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By Fernando A. Buttazzoni, Jorge C. Munita

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

Jan 1, 1985

By Charles T. Steuart

The Arkansas Novaculite of Devonian and Mississippian age is the most distinctive formation in the central Ouachita Mountains of Arkansas from the standpoint of both topography and lithology. The formation typically forms precipitous, narrow ridges (hogbacks) which reflect the steepness of dip and the resistance and thickness of the rock units. The Arkansas Novaculite varies from less than 200 feet thick in the north to locally over 800 feet thick in the south and outcrops over an east-west distance of 360 km (200 miles) in the Ouachita Mountains of Arkansas and Oklahoma. Most of the rocks of the formation are highly siliceous with novaculite predominating, and lesser quantities of chert, siliceous shale, conglomerate and rarely sandstone. Novaculite is commonly defined as a homogeneous mostly white rock, translucent on thin edges with a dull to waxy luster and composed almost entirely of microcrystalline quartz. The word novaculite comes from the Latin word novacula, meaning razor hone. This term was first used by Richard Kirwan in his mineralogy text of 1784. The origin of novaculite remains controversial but we believe it was a primary silica derived mostly from the alteration of submarine volcanic-rich materials, with numerous fine biogenic components and some minor clastics (derived mostly from foreland facies via turbidity currents) and deposited as an amorphous siliceous ooze in the deep Ouachita trough. It was subsequently converted to microcrystalline quartz during diagenesis by the compaction of the overlying rocks and the intense Late Paleozoic Ouachita Mountain tectonism. In the central and southern portions of the region three divisions of the formation have been defined: a Lower Division predominantly of light-colored novaculite; a Middle Division of interbedded dark chert and shale; and an Upper Division of massive often calcareous novaculite. In the northern exposures the formation is thinner and contains more black chert and shale, chert-shale conglom¬erate, sandstone and less novaculite. The massive novaculite of the Upper and Lower Divisions is a source of high purity silica (99+%). Indians were the first to use novaculite. They made their various tools and hunting implements from the weathered broken rock until they learned the quarrying techniques. The first white men in the area recognized the use of novaculite for sharpening their tools and knives: previously whetstones were obtained in small quantities from Europe. To this day whetstone is quarried mostly in areas which the Indians and possibly the Spanish previously worked. Some of the current mining practices have changed very little from those of the early quarryman. In areas where the novaculite of the Upper Division is poorly cemented, this friable tripolitic material has found applications in such uses as an abrasive, as a filler or extender in paints, plastics and other purposes. Some of the dense novaculite is suitable as a filler in fire bricks and also in plastics. Because some of it has the tendency to decrepitate when heated not all novaculite can be used for these applications. Several quarry operators are crushing novaculite for road, concrete, and other aggregate. This use was formerly rather limited due to the abrasiveness of the novaculite on crushing and screening equipment. Further potential uses of novaculite are speculative but include application of high purity silica in the production of silicon metal for solar cells, seed or "growing", and fusing quartz for electronics.

Jan 1, 1985

By M. S. Azun

The authors' paper did not explain the facts and reasons why state companies are established and what their role is in international industrial mineral trading. Also. I do not agree with the conclusion implying that the main goal for state companies is to capitalize natural resources. Almost all state companies are founded by certain laws and their activities are arranged by state regulations. Their only aim is to operate mineral deposits for their people and to protect the rights of the people. Although some ore deposits, such as nonstrategic or small, may be exploited by privately owned companies, the state has the right to control the operation and production. Activities of state companies may or may not be widened because of the character of the deposits and the importance of the mineral market involved. For some countries, although governments may occasionally change hands, the policy of the mineral trading system is not affected by this change. There is no doubt that any government desires to make more earnings to increase GNP, when it is involved in operating and trading mines. It wants to produce and sell the finished products, instead of unprocessed ones, if possible. When it is known that some mineral deposits are relatively rare, such as Turkish boron deposits, the government can nationalize the mines to control production and affect the market. If there is an abundance of a certain mineral in the market, the government can cut production and set a floor price, such as Canadian potash. Also, when production of a specific mineral is unique, such as Turkish chromite, the price of such mineral may be set by correspondent government. One may add that if some governments with their state companies produce a certain mineral in a larger amount, they may decide to establish a cartel to protect their production and price. These are the facts followed by government-owned state companies and partially government-owned companies. The reason being charge of many deposits by the state companies is always the same: "protect" the mineral rights of the people.

