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By C Smith, J Cilliers, K Hadler

Unstable flotation froths, that burst before they overflow, produce no concentrate. Increasing the froth stability to improve recovery is therefore an obvious control strategy. Froth stability can be measured readily as the fraction of air entering the flotation cell that overflows as froth, rather than bursting on the surface; the ‘air recovery.’ Air rate is one of the most significant variables affecting froth stability. It is interesting that froth stability (air recovery) is maximised at a specific air rate, above or below which it decreases. It is important for metallurgists to realise that this maximum froth stability also produces the maximum mineral recovery, without compromising concentrate grade. Flotation cells must be operated at the air rate that produces the highest air recovery. The peak air recovery (PAR) to maximum mineral recovery relationship was first demonstrated by Hadler and Cilliers in 2009. Since then, the relationship between PAR and flotation performance has been widely explored; varying air rate, froth depth and particle size. Industrially, reducing the flotation bank air rate to achieve PAR yielded better mineral recoveries than other down-the-bank air rate profiles. In this paper, we present an overview of these key developments and findings in flotation optimisation based on PAR. Furthermore, using new industrial data, we show that PAR is not just applicable to rougher-scavenger cells, but also to flotation columns. Finally, we consider the future application of such an optimising control concept. CITATION:Smith, C, Hadler, K and Cilliers, J, 2018. Flotation control using froth stability: past, present and future, in Proceedings 14th AusIMM Mill Operators' Conference 2018, pp 441–454 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Aug 29, 2018

By A Dunne, R Kruger, H Coleman, P G. Laurens

External and internal challenges in mining are increasing the difficulty and complexity of operating mines. The external mining environment has a big impact on mining operations and is driving the focus on safety, sustainable mining, green issues, profitability and productivity. There is a very high emphasis on ‘reducing cost to improve’, lower mining and beneficiation costs by eliminating waste/inefficiencies (reduce people, use less consumables, multiskilling, etc). The internal mining environment is getting tougher to operate in, with the deposits being more difficult to mine, more difficult to manage due to external pressure along with issues associated with maintaining quality, etc.Technological and environmental developments too numerous to mention, mean that cost control models, reduction in human resource numbers, as well as other drastic measures to curtail expenditure and increase profitability have become part of everyday business. The capability to manage the mining environment in a systemic manner has been lacking and this increases the pressure for performance on those individuals operating and managing mines.Working smarter has become crucial to ensure that businesses optimise the use of their resources, become more safety conscious, more productive and remain cost-effective, while recognising the importance of sustainable mining now and in the future. The logic of determining and managing to the capability of the mining value chain will be examined and the underlying assumptions or beliefs guiding behaviour and decision-making will be highlighted.In order to identify the obstacles in the mining value chain that hinder achievement of its full potential, the following questions have to be asked:What are the factors that influence the performance of a mining value chain?What is the design capacity of the mine?How can the inherent flow and value capacity of a mine be determined?What types of solutions will allow a mine to operate at its inherent flow and value capacity?This article will discuss the way we plan, measure, assess and manage the mine value chain, by addressing the following factors:balanced capacity versus flow and value capacity designthe use of averagingoptimising individual components in a value chain versus optimising the whole value chain.Optimising flow and value through the mining value chain is one of the three pillars of Mineral Resource Throughput Management (MR™). MR™ is an entrenched and academically supported philosophy that has been successfully applied in the past decade in various mines throughout the world by EXXPLEO, a mining and beneficiation consulting company. EXXPLEO has partnered with HCL (a global IT company) to embed the MR™ philosophy, methodology and toolsets into a formal software product called Synchronised Digital Mining (SDM). The SDM system will provide mining companies with a sustainable platform to effectively apply the MR™ principles and toolsets effectively across all operations targeting increased productivity, efficiency and profitability without having to train operations and management staff into expert MR™ practitioners to successfully achieve the desired results.CITATION:Dunne, A, Laurens, P G, Kruger, R and Coleman, H, 2015. Optimising flow in the mining value chain, in Proceedings Iron Ore 2015, pp 437–442 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Jul 13, 2015

