Search Documents

By John J. Sammarco

"The mining industry has made great strides in making mining safer and reducing the occurrence of mine disasters. Nevertheless, sometimes miners encounter smoke while trying to escape from a mine. Underground miners use different visual cues to help them escape from a smoke-filled environment. Foremost, miners look for primary and secondary escapeways that are typically indicated with reflective markers of various colors, with at least 11 colors available from manufacturers. Federal regulations require that escapeways be marked, but they do not specify the colors to be used. Thus, no standard color code exists and some colors can be more difficult to see in a smoke-filled mine.Researchers at the National Institute for Occupational Safety and Health (NIOSH) Office of Mine Safety and Health Research (OMSHR) tackled this problem by taking a human-centered approach to provide miners with better visual information that would improve their ability to see escapeway markers in smoke, thus enhancing their ability to self-escape. What marker colors does your mine use?Does your mine use blue retro-reflective markers to indicate primary or secondary escapeways? Is your mine ready to purchase new or replacement retro-reflective markers? Color is important and blue had the poorest visibility as determined by OMSHR’s recent research investigating the visibility of markers in smoke. OMSHR researchers are not alone in their interest to improve a miner’s ability to escape - specifically when their efforts are hampered by smoke. For instance, there is a LinkedIn Mining Safety subgroup called "Standardized Color Code for Escape Ways and Returns in Underground Mines," and a recent National Academy of Sciences report recommended the development of humancentered technologies to enhance self-escape from underground mines. The mining industry has a common goal of helping improve miner safety, especially when it can be done by way of a simple and relatively low-cost solution of using escapeway colors that are more visible."

Jan 1, 2014

By Stanley Dempsey

INTRODUCTION The mining industry has been under- going a significant restructuring for the past several years. Some firms have been liquidated. Some have been merged with other firms. A number of mining divisions of larger firms have been spun off, in some cases in leveraged buyouts by management. Recently, there have been a number of spin outs of gold subsidiaries. There are also a number of start-up situations where new firms are emerging as significant gold producers through mine development or acquisition. This restructuring has created an attractive market for specialized mining finance firms, and a number of firms have recently entered that field in the United States. These firms provide financial advisory and valuation services to mining firms and project developers, and access to venture capital. In some cases, they invest for clients or for their own account. I have been asked to describe how our firm works, and what kind of information we expect to receive when mine developers seek our assistance in financing a project. HOW WE OPERATE Denver Mining Finance works for both mine developers and investors. We also provide expert advice on mining issues to governments and to firms who are in litigation over mining issues. A lot of our work involves valuing mineral interests for various purposes. Our principal expertise is in the technical, commercial, and financial area. We help put mining deals into shape commercially so that they can be financed, and we help investors get into mining deals that are commercially sound. We work on projects, but we also advise mining firms on the structure of their business and how to make the most out of one or several mines that they might own. In addition to our work for clients, we are also prepared to invest in mining projects for our own account, and to recommend gold properties for acquisition by our parent company, Royal Gold, Inc. We are, to some extent, a venture capital firm, in that we sometimes work with projects that are not "bankablerV1 and are prepared to invest in attractive early-stage situations in mining. However, I want to emphasize that our principal focus is on development of commercially attractive mining projects that can be brought into production in the best possible financial terms. If we can make a project qualify for a project loan from a commercial bank, we will not advise the developer to use high cost venture capital. For the purpose of this paper, I will focus primarily upon our functions with respect to development of precious metal projects. In a typical case, a firm with an advanced-staged project approaches us for help with financing the final feasibility study, and construction and operation of a mine. In some cases, the developer has already developed a financing plan and wants only our access to investors. If we agree that the project is sound and that the financing scheme will be attractive to investors, we will help the developer reach investors on a commission basis. In such cases, we are particularly insistent that the financing plan and our participation meet all regulatory requirements, particularly compliance with state and federal securities laws. In most cases, however, the developer asks us for advise both on how to structure the financing, and how it can be implemented. Here we work for fees based on hourly rates for advisory work,

