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By M Wilson, D Whiteman, P Kuiper, S Talu, G Watt, A van As

Once the draw process has begun in a block cave, it is very difficult to identify which regions of the cave have successfully propagated, where the caved material is flowing from and where it is flowing to. The uncertainty around cave flow increases as the cave is drawn and can be further compounded by poor draw control practices. These uncertainties make it difficult to plan effective draw strategies to control dilution, as flow model predictions tend to gradually diverge from the actual state of the cave. There have been documented occasions where observed caving phenomena, such as muck pile surface rilling, could not be reproduced with the cave flow models of the time. The ultimate consequence of cave flow uncertainty is generally manifest as higher dilution and lower grades.In order to measure the real-time flow of caved material within an active block cave, CRC Mining and Elexon have developed, together with Rio Tinto, a cave flow monitoring system called Cave Tracker, which is being trialled at Argyle Diamond Mine (ADM) in Western Australia. The Cave Tracker system at ADM comprises electronic ‘beacons’ that have been installed down long HQ diameter drill holes located above the extraction level. As the cave-back propagates and the rock mass fragments, beacons are released into the muck pile and flow along with the caved material to the drawpoints below. At Argyle, the beacons are configured to emit a signal every three days. These signals are picked up by detectors installed on the extraction and undercut levels, allowing the positions of the beacons to be determined.By examining the real-time material flow in different regions of the cave, flow mechanisms can be better defined. Draw control strategies can then be actively tailored to manage the current state of the cave. Thus, previously undetectable indications of excessive rilling, rapid cave propagation, cave stall, air gaps and dilution entry can now be identified early and assessed continuously as the cave progresses. For the first time it is possible to amend draw strategies based on measurements from inside and outside of the fractured zones, allowing caves to be managed more effectively.CITATION:Whiteman, D, Talu, S, Wilson, M, Watt, G, Van As, A and Kuiper, P, 2016. Cave Tracker flow monitoring system installation at Argyle Diamond Mine, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 479–488 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By C Tickell

Achieving occupational health and environmental noise objectives is a major consideration in the planning or operational phase of resource development and industrial projects to meet the needs of the workforce and community and comply with legislative requirements. For material handling systems, ventilation plants, mobile equipment, process plants and fixed infrastructure, noise emissions need to be considered at the design phase. The preferred approach is to provide noise emission technical specifications, but in many cases this is not stipulated. An occupational noise requirement, such as ‘not to exceed 85 dBA at 1 m’, is often provided, but this will not achieve the required occupational or environmental noise objectives and may cause overly stringent requirements when they may not be needed. It should be noted that when developing the technical specification, measuring compliance needs to be taken into account as, in some cases, measuring may be very difficult or even not possible.This paper will discuss the requirements for providing an effective noise specification that ensures the environmental and occupational noise objectives are able to be achieved and that, once installed, compliance can be measured. It discusses planning such as when to set the objective, correlating the appropriate objectives for the environmental and occupational noise requirements, allowing for measurement tolerance, providing a suitable criteria and data format for the suppliers to respond to and methodology to measure compliance. Different phases of a project require different approaches to planning for noise management and these will be discussed in the paper. Examples from 35 years of industry experience will be included.CITATION:Tickell, C, 2016. Preparing effective specifications for occupational health and environmental noise objectives in mining project design and delivery, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 781–788 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By M Mohammad Khani

An economic block cave is dependent to the characteristics of the rock mass at stages of caving. These are cave initiation, propagation and ore flow. In this research, the rock engineering system (RES), first established by Hudson (1992) to solve complex rock engineering problems, is introduced and verified against the well-established caving parameters established by Laubscher. There are two types of factors influencing caving and these are natural (cannot be controlled) and induced (operator controlled). A RES based interaction matrix is developed by determining the rating parameters required to reproduce the caving database using Laubscher’s caving parameters. This provides the relative importance of the parameters in the interaction matrix. After discussing the rock mass caving process and identifying all the effective parameters, an interaction matrix is introduced to study the cave initiation of rock masses. The expert-semi-quantitative (ESQ) coding method is utilised to assign the numerical value to each parameter’s interaction. Thereafter, the interaction intensity and dominance of each factor in the system is determined to classify these factors. Finally, all the parameters affecting caving operation and their weights on the RES system are identified. This new application of RES in block caving is very efficient and useful for any stage of caving studies and helps experts to make decisions more accurately.CITATION:Mohammad Khani, M, 2016. The application of rock engineering systems to block caving to identify the effective parameters, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 853–860 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By E Widzyk-Capehart, C Hölck Teuber, S Steffen, V Rivero, O Fredes, E Sanchez, I Pedemonte, N Gonzalez