Exploration requires substantial capital, and is an extremely risky business (only 1 in 100 prospects ever becomes a mine). The average lead time, that is the time between discovery and production, varies from around two years for a gold mine, to 15 years for a lead/zinc mine. Since it takes years to find, prove and develop most ore bodies, exploration must be carried out years ahead of the depletion of existing deposits. Investors in exploration are exposed to risk for long periods before knowing whether they will receive a return on the funds invested. The risk, high-cost, uncertainty and long lead times involved in exploration make it an aspect of commerce that most managers and investors find difficult to rationalise or understand. Nevertheless, it is a given that the long-term survival of the mining sector depends on discovery of new mineral deposits, however the immediacy of the need to find or acquire new mineral deposits in order to compete and prosper in the industry is less well understood. This paper examines the commercial realities which underlie exploration for new mineral deposits. The first and foremost reason for exploration is to maintain or increase depleting ore reserves which are the asset base of mining, but there are other compelling commercial reasons for exploring, and these are: to maintain return on investment, to achieve growth or create wealth through discoveries which lead tonew mining ventures, to remain competitive in the industry, to diversify, and to control raw material source for mineral processing and/ormarketing ventures. Exploration is necessary for survival of the industry, and also for survival of organisations competing in the industry. The organisations which discover the best orebodies are in the best position to compete, and mining organisations which fail to find or acquire new mineral deposits rapidly become uncompetitive and unable to maintain return on shareholdersÆ investment.

Jan 1, 1998

By K Schonert, K Eichas

Electrostatic separation of non-conductive materials can be accomplished by triboelectric charging. The efficiency of convential separators becomes worse in the size range below about 100 ¦m. These problems are solved by developing a new double-drum-separator. The investigations have shown the possibility of separating very fine mineral mixtures (eg quartz/calcite) in a strong electric field after tribo-charging in a special dust-feeder. The paper reports about the influence of particle size and field intensity on the separation and deals furthermore with the problem of desagglomeration.

Jan 1, 1993

By P Mugebe, M Yahyaei, M S. Kizil, R Low

This paper seeks to establish an empirical relationship between the impact of mining technological innovation implementation and a company’s market value. The company’s market value is represented by its stock price. In a bid to ascertain the relationship, a stock price prediction model is sought to be established using the firm-specific factors impacted by the implementation of innovative technology. This work is performed under the watch of the prevailing macroeconomic factors. The background anchors in the understanding that the difference between the economic status of a mineral deposit and its uneconomic status lies in the level of mining technological innovation most prevalent at a given time (Hartwick, Olewiler and Preuss, 1986; Wellmer and Scholz, 2017; Wright and Czelusta, 2003). This is derived from productivity improvement, resulting in sustainable profitability due to technological innovation. Unfortunately, there is not an adequately established relationship that links this technological innovation impact to the share price performance of the mineral commodity company.

Sep 1, 2024

The use of comparative sampling methods during the evaluation of the tin-copper deposits at Cleveland mine yielded closely checking average results from groove, channel, AXT split diamond drill core, and bulk sampling for both tin and copper content of the ore.The weighted mean tin and copper grades and values for the groove, channel, and split core samples showed small percentage differences from bulk sample results, and the F-ratio test for single population origin of the four types of samples was accepted at the 99· 5 per cent level of confidence.These results indicate that grade estimates based on the assays from AXT split diamond drill core and/or groove samples would be reliable within practical limits.

Jan 1, 1968

By T Higuchi, K Fukada, K Takehara, Y Iwami, S Fujiwara

Following the Paris Agreement adopted in 2015 and the SDGs, reduction of CO2 emissions has been taken up as an issue worldwide, and the steel industry, which has a particularly large emission, is required to significantly reduce it. Most of the CO2 generated in the steel industry is generated from the ironmaking process, due to the use of coke and its raw material coal in the ironmaking process. JFE Steel Corporation has been considering the use of hydrocarbon-based gaseous fuels and liquid fuels as a partial alternative to coke breeze used in the sintering process since 2006, immediately after the Kyoto Protocol came into effect in 2005. In a laboratory study, a pot test was used to investigate the effect of the type of fuel, its amount and its injection method on the heat pattern in sinter bed. As a result, the authors developed a technology, in which a predetermined amount of gas fuel or liquid fuel was injected from the surface of sintering bed to extend the holding time of 1200°C or higher at which liquid phase sintering occurs in the layer, to improve the sinter strength while reducing the amount of coke breeze. The authors succeeded in putting this technology to practical use using hydrocarbon-based gas fuel in 2009 and achieved a maximum annual reduction of 60 000 tons of CO2 per sintering machine. In this report, the authors introduce the results of laboratory studies on the use of various energy sources, the practical application of the technology for injecting hydrocarbon-based gaseous fuel into the sintering machine, and the operational results.