Jan 1, 1987

By Stanley Dempsey

Mine developers commonly undertake projects that require more funds than they can invest themselves. From that point until they are able to complete a "bankable" feasibility study, they require access to venture capital. In the United States, most venture capital has been provided to the small mining segment of the industry through tax advantaged limited partnerships. Recent changes in Federal tax law makes other forms of financing competitive, and the use of corporations and private and public offerings of shares may soon become more popular ways of securing venture capital. A number of new financial services firms have entered the mining finance business in recent years. They provide mine developers with access to venture capital.

Jan 1, 1987

By James M. Barker

Marketing is the linchpin of the industrial-mineral (IM) industry. Without markets and consumers for IM products, all other associated IM activities are superfluous. The simple existence of an IM deposit does not mean that it can be exploited. A dynamic interaction between exploration (geology), mining, processing, transport, marketing, sales, and consumers is required for profits. Geology dictates the existence of a deposit, but markets dictate its development, and transportation provides the connection. This is true to such an extent that marketing commonly is called the exploration phase of IMs. Marketing is strategic and includes long-range market-development and planning activities, whereas selling is tactical and more focused on day-to-day consumer interactions. Each will help the other when properly done. Many producers of IMs have failed because of inadequate marketing skill, information, and practice. Over many years at the Montana Bureau of Mines, the many developers seeking technical assistance to find an IM deposit, but who had no marketing plan, always failed. In contrast, the few who sought assistance first on marketing, with the IM deposit to be found later, always succeeded (Richard Berg, personal communication, 1998). Marketing has many facets helped by geologists who must be aware of what marketing is attempting to do. A geologist needs to understand many aspects of IMs: location (deposits, plants, consumers), processing (specifications), transportation (truck, rail, barge, ship), competition (local, regional, national, international), substitutes, pricing, and new developments and market forces of all kinds. Some needed skills are not taught formally to geologists, so well-rounded self-education and on-the-job training are the way a geologist normally enters into IM marketing. The IM geologist generally is associated with marketing either by helping to prepare a market study or by acting on the results of one. Preparing a market study is a two-part process. The first part is relatively simple but requires a time-consuming collation of data into an IM survey (mostly past-and present-oriented). The more difficult and much more important second part entails expanding the IM survey into a market evaluation (mainly future-oriented) that emphasizes forecasting, timing, location, and specific products. A market evaluation generally boils down to formulating the right questions to ask of the right persons. One very good question to ask is, "What could be the market for this specific IM?" while thinking for yourself without excessive recourse to gossip, rumors, promoters, developers, or (at times) IM experts. The evaluation must prove that market potential exists and suggests a marketing plan. Effective marketing is an ongoing process, with the initial marketing plan modified over time, using wide and continuous input to avoid tunnel vision. Industrial-mineral markets are based either on commodity (lower-priced, basic-processing) minerals or specialty (higher-priced, value-added) minerals. IM marketing methods are either product-driven (commodity minerals), a more traditional approach, or market-driven (specialty minerals), but these are neither mutually exclusive nor is one always better than the other. Focusing too much on specialty minerals can lead to problems. A blend of commodity products with specialty products commonly lowers risk and enhances long-term profits. The highest profits occur in specialty minerals at the cost of higher risk and complexity and require intelligent marketing, versatile technical services, and creative research and development. Industrial minerals are best served by an industrial-marketing approach rather than a consumer approach. Modern industrial marketing emphasizes the consumer using the "marketing concept." The marketing concept focuses all management and operational activities on total consumer management and satisfaction similar to the total quality management approaches to excellence.

