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PRESIDENT Truman's economic report to Congress calls for an increase of 40 billion dollars in the value of goods and services produced in the United States by 1955; this is an increase of 16 percent over our 1949 production. If such an increase is to be realized, it will be possible only by a comparable increase in the production of steel-the keystone of our economy. Going one step further, since the raw materials of steel are iron ore, limestone, and coal, the President's goal can be reached only through the efforts of the mining industry. Coal and limestone reserves are not critical at this time, but the abundance of iron ore reserves has been subject to controversy. In this issue we proudly present "Cerro Bolivar--Saga of a Crisis in Iron Ore Averted" (a story which has been seven years in the making and three years in the getting).

Jan 2, 1950

By H. W. Straley

Some ten years ago the writer1 made a survey of college catalogues to determine what sort of training geologists were receiving in basic sciences. In the light of this compilation and subsequent experience, he made the statement at the 1939 meeting of the Institute that apparently only in schools offering a curriculum in geological engineering or in the geological option of mining engineering curricula could geologists hope to receive the training advocated by Hubbeet.2 In the former study, schools of engineering were excluded because the preparation was known beforehand. The present study aims to consider engineering schools in an effort to determine not only what basic studies are required but what use is made of them in geological courses of the third and fourth years. The present study combined the method of consulting catalogues with a questionnaire. Letters were mailed to officials responsible for supervision of mineral industries curricula requesting information On' (I) the extent to which the engineering preparation of the first two years is actually used in the work of the last two; (2) the extent to which the engineering of the last two years is used in courses in geological engineering or geology; and (3) whether geologists or geological engineers teach descriptively or analytically. Both methods of securing information are open to criticism; the former on the basis of the incomplete information supplied by university catalogues concerning prerequisites and curricula and the latter on the ground that the questions may be phrased poorly or given insufficient consideration by replying officials. Fifty-six questionnaires were mailed and 39 (70 per cent) replies were received. Of the replies, 6 (11.3 per cent) were from colleges of liberal arts unconnected with engineering schools, 11 (20 per cent) were from schools having curricula in geological engineering and 22 (39 per cent) were from departments of mining engineering. The number of replies and their distribution were satisfactory in spite of the receipt of only six from liberal arts colleges. It should be understood that the universities of which the catalogues were examined were not necessarily the same in both compilations. No departments that are admittedly or known to be acting solely as service departments were recorded in the second study. Table I shows that all professional schools require mathematics through calculus, whereas only 7 per cent of the liberal arts curricula expect the same level of preparation; only 73 per cent require trigonometry and 40 per cent college "algebra. The proportion of geological engineering curricula requiring differential equations is higher than mining. All of the engineering schools require general and analytical chemistry, whereas only 77 per cent of liberal arts curricula require general and 18 per cent analytical. Twenty-two per cent of the mining and 40 per cent of the geological engineering

Jan 1, 1946

By H. W. Straley

Some ten years ago the writer1 made a survey of college catalogues to determine what sort of training geologists were receiving in basic sciences. In the light of this compilation and subsequent experience, he made the statement at the 1939 meeting of the Institute that apparently only in schools offering a curriculum in geological engineering or in the geological option of mining engineering curricula could geologists hope to receive the training advocated by Hubbeet.2 In the former study, schools of engineering were excluded because the preparation was known beforehand. The present study aims to consider engineering schools in an effort to determine not only what basic studies are required but what use is made of them in geological courses of the third and fourth years. The present study combined the method of consulting catalogues with a questionnaire. Letters were mailed to officials responsible for supervision of mineral industries curricula requesting information On' (I) the extent to which the engineering preparation of the first two years is actually used in the work of the last two; (2) the extent to which the engineering of the last two years is used in courses in geological engineering or geology; and (3) whether geologists or geological engineers teach descriptively or analytically. Both methods of securing information are open to criticism; the former on the basis of the incomplete information supplied by university catalogues concerning prerequisites and curricula and the latter on the ground that the questions may be phrased poorly or given insufficient consideration by replying officials. Fifty-six questionnaires were mailed and 39 (70 per cent) replies were received. Of the replies, 6 (11.3 per cent) were from colleges of liberal arts unconnected with engineering schools, 11 (20 per cent) were from schools having curricula in geological engineering and 22 (39 per cent) were from departments of mining engineering. The number of replies and their distribution were satisfactory in spite of the receipt of only six from liberal arts colleges. It should be understood that the universities of which the catalogues were examined were not necessarily the same in both compilations. No departments that are admittedly or known to be acting solely as service departments were recorded in the second study. Table I shows that all professional schools require mathematics through calculus, whereas only 7 per cent of the liberal arts curricula expect the same level of preparation; only 73 per cent require trigonometry and 40 per cent college "algebra. The proportion of geological engineering curricula requiring differential equations is higher than mining. All of the engineering schools require general and analytical chemistry, whereas only 77 per cent of liberal arts curricula require general and 18 per cent analytical. Twenty-two per cent of the mining and 40 per cent of the geological engineering

