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By R. J. Pindred

Discussion by R.J. Pindred In his paper, Davis presents an overview of risk. He also introduces the Capital Asset Processing Model (CAPM) as a foundation for selecting the appropriate discount rate for a mining project. While applying portfolio theory is more defensible than the ad hoc adjustment of discount rates, the CAPM is not a panacea. CAPM shortcomings [The CAPM, as Davis stated, is expressed in the equation: ri=rf+pi4) where ri is the project discount rate rf is the risk free interest rate (3i is the project beta, and 0 is the market risk premium (rm - rf)] Application of the CAPM is more difficult than Davis indicates. Valuation is prospective, while the CAPM parameters are historical. Beta is determined from a regression analysis of historical data, while the beta needed for valuation is the expected beta. Betas are known to be unstable and the regressions that generate them often have low explanatory power. The difficulty of estimating a "project" beta must also be considered. Thus, the beta that is used in the CAPM will be based on the analyst's judgment. Like Cavender's discount rate, this judgment can lead to different project NPVs. Subjectivity in valuation cannot be avoided by a mechanical application of the CAPM. The risk-free rate, which Davis identifies as a short-term real rate of 4%, is also subject to scrutiny. A mining project is not a short-term investment and no single risk-free rate is appropriate for all of the cash flows. The hypothetical mine discussed in Cavender's paper is a six-year project. One might argue for the application of a risk-free rate from the Treasury yield curve at the duration of the project (in a bond-duration sense). This, too, is inappropriate. The risk-free rate should be matched to the timing of the cash flow. These rates can be determined by calculating the implied forward rates from the yield curve using a procedure known as "bootstrapping." It is likely that each of the project's cash flows would be discounted at a different rate. Commodity prices Davis criticizes the "ad hoc adjustment to the discount rate." Yet, in his discussion of the value of stochastic simulation, he suggests that the gold price be modeled as a "random walk, with or without a trend." This is essentially an arbitrary modeling of price risk. Consider that a liquid market in gold futures exists. The futures' price curve, which is closely related to the market's estimate of future spot gold prices, should be used to provide inputs to the model. This is especially true of a relatively short six-year project. Alternatively, as Davis correctly points out, a risk-averse investor can sell the commodity short to hedge price risk. Is it any more correct, in the portfolio sense, to account for price risk at all ?? References Cavender, B., 1992, "Determination of the optimum lifetime of a mining project using discounted cash flow and option pricing techniques," Mining Engineering, Vol. 44, No. 10, pp.1262-1268 Fabozzi, F.J., 1993, Bond Markets, Analysis and Strategies, Second Edition, Prentice Hall, Inc. Higgins, R.C., 1992, Analysis for Financial Management, Third Edition, Richard D. Irwin, Inc. Solnik, B., 1991, International Investments, Second Edition, Addison Wesley Reply by G.A. Davis Pindred discusses two issues related to my paper, the shortcomings of the Capital Asset Pricing Model (CAPM) and which commodity price values to use in the valuation exercise. Even though these topics are not directly related to the use or misuse of Monte Carlo simulation, they are important points to take into consideration in valuation exercises. Since I do not appear to have addressed these issues satisfactorily in my original paper, I will comment on each here. Pindred agrees with me that applying portfolio theory, and specifically the CAPM, to the selection of project discount rates is more defensible than ad hoc methods. But he then points out that the application of the CAPM to project valuation is more difficult that I indicate. It is true that the CAPM is a difficult tool for project valuation in general,. But the application of the CAPM to mining projects is one of the easiest I can think of. The biggest problem with using the CAPM for project valuation is coming up with an expected project beta. I suggest a project beta for gold projects of 0.45. The "true" value might be 0.35, 0.55 or whatever. Pindred correctly notes that the selection of the appropriate project beta is based

Jan 1, 1996

The U.S. economy and, consequently, the demand for minerals grew at more moderate rates in 1995 compared with stronger performances the previous year. Demand for metals such as steel and copper was relatively stable. For example, the decline in steel consumed in motor vehicle manufacturing (reflecting lower vehicle sales) for the first half of 1995 was offset by an increase in steel consumed in construction during the same period. More detailed information on events, trends, and issues in the mineral and material sector Is presented below and in the commodity sections that follow. Overall Performance The value of processed materials of mineral origin produced in the United States during 1995 was estimated to be $395 billion, an increase of almost 10% compared with 1994. The estimated value of U.S. raw nonfuel minerals production in 1995 was $38 billion, about 7% more than in 1994. The value of U.S. minerals production has increased in 30 of the last 35 years.