This paper summarises the research, development and initial application of a sensing platform that has the potential to monitor subsurface deformations, pore pressure and other variables simultaneously to gain a better understanding of rock mass behaviour. The platform is based on Networked Smart Markers (NSMs) devices, which, with their ability for wireless communication between individual sensors and the possibility of real-time data acquisition and processing, will assist in the development of predictive tools to better assess rock mass behaviour.A good opportunity to implement this technology is in the specific application of transitioning from an open pit mine to an underground caving operation. One of the key elements to maintaining the mining business during such a transition is having a good understanding of the unique geotechnical conditions of mutual influence created during the open pit to underground interaction. The knowledge acquisition will require the implementation of a robust platform for geotechnical monitoring, which could be enhanced by incorporating the NSMs. The integration of sensors within the NSMs would enable the collection of additional data about rock mass behaviour (ie caving propagation and crown pillar fracturing), which could be used to improve the management of mining operations and, specifically, allow the development of reliable predictive tools based on the data collected.CITATION:Widzyk-Capehart, E, Hölck Teuber, C, Fredes, O, Rivero, V, Sanchez, E, Pedemonte, I, Gonzalez, N and Steffen, S, 2016. Understanding rock mass behaviour through the development of an integrated sensing platform, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 275–284 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By S Rogers, D Stead, E Eberhardt

The last decade has seen a major increase in use of the discrete fracture network (DFN) approach applied to cave mining problems, often integrated within more complex geomechanical simulations. Because the value of the DFN model directly depends on the quality and quantity of available field data, there is the need to apply dedicated mapping procedures to collect sufficient structural data at the required engineering scale. This paper attempts to address several key questions about DFN modelling; for example: are current methods for fracture mapping suitable for DFN modelling? What are the critical parameters that we need to measure and what do we need to change in the current practice? Particularly at the earlier stages of a cave project, engineers may have to account for the lack of appropriate data, which manifests itself in the form of increased uncertainty and the difficulty to characterise variability in an objective manner using a limited set of data. DFN models could in principle be generated using limited data by assuming statistical distributions for the sampled parameters; however, engineers would need to be aware of the implications that such limited knowledge (and increased uncertainty) would have on stability analysis, fragmentation analysis and mine design. When used correctly, a DFN approach offers practitioners the opportunity to:maximise the use of fracture data collected from mapping of rock exposuresgenerate more realistic synthetic rock mass modelsprovide estimates of natural fragmentation that also account for rock mass variability.CITATION:Elmo, D, Eberhardt, E, Stead, D and Rogers, S, 2016. Discrete fracture network modelling – importance of accounting for data uncertainty and variability, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 845–852 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By A Kurniawan, A Sjadat and M Akhasyah