Jan 1, 1946

By Daniel T. Brian, O&apos

Exploration targets and results in the mining industry are commonly summarized in terms of tonnage and grade. Business appraisals require, as additional information, the expected profit or loss implied by the physical summay. The early incorporation of knowledge gained through financial analysis computations can provide a means for economically resolving many common exploration and development problems. Examples of such applications from the activities of exploration planning, reconnaissance, land acquisition, and development planning are presented. While prospecting for mineral deposits, geologists are frequently asked what they hope to find or have found. The response is usually descriptive, such as "50 million tons of 1% copper," and the economic implications are deferred until a capital investment decision is required. At that time, a financial analysis integrating the four analysis components is completed. These components are: 1) Tonnage and Average grade above cutoff grade 2) Capital and operating costs 3) Product value 4) Appropriate profit or loss accounting Close examination of these components reveals that there is no intrinsic reason for avoiding financial analyses at earlier stages in exploration, as long as the uncertainty of the estimate is realized. Tonnage and average grades are commonly estimated at early stages in exploration. For this component, the appropriate cutoff is the major uncertainty. Capital and operating costs are difficult to estimate before detailed quantitative information is available, but estimates useful for the types of applications pertinent to earlier exploration stages are possible. Product value estimates may or may not be difficult, depending on the pricing structure of the particular commodity. A simplified accounting procedure usually may be adopted without introducing any significant loss of validity. This paper describe some of the financial analysis applications which are pertinent during mineral exploration and deposit development. These applications lend additional insight during exploration planning, land acquisition, physical exploration, and development. The examples are oriented toward a hypothetical management investment policy which is based on a single criterion, a minimum 15% discounted cash flow rate of return. In reality, managements use multiple criteria. This simplification is convenient for purposes of presentation and does not invalidate the examples. Computers are useful, but not a requirement, for the applications described. The use of computers provides the results on a more timely basis at costs lower than equivalent manual computations. UNDERLYING PRINCIPLES AND ANALYSIS METHODS Data estimates are subject to uncertainty. The analyst may choose to assess this uncertainty by using one of two principles. Each principle has some advantages. The principle most commonly employed is "assumed certainty." Each financial analysis is based on one set of selected data, which may represent the average estimates, minimum expected conditions, etc. The critical data is identified by making successive calculations, varying the values used. Such studies, called sensitivity analyses, isolate the economic effect of various uncertainties, and guide the allocation of future efforts toward improving the overall accuracy of the analysis. A second principle, "assumed risk," examines the interactive effect of the current uncertainties by qualitatively assigning probability distributions to each data element. These probability distributions indicate the currently appraised chance that a given numerical value will prove to be true. The corresponding procedure, risk analysis, consists of processing many individual financial analyses, each analysis being based on randomly selected numerical values from the probabilistic distributions. The result is a numerical presentation of the uncertainty, but care must be exercised in the interpretation of results. The advantage of this procedure is the direct measurement of economic uncertainty caused by the interaction of uncertain estimates. Kennecott Copper Corp. has developed computer systems for accomplishing sensitivity and risk analyses.

