad business, the decision to "give away the razors and sell them the blades", Caterpillar's "SOQ NaP" campaign (Sell On Quality, Not On Price), or the tanker industry's eventual realization that by better managing turn-around the firm could control their largest single cost: depreciation. It is important to remember that very few strategic planning decisions are going to become Harvard Business Review case studies. That fact does not, however, diminish the need for understanding the firm's business, and actively planning how it is going to remain in business in the future!

Jan 1, 1989

By Phillip J. Maddex

Transportation is a major part of yours in the industrial minerals industry. Whereas federal income taxes merely take 50 per cent of your firms profits, transportation cost may take 50 per cent of the gross realization - selling price plus transportation - on your product, f. o. b. customers plant.

Jan 1, 1969

By Jack E. Thompson

I have spent my entire life in the mining industry pursuing what I believed was an honorable profession that provided products that were critical for our social and economic well being. Now I am told that all of my efforts been for nothing and that I have been doing something morally wrong - mining. This view of the future is not one that the mining industry has to allow to unfold. A determining factor in how things will turn out is continued improvement of the industry's environmental performance. To some extent, the current state of affairs in the United States is a result of the common perception that greedy corporations (usually foreign) are somehow ripping off US citizens of their native birthright or natural treasures in the name of corporate profits. Implicit in this view is the belief that corporations will take shortcuts or violate the environment in the name of profits. I have 26 years of experience in working in the copper, uranium and gold industries. Profits during those years were meager and difficult to find (Fig. 1). In fact, when I began working fresh out of college, I chose copper, which was then selling at around $1/lb. By the time I left copper mining, it was selling for 45 cents/lb. I then moved to uranium, which was selling for $52/lb. By the time I left it was $16/lb. I finally picked gold, which was then at ($650/oz). There is a whole generation of engineers, geologists and professionals who have spent two decades downsizing, closing mines, improving costs and getting smarter about how the mining industry does what it does. The environment, health and safety are areas where there have been great improvement. There are five characteristics of corporate governance that are critical for a company to develop and an industry to embrace if environmental, health and safety excellence is to reach new heights in the labor pool.

Jan 1, 1997

By Robert Hochscheid

When the original water-only cyclone patents were established in the 1950?s, the supplies of low cost oil and natural gas were abundant and low selling prices for metallurgical and steam coal provided little incentive for developing more sophisticated coal cleaning systems. Bituminous coal sold for less than $5.00 per ton, and in this period many domestic coal producers discarded to the slurry pond the coal finer than 0.5-mm. For many producers, the selling price would not permit the recovery of the capital and operating costs required for dewatering and drying the fine coal. Water-only Cyclones Clean Fine Metallurgical Coal The first broad interest in the water-only cyclone became evident in the mid- 19601s, and though some work was done on coarser coals, investigators were particularly interested in cleaning coal finer than 0.5-mm. Flotation was the only fine coal cleaning method that was broadly accepted, but short-comings were recognized and investigators were looking for an effective fine coal cleaning device or system. Because of the greater market value and the need for reducing pyritic sulfur in metallurgical coals, much of the development work of the 1960's was done on coking coals.

Jan 1, 1981

By Drew A. Meyer

Magnetic metals are the granddaddy of products which may be recovered from municipal waste. Aside from hand-picking of newsprint and corrugated boxes, magnetic metals are usually the first items a resource recovery facility considers extracting from the solid waste stream. Magnetic metals from incinerator residues and from municipally mandated source segregation programs were first used in significant quantities by the Copper Industry. The ability of the Copper Industry to consume metals from the municipal solid waste stream raised everyone's hopes that there would be more markets for municipal scrap when more of it became available. Somehow something has gone wrong. It is widely acclaimed that scrap is an environmentally sound and economical source of iron. It is greatly in demand for Its contained energy. The prices that the steel industry has been willing to pay for the scrap during the past year are all the proof anyone should need that scrap Is desirable and sought after. But the very fact that I'm speaking today on the markets for magnetic metals recovered from municipal waste indicates that something Is wrong. Clearly the problem is not that we do not need the scrap. The problem is we have not produced the kind of scrap that consumers are willing to buy - either through ignorance of what the consumers wanted or through a conviction that ferrous scrap is so obviously a good thing somebody will surely want it no matter what. Dr. Harvey Alter of the National Center for Resource Recovery has said "You can't sell garbage". In a sense that is only partly true. It really should be "You can't sell garbage for very long". The Steel Companies, in an effort to prove that steel is an environmentally desirable packaging medium, have bought some scrap that can only be described as garbage. They are to be commended for doing so. The fault lies not with the Steel Company for taking and paying for "garbage" but with the producer of that poorly prepared scrap. Far every instance where the steel industry has purchased the often undesirable product from resource recovery facility there are several magnetic installations sitting Idle because someone forgot the most essential part of producing the magnetic product - selling it to someone.