PT Freeport Indonesia’s Deep Ore Zone (DOZ) is a block cave mining operation that has been in production for 15 years. DOZ is located approximately 900 m below surface and has an average production rate of more than 5000 t/d. The footprint of the extraction level will ultimately be 900 m long and average more than 200 m wide. The undercut level is located 20 m above the extraction level.While developing Panel 1K on the northern portion of the extraction level, a major geotechnical problem was encountered when there was a change in lithology and an associated fault intersection. A large collapse of the hanging wall of the extraction level drifts occurred in the area of the fault intersection between February and March 2011. This was followed by a collapse of one of the undercut level drifts directly above the extraction level in May 2011.It was suggested that the best approach to mitigate risk during rehabilitation was to systematically open up the failed area under the protection of a steel set support system. To achieve this, approximately 60 t of grout was injected from the undercut level to fill the voids created when the rock mass between the two levels failed. A ground penetrating radar system was used to survey the condition of the rock mass between the two levels before and after the injection of grout. After the grout injection phase was completed to a satisfactory level of confidence, rehabilitation activities started on the extraction level by taking out the now consolidated material from inside the drift in 2 m advances from under steel sets initially constructed in secured ground.Controlled blasting was the key aspect to the success of the initiative to open up just enough of the drift to systematically support the rock mass before the next set was installed. The systematic support consisted of in-cycle shotcrete sprayed over mesh pinned to the exposed rock, as effectively as possible, with splitsets before spiling the next advance’s protection canopy with rebar. Once secure, a combination of steel set and pumped concrete was installed as the final support. This final support provided a safe platform to repeat the process until the failed zone was safely traversed.CITATION:Kurniawan, A, Sjadat, A and Akhasyah, M, 2016. Rehabilitation of the collapsed panel 1K north in the Deep Ore Zone block cave mine, in Proceedings Seventh International Conference and Exhibition on Mass Mining (MassMin 2016), pp 763–768 (The Australasian Institute of Mining and Metallurgy: Melbourne).

May 9, 2016

By Georgene Renner, Chee Theng, William Gleason

"More than 6,300 people attended SME’s 2016 Annual Conference & Expo in Phoenix, AZ and many of them made the trip to the conference to take part in the excellent technical sessions that are presented on a yearly basis by the Society.Holding true to form, this year’s conference was full of options. In fact, this year there were 121 technical sessions and 751 presentations to chose from. The following is a sample of some of the technical sessions as seen through the eyes of the editors of Mining Engineering and SME technical papers.SME Sections Sharing Success: Changing thePublic Perception of MiningThis session was a workshop on how several local sections were effective in getting the message out to their communities and schools about the value of the extractive minerals industry. Several sections shared their outreach successes, including the Mining in Society merit badge activities by the Minnesota Section by Julie Lucas and SME’s participation in the World Scout Jamboree in Japan by Frank McAllister.Dan Alexander highlighted activities by the Pittsburgh Section, such as preparing minerals kits and pamphlets for elementary school classes and regional science fairs. The West Virginia University Student Chapter used the kits as handouts at their local gem and mineral show. School speakers in full mining gear were especially interesting to the young children.Other speakers were Michael Linn, Paradise Valley Unified School District — Business and School Partnerships; and Greg Kruse, Central Wyoming Section of SME — What makes a successful section?Engineering Competency ModelAmerican Association of Engineering Societies and the U.S. Department of Labor, with a grant from the United Engineering Foundation, developed a guide to the set of skills necessary for success in the engineering community -- Knowledge – Skills – Abilities — needed for all disciplines.Various engineering societies are now writing the Tier 5 occupation-specific requirements. The Competency Committee is charged to write concise and discipline-specific mining engineering, mineral processing engineering, geological engineering, and geophysical engineering by Sept. 30, 2017."

May 1, 2016

By Todd Schrauf, James Scott, Mark Smith

"Cyanide heap leaching of gold ores in areas with extremely low winter temperatures requires special considerations to prevent freezing of the leach solution. Factors that impact the solution temperature include ore temperature at the time of stacking and during operation, burial of drip irrigation lines, use of geomembrane covers and heating of the leach solution. Thermodynamic modeling was performed to simulate expected ore and solution temperatures under different operating strategies for Kaminak Gold’s Coffee gold project in the Yukon Territory. Mean monthly temperatures at the site ranged from a low of -22.5 °C (-8.5 °F) to a high of 13.6 °C (56.4 °F), while in situ ore temperatures ranged from -0.5° to about -1.5 °C (31 ° to 29 °F). The modeling results were used to optimize the operational parameters and indicated that a combination of drip line burial and heating of the leach solution during the winter months was required to maintain solution temperatures above freezing during the initial years of stacking, although as the size of the heap increased, heating was no longer necessary.Modeling objectivesThe successful operation of a cyanide heap leach under extremely cold winter temperatures requires the implementation of operational strategies to prevent freezing of the leach solution and the ore within the heap. Thermodynamic modeling of the heap provides the means to quantify the effectiveness of these different operational parameters on maintaining the required operating temperatures to avoid freezing within the heap. The operational parameters that were evaluated with the model included:"