Nov 8, 2021

By C D. Rose

"The primary objective of this paper is to demonstrate a different approach to predicting and verifying mechanical sampling system precision. Early in the year 2011 an experiment was conducted to evaluate the sampling precision being obtained by a three-stage falling-stream mechanical sampling system for coal owned and operated by Peabody Energy. This system collects samples from lots averaging approximately 14000 t being loaded onto rail cars at a flow rate averaging about 9000 t/h. In phase 1 of the experiment, a total of 60 increments were collected in a two day period at preassigned intervals using a cross-belt sampler located on a conveyor belt feeding a silo upstream of the sampling system under evaluation. Coal variability parameters were calculated from the resulting laboratory analysis data using the gauge-invariant fractal model developed by the author.Estimates of precision of the three-stage system as a function of the number of increments were calculated using the variability parameters determined in phase 1. In phase 2 of the experiment, duplicate samples of 30 lots of coal were taken by the three-stage sampling system, enabling calculations of the precision being achieved by the system. Phase 2 precision estimates are in reasonable agreement with those of phase 1. Conclusions drawn from the experiment include the following: Experimental variograms or the equivalent correlograms are essential in understanding sampling issues and for designing a sampling system to meet specific precision requirements. Consensus coal sampling standards provided by ISO and ASTM may be improved by treating all stages of a mechanical sampling system as æsamplingÆ rather than considering downstream sampling stages as æsample preparationÆ, to be treated in a separate part of the document. The coal industry would profit from use of methodology for routinely monitoring the overall measurement precision and the precision of the individual components of measurement: sampling, sample preparation and laboratory testing. This would not only give necessary credence to the measurement results but would also no doubt, lead to more efficient sampling system designs.CITATION:Rose, C D, 2012. Evaluation of precision being obtained by a three-stage sampling system for coal, in Proceedings Sampling 2012, pp 115-124 (The Australasian Institute of Mining and Metallurgy: Melbourne)."

Aug 21, 2012

Previous methods for measuring the flow of solids in Jnrdraulic conveying have not considered the important effects of slip velocity and particle concentration. In this paper an extension of the method proposed byShirato et al. (J. Chem. Engng. 'Japan, 1: 164-167) for determining mass flow in a vertical conduit is outlined.The present method consists of measuring' the volumetric flow of the slurry (by a magnetic flow meter for instance) and the density of the slurry in two pipe sections of different diameters. Effects of variation of slip withparticle concentration, not previously considered, are allowed.Problems involved in estimating the density of a slurry from differential pressure measurement are discussed.The major problem is the uncertainties in estimating frictional losses due to the wall in two-phase flows. The greater reliability of a more "direct" technique, such as by 'Y-ray absorption, for measuring solid concentration is emphasized.

Jan 1, 1971

It cannot be said that accurate and reliable ore reserve estimation is the fundamental of any mining operation success. Estimation techniques which are used to estimate the grade distribution of an orebody together with the assessment of uncertainty and risk have a vital influence on the success of any optimisation algorithm. Traditional estimation techniques such as kriging or inverse distance weighting are frequently used for assigning grade values to blocks. Various attempts have been made in order to compare geostatistical estimated methods for ore reserve estimation. This paper aims to evaluate the sensitivity of different estimation methods over changing the block dimension. For this reason, several block models with different dimensions were derived in Chador Malu iron ore mine which is located in 180 km northeast of Yazd in the centre of Iran. Each block model was estimated by different estimation methods such as nearest neighbours (NN), inverse distance (ID) and ordinary kriging (OK). The results of each estimation methods were compared against a control block file created by using the assay results of all blastholes drilled in the ore over four benches of the pit. The results signify that by estimating the large block size, no significant improvement occurred due to the employment of different estimation techniques. Furthermore, the grades estimated based on ID method is more reliable, but OK methods estimated more accurate tonnage.