Jan 1, 1999

By C. Roos

Traditionally within the mining industry, the main functional process flow for resource and reserve evaluation proceeds from geologists who build the geological model, to resource estimation geologists (modelers) who estimate the grades, to mining engineers who develop the mine design and schedule. The interface between these three disciplines is not always seamless. Assumptions made during one stage of the process are not always communicated down the line, even though most mining companies have procedures in place to encourage communication across the various disciplines. These procedures do not always achieve their aim due to a variety of reasons including time constraints, appropriate people not being available, or a lack of understanding of what other disciplines require, and the handover process can degenerate into one of sending computer files on to the next discipline in the process flow. This paper focuses on the interface between the resource estimation and mine engineering disciplines, and outlines some of the common assumptions made when generating a resource model and the risks that engineers may be taking when elevating cutoff grades, optimizing schedules or generating forecasts. The case studies presented focus on openpit gold deposits, but the concepts should be applicable throughout the industry. A summary of key questions and recommendations is provided.

Jan 1, 2014

By C. Roos

Tradicionalmente en la industria minera, el flujo principal del proceso funcional para la evaluación de recursos y reservas procede de geólogos que elaboran el modelo geológico, de allí a los geólogos que hacen la estimación de los recursos (los modeladores) quienes estiman los grados, y a los ingenieros de mina que desarrollan el diseño de la mina y su calendario. La interfaz entre estas tres disciplinas no está siempre exenta de baches. Las presunciones hechas durante una etapa del proceso no siempre son comunicadas a los demás, a pesar que la mayoría de las empresas mineras tienen procedimientos y protocolos establecidos para promover la comunicación a lo largo de las distintas disciplinas. Estos procedimientos no siempre logran su propósito debido a una variedad de razones que incluyen restricciones de tiempo, no tener disponible a las personas apropiadas, o a una falta de entendimiento de lo que las otras disciplinas requieren, y el proceso de traspaso puede degenerar en el envío de archivos a la siguiente disciplina en el flujo de proceso. Este artículo se ocupa de la interfaz entre la estimación del recurso y las disciplinas de la ingeniería de minas y el esquema de algunas de las presunciones comunes hechas al generar un modelo del recurso y los riesgos que los ingenieros podrían correr al elevar los grados de corte, optimizar calendarios o realizar predicciones. Los casos de estudio presentados se centran en depósitos de oro a cielo abierto, pero los conceptos deben ser aplicables a toda la industria. Aquí también proveemos un resumen de preguntas clave y recomendaciones.

Jan 1, 2014

By Ann L. Backstrom

The Apex Tunnel is part of the Southern Nevada Water Authority?s proposed Clark, Lincoln, and White Pine Counties Groundwater Development Project. The project is intended to develop unused Nevada groundwater for meeting the water needs of Southern Nevada and would involve over 322 km (200 mi) of water transmission facilities. The Apex Tunnel, as currently conceived by ongoing planning and environmental analyses, would extend 2804 m (9,200 ft) through a structurally complex terrain of Paleozoic carbonate rocks and younger basin fill deposits and will traverse both public and private lands. Several faults cross the tunnel study area, juxtaposing rocks of varying lithology and degree of folding, and creating intervals of differing rock conditions along the tunnel alignment. This paper discusses how the geotechnical program was developed to be flexible and allow for rapid implementation of revisions based on new knowledge that became available during program execution, resulting in more effective decision making and enhanced value from the geologic investigation during the planning phase of the project.

By E. C. Skinner

As the program says -we'll he talking about the expectations of the Management of an Industrial Mineral enterprise relative to the activities of geologists engaged in that enterprise. Industrial Minerals is such a large industry both in tons produced and in value of product -and of such diversity and complexity of participating enterprises, minerals and products that I doubt if anyone person can speak for the entire industry as to the expectations of management with respect to the geologist. I'm sure there are major differences in emphasis between segments of management as to the relative importance of the different aspects of the geologists' role in the scheme of things. However, we will try to generalize concerning what we consider to be important factors and to be more specific perhaps of some of the factors with which we have had direct assessable experience.