Apr 1, 2016

By N Cusworth, W R. Mackenzie

"In 2007, the authors presented a framework for the conduct of resource project feasibility studies and provided guidance on minimum standards and best practice (Mackenzie and Cusworth, 2007).This paper will present the authors’ observations in relation to feasibility studies undertaken to support investments made during the unprecedented period of resource project capital investment since 2007. It will also provide comments on general trends in the mining industry’s approach to project assessment and update recommendations on best practice.CITATION:Mackenzie, W R and Cusworth, N, 2016. The use and abuse of feasibility studies – has anything changed?, in Proceedings Project Evaluation 2016, pp 133–148 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By A A. Roberts, R F. Dewhirst

"Extensive literature surveys, research in the project environment and personal experiences both within and consulting to project teams have revealed some consistent ‘people factors’ that contribute most to ultimate project success. Outside of purely technical and business case issues, there are a small number of leadership characteristics – probably only ten – that if correctly applied can positively leverage a team’s impact on project success.Of the top seven project success characteristics that were consistently highly rated in a recent study, five of them were around leadership. The authors have focused on this topic, noting that good leaders need to display the following traits:passionate commitment to deliveryconsistent modelling and reinforcement of correct values and behaviourfocus on managing relationships well and energising teams and individualscarefully clarifying project vision from front-end loading stages onwardseffective decision making.Not every project manager can and does practise these behaviours all of the time, but being aware of them and receiving training or facilitation in improving their application of these skills can equip project managers with the essential tools to markedly improve their own performance and that of their teams.This paper draws upon experiences in the field and provides lessons – both good and bad – to illustrate. As well as examining leadership traits, the way in which a leader can establish, organise, motivate his or her team and ultimately lead them to success is examined. The paper shares methodologies that have been successfully used to track status within a team and generate appropriate recovery plans where required.In particular, the paper will examine a case study based on an amalgamation of real project issues in some challenging situations using virtual teams (ie physically distant teams located in different centres) to illustrate the importance of strong and positive leadership in achieving success across geographies, time zones and languages.CITATION:Roberts, A A and Dewhirst, R F, 2016. Leadership in projects – a recipe for success, in Proceedings Project Evaluation 2016, pp 49–58 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By L A. Martinez Tipe, J McKibben, S Barry

"Metal prices are central to a mineral investment decision and have a profound impact on the financial performance of companies in the mining industry. At its most basic level, metal prices are influenced by the disequilibrium between international metal volume supply and demand. That is, the commodity price is a regulator that equates international metal supply and demand where inventories act as a buffer between the emergence of this disequilibrium and its dissolution through a price change.From this viewpoint, mining companies are required to forecast metal and bulk commodity prices when evaluating minerals projects through discounted cash flow (DCF) analysis. While supply-demand models are instructive, many companies use historical prices, spot prices, futures/forward pricing and consensus opinion (or a combination of all of these) to develop price forecasts.This paper discusses the definition, fundamentals and differences between futures/forward and consensus pricing and the appropriateness of each in a DCF model for mine project economic evaluation.Our results demonstrate that great care is required when using either futures/forward or consensus pricing and that the decision to use one rather than the other requires consideration of other important elements in the DCF model (ie the risk-adjusted discount rate).CITATION:Martinez Tipe, L A, McKibben, J and Barry, S, 2016. Metal prices and the differences between forward and consensus pricing – which one is better for use in a discounted cash flow model?, in Proceedings Project Evaluation 2016, pp 149–158 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By B E. Hall, D B. Kahler