Jan 1, 1985

By Noel N. Moebs

The Bureau of Mines studied the feasibility of water diversion and overburden dewatering for underground coal mines in the Appalachian region. All relevant published literature pertaining to the occurrence and control of surface and ground water in underground coal mines was reviewed, and the impacts of mine water with respect to health and safety, production, environment, and costs were assessed and are described in this report. The report also identifies the sources of water inflow into underground coal mines, and gives a summary description and evaluation of techniques that can be used to reduce the amount of water entering these mines. Engineering practices currently used by operating coal mines in the Appalachian region to prevent the movement of ground and surface water into active coal workings were reviewed and are summarized. Major emphasis has been placed on the identification of geologic and hydrologic conditions of the site, the water control methods used, and an evaluation of their technical and cost effectiveness.

Jan 1, 1985

By K. C. Dean

Discarded automobiles represent the greatest single resource of reusable metals, plastics, and rubber in the United States. This report presents results of Bureau of Mines research, conducted from 1965 to 1983, on separating and recovering useful materials from the scrapped hulks, using old and new metallurgical techniques combined with standard scrapyard methods. The Bureau determined the materials composition of three composite cars designated as circa 1960, mid-1970's, and early 1980's, and used these cars to study smokeless incineration and hand-sorting techniques. In studies on treating rejects from automobile shredders, the Bureau designed a process that included air classification, water elutriation, magnetic separation, handpicking, and heavy-medium separation, and also investigated cryogenics and liquation. Complete recovery of cop-per and other metals was economically made by hand and tool dismantling, leaching, or selective melting of starters and generators. Techniques are also discussed for plastic recovery and waste tire treatment.

Jan 1, 1985

By C. M. Palencia

The Bureau of Mines evaluated the potential availability of molybdenum resources from 88 mines and deposits that account for more than 90 pct of the demonstrated resource base in market economy countries (MEC's). For each property, tonnage-cost relationships were developed that indicate the molybdenum potentially available at different average production costs, including a 15-pct rate of return on invested capital. From the 23 MEC primary deposits, 2.5 billion 1b Mo was determined to be potentially available at a price of $411b, rising to 4.7 billion 1b Mo at $8/lb. Copper price-molybdenum tonnage relationships were developed for those mines and deposits from which molybdenum can be recovered as a byproduct of copper production. This analysis showed that another 3.4 billion lb Mo is potentially available based on a copper price of $0.7511b, rising to 4.3 billion lb Mo at $l.00/lb. The United States has been the world's largest molybdenum supplier since 1924. Its remaining resources are sufficient to meet the domestic demand of 57 million lb/yr Mo (averaged for a 10-yr period) through the end of the century. Production from primary domestic mines was suspended during most of 1983 because of oversupply of materials. A major concern is the cheap molybdenum byproducts from foreign copper operations in which employment and the need for hard currency override economics in meeting production goals.

Jan 1, 1985

By Piyush K. Dutta

This report describes the design, development, manufacture and incorporation of noise control features on a jumbo drill and the results of successful tests of this drill in surface and underground mines. The noise-reducing features developed under this program are applicable to future designs of jumbo mounted drills that can be cost effectively manufactured and have the potential to reduce noise levels at the operator's position from 115-120 dBA to 95 dBA or less without a reduction of currently attainable drilling rates.

Jan 1, 1985

By Keith L. Harris

The performance of the world economy improved significantly in 1984. Real world output!/ grew 4.3% (compared with 2.6% in 19831, the highest since the 4.4% increase recorded in 1978 (table 1). The output of industrial nations rose 4.9%, while that of the developing nations rose 3.7%. The United States and Japan had the largest increases in output of the major industrial nations, with respective increases of 6.8% and 5.8% (table 2). The components of real output with the most significant growth in the industrial countries were gross fixed investment (9.2%), consumer expenditure (3.1%), and public consumption (2.5%) (table 1). Industrial output, as measured by industrial production indices, has returned to about the 1980 level for most of the major industrial nations (table 2). Exceptions to this were industrial production in Japan and the United States; Japan's industrial production rose steadily throughout the 5-yr period and is now more than 16% above the 1980 level, and the industrial production index for the United States reached 11 1.2 (1980=100.0). Real total domestic demand grew at 8.7% in the United States, more than double the rate of Japan, which, at 4.0%, had the second-largest growth. Average demand for all industrial countries was up 5.1%. During 1984 the U.S. dollar showed great strength on international markets, contributing to large current-dollar negative net exports of goods and services and even larger negative net exports of the merchandise sector. While growing U.S. imports helped spread the benefits of the recovery, they also led to a widening of current account imbalances and growing trade tensions throughout the world.3/, 4/

Jan 1, 1985

By Brian F. Taylor

The Mexican fluorspar industry is faced with and will face serious problems, some of their own making and others beyond their control. However, they still offer the most secure source of fluorspar for North American' consumers. Since 1975, even in light of declining markets, they have, increased then production capabilities' as shown in Table #1. In analyzing Table #1, we note that Compania Miners Rio Colorado has closed down due to their ore reserves being exhausted. Fluorita de Rio Verde expanded their acid grade fluorspar capacity in anticipation of additional North American business. Campania Miners Las Cuevas presumably increased capacity to meet their North American contractual commitments and to supply their own hydrofluoric acid plant (Fluorex) at Juarez, Mexico. Historically, the Mexican fluorspar industry has relied on the United States as the mainstay for their sales. As shown in Tables #2 and #3, the Mexican share of the United States market has moderately decreased. However, as noted in Table #4 the volume loss is substantial as explained below.