Jan 1, 1972

By R. A. Matuszak

In recent years, a new concept in the control of electrically powered excavators has come into existence. The new type of control system has come to be known as "static" control. The use of the name "static" to describe this system is somewhat misleading since this term refers only to one of the many advantages of this very important advance in excavator control systems. In 1959, the first truly "static" control for Ward-Leonard equipped electric excavators was designed, developed and placed in service. The control system, originally intended only as a more modern electronic type of alternate to the tried and proven rotating amplifier control system then in use, has since proven to be much more.

Jan 1, 1964

By Adam Bedell, Brad Crenshaw

Tunnel project contract documents often present groundwater infiltration requirements for components of the underground portions of the project. All too often these documents require quantifiable target inflows for these components, but only refer to them in subjective terms such as “dry,” “manageable,” etc. The Contractor’s definition of these terms will inevitably differ from the Engineer’s definition of these terms. The purpose of this paper is to look at common subjective terms used in documents and provide suggestions for reasonable quantifiable language. Additionally, the paper will provide information and recommendations on relative levels of cost and effort increase needed to provide increasing levels of water cutoff (i.e., achieve “dryness”?).

Dec 1, 2022

By Diane Moody

I have been asked to give you the National Coal Association's (NCA) view of the future of the coal industry. However, before discussing the outlook for the future I would like to set the stage by taking a brief look at how the industry has changed over the last decade. In 1977 the coal industry was in the midst of a period of steady growth. Although most of the gains in the early and mid 1970's occurred in the west, the industry was still predominately eastern, with eastern production accounting for 76 percent of the 697 million total tons produced in 1977. The labor force was nearing a high - at over 220,000 workers, and the number of active mines was also at a decade high of over 6,000. Productivity on the other hand was at a low. The average miner produced 1.80 tons per hour, and labor relations were also at a low point. Projections for coal's future were very optimistic, mainly because of the unprecedented growth in coal use by the utility industry. In 1977 the 477 million tons of utility coal accounted for 68 percent of U.S. coal production, and the utility industry planned on 129,000 MW of new coal-fired capacity over the next decade. Consumption of metallurgical coal at coke plants was the second largest market at 78 million tons; the industrial and residential market consumed 70 million tons and exports were at 54 million tons. But in retrospect, a lot was happening in 1977 that signalled many changes in the coal industry: - Amendments to the Clean Air Act were passed, which required that utilities take an entirely different approach to meeting New Source Performance Standards at new plants, and required that standards be set for industrial boilers as well; - the Surface Mining and Reclamation Act became law; -electrical generation, despite the optimistic forecasts, was nearing the end of a period of close to five percent annual growth; -1977 ended and 1978 began with the longest coal strike in U.S. history. -crude oil imports in the U.S. reached an all time high as did both total consumption of petroleum products in the U.S. and oil consumption at utilities. The high level of oil imports set the stage for the oil price increases of 1979 and 1980 which resulted in an immediate increase in demand for coal, not only in the United States, but world wide. Labor strikes in Australia and Poland sent foreign buyers to the U.S. literally in droves, and quickly made the U.S. a force in the world steam coal market. The U.S. coal and transportation industries responded to this overwhelming potential demand for coal. In a very short time, the capability had been developed to mine and transport the 1.2 billion tons of coal that forecasters said would be needed by the mid 1980's. What was not anticipated was that the economic effects of sharply higher oil prices would dampen demand for energy, especially for electricity, as quickly as we have seen; that coal industries in other countries would respond as rapidly as the U.S. coal industry, and at a rate

Jan 1, 1988

By L. M. Gochioco

The U.S. coal industry is under-going dramatic changes to meet the challenges of the keenly competitive fuels market. The application of innovative technologies is needed to improve safety and to increase productivity in order to make coal more competitive as a fuel. As more coal companies shift into capital intensive longwall mining, there is a clear need to invest more in exploration before mine plans are made. Coal seam anomalies may create adverse mining conditions. The early detection of these anomalies could make the longwall mining safer and more productive through improved planning. A standard exploratory drilling program can provide only limited geologic information. The seismic reflection technique can be used to detect coal seam anomalies and is effective in reconnaissance surveying. Recent advances in the quality of coal seismic data have increased the success rate of seismic surveying. Therefore, surface seismic surveys, coupled with selective drilling, will come to play an integral role in coal exploration in the 1990s.