Jan 1, 1970

By Raymond O. Ladoo

FUSED quartz is a glass made by the fusion of nearly pure silica. Some confusion in terminology exists but in the trade today "fused quartz" generally refers to the perfectly transparent colorless product made from rock crystal whereas "fused silica" is a white, translucent product made from silica sand. Vitrified silica is the term preferred by purists for all quartz glass, but it lacks the definiteness of -the trade terms. Since the raw materials, methods of production, and properties of the finished products arc different for the two types, the trade terms are preferred. As fused quartz is amorphous, it-physical properties differ greatly from those of quartz crystal. Lacking crystallographic directions and having no piezo-electric properties, fused quartz. of course, has no value for the making of radio oscillator plates; but it does have other valuable and unique properties. Perhaps the 'best known and most useful properties are its extremely low coefficient of expansion and its ability to transmit short-wave ultraviolet radiant energy. Crystal quartz not only has an aver-

Jan 1, 1947

By WILFRED SYKES

THE story of the rolling of strip steel is not limited to any one plant or individual or group of individuals. It is a story with many ramifications. First of all, it should be understood that the strip mills we are considering are continuous mills, in that the steel passes directly from one mill to the other in a more or less straight line. Continuous mills are not new; in fact, they have been used for many years in the rolling of a few simple shapes. They were, however, driven by one motor through jackshafts, and as a result the speed of each roll stand had a fixed relation to that of every other stand in the series. This in turn fixed the reduction that could be made in each stand. The mill could produce simple things, but was not satisfactory for the production of the variety of strip now required. It was, therefore, necessary to get away from the restrictions of that kind of drive. To accomplish this, the designer could either separate

Jan 1, 1936

By W. D. Johnston, T. P. Thayer

THE minerals that collectively are known as chromite form an isomorphous series of the general formula (Mg,Fe) 0. (Cr,Al,Fe) 203. So wide is the range in chemical composition in this group that chrome ore consisting entirely of the mineral chromite may range from less than 30 pct to more than 60 pct Cr203. The most comprehensive published data on the chemical com- position of chromite are by Stevens,62 who made complete analyses of 52 samples of chromite concentrate from many localities in North, Cen- [ ] tral, and South America. These samples were mechanically purified to remove associated silicates and might be regarded as the cleanest chromite that could be obtained by any mechanical milling process. Fig 1 shows the predominant zone of isomorphism, within the triangular prism of composition defined by the mineralogical end members of the series, wherein his analyzed samples fell.

Jan 1, 1949

By Henry Louis

THE work performed by the Royal Commission on Mining Subsidence is likely to prove of permanent value, less perhaps for the conclusions it has reached and for the recommendations it has based upon these than for the admirable exposition which it affords of the law concerning mining subsidence and of the legal status of the person who has suffered damage by reason of such subsidence, as also of him whose working has caused the damage. The Commission was appointed by Royal Warrant in the middle of 1925 and delivered its final report in the middle of 1927. The terms of reference to the Commission were as follows: "To consider the operation of the law relating to the support of the surface of the land, and of buildings or works on or under the surface, by underlying or adjacent minerals; to enquire into the extent and gravity of the damage caused by subsidence owing to the extraction of minerals and the incidence of the resulting liability; and to report what steps should be taken, by legislation or otherwise, to remedy, equitably to all persons concerned, any defects or hardships that may be found to arise in existing conditions."

Jan 1, 1929

By M. M. Singh, J. W. Brown

Three rocks of highly varied physical properties are selected for the first reported experimental study concerning microseismic activity of rock under tension to determine the effects of static fatigue, loading rate, repeated loading and rock anistropy compared to compression and bending loads. The microseismic method of detecting rock under deformation may be a great potential tool in surveillance and location in situ of dangerously stressed strata, as well as predicting rock failures. Noises emitted under load or the rate of energy (energy of noise pulses generated per unit time) are computed for varying conditions. The tests are conducted at constant load on a dead weight loading machine to eliminate all possible extraneous noises — an indispensable precaution — at various load levels. Experimental results are reported including the relation of total energy emitted to tensile strength of rock and the possibility of simulating a phenomenological model for microseismic activity. Plots of some of the experiments are included. INTRODUCTION Rock failure, whether on a large scale faulting in the earth's crust and rock bursts in mines, or on small scale ruptures of laboratory test specimens, generates transient vibrations in the rock mass. Mechanisms of intermittent deformation, such as twinning and cracking through and between mineral grains, also produce similar vibrations, but of very small amplitude. Such vibrations from both deformation and failure are referred to as microseismic activity, rock noise, or occasionally seismo-acoustical activity. An individual rock noise is sometimes

Jan 1, 1967

By A. K. Chakravarti, A. Lihiri, G. G. Sarkar

One primary objective of India's third Five Year Plan is the expansion of coal production. The goal: boost present output of 45 million tons to 95 million tons by 1965--an increase of more than 100 pct!