Jan 1, 1996

By Za-Chieh Moh

This paper presents a summary of the current pile foundation practice in Taiwan. Constructions of driven piles, drilled shafts, and barrette foundations are reviewed. This paper also briefly summarizes the pile works of four major construction projects in Taiwan, namely, Hsin-Ta Power Plant, Taichung Power Plant, Taipei Transit Systems, and Taiwan High Speed Rail.

Jan 1, 1996

By Lawrence Devon Smith

"Within the mining industry the term “due diligence” is used to describe a detailed data review, generally in connection with the purchase or sale of a mineral property, the approval of a large capital expenditure, or the borrowing of a large sum of money.The term originates in the requirement of the board of directors of a corporation to “act honestly and in good faith and exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances” (OBCA, 1994). Furthermore, the law assumes that a corporation (or its board) will have exercised due diligence in the acquisition of an asset and, therefore, knowingly (in the absence of fraud or deceit) will have taken on the liabilities and obligations associated with the asset (Nelson, 1994). This is the familiar “Buyer Beware”.Directors are liable for their decisions except “if the director relies in good faith up on financial statements of the corporation represented by an officer of the corporation or in a written report of the auditor, or a report of a lawyer, accountant, engineer, appraiser, or other person whose profession lends credibility to a statement made by any such person.”(OBCA, 1994).Hence the importance of reports prepared by professionals. They provide confirmation that the directors have exercised due diligence in the performance of their duties. For this reason these reports are referred to as due diligence studies."

Jan 1, 1996

A combination of the needs of business, employee desires and safety and health considerations is stimulating increasing attention to the time spent by people at work and the timing of that work. Particularly we are seeing: - innovative work schedules for 24-hour mining businesses; and - response from industry to accommodate the needs, even the desires, of employees in return for systems which are more productive and more capital efficient. There appears to be an evolutionary trend for business management to become more sophisticated and responsive to the need for achieving close to best cost work schedules to sustain continuous improvement. The underlying motivating forces driving this trend for improved techniques in organising attendance at, and time spent at work, is the seemingly inseparable combination of technological advance and ever-increasing accumulation of capital. The mining industry has not remained untouched by this thrust for ever-increasing need for best use of labour, to adopt advances in technology and to provide attractive opportunities for putting accumulated capital to work. An essential component of this on-going thrust is a substantial effort by the mining industry to improve the performance of labour by providing most-productive work schedules.

Jan 1, 1996

By I. Marklund, W. Hustrulid

Sublevel caving is likely to remain the dominant system at both Malmberget and Kiruna for the foreseeable future. The sub-level interval has increased from 12 m in 1983 to 30 m, requiring more effective drifting and the development of a contour blasting technique to reduce requirements for rock reinforcement. Production drilling is mainly by hydraulic hammers or water-powered in-the-hole machines drilling 115 m diameter holes. Loading operations are undertaken 7 days/week with 15-25 tonne capacity electric shovels. Production has increased by nearly 70% since 1983 and productivity has risen threefold

Dec 1, 1995

By C. A. Pickles, J. M. Toguri

The refining of two molten Ag-Cu alloys, containing 7.5 and 11.2 mass% Cu, with a borosilicate slag was investigated using both air and pure O2 to determine the effects of the following variables: flow rate of oxidising gas; injection time; mass of sodium borosilicate flux; and injection of the oxidising gas into either the slag or the metal. The results demonstrate that more than 90% of the Cu can be removed with Ag losses of less than 5% and that refined metal with a Cu content of less than 0.5 mass% can be produced. Ag losses to the slag increased with the amount of Cu removed, and a mechanism is proposed to account for this

Dec 1, 1995

By G. G. Barbante

Anode slimes produced during copper electrorefining are a valuable source of silver, gold, selenium and tellurium. The conventional pyrometallurgical process for treating slimes involves preliminary leaching in sulphuric acid followed by smelting in a reverberatory furnace with fluxes, but it is slow and has many recycle streams. The chemistry of the phases and the reactions that occur in slimes smelting are poorly understood and and this prevents major improvements to the process. Laboratory-scale experiments were conducted using unleached slimes, with and without the addition of fluxes and under neutral, oxidising and reducing conditions. Results show that selenium is readily removed as gaseous selenium dioxide and that molten Cu-Ag-Se-O phases form when fluxes are added. Oxidation-refining of these phases by air injection and flux addition can result in the formation of silver suitable for further electrorefining