Dec 6, 2010

By J F. C L Costa, J C. Koppe, C Diedrich

Currently mineral resources evaluation is firstly expressed in terms of volume. Next the resources are transformed into tonnes by using an average bulk density applied to the whole deposit or, in some other circumstances, various different densities to distinct geological domains. Previous work in uranium, copper and nickel deposits used linear correlation between grades and bulk density to derive the density. Geophysics methods are also another good way to obtain density indirectly.These approaches do not take into account that two samples with the same grade but with different bulk densities can characterise different sample supports, leading to severe bias in grade and tonne estimates. It is important that the systematic measurements of bulk density are included into the estimation process, particularly when density is not correlated with the grades. Additionally, the extra time and costs involved in obtaining the bulk density data have made the mining industry disregard it.This study reports the impact in resource estimates by using a methodology that includes the bulk density variability. It involves the determination of a variability model for the bulk density and another model for the composite that was weighted by density as well as by its length. Next, these variables are estimated by kriging and the final grade estimates are obtained. The tonnages are obtained with the bulk density estimates. The conventional methodology was also applied and both estimates are compared to the reconciliation data from a major copper deposit. The results show a significant difference between the tonnage and grade estimates obtained from these two methodologies.The results show that considering density variability when compositing leads to a more accurate methodology resulting in better grade and tonnage estimates locally and globally.

Sep 26, 2011

By Q Shu, T Deng, B Yan, B Song, D Wang

In view of the lack of phase equilibria data of vanadium-bearing oxide system and the desirability of them for design or optimisation of vanadium extraction process, the phase equilibria relationships of V2O3-FeO-SiO2-CaO(15 mass per cent) system were determined experimentally and then an isothermal section phase diagram of this system was constructed. Totally, 81 samples of different composition were equilibrated at 1623 K for 48 hours in iron crucible under Ar atmosphere. The equilibrated samples were quenched quickly in cold water, and then the phase constituents of all the samples were identified by X-ray diffraction (XRD) combined with electron probe microanalysis (EPMA) measurements.

Aug 21, 2024

In a state-of-the-an review of predictive methods for longwall support load calculation, special respect is paid to those techniques which enable actual roof conditions and local lithology of strata to be involved. Principal systems of roof examination include the borehole perforation test and seismic velocity measurements. Roof strata stability is related to caveability classifications and roof inclination due to subsidence. The critical analysis of both load resistance prediction methods and roof stability classifications shows that each has its own value of reliability level. The present research opportunities analysed underline the significance of developing fully reliable prediction techniques as needed by the coal industry.

Jan 1, 1991

By Sagrabb T

In a company's quest for financing the development of a new mine, it will make calls on stockbroking houses and banks. The choice of the best-fit broker or banker is of great importance, and in the case of the miner, this is a house that has an intimate understanding of the mining industry, particularly one that has a solid staff complement of personnel with operating mine experience at a senior level. The most important document that the company will present to support its financing request will be the Feasibility Study. It cannot be too strongly emphasised that this document must be absolutely comprehensive and cover items including: (a) Geological review; (b) Resources and reserves; (c) Mineability; (d) Mining schedule; (e) Metallurgy; (f) Process plant description; (g) Infrastructure and services; (h) Management and operations; (i) Environmental and social impact; (j) Capital costs; (k) Operating costs; and (1) Financial analysis. The elements listed above represent major topics and require a great deal of expansion in the body of the document. Rothschild Australia Limited assists its client companies by supplying a detailed framework so that they will be in a position give the bank the information it needs to complete its technical `due diligence' study within a mutually agreed time. The client company will advance its position markedly if it uses well-known, reputable consultants to either complete or assist with the various aspects of the Feasibility Study. Such an approach will give the potential financier confidence that the company has taken a professional and unbiased attitude in determining the feasibility of the property in question. Most small- to medium-sized mining companies, both within Australia and overseas, will prefer, or will find it mandatory, to request a project funding package rather than opt for a corporate loan. This is because the company either does not want to tie all of its assets to the performance of one project, or that it is a one or two project company with no other substantial assets and is therefore unable to obtain a corporate loan. Upon receipt of the Feasibility Study, the bank will use the data supplied by the company in its cash flow analysis to build its own financial model. The purpose of this is to examine the timing of