Jan 1, 1990

By Sean Hunter

Artificial Intelligence has a long history but is currently coming strongly into focus with new advancements. This leads to questions many people are asking: what exactly is AI, how can it be used effectively in mining operations, and what foundation is required to make AI implementations successful? In mining, many AI applications exist, from drill pattern optimization to predictive maintenance. However, many implementations struggle due to data integration challenges. Mining operations generate large amounts of data from many sources, such as fleet management systems, drill sensors, process control systems, and laboratory results. Unfortunately, this data often exists in silos where it’s difficult to get it out, making AI applications unable to leverage it. Worse still, tools that use AI don’t always provide their data back to the system, creating even further data silos. All these problems make it hard to take advantage of the data at the mine, slowing down and reducing the effectiveness of AI. This paper presents a comprehensive approach to organizing mining data using an AI-ready knowledge graph system. We will first explore the evolution of AI in mining, from early expert systems to modern machine learning applications. Then, we will detail how a knowledge graph can integrate business context, operational data, and AI models into a cohesive system that enables more effective AI implementations across mining operations. The proposed method has been developed considering both the unique data challenges faced by the mining industry, while also considering best practices learned from the AI field at large. By following this approach, it’s possible to better utilize existing data, getting higher quality and more complete results faster, and in a way that’s reusable and composable.

Feb 1, 2025

By S. M. Pickering, L. T. Gregg

Appraisal of industrial minerals beneath privately owned land requires a different approach and mindset from valuation of base and precious metals or energy minerals, and from valuation of government-owned mineral lands. First, is it the value of inground minerals or of mining rights that is being sought? Second, value to whom, the mining company, a potential investor, the mineral landowner, a lending institution, the property tax assessor, or a condemnor? Third, how should mineral value be apportioned between the land and mineral owner, and a mining company with limited years of lease-hold interest? These and many other questions must be addressed before a valuation method and Discount Rate are selected. For various reasons the Income Method is most often used, with Net Present Value calculations made for long term predicted mining income. Choice of an appropriate Discount Rate is critical.

Jan 1, 2000

By L. Andrews, G. Smits, M. D. Adams, E. A. Viljoen

A new approach has been developed that is capable of ascertaining the ore component that is responsible for the preg­robbing of pregnant pulps. Many gold mines are currently treating ores containing a component that is detrimental to the recovery of gold, in that they "preg-rob" the pregnant pulp by adsorption of some of the dissolved gold. The identity of the preg-robbing component in this type of ore has been the subject of considerable debate over a lengthy period, th various suggestions including amorphous carbon, chlonte, chalcopyrite and layered silicates, such as the phyllosilicate minerals pyrophyllite, kaolinite, phlogopite and illite. A means is now available to identify and characterize the preg-robber in gold ores. This new approach consists of contacting the ore with a synthetic aurocyanide solution, identifying the mineral grains by optical microscopy and analysing each grain individually using high-sensitivity electron microprobe analysis. The approach is exemplified in this initial study by identifying the preg-robbing component in an active sample of gold-bearing shale to be an amorphous carbonaceous phase consisting of discrete particles of about 5 µm diameter interspersed with shale particles and agglomerated into grains of up to 100 µm diameter. Microanalysis of these grains as well as other mineral particles revealed that the gold content of some of the carbonaceous grains was close to 7000 g,lt, with no gold being detected in any of the other mineral phases that were found to be present (e.g. quartz, chlorite, muscovite, pyrophyllite, etc). Bulk analysis of the sample for carbon and gold confirmed that gold loadings of around 7000 g,/t would be expected if all of the gold were adsorbed onto the carbonaceous component. The carbonaceous constituent is probably also responsible for the anomalously high surface area measured for the material. It probably acts in a similar fashion to activated carbon, and the correct choice of organic blinding agent will decrease the extent of preg-robbing by lowering the activity of the material for gold, without causing any downstream problems such as fouling of the activated carbon used for gold recovery