Jan 7, 1961

Jan 1, 1967

By E. W. Engelmann

RAPID progress has been made during the past year in the copper mills throughout the country. Particular efforts have been made to increase the fine-grinding efficiency by the installation of larger classifying units operating in closed circuit with ball mills, such as the 78-in. high-weir Akins installation at the Phelps Dodge plant at Ajo, Ariz.; also the Type "FX" Dorr classifiers of Nevada Consolidated at McGill. Nev. and the "FX" Dorr bowl classifier of the Braden Copper Co. in Chile. Some of the copper milling plants in the Southwest, such as Chino in New Mexico and Ray Con. in Arizona, have replaced rolls operating wet in their fine-grinding circuit by rod mills. At Hollinger primary rod mills were formerly used in open circuit followed by pebble mills in closed circuit with classifiers. They now have primary ball mills in closed circuit with large extra heavy classifiers and no secondary mills. This new installation is producing the same grinding on 5000 tons per day with a reduction in cost of nearly 4c. per ton. At the Braden plant, in Chile, short-head Symons crushers have replaced 54-in. rolls, thereby in- creasing crushing capacity with some saving in maintenance cost.

Jan 1, 1939

By Paul M. Tyler

HISTORICAL concepts of the economics of the glass-sand industry are changing rapidly. The greatly expanded demand for glass containers combined with higher freight rates on raw materials and manufactured products have induced a migration of glass factories toward densely populated centers and the creation of new standards of place value for sub- standard sand deposits. This migration has been facilitated by the construction of pipelines to bring cheaper natural gas and liquid fuel to large cities and may be further speeded by the adoption of modern mineral dressing methods to permit economical utilization of local raw materials. Our national resources of naturally high-grade 1 silica sand are abundant, but most of the best de- posits are situated so far from large centers of population that it now costs $3.00 to $5.00 a ton to carry the sand from the mine to the optimum site for a 1 factory making beverage bottles, scientific and electrical glassware, and miscellaneous blown and pressed ware for local markets. It follows that on the basis of freight savings alone it may be economical to use material from inferior deposits closer to the factory even though the f.o.b. cost of mining and treatment may be much high

Jan 1, 1950

AT THE dinner at the Cosmos Club in Washington, tendered to Herbert Hoover on Jan. 5, on the occasion of his retirement from the presidency of the Federated American Engineering Societies, he made an informal speech in which he pointed out not only the unique position which the engineer now occu-pies by virtue of the new Federated Societies but also the opportunity that is thus presented for national service. In this connection and in pointing out some of the reasons for the present economic maladjust-ment, Mr. Hoover said in part: This body has entered upon a path of public serv-ice that is unique in the whole United States. The engineer has devoted himself all these years to the upbuilding of the material values of the United States. He has done that effectively more effectively than-has been accomplished in any other of the great countries of the world. The birth of this society marks the evolution of the engineer into an interest in public affairs. With his intelligence, his experience and training and the unique knowledge that he possesses not only of the material but the intangible values among our people, he is now organized so that his united voice may become heard outside of his profession. We have probably 175,000 engineers in our country, representing an intellectual possibility for service possessed by no other group. It is therefore an augury of real social development when the engineers of the United States join together for purposes of public service.