Jan 1, 1994

By F Ouchterlony

Soviet precursors to Cunningham’s Kuz-Ram model from 1983 are described. They are rooted in the mean fragment size and Rosin-Rammler (RR) fits to sieving data and rely on approximations. Three versions of the Kuz-Ram model are presented and all three are de facto based on the median fragment size x50, even if the term mean is used in the papers. This discrepancy caused Spathis in 2004 to suggest a correction procedure for the Kuz-Ram rock factor A, which was said to explain some of the missing fines in the model. This correction, while applicable to Cunningham’s 1983 paper, does not apply to his 1987 paper, in which he presents his own A factor.Common fixes of the Kuz-Ram model’s fines issue are fragmentation models where the fines are mainly generated in a crushed zone around a blasthole. This is contradicted by careful model blasting tests. The lack of a largest block size in the RR function may lead to spurious values of the uniformity coefficient n, eg in conjunction with image-based fragmentation measurements or crusher modelling. These issues may be solved by using the transformed RR function, which has a largest block size xmax or its replacement by the Swebrec function, such as in the KCO model.The mean to median issue is investigated in some detail and it is found that using x50 instead of the mean:has a sounder theoretical backgroundis less prone to errorsis not contradicted by the original Soviet data.It is finally suggested that future work on fragmentation prediction equations focus on the use of distribution independent quantities like percentiles, eg x50, x20 and x80. Some previous work in this direction is briefly analysed and one consequence is that the n-value of the Kuz-Ram model should depend on specific charge.CITATION:Ouchterlony, F, 2015. The median versus the mean fragment size and other issues with the Kuz-Ram model, in Proceedings 11th International Symposium on Rock Fragmentation by Blasting, pp 109–120 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Aug 24, 2015

By Butler I. K, Nicholson P. M

There are four main types of base metal and gold mineralisation recognised in the central Pine Creek Geosyncline. These are stratiform, polymetallic veins, stockwork/concordant gold-quartz veins and unconformity related uranium-gold-platinoid mineralisation. The stratigraphy of the central Palaeoproterozoic Pine Creek Geosyncline has been simplified into three groups comprising the Batchelor, Frances Creek and Finniss River Groups in ascending order. Stratiform mineralisation occurs within the Frances Creek Group. The earliest mineralisation is found adjacent to circular faults ringing basement highs. Higher in the stratigraphy, stratiform mineralisation is often associated with zones of high compression in the vicinity of basement highs. A synsedimentary-diagenetic origin for stratiform mineralisation is proposed. Polymetallic vein mineralisation occurs within the Frances Creek and Finniss River Groups. Its composition changes systematically through the stratigraphy similar to the stratiform mineralisation. The mineralisation is structurally controlled and usually occurs in the vicinity of basement highs. Stockwork-concordant gold-quartz vein mineralisation is hosted by the upper Frances Creek and Finniss River Groups. It occurs within compressional zones and along the Pine Creek Structure corridor around, above and particularly between basement highs. Mineable reserves occur in thick continuous semi concordant quartz-sulphide veins and/or stockworks. Unconformity related uranium-gold-platinoid mineralisation shows a close spatial relationship with the Palaeoproterozoic/Mesoproterozoic unconformity. The mineralisation is localised by structures formed during Mesoproterozoic deposition and is commonly adjacent to Archaean basement or its remobilised equivalents. The type of mineralisation (stratifom/polymetallic vein) is a reflection of local stress regimes, structure and physio-chemical conditions. An initial phase of stratiform mineralisation is postulated to have occurred with the first significant marine transgression in a tensional regime. A second phase occurred later during a compressive regime. "Ihermochemical sulphate reduction of mineralising fluids by hydrocarbons is invoked as the precipitation mechanism for the polymetallic vein type of mineralisation. Hydrocarbon generation is postulated to have occurred within the Frances Creek Group, in many places contemporaneously with the movement of mineralising fluids and basin compression. Polymetallic veins formed from the interaction of mineralising fluids and hydrocarbons which were trapped in suitable structures. An abundant, continuing supply of hydrocarbons was necessary to form significant deposits. Where these conditions were not net, the mineralising fluids largely continued their ascent to the near surface environment to form stratiform deposits. The stockwork/concordant gold-quartz vein mineralisation is a later event and occurred during the relaxation of compressional defonnation after deposition of the 1-inniss River Group.