"'Optimisation' has become a catchcry among many mining companies looking to tell the market how mining businesses will be improved and shareholder value increased. Consequently, the term 'optimisation' has been adopted by many service providers as they look to assist mining companies in achieving their objectives. But the explosion of services and products being offered with the label 'optimisation' has created some confusion. Mining companies ask for help in 'optimising' and service providers offer their assistance because they have a product that has the word 'optimisation' in its title. This is of course an over-simplification, but not by much! The authors' discussions in recent years with both mining companies and service providers have uncovered a number of very different definitions of optimisation.This paper provides a framework for identifying the scope and approach of different mining optimisation products and services, particularly the distinction between optimisation of components of the operation and the business as a whole. The different types of business optimisation are discussed, highlighting the failings of the mining industry's typical approach of strategy selection (as opposed to strategy optimisation). Mining business optimisation is discussed as a wicked problem, with the implication of this on how strategy optimisation models should be used and what the objectives of a business optimisation study should be.Case studies are also included to illustrate how fully flexible strategy optimisation models have been applied to assist decision-makers understand the impacts of changes in one part of the operation on the whole mining and treatment process, from geological models to the sale of product to customers.CITATION:Kahler, D B and Hall, B E, 2016. Strategic decision-making in mining – business optimisation using flexible evaluation models, in Proceedings Project Evaluation 2016, pp 215–225 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By P J. Fairfield

"This paper reflects on the author’s experiences in undertaking mining studies and reviewing mining projects and technical reports, particularly over the past five years, and the impact of recent changes in reporting standards and listing requirements pertaining to mining-related evaluation and valuation exercises. It also discusses contemporary changes in the expectations of the investment community and the implications for the role of the technical specialist in providing advice to such stakeholders.Not for the first time in history, the resources industry has experienced a significant downturn after a period of strong, sustained growth in line with the traditional view of the cyclical nature of commodity markets. The resource industry is currently faced with capital austerity in the wake of projects ‘failing’ (not delivering to expectations). In response, the industry has experienced changes in investment behaviour (slowing of investment) and an increasing regulatory burden as stakeholders seek a greater understanding of mining project risks.This paper discusses this response and uses case studies to highlight the key learnings (perhaps re-learnt) by the industry. It also discusses the challenges faced by technical specialists in communicating the results of technical and valuation studies to the investment community.As investors seek to take advantage of the current stage in the investment cycle, the key challenge of the technical specialist is to effectively communicate the uncertainty in technical assumptions, risks and opportunities that drive project value.CITATION:Fairfield, P J, 2016. Managing expectations – from buyer beware to buyer be aware, in Proceedings Project Evaluation 2016, pp 66–74 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By D J. Logan, J Jackson

"As of 1 December 2014, the 2012 edition of the JORC Code requires Ore Reserves to be defined by studies at the pre-feasibility or feasibility level. This paper examines how the pathway for most mining developments is determined in the Pre-Feasibility Study and how a trade-off must be made between the need to make the best decision, the constraints of limited time and resources, and the level of the project’s accuracy and uncertainty in terms of value. Issues considered include framing the scope of the study, planning for robust decision-making and ensuring effective communication between the diverse disciplines within the team.An inherent conflict exists between the immediate value added to a mining business from an increase in ore reserves resulting from a ‘quick’ Pre-Feasibility Study and the long-term value of pursuing a development strategy based on proper investigation and evaluation of the options. Recognition and resolution of this conflict is necessary if a project is to progress into future development stages, both in a timely manner and with the optimal development alternative and strategy.The challenge for project developers and those conducting the Pre-Feasibility Study is to understand what the key deliverables are (ie an Ore Reserve statement, option selection, business evaluation, forward work plan or risks) and how to follow good practice to ensure that these deliver value.CITATION:Logan, D J and Jackson, J, 2016. The pre-feasibility study – big choices, little time, in Proceedings Project Evaluation 2016, pp 122–132 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By J Coombes