Jan 1, 1993

By H. Lyn Bourne

This is the fourth annual tabulation that gives mineral royalty information. The table presents previous information plus about two dozen new entries. In addition to the royalty information, some entries show the cost of purchased reserves. Last year's tabulation appeared in two issues, to accommodate all of the information. This year the format has been changed slightly so the table can be printed in one issue. This year's table presents the commodities in the same sequence as last year. Sand and gravel information appears first, followed by: crushed stone for aggregate; other stone; industrial sand; other industrial minerals; energy minerals (coal, oil shale, uranium); and finally metals. As always, a caveat relates to factors that influence the reserve values. The data should serve only as a general reference. The table is not intended to present an absolute scale of reserve costs. Several factors influence the value of mineral commodities. These factors include: • location and transportation costs (especially significant for most industrial minerals); • market conditions for both the commodity and the company acquiring the right to mine it; • quality or grade of the deposit as it reflects the amount of processing and beneficiation necessary to produce the finished product; • and legislative restrictions and conditions for mining a given material at a given site. These and other factors will influence reserve costs of reserves. The table shows the range of royalties and the variations in the basis of computing the fees. In a few instances, it gives the cost of acquired reserves based on purchase price and quantitative estimates of the material in place. The table lists the commodity; the location (either by state, US geographic area, or Canadian province); the cost (R for royalty and P for purchased cost); and the year in which the lease or purchase agreement occurred. The last column offers either comments or gives a footnote number for more information. The cost column requires more explanation. The units may refer to cubic yards (/yd), cubic feet (/cuft), tons (/T) (2000 lbs) or acres (/A). 1 cu yd = 0.76m3 1 cu ft =0.28m3 1st = 0.9 t7 1 acre = 0.40 ha or m2 In several cases the royalty is a percentage of the finished products, sale price and is levied against either the amount produced or the amount sold. We thank those who contributed information for the table: J. Dunn, T. Eyde, K. Loda, L. Morgan, F. Nix, H. Sorenson, and L. Williams. Several people have said they would like this to be an annual tabulation. That can happen if new information comes to the writer. What appears in the table is only a very small fraction of the cost information relative to the various commodities and the geographic areas for which there is royalty information. If you find this column of interest and possess information write or call: H. L. Bourne, c/o Neyer, Tiseo & Hindo, Ltd., 38955 Hills Tech Dr., Farmington Hills, MI 48018, (313) 553-6300. Only with new information can this become an annual and current source of reserves costs.