Aug 1, 1995

By A. C. Apling, N. B. Barrett

Roadstone production requires the generation of non-flaky material, as outlined in British Standard 812 section 105.1; with respect to this criterion, a mathematical model of a cone crusher must be able to predict the flakiness index of a particular size range as determined by the relationship between thickness and nominal size. The Whiten cone crusher model utilises breakage and classification functions to predict a product particle size distribution only, so a shape function has been proposed that is based on a phenomenological approach, taking into account the transfer between flaky and non-flaky material at each stage of breakage. The results of laboratory tests to determine material breakage characteristics and of examination of pilot-scale test products illustrate the method's potential

Apr 1, 1995

By C. S. Spirakis, A. V. Heyl

Paper presented at the conference Economic geology in Europe and beyond II, models for mineral deposits in sedimentary basins, held in Keyworth, UK, 13-14 April 1994. The modified basinal brines, containing partly oxidised sulphur species, scavenged metals from basement rocks and sediments and transported them through the host rock, which contained local concentrations of organic matter. Reacting in various ways with the mineralising solution as temperatures at the sites of mineralisation changed, organic matter caused the precipitation and dissolution of a variety of minerals in the ore zones; it was organic matter that caused all of these reactions to occur at the same sites. Thus all components of the mineralising fluid - salt, water, heat, sulphur and metals - were obtained within the ore district. The siting of the mineral districts was related to the locations of faults through U- and Th-enriched granites beneath sediments containing basinal brines, and the locations of ore deposits within the districts were controlled by local concentrations of organic matter

Apr 1, 1995

By L. D. Snyder, J. K. Russell

"The Lower Jurassic Iron Mask batholith intrudes Upper Triassic Nicola Group volcanic rocks in the Quesnellia terrane of southcentral British Columbia and hosts Cu-Au mineralization. The batholith comprises three mappable intrusive phases, including: Pothook gabbro to diorite, Cherry Creek monzodiorite to monzonite and Sugarloaf diorite. The Iron Mask hybrid forms a fourth mappable unit that makes up to 45% of the areal exposure in the batholith. It is highly variable in texture and composition and subdivided into three types; Type I and II have abundant (partially digested) xenoliths, many of which are derived from the Nicola Group, whereas Type III is xenolith-poor and shows extreme outcrop-scale textural diversity.Pothook and Cherry Creek rocks are similar in texture, mineralogy, whole rock and mineral composition and style of alteration. Contacts between the two can be intrusive or gradational. Rocks collected from these two suites have compositions that are permissive of a single magma batch, although simple crystal fractionation does not explain all chemical variations within and between the two suites. The Sugarloaf unit comprises a diverse group of amphibole-phyric rock types and is texturally and mineralogically distinct from Pothook and Cherry Creek suites.The Iron Mask hybrid represents progressive stages of physical and chemical interaction between Nicola Group country rocks and Pothook magma. Magmatic assimilation (selective or partial) is supparted on the basis of field relationships, petrographic observations, and REB compositional data. Thermal dehydration and partial assimilation of Nicola Group rocks by Pothook magma is shown to be a valid means of promoting early and extensive volatile saturation in the Iron Mask batholith."

Jan 1, 1995

By John E. Hamak

The identified helium resources of the United States were estimated by the U.S. Bureau of Mines at 617 Bcf, as of December 31, 1992. This includes 285 Bef of demonstrated reserves, 85 Bcf of demonstrated marginal reserves, and 37 Bcf of demonstrated sub-economic resources. The identified resources also include 166 Bcf of helium in inferred reserves and inferred marginal reserves and 44 Bcf in inferred sub-economic resources. The identified helium resources contained on Federal lands are approximately 172 Bcf, including 32 Bcf in underground storage in the Cliffside Gasfield near Amarillo, TX. Undiscovered helium resources in the United States are estimated at a most likely volume of 104 Bef, with a maximum volume of 249 Bcf and a minimum volume of 41 Bef. Also reported are 51 Bcf of helium in nonconventional and low-helium-content natural gases. Extraction of helium in the United States occurs mostly from natural gases produced from the Hugoton gas area in Kansas, Oklahoma, and Texas, and the Riley Ridge area in southwest Wyoming. Helium extracted from natural gas in the United States in 1992 was 3.3 Bcf. Some shortfalls in helium supply may occur in about 5 to 10 years.

Jan 1, 1995

Reconnaissance geochemical exploration in the vicinity of low angle detachment faults which bound the core of the Paparoa metamorphic core complex yielded Au up to 14 ppm, with 35% of greywacke, granitoid and quartz vein samples in the northern range exceeding the 0.01 ppm detection limit. Au is associated with Ag, As, Sb and Cu anomalies consistent with epithermal-type mineralisation. The Ag and Cu anomalies also distinguish this mineralisation from older, mesothermal Au deposits widespread in the Ordovician 'slate belt' greywackes, which comprise much of the upper plate of the core complex. Baryte, molybdenite, fluorite and stratiform U mineralisation in the northernPaparoa Range may also be related to hydrothermal activity along the detachment fault zones.