Jan 1, 1975

By Donald M. Duncan

An acceptable source of concrete aggregate is available in Kansas City in a continuous, medium bedded, slightly dipping limestone unit. Removal is accomplished in shallow depth, 12 feet to 17 feet high, room and pillar mines. The accepted empirical design spaces 20 foot pillars 60 feet on center. A portion of the 20 foot unit is left in place for roof support. Rock and soil cover is variable to 100± feet maximum. Long-term stability of these mines is affected by numerous factors, including the above mine-rock profile, ground water conditions and mining practice. Crusher-run aggregate sells at the mine for $2.20 per ton, yielding a gross income of $2.00 to $2.80 per square foot of mine. Use of mine space for real estate development requires a new perspective in mine development. Mining practices to obtain long term stabile structures can become an over-riding factor as compared with minimum production costs and maximum extraction ratios. Poorly mined areas are unusuable for secondary purposes. Development cost for lease space in less desirable mines is substantially greater than those planned for a secondary use. Real estate development in mine space involves unique engineering problems. Properly engineered developments offer singular advantages. Warehouse lease space sells for $.50 to $1.00 per square foot per year; fully developed office areas may double these values.

Jan 1, 1968

By R. E. MacDougall

Very few mineral properties spend their entire lifespans from discovery to depletion in the hands of one owner. More likely, properties will have several owners, and partial interests may change quite often. Similarly, mineral companies are bought and sold with frequency, in recent years at what appears to be an accelerating rate. The reasons for selling a property can be manifold -need for additional capital in other parts of the business, need for development capital, realization of a large gain at a perceived high point in the market, pessimistic commodity outlook, retirement of principals, or resolution of estate problems. Regardless of the reasons for a sale, there are specific steps that logically follow. Spruce up the business, package the information, market the property, negotiate the terms, close the sale, and make sure it stays sold. Adherence to certain very basic ground rules in property sales can maximize the profits and minimize the effort.

Jan 1, 1990

By J. M. King, C. J. Boggs

Acquisitions of mineral properties and companies can saddle the acquirer with unexpected and substantial liabilities and obligations incurred by the acquired or selling company that are not readily apparent from review of the company's books or files. This paper will address selected areas of concern, such as environmental and reclamation liabilities, problems of foreign ownership by the buyer or seller, pension obligations, plant closing laws, effective title review, land use and zoning.

Jan 1, 1992

By Sidney V. Gold

Should Gold Producers Hedge Their Positions Through : Sales on Forward Markets? Purchases of Put Options? Sales on Spot Market? Forward Markets Assumptions 1. Producer has a known amount of Gold to sell in year ahead. 2. Effect on price is the same whether sold Forward or Spot Market. 3. None of us have knowledge of Future Price Trend. 4. Contange Market prevails in which Forward price premium is approximately equal to rate of interest.

Jan 1, 1983

By R. M. Quinlan

The coal industry in the United States has undergone significant economic changes during the past six years. The price of coal remained relatively constant from 1950 to 1969 (See Figures 1 and 2). Steam coal prices tripled and metallurgical coal prices doubled from 1969 to 1974. This price structure has created a new economic environment for coal preparation. Contributing factors to these price trends include: ? Coal Mine Health and Safety Act of 1969 ? Mid-East oil embargo of 1973 ? United Mine Workers of America contract agreements ? Productivity decrease (tons per man-day basis) ? Environmental Protection Agency regulations The increased value of coal justifies additional capital investment in cleaning facilities to optimize yield. Current trends include recovery of existing slurry ponds and recleaning of refuse. Coal preparation plant product yield and quality must be evaluated in terms of the amount of capital expended and cost of operation. Therefore, it is advantageous to optimize the plant product based on clean coal selling price and rate of return on investment.