Jan 8, 1986

By H. Lyn Bourne

This is the fifth annual tabulation of mineral royalty information. This tabulation, like the previous editions, includes all of the earlier data. There are also 60 new entries. In addition to royalty information, some entries show the cost of purchased reserves. Two articles relative to the evaluation of minerals reserves appeared in December, 1986. R.H. Paschall (In the Aggregate, ME, p 1139) wrote a good article, although it lacked specific royalty data. However, this author takes exception to two ideas in Paschall's column. Paschall contends that the royalty rate does not affect the mineral appraisal. This present author could not disagree more. Paschall also claims the location of an industrial mineral deposit is the only serious or practical caveat in comparing royalties. Comments received here from readers helped make the list of caveats that are cited each year. The readers will decide which factors influence the mineral value for their commodities of interest. Paschall's point about the relationship of the parties who are negotiating a royalty agreement is important and very well taken. The other article, written by William Vernon (Pit and Quarry, December 1986), gives a step-by-step process on how to conduct a mineral appraisal. The article cites three reasons for an appraisal: transfer rights; collateral for a loan; and taxation. A fourth reason is to establish adequate compensation for reserves lost through condemnation. This author has appeared in several court cases where compensation for loss of mineral reserves through condemnation required a mineral appraisal. Royalty rate becomes an important factor in the appraisal process, although the Pit and Quarry article refers to that part of the valuation equation as "profitability." Both articles were well written and are recommended reading for those interested in mineral valuations. The same caveats that have appeared in previous columns relative to factors that influence the value of reserves are restated. The data in the table serve as a general reference and are not intended to present an absolute scale of reserves costs. Several factors influence the value of any mineral commodity. The factors include: • location/transportation - especially significant for most industrial minerals; • market conditions both for the commodity and the company acquiring the right to mine; • quality or grade of the deposit as it reflects the amount of processing/beneficiation necessary to produce the finished product; and • legislative restrictions and conditions for mining a given material at a given site. These and other factors will significantly influence the cost of reserves. The table shows the range of royalties and the variations in the basis of computing the fees. In a few instances, it gives the cost of acquired reserves based on purchase price and quantitative estimates of the material in place. The table lists the commodity in column 1, and the subsequent columns give: • the location by state, US geographic area, or Canadian province ; • the cost - R for royalty and P for purchased cost; • the year in which the lease or purchase agreement occurred; and • comments or footnotes for more information. The cost column requires more explanation. The units may refer to cubic yards (/cu yd), cubic feet (/cu ft), short tons (/T), or acres (/A). 1 cu yd = 0.76 M2 1cuft = 0.28m3 1 st = 0.9072 t 1 acre - 0.4047 ha or m2

Jan 7, 1987

By H. Lyn Bourne

This is the seventh annual tabulation of royalty information. It is also the first year in which some data have been deleted to make room for new data. The concept of royalties evolved from a time when the government owned all of the land, including mines, to the situation where free miners won the right to claim minerals but paid a portion of their production to the royal treasury. Today, a mineral royalty is a payment to the owner of the mineral rights for the privilege of producing the mineral commodity. However, some people incorrectly believe that the selling price and the royalty are the same thing. The contract between the owner (lessor) and the mining company (lessee) is the mineral lease. Some clauses that are common to mineral leases include: identification of property, granting clause, reservations, definitions, royalty rate, taxes and title, indemnity, termination, inspection, assignability, successors, and reclamation. There often are variations in royalty rates for a given commodity that reflect differences in location, quality, market conditions or public versus private ownership. History In the time of ancient Rome, the government owned the mining properties by virtue of conquest. It would lease the mines to favored citizens who would pay rent to the State. Various conditions of sovereign ownership of both land and mineral rights continued in Europe until the Renaissance. As the laws evolved for land ownership by private citizens, the concept that minerals belonged to the State (King, Crown, sovereign) continued until about the 15th century. Free miners challenged the notion of sovereign ownership and won the right to discover and claim minerals. But a portion of their production had to be paid to the sovereign - a royalty. So, the original concept of a mineral royalty was a tax on production that was due to the Crown or Church. The term mineral royalty, as it is known today, is a payment to the owner of the mineral rights (formerly the royal owner) for the privilege of mining and producing the mineral commodity. The owner of the mineral rights, the lessor, and the mine operator, the lessee, enter into an agreement to mine the property. The agreement is the lease. While this concept is common, there are some who do not understand that the royalty is a portion of production paid to the owner as agreed on in the lease document. This author has seen reports where the selling price of a commodity has been quoted as the royalty. ("They get 70 cents a ton royalty at their pit and the guy down the road only has a 65 cent royalty.") These reports have been authored by people not familiar with the mining industry. Lease clauses In addition to the amount to be paid the lessor, there are several other items to be addressed in the lease agreement. The following list may not be all inclusive, but briefly describes most of the common clauses any good mining lease should contain. Identification: This opening clause names the owner (lessor) and the operator (lessee), the address of each, and gives the legal description of the property. Granting clause: This part of the lease gives the time period or duration of the agreement and information about renewal periods. It also has language about the exclusive right of the lessee to mine the property. Reservations: If the owner wants to exclude any portion of the property or set some specific conditions about the operation, there needs to be a clause that describes these reservations. Definitions: This section should address some of the technical terms that the lessor may find confusing - short tons versus cubic yards, dollars versus percentage of average selling price, any escalator indices such as consumer price index or producer price index, and material mined versus material sold. Royalty: This section spells out what the royalty rate will be, how often it will be paid, if there is an annual minimum, the pay dates, and how the records will be kept. This section also describes the conditions under which the lessee is exempt from the annual minimum - natural disasters, strikes, governmental actions, or other causes referred to as force majeure. Taxes and title: The lease needs to identify who is responsible for the property taxes, severance taxes (if applicable), and other taxes that relate to the mining activity - taxes on equipment, improvements, or stockpiles. This is a good place in the lease for the owner to certify his ownership of the property and its mineral rights and also certify that no other leases are in effect. The lessees may want language that allows them to pay mortgages or other debts on the property to keep their lease in effect. Indemnity: This portion of the lease identifies that the lessee assumes the risks for lessee's mining operation. Lessor should expect indemnification by the lessee through standard insur¬ance policies - workers compensation, liability and property damage. Termination: Both the lessor and lessee want language that will allow them to terminate the lease. This section of the lease describes the conditions under which one of the parties may terminate the lease (failure of the