Jan 3, 1922

By Robert S. Dewey

More wells were drilled in West Texas† during 1944 than in any year since 1941. As compared with 1943, there was an 82.5 per cent increase in the total number of completed wells. The 1646 wells required an estimated 140,715 days to complete for a total of 7,632,249 ft. An average of 85 completion days was required to drill to an average of 4630 ft. This depth is approximately 100 ft. greater than that of the previous year. It is estimated that $100,000,000 was invested in drilled wells. As of Dec. 31, 1944, there were 270 field and 91 wildcat wells being drilled. While an identical number of wells were drilling Dec. 31, 1943, the proportion of wildcats increased in 1944 from 19.7 to 25.2 per cent. During 1944, oil wells were completed in 103 of the 164 fields in West Texas. Of the 1361 oil wells, 385 were in Slaughter, 116 in Fullerton, 63 in North Cowden, 62 in Fuhrman-Mascho, 59 in Wasson, 52 in Westbrook and 47 in North Ward. Approximately 22 per cent of the wildcat drilling was to pre-Permian formations. Despite the increasing proportion of wildcat wells drilled, the wildcat discovery rate has declined since the year 1942. AS compared with 1943, the number of wildcat wells drilled increased from 11.7 to 12.7 per cent and the footage in wildcat exploration increased from 13.3 to 13.8 per cent of the total. The monthly production of crude continued to increase to a peak of 15,336,000 bbl. in October 1944. As compared with a similar peak production in October 1943, there was a 37.3 per cent increase. The yearly production increased from 98,165,-ooo bbl. in 1943 to 159,943,000 bbl. in 1944, an increase of 62.8 per cent. Based upon an assumed average price of $1.00 per barrel and less 1/8 royalty, the gross return to the producer amounts to $140, 000,000. From 1943 to 1944, the average number of producing wells increased 6 per cent while the average daily production per well increased 53.1 per cent. The average daily production per well increased from 17.5 bbl. in 1943 to 26.8 bbl. in 1944. The proportion of flowing wells decreased from 50.5 per cent in January to 49.1 per cent in December 1944. Drilling With the continued shortage of labor and materials, drilling costs have risen sharply. Just how much is difficult to ascertain. Owing to competition for available drilling rigs, contractors are reluctant to assume drilling risks. In consequence, some contracts are let on a cost plus basis, or day work below some specified depth with the operator furnishing part of the consumable materials, such as mud and drilling bits. Contractors are having difficulty in maintaining full and effective drilling crews with insufficient and inexperienced labor. Service companies have inadequate labor and equipment to meet their appointments promptly. Pipe Lines The Gulf Pipe Line Co. increased the capacity of its 10-in. main line by filling in gaps amounting to 75 miles on the loops between Judkins and Weatherford, Texas.

Jan 1, 1945

By Robert S. Dewey

AS a result of drilling operations during 1943, West Texas again added sufficient new oil reserves to replace the oil produced during the year, but failed to maintain its position in currently available reserves because the deeper discoveries will require years for development. Drilling failed to provide the additional oil necessary to meet the increase in current and anticipated market demand. Although 13.3 per cent of the total footage drilled was in wildcat exploration, the ratio of oil discoveries to total wildcats was less in 1943 than in 1942, but comparable to that in 1941. Of the 732 field wells completed, 270 were at Slaughter, 55 at Wasson, 45 at Mascho and 31 at North Cowden. As of Dec. 31, 1943, there were 361 drilling wells including 71 wildcat and 290 field wells; 19.7 per cent were wildcats. It is anticipated that the percentage of wildcats of the total wells will be higher during 1944 than in either 1942 or 1943. Tables 3 and 4 present a three-year comparison of drilling activity and illustrate the downward trend of development that has been in effect during that time. Because of development lag in the deeper Ordovician fields, several years elapse before 2 sufficient number of wells is completed to give a substantial producing rate. As these new oil reserves cost more to find, and will cost more to produce on a barrel basis than the oil marketed during the year, their reserve replacement value to the industry is less in money. Costs While complete costs for deeper drilling are not yet available for analysis, it is evi- dent from the data on drilling rates to comparable depths, contract prices, and general increases in costs, that the cost of drilling has risen approximately 20 per cent during the year. One representative drilling contractor estimates that the average drilling time on a 5000-ft. field well has increased nearly one third and that out-of-pocket costs have increased a dollar per foot. Three major factors contribute to this increased cost: (I) less experienced labor, (2) deterioration in mechanical equipment and expendable material, and (3) increased contract prices. In the past, when there were more drilling rigs than wells to be drilled, some contractors would cut their drilling profit to keep their personnel and rigs working. As this practice is no longer necessary, the contract prices are adjusted upward to assure a profit. On deep and difficult drilling, contracts are let on a cost plus basis. A number of mechanical difficulties have become evident. Inferior quality of steel used in drill pipe and rock bits has added appreciably to drilling time and cost. Contractors are experiencing delay in obtaining repair work and repair parts for prime movers. As the length of drilling time required an shallow-field wells has not increased in proportion to that on deeper wells, it seems that the medium-sized drilling rig is better adapted mechanically than the heavy one to the work imposed. One of the main deficiencies in the heavy rig equipment is inadequate pump capacity. Drilling Mud The increasing amount of deep drilling has emphasized the importance and relationship of good mud to efficient and suc-