Jan 1, 1985

By Keith L. Harris

The U.S. economy continued to grow moderately in the third quarter, but at a slightly higher rate than in the previous quarter. According to the Department of Commerce's preliminary estimate, real gross national product (GNP) grew at a seasonally adjusted annual rate of 3.3% during the third quarter of 1985, compared with a revised 1.9% for the second quarter and 1.6% for the third quarter of 1984 (table 1). Civilian unemployment dropped from the constant 7.3% rate between February and July to 7.0% in August and 7.1% in September. Employment on nonagricultural payrolls continued to increase (table 2), resulting in a continued rise in personal income, which in turn supported growing consumer purchases. Although purchases of services continued to provide the underlying foundation for the economic growth, the manufacturing sector received additional stimulus from significant increases in consumer purchases of durable goods, particularly automobiles. The increased demand for durable goods resulted in significantly higher industrial production for August and September, compared with levels attained previously this year (table 3). Capacity utilization increased to 80.5% in August but returned to 80.2% in September, matching the 1985 low previously reached in July (table 4). The real net export deficit grew only $0.2 billion in the third quarter; at $34.0 billion, however, it continued to exert a negative influence on the economy. On September 22, in an effort to reduce the deficit and make U.S. goods more competitive on world markets, the U.S. Government agreed to cooperate with the Governments of France, the Federal Republic of Germany, Japan, and the United Kingdom in attempting to lower the-value of the dollar in relation to other world currencies. Low inventories, rising factory orders and construction spending, the possibility of a lower U.S. dollar, and aggressive automobile production plans announced by domestic producers for the fourth quarter indicate the potential for an increase in manufacturing activity in the United States.

Jan 1, 1985

By Andrew B. Cecala

As deeper seams are continually mined, methane liberation will continue to increase and must be monitored effectively. To effectively monitor and develop appropriate control technology, methane-liberation patterns must be known. The Bureau of Mines recently completed a study to identify specific patterns of face methane liberation during long- wall mining. Both of the longwall faces surveyed had high methane liberation rates. At one longwall face, most of the methane was liberated during cutting of coal by the shearer mining machine. At the second face, a significant portion of methane was emitted from the face and floor. An effective methane-monitoring system would be different for each longwall panel because of the differences in how the gas is released along the face.

Jan 1, 1985

By Edward E. Johnson

The U.S. economy made significant progress in 1984. The current-dollar gross national product (GNP), the market value of the Nation's output of goods and services, increased almost 11 percent over that of 1983 to slightly more than $3.66 trillion (table 1), and the real gross national product increased almost 7 percent.2/ Such rapid growth in real GNP has not occurred since the early 1950's. Real final sales increased only 5 percent during 1984, and real business inventories increased $24.8 billion ($57.9 billion in current dollars). Total employment of 106.7 million was an all-time record, and the unemployment rate declined from 9.5 percent in 1983 to 7.4 percent in 1984. During 1984 the U.S. dollar showed great strength on international markets, contributing to large current-dollar negative net exports of goods and services (-$62.5 billion) and even larger negative net exports of merchandise (-$107.6 billion). The strong dollar and the substantial increase in net imports of goods and services helped reduce U.S. inflationary pressures and provided a major source of loanable funds for financing domestic private investment.

Jan 1, 1985

By T. C. Canter

Technological change is continually affecting the mining industry and the many papers being presented at this meeting reflect this fact. I fully agree that miners must remain fully cognizant of technology that can change mining costs and therefore your competitive marketplace. Despite the embrace of new technology and effective mine management techniques, the mining enterprise may not realize increased net income if the structure of the minerals marketplace is not understood. An important segment of the marketing structure for minerals is transportation. Transportation costs per ton can be much greater than the mining costs per ton and may accordingly overshadow hard earned gains in productivity. Change is greatly affecting the transportation industry but the change is driven more by governmental policy than technology. Although some technological advances are occurring in the bulk transportation business, the changes I want to address arise from policy. Policy changes have come from legislation in the 1970's culminating with the Staggers Act of 1980 and ensuing Interstate Commerce Commission decisions.