"In today’s challenging climate of reduced staffing, limited funding and uncertain markets, we are called on to operate more productively and ‘be more innovative’. As an industry, we are quick to identify our practice areas as a mark of our role in the machinery of the mine value chain. We proudly note our profession – ‘geologist’, ‘mining engineer’ or ‘accountant’ – and demarcate our responsibilities and even our physical space. We even subdivide our disciplines into sacred entities such as ‘logging geologist’, ‘resource geologist’ or ‘structural geologist’ to prevent any blurring as though somehow the confusion will cost valuable disciplinary ground. How can we function professionally to heed the call to be more productive and more innovative?The purpose of this paper is to underscore what is expected from project evaluation, examine the ways in which we work as an industry and explore alternatives used in other industries and environments.The paper begins with a summary of project evaluation expectations and the ways in which disciplines typically interconnect when conducting project evaluations. Next, the paper examines alternative work frameworks and making a distinction between multidisciplinary, interdisciplinary and transdisciplinary frameworks. In-practice examples of these frameworks in alternative industries and contexts provide evidence for application as well as an opportunity to examine their pros and cons.The paper closes with a call to re-examine working practices in the mining industry, with a view to enhancing productivity and heeding the call for greater innovation.CITATION:Coombes, J, 2016. Transcending the mining discipline divide – multidisciplinary, interdisciplinary or transdisciplinary?, in Proceedings Project Evaluation 2016, pp 2–10 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By R Knight

"In project evaluation there are two matters of keen interest to non-executive directors: the process by which an investment recommendation is reached, as well as the investment itself, as presented. It is sometimes mistakenly believed that Boards of directors are interested only in the result. That is not so. The process by which project evaluations are derived and socialised with the Board is as important as the result, sometimes more so.Setting aside the gloomy predictions of the doomsayers and looking through short-term volatility in supply and demand, the overall availability of mineral resources more often than not exceeds demand. There are in reality more development projects in prospect at any one time than are needed to meet the market. Only the fittest will prosper, although some others may survive.Optimism springs eternal in the mining industry and every project promoter, executive or entrepreneur has a convincing project development case. Some will create value for shareholders, but the historical evidence suggests that many will fail to meet the expectations set in their evaluation.Boards of directors make the final decision to invest, or not, in a new mine. Knowledge is power, and on that basis the balance of power favours management. Management has the facts (or in some cases, what passes for fact) and the passion to invest. The non-executives have the power of approval – yes or no – but before making a decision directors must demonstrate due diligence, the essential precursor to project approval.Management has a vital part to play in facilitating that due diligence process and in encouraging the independent thought processes of the Board. A closed approach by management fosters a negative, risk-averse attitude on the part of the Board. One that encourages an understanding of the rigour of the project evaluation process and the robustness of the result will allow directors to understand better the implications of their decision.CITATION:Knight, R, 2016. Project evaluation – a non-executive director’s perspective, in Proceedings Project Evaluation 2016, pp 11–19 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By L I. Rozman

"There have always been development projects that fall short of expectations. In the last decade, we have seen more than the usual number of mining and oil/gas development projects taking significantly longer to develop and costing materially more than expected. The recent resource-equity market slump proves that investors are now far more cautious about investing new capital in the mineral and petroleum resources sector.What have we learned since 2005? Why have projects missed their targets? Why do investors often feel misled?Valuation of a project and the estimation of value is a more complex process than the evaluation of the merits of project development. The merit of project development can be clear from a prefeasibility evaluation, but this is no reason to skip the rigour of a feasibility study. The valuation of any project that is developed with any added risk should be discounted for this added risk.The development of a project impacts on other stakeholders, and the indirect cost of these impacts can have material implications for the cost structure, time and ultimate valuation of the project for its financial backers. The development of new projects (and thereby supply) can also have an impact on commodity prices, and therefore an impact on returns for financial backers.This paper will provide commentary on the author’s experiences and observations as a project developer and operator for 25 years, before becoming a project financier a decade ago.CITATION:Rozman, L I, 2016. Project evaluation and valuation – an investor’s golden rule, in Proceedings Project Evaluation 2016, pp 31–36 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By J Evans-Wheeler