Jan 1, 1944

By Robert S. Dewey

AS a result of drilling operations during 1943, West Texas again added sufficient new oil reserves to replace the oil produced during the year, but failed to maintain its position in currently available reserves because the deeper discoveries will require years for development. Drilling failed to provide the additional oil necessary to meet the increase in current and anticipated market demand. Although 13.3 per cent of the total footage drilled was in wildcat exploration, the ratio of oil discoveries to total wildcats was less in 1943 than in 1942, but comparable to that in 1941. Of the 732 field wells completed, 270 were at Slaughter, 55 at Wasson, 45 at Mascho and 31 at North Cowden. As of Dec. 31, 1943, there were 361 drilling wells including 71 wildcat and 290 field wells; 19.7 per cent were wildcats. It is anticipated that the percentage of wildcats of the total wells will be higher during 1944 than in either 1942 or 1943. Tables 3 and 4 present a three-year comparison of drilling activity and illustrate the downward trend of development that has been in effect during that time. Because of development lag in the deeper Ordovician fields, several years elapse before 2 sufficient number of wells is completed to give a substantial producing rate. As these new oil reserves cost more to find, and will cost more to produce on a barrel basis than the oil marketed during the year, their reserve replacement value to the industry is less in money. Costs While complete costs for deeper drilling are not yet available for analysis, it is evi- dent from the data on drilling rates to comparable depths, contract prices, and general increases in costs, that the cost of drilling has risen approximately 20 per cent during the year. One representative drilling contractor estimates that the average drilling time on a 5000-ft. field well has increased nearly one third and that out-of-pocket costs have increased a dollar per foot. Three major factors contribute to this increased cost: (I) less experienced labor, (2) deterioration in mechanical equipment and expendable material, and (3) increased contract prices. In the past, when there were more drilling rigs than wells to be drilled, some contractors would cut their drilling profit to keep their personnel and rigs working. As this practice is no longer necessary, the contract prices are adjusted upward to assure a profit. On deep and difficult drilling, contracts are let on a cost plus basis. A number of mechanical difficulties have become evident. Inferior quality of steel used in drill pipe and rock bits has added appreciably to drilling time and cost. Contractors are experiencing delay in obtaining repair work and repair parts for prime movers. As the length of drilling time required an shallow-field wells has not increased in proportion to that on deeper wells, it seems that the medium-sized drilling rig is better adapted mechanically than the heavy one to the work imposed. One of the main deficiencies in the heavy rig equipment is inadequate pump capacity. Drilling Mud The increasing amount of deep drilling has emphasized the importance and relationship of good mud to efficient and suc-

Jan 1, 1944

By F. C. Blake

The best method for the estimation of copper in ores and secondary products is that proposed by Dr. Steinbeck* for the award offered by the Mansfeld'schen Ober-Berg-und Hutten-Direction. It is based upon the decolorization of the blue ammonia solution of copper by potassic cyanide.7 It is necessary for the accurate estimation of copper in arsenides that the arsenic be separated from the copper before the ammonia solution is made. The presence of a notable amount of arsenic renders the titration by potassic cyanide inaccurate, the end reaction being obscured by the appearance of a yellowish-green tint towards the end of the titration. The change of the color of the ammonia solution from blue to the tint caused by the presence of arsenic cannot be used for an end reaction, for the intensity and quick appearance of the latter color depend upon the amount of arsenic present in the solution. In the analysis of speise, the method of separating the copper by an oxidizing and reducing treatment in the muffle, to volatilize the arsenic, gives poor results, and there may easily be some loss of the weighed sample. The separation of the precipitated sulphides of arsenic and copper by treating with sodic sulphide, gives good results, but the process is tedious. I have used the two following methods, which are simpler and more expeditious than those mentioned, with good results