Jan 1, 1995

By James P. Bennett

The U.S. Bureau of Mines, Tuscaloosa Research Center, is conducting a review of the usage of different types of refractories, the current industrial practices to recycle/dispose of spent refractories, and the concerns associated with these practices. This information will serve as the technical basis for initiating a research program to recycle or find alternate uses for spent refractory materials. Approximately 1.6 million metric tons of clay based and 1.2 million metric tons of non-clay based refractory materials were manufactured in the United States in 1992 alone, representing a value of almost 2 billion dollars. Landfill has been and remains the disposal means of choice. Issues such as environmental regulations, concerns over landfill disposal, future liability, and product stewardship programs have brought about increased emphasis for recycling or alternate material use. Information on refractory consumption and the issues associated with recycling or disposing of used materials will be discussed, including current recycling practices.

Jan 1, 1995

An understanding of the way that solutes are transported in mining or natural environments is essential to the development of sound strategies for managing waste disposal. Research on miscible pollutant movement in unsaturated porous media is carried out both experimentally and numerically. Results of numerical modelling are obtained by solving the groundwater flow equation and the solute transport equation. The finite element method is employed and comparisons between simulation results and experimental data are found in remarkable agreement.

Jan 1, 1995

By J. M. Pugliese

The U.S. Bureau of Mines is developing designs and estimating costs for vertical in situ copper mining wells as part of its in situ mining research program. Conceptual designs and estimated costs for "deep" 1100 m (3600 ft) recovery and injection wells in an undisturbed copper ore zone are presented. Within a single in situ copper mining well, multiple perforated well completions and associated costs are discussed for two ore zones between depths of 370 m (1200 ft) and 550 m (1800 ft). The order of well specifications for designing these wells is explained.

Jan 1, 1995

By D. M. Anderson

The current mine closure process is faced? with the formidable challenge of controlling environmental and legal liabilities that are associated with mine closure. The current level of environmental statutes and regulations, and the legal/liability considerations, has evolved through regulatory enactment of mine reclamation laws and other existing environmental laws, such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Management tools and techniques to limit risk exposure and financial losses should be employed as an active measure throughout the mine life, including closure and post-closure.

Jan 1, 1995

By C. A. Young

The remediation of cyanide (CN-) and nitrate (NO)-) anions in mine and agricultural waters by various photolytic methods has been reviewed and investigated. Photolytic methods such as direct photolysis, homogenous photolysis, and heterogeneous photocatalysis are briefly described and compared. Results and discussions show that each method has certain advantages and disadvantages. For each method, Eh-pH diagrams prove useful for determining reaction mechanisms. Preliminary results obtained for cyanide oxidation and nitrate reduction show that homogeneous photolysis can be superior due to faster kinetics than the other methods. The photolytic methods were individually, not simultaneously, tested and compared. Differences in concentrations of products were obtained and attributed to differences in photoconversion efficiencies and other inherent characteristics of .the photolytic methods. Various reaction mechanisms are proposed in accordance with the literature as well as measurements obtained from solution analysis using ion selective electrodes and ion chromatography .

Jan 1, 1995

By Jacqueline A. McClaskey

The U.S. Bureau of Mines (USBM) Information and Analysis Directorate collects worldwide data on virtually every commercially important nonfuel mineral commodity. These data form the base for tracking and assessing the health of the minerals sector of the U.S. economy. The USBM's data collection activity was instituted by the 47th Congress in an appropriations act of August 7, 1882 (22 Stat. 329), which placed the collection of mineral statistics on an annual basis. The most recent authority for the USBM survey activity is the National Materials and Minerals Policy, Research and Development Act of 1980 (Public Law 96-479, 96th Congress). This act strengthens protection for proprietary data provided to the U.S. Department of the Interior by persons or firms engaged in any phase of mineral or mineral-material production or consumption.

Jan 1, 1995

By C. J. Beyke

In recent years recycling of household batteries has received increasing attention, primarily for environmental reasons. This article reviews the major battery types and some of the technologies available to recycle them. It also discusses issues such as collection and sorting which are related to battery recycling in the United States. Finally, results from research being conducted by the U.S. Bureau of Mines on the reclamation of nickel-metal hydride, alkaline, and zinc-carbon batteries are presented.

Jan 1, 1995