Jan 1, 1994

Successful evaluation and exploitation of resources and reserves relies on the collection of high quality sample data. The quality of the sample data must be maintained through the application of a robust quality assurance and quality control (QAQC) program, including documentation of sampling procedures, training of sampling personnel and the regular monitoring of control samples. However, the application of QAQC programs in the minerals industry is often poor and the purpose misunderstood. It is all too common to have good quality control data collected, but no analysis work carried out until after drilling is completed. In a lengthy drill program, this can lead to problems not being discovered and corrected as they happen. Moreover, rectifying problems afterwards will be costly in terms of time and money, if not impossible. The consequences of poor quality sample data are many and include such effects as over- or underestimation of block grades, misclassification of ore and waste, and lower confidence in the resource/reserve models. The purpose of this paper is to highlight, using case studies, the importance of good QAQC practices to monitor the quality of sampling and laboratory sample preparation and analysis.

Mar 1, 2010

By J Player, P Mikula, G Sweby

A numerical modelling back-analysis exercise was carried out at a WA gold mine at which early signs of seismicity (rock noise, scatts from active faces) were becoming apparent as depth of mining increased towards the 500 m mark. Some strain bursting had occurred and it was necessary to discover what the implications of this were for greater depth. The aim of the modelling was to: 1. Establish a correlation between observed ground conditions and model predicted damage, in overstressed areas of the mine. 2. Use this correlation to forecast rock mass damage and ground control requirements for proposed future stoping panels at greater depth. Good correlation has been achieved between observed rock mass damage, and a 3D Finite-Element RS3 model, run in elastic mode. Two candidate stress field orientations were modelled. The model parameter best fitting the observations was the Strength Factor (SF), the ratio of strength/stress. The good match (correlation coefficient of 0.7) between observed and modelled suggests that the elastic approach is justified for the depth range and rock mass properties analysed. The correlation also enabled a link between observed damage and installed ground support performance. Using the linear best-fit between observed and modelled, a forecasting exercise was carried out using the same RS3 model, modified to include future stoping. The resulting damage and ground support categories were obtained from the modelled SF for each proposed stoping level. Also, a series of generic geometries was assessed to investigate the impact of varying stope face lead/lag distance, sill pillar height and stope pillar size, on ground conditions. The key finding of the generic geometries were: • Ground support schemes have been defined for the expected conditions. • All ore drives are expected to have significant damage in the backs and rehabilitation. • Lead/lag distance not to exceed 10 m. • Sill pillar/level intervals of less than 20 m require an increase in ground support scheme. • Pillar sizes for maintaining footwall and hanging wall stability should be at least 10 m × 5 m.

Nov 29, 2022

By N Collins, A Woodley, A N. Danoucaras, C McCombe, N C. Kunz

Over the past decade, the mining industry has come to recognise the importance of water both to itself and to others. Water accounting is a formalisation of this importance that quantifies and communicates how water is used by individual sites and the industry as a whole. While there are a number of different accounting frameworks that could be used within the industry, the Minerals Council of AustraliaÆs (MCA) water accounting framework (WAF) is an industry-led approach that provides a consistent representation of mine site water interactions regardless of their operational, social or environmental context that allows for valid comparisons between sites and companies.The WAF contains definitions of off-site water sources and destinations and on-site water use, a methodology for applying the definitions, and a set of metrics to measure site performance. The WAF is comprised of two models: the input-output model, which represents the interactions between sites and their surrounding community, and the operational model, which represents on-site water interactions.Members of the MCA have recently adopted the WAFÆs input-output model to report on their external water interactions in their Australian operations, with some adopting it on a global basis. To support this adoption, there is a need for companies to better understand how to implement the WAF in their own operations. Developing a water account is non-trivial, particularly for sites unfamiliar with the WAF or for sites with the need to represent unusual features. This work describes how to build a water account for a given site using the input-output model, with an emphasis on how to represent challenging situations.CITATION:Woodley, A, Danoucaras, A N, McCombe, C, Kunz, N C and Collins, N, 2013. A robust methodological approach for mine site water accounting, in Proceedings Water in Mining 2013 , pp 335-342 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Nov 26, 2013

"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