Jan 1, 1881

By L. R. MacLead

Delivery of tailing to any part of the area by gravity from the ridge was found practicable. Experiments with asbestos-cement pipe proved it possible to use level pipe across the dams if it is fed through an inclined section in which pressure could be developed. Use of pipe to transfer the tailing to the dams was not favored because of the possibility that choking might occur. Metal flume was not believed to have sufficient wear resistance on this material and wooden flume would not withstand damage by the weather so well- Flume -action made- of 26-in diameter asbestos-cement pipe, split before curing and molded to a specified cross section, were finally approved. The flume is connected to the 24-in. diameter tail in distribution pipe by heavy concrete lateral launders. Cascades of horizontal and vertical pipe sections are used at the top of the pressure leg where scouring by high-velocity flow of tailing might occur.

Jan 1, 1942

By P. B. Baxendell

The appraial of producing properties and profitability ntzalysis of a proposed capital expenditure are based on the same principles. In both problems a projection of future cash income is. cornpared to one or more capital expenditures. Several different methods have been in use either to compute a price to obtain a given earning power on the investment or to compute the earning power which will result from a given capital expenditure. One of these, the "Average Annual Rate of Return" method, computes in a simple manner the ratio of the present value of the future earnings after amortization to the present value of the undepreciated balances of the investment over the life of a project. This method, not well known generally, appears to have some rather unique advantages in reducing the computation work required, eliminating trial-and-error solutions, and providing a more accurate answer when applied to oil industry investments subject to the unit-of-production basis of amortization. Its derivation is given and its versatility demonstrated in the solution of certain everyday investment problems. A number of charts, useful in applying this method to profitability analysis and appraisal work, are provided. The current trend in the market values of producing properties is shown. INTRODUCTION Making sound capital expenditure decisions requires an objective means of measuring the productivity of individual investment proposals. Since the best measure of the economic worth of such proposals is their ability to produce profits, it is common practice to grade proposed capital expenditures according to their annual earning power as a percentage of the outstanding capital. The same principles which govern the determination of the rate of return of proposed capital expenditures also apply generally to the problem of determining the appraisal value or purchase price of income-producing oil and gas properties. Both problems are of prime importance in the producing phase of the oil business, where management is faced daily with decisions to drill or not to drill certain development wells, or with the determination of the appraisal value of producing properties. The common feature in both problems is that a projection of future cash income is compared with a known or estimated capital investment to determine itsiearning power or annual rate of return. In the case of development drilling, the cost of the proposed well can usually be estimated with a fair degree of accuracy and the problem consists of finding the rate of return on the invested capital. In the case of appraising producing properties, on the other hand, the desired rate of return is usually known in advance and the problem consists of determining the purchase price which, for the given income projection, results in the fequired rate of return. Certain accounting procedures common to the oil and gas producing business make these two problems and their solutions somewhat different from corresponding problems in other industries, and, in certain ways, simpler. The main difference is in the amortization policy which, for oil and gas production, is frequently on a unit-of-production basis, compared to the amortization on a time basis used in many other industries. The purpose of this paper is to discuss briefly the various methods currently in use for the measurement of productivity of invested capital in producing properties and, in more detail, the derivation and application of what will be called the "Average Annual Rate of Return Method". This rather interesting and not too well known method has some very definite advantages in the solution of many problems common to the oil industry. For the sake of simplicity, federal income tax considerations have been disregarded in the examples used, since they do not affect the principles involved. The use of the production payment route in the sale or purchase of producing properties, which has been amply covered in many other publications, has also not been included in this analysis. METHODS FOK MEASUKING THE EARNING POWER OF INVESTED CAPITAL, Of the many different methods used to measure the earning power of invested capital, four are applicable to oil or gas production ventures. Depending on whether these four methods utilize one or two interest rates, and whether a fixed amortization pattern is used, they may be classified as follows.