Jan 1, 1976

By Gerry Norton

The overall economics of a coal production unit are governed by a number of interdependent parameters which individually and collectively affect the final result. A business judgement is measured through return on investment considerations and in this respect, a sensitivity analysis proves useful. Figures 1 and 2 show how the various parameters affect return on investment through unfavourable change from planned or expected values. In the case of metallurgical coals, the selling price negotiated is the primary and most sensitive variable, followed by transportation, clean coal yield and capital funds invested in mining. It is clear that coal preparation plant capital and operating costs are the least sensitive to R.O.I. For energy coals, the selling price is determined by heat energy content (x cents per million BTU's) and is therefore not con¬sidered as an interdependent variable. In this case, transportation cost is the major primary factor affecting the level of income. Again the amount of saleable clean coal or total yield has a major effect on return on investment. Most of the factors considered in Figures 1 and 2 are fixed and unfavorable change from planned values becomes critical but clean coal yield is to a great extent controllable during actual operations. Once the theoretical yield for a particular coal has been determined, the optimum return is achieved by approaching this theoretical yield as nearly as possible in practical commercial operation.

Jan 1, 1975

By Alan C. Noble

Ore reserve estimation is a multi- disciplinary process involving not only tonnage and grade estimation (resource estimation), but also consideration of technical and legal aspects such as mining the deposit, beneficiating the ores, and selling the product. This paper provides a background to under- standing resource estimation including geologic modelling, manual estimation methods, conventional computer methods. and geostatistical methods. Mine planning, metallurgical studies, legal/environmental, and marketing considerations are also discussed as they relate to estimating ore reserves.

Jan 1, 1991

By E. J. Wade

My subject is gold price forecasting and monitoring as an important aspect of gold marketing. While I 'm specifically addressing gold, it is understandable that many other commodities could be readily substituted. Gold marketing must be studied as three distinct processes, and it is my intention to cover each of these processes in turn. First I?ll cover the process of gold price monitoring and forecasting in some detail. In order to select a method, or combination of methods, to be used to sell gold a determination of the future price profile is essential. The profitability of the sales effort will be determined, to a large extent, by how accurately the future price behavior of the gold market has been forecast.

Jan 1, 1985

By Michael Rieber

Mineral economics interfaces the mineral sciences and engineering with finance and economics in the analysis of appropriate questions facing the minerals and energy industries. Its practitioners include those trained in the earth sciences; mining, petroleum, and geological engineering; metallurgy and mineral preparation; as well as finance, information systems, economics, and statistics-most usefully in one or more combinations. Allowing for some overlap, three general areas may be identified: evaluation, economic analysis, and resource appraisal. Evaluation begins with mine investment analysis (exemplified by Gentry and O'Neil, 1984) and process costing, for which the STRAMM Handbook (Anon., 1977) provides a well-known basis for mining and beneficiation. But it extends from property appraisal, often used for the determination of taxes and royalties, through the determination and comparison of transport costs (e.g., Richer and Soo, 1977), and to benefit/cost analyses of externalities. Economic analysis, the subject of this section, is displayed in rigor and extent both theoretically and as applied to commodity classes in Vogely (1985), but it is implicit though apparent throughout Lefond (1983). The text edited by Vogely places minerals in their aggregative context with economic growth and trade, proceeds to the theoretical analysis of minerals and their markets, analyzes the structure and performance of the major mineral sectors, and concludes with policy issues: fuel, nonfuel, and environmental. Resource appraisal employs quantitative methods for the estimation of mineral and energy resources. It moves through geologic, geophysical, and geochemical properties to the identification of estimation procedures for mineral endowment and for the economic measure of stocks and flows of specific minerals (Harris, 1984). It can be used to estimate the probable amount of a specific resource remaining in a given region and has been used to project sites in a specific

Jan 1, 2008