"The mandate of the 2005 VALMIN Code to provide ‘(all) reliable, thorough, understandable material information required by investors and their advisers when making investment decisions’ requires that due diligence for tenure be full and thorough. Yet a published due diligence would often appear to be simply a list of tenures allegedly held without any commitment as to the standing of the tenure as safe and secure or otherwise.The value of due diligence for tenure, as mandated in the 2012 JORC Code and the 2005 VALMIN Code, must focus on compliance rather than simply on ‘vital statistics’. Enforcement in every jurisdiction in Australia focuses on penalties (some more harsh than others) for non-compliance, which, in turn and most importantly, reflects directly on security of tenure. Some 22 Acts (on average) impinge on security of tenure and fundamentally underpin the security of any mineral asset.This paper will outline regulatory processes to demonstrate how tenure compliance is achieved and argue that the rigorous application of good practices in tenure evaluation will lead to more of this information being made available on a regular basis.The paper will then focus on further practical examples of tenure compliance failures, the application of these to the requirements of the JORC and VALMIN Codes and due diligence that failed to fulfil the mandate. Examples will be given that alerted other professionals using the JORC Code to complex geological and mining situations of which they were unaware in their valuations.Finally, the author will make a personal plea for tenure to be considered at the commencement of any reporting process.CITATION:Evans-Wheeler, J, 2016. The VALMIN code and tenure compliance – not just a list, in Proceedings Project Evaluation 2016, pp 112–121 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

"Recognising that the mining industry is wedded to the break-even cut-off grade rather than a cut-off grade that optimises value, the author examines some perils and pitfalls in the use of break-even grades that lead to what the author calls ‘negatively geared ore reserves’.Negatively geared ore reserves occur when a portion of the ore reserves actually has a negative value and is effectively being subsidised by the more profitable portion of the ore reserves. This situation is generally difficult to detect with the level of information available to the public investor. The ore reserves can still be quite profitable in total, but now possess a level of risk that may not be appreciated.The risk profile (financial risk) of a negatively geared ore reserve is far greater than for a non-negatively geared ore reserve. Like a negatively geared investment property in a falling property market (for readers familiar with the Australian tax minimisation investment strategy), when the price of a commodity falls, a company that possesses a negatively geared ore reserve loses value at a magnified rate relative to a company that has a neutral or positively geared ore reserve. In the extreme case of a major commodity price reduction, as happened with the gold price in mid-2013, the negatively geared ore reserve can easily become negative value in total, not just in part.The negatively geared ore reserve is sometimes intentional – for instance in order to increase published ore reserve tonnages and meet the CEO’s key performance indicators – but is also often unintentional, resulting from various errors in the break-even calculation. Common errors in calculating a break-even grade include using fixed metallurgical recoveries, not including allowances for ideal laboratory versus real plant results, ignoring available operational data and using modal rather than mean parameter values in cost and performance calculations.This paper examines a common value distribution profile in many ore reserves and the effect of common break-even grade errors on this profile.CITATION:Poniewierski, J, 2016. Negatively geared ore reserves – a major peril of the break-even cut-off grade, in Proceedings Project Evaluation 2016, pp 236–247 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016

By E C. Holloway

"The financial valuation of mining assets has a number of fundamental differences to the valuation of many other asset groupings. One such difference is that typically, the greater proportion of both the cost and revenue sides of the cash flow are inherently governed by systemic market forces.As a result, the range of outcomes for the valuation of each mining asset is more unpredictable, with higher levels of risk and uncertainty. In contrast, the management function of many other non-mining businesses or industry groups can control at least a portion of the cash flow by maintaining the margin or controlling the sales price. The management teams of mining businesses and operations typically have limited options, and are thus price-takers for both costs and revenues. As mining is an inherently cyclical industry, large, long-life operations can exist through several price cycles, making valuation both subjective and challenging.The outcomes of both static- and stochastic-based valuations, as well as the internal probabilities of the associated cash flow statements, are significantly impacted when the correlations between the appropriate parameters are quantified, modelled and incorporated into the valuation framework. The appropriate parameters for correlation modelling primarily include those that are governed by systemic market forces. Applying this process results in a different risk profile for the asset by allowing the risks resulting from systemic market movements to be more accurately quantified and then objectively minimised. This process also reduces the level of residual uncertainty in the valuation outcome.This paper presents a valuation methodology to pragmatically incorporate this level of valuation sophistication and statistically quantify the associated increase in the level of confidence of the valuation outcomes reported.CITATION:Holloway, E C, 2016. Correlated valuation methodology, in Proceedings Project Evaluation 2016, pp 181–200 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Mar 8, 2016