Jan 1, 1985

By T. L. Muldoon

The bagging of dry pulverized products using fluidized air packers creates severe respirable dust problems in many surface mining operations. During bag filling, excess air and product blows by the bag valve/nozzle interface. After bag ejection, dust blows out of the bag valve. During conveying and handling dust is released from the bag valve and dirty bag surface. Overexposure of the bagging machine operator and bag handlers is common. This report describes the development and testing of a new dust control system for bagging machines. The system features a new bag clamp design to reduce product blowby during filling. A controlled vacuum system removes excess air from the bag before ejection, eliminating the problems after bag ejection and during conveying and handling. The system has shown significant reductions in dust exposure for both bag machine operators and bag handlers. These reductions are achieved with no significant effect on total mill productivity.

Jan 1, 1985

By Edgar F. Cruft

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

Jan 1, 1985

By Michael A. Gustafson, Fernando B. Sotelino

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

Jan 1, 1985

By John K. Hammes

INTRODUCTION This introductory paper presents a description and definition of what the finance function is and what it specifically means for the mining industry. In its simplest terms, finance is, "management of money matters". As an area within the discipline of business administration it draws heavily on the related fields of economics and accounting, and to a lesser extent on marketing and production. MINING FINANCE DEFINED In preparing to write about what finance means to the mining industry, I asked a number of mining people the question, "What does mining finance mean to you?" Most responded that mining finance was "How a company borrowed money for mine development", and perhaps half those questioned included "raising equity" in the definition. It is not surprising that the mining industry concept of finance is the providing of funds needed for the objectives of the business, for that was once a view shared by authorities in the field of business administration. Further, it is certainly the area where much of the emphasis has been placed in the past ten to fifteen years as the industry struggled with the development of more remote and more refractory or lower-grade orebodies while profitability and internal cash flow were below expectations. No wonder project finance became such a popular topic. Twenty years ago it is probable that the emphasis would have been on mine valuation, for that subject was the area of finance then most often examined in industry publications. Papers concerning the pros and cons of payback, internal rate of return, and discounted cash flow appeared regularly. Let's examine the following situations, each the result of a financial decision: - Funding the exploration program in a developing country was accomplished by buying the next six-months budget needs in local currency. One week later the currency devalued 30 percent. If the purchase had been delayed or the local currency borrowed short term, a substantial saving would have been made in funding the program. - A major mining company borrows heavily to finance both expansion of its primary mining business and its entry into several new industry segments. When markets for all of the commodities it produces turn down for a prolonged period, there is concern over the adequacy of cashflow to cover debt service in addition to other company needs. The company's financial officers, however, had arranged very large committed credit facilities from numerous financial institutions which assured the availability of funds for several years. This enabled the company to implement a strategy to conserve cash, sell assets and survive until conditions improved. Further, short term suppliers of credit also were comfortable with the assurance that longer term credit was there to support them. -A medium size mining company financed several mines independently with limited obligations on the part of the parent company. The company decided to refinance the operations under one agreement. More flexible terms, lower interest cost and a longer tenor financing were achieved in return for assuming the risk as a direct obligor. - The exploration and development group of a large mining company proposes to develop a new mine in a country in which the company does not presently operate. When the investment is rejected they are advised that one reason was that the reinvestment assumption inherent in the discounted

Jan 1, 1985

The small-scale surface mining operation in northern regions is typically located in a remote, ungaged basin. With the recent increase in the economic potential of mining, the number of small operations is increasing. The year-to-year variability in precipitation in this region under study is of great concern to mine operators. Some years may yield only 5 to 6 inches of precipitation, while others may yield in excess of 15 inches. Such variability makes placer mining operations difficult to plan, since low water years may result in too little run-off for gravel washing and high water years may result in flooding of mining developments. There are no official streamfloaw records in many watersheds in the northern region containing placer mining claims. However, information from other streams permits calculation of an estimated discharge for a watershed under consideration using average flows per square mile of drainage. It is to be emphasized that these are average or expected figures in reality, one water year may be significantly wetter or drier than another. This high variability of annual precipitation is significant in relation to placer operations because of the large quantities of water required for this type of mining. Some operations can not operate in low water years. In the larger watersheds, operations may continue in low water years but at a slower pace because of longer water collecting times. The high variability of available run-off rakes placer mining in many parts of Alaska difficult to plan on a long range because of the unpredictability of water supplies.

Jan 1, 1985

By G. E. Pralle

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

Jan 1, 1985

By Ellsworth R. Spencer

A lightweight fiberglass feed leg for hand-held pneumatic percussion rock drills has been fabricated and tested by the Bureau of Mines. Its lighter weight facilitates easier handling of the rock drill apparatus, thereby reducing the potential for back injury to the driller and in- creasing drilling productivity. Current hand-held feed leg drills of the same class are 50 pct heavier than the Bureau-devised feed leg drill, which is comprised of a reduced-noise drill and the fiberglass feed leg. In-mine tests of the fiberglass leg showed that its performance and cost are comparable to those of standard aluminum feed legs.

Jan 1, 1985