Jan 1, 1989

By H. Lyn Bourne

This is the ninth annual tabulation of royalty information. Again this year, some of the older information has been deleted to make room for more than 30 new entries. Several articles and publications crossed the author's desk this past year that relate to mineral valuation and mineral royalty. Tom Loucks presented a paper, "The Valuation of Hard Rock Mineral Property," at the Rocky Mountain Mineral Law Foundation in Santa Fe, NM in July, 1990. His paper gives an indepth explanation of the definitions and concepts related to mineral valuation. It includes descriptions of numerous legal cases that have dealt with mineral valuation and proper reference is given for each case. Loucks works for the Denver Mining Finance Co. Gold royalties generally range from 5% to 7%, net smelter return. However, Severn Brown sent information that shows a much wider variation. Echo Bay Mines reported in its 1989 annual report royalties that range from 1.5 % to 30% for gold from various gold properties. Brown also sent a copy of an article that appeared in the Dec. 27, 1982, issue of Fortune magazine. This issue carried an article by Walter Guzzardi, Jr. "The Huge Find in Roy Ash's Backyard." The article gives the history of Newmont's leasing in Nevada on property that became the Carlin, Bootstrap and Blue Star Mines. The article states that the initial royalty was 10% that escalated to more than 16%. Another property, the site of Gold Quarry, provides an 18% royalty to the same own¬ers. The article makes interesting reading for those interested in mining history.

Jan 1, 1991

By H. Lyn Bourne

This is the eighth annual tabulation of royalty information. Again this year, some of the older information has been deleted to make room for nearly 30 new entries. Several articles and publications have appeared recently that relate to mineral royalty or mineral valuation. R. B. Parsons wrote "Mining agreements, royalties and profits" (CIM Bulletin, November 1988). He distinguished between net smelter return (NSR) and net profit interest (NPI). Parsons used examples to show the difference between these royalty payment methods. Mining Engineering (January 1990) carried an article by H. V. S. Tingley entitled "Using business due diligence to help evaluate mineral deposits." The article identifies some factors that must be examined during mergers or acquisitions in the mining industry. Since each mining operation is unique, each has risks and opportunities that need recognition and evaluation. The author suggests that a team is necessary for a proper evaluation because no one person has expertise in all of the factors that must be examined. Also in January's Mining Engineering was "Limestone mining: Reserves and valuation," by B. C. Lewis and R. P. Moran. They presented two case studies of valuation of limestone reserves. One was a 109-hm2 (270-acre) parcel in West Virginia and the other a 121-hm2 (300-acre) tract in Alabama. The authors discussed risk, discount rates, and royalty methods as financial parameters in valuation of limestone reserves. Two papers were presented at the SME meeting in Las Vegas, NV in 1989 that bear mention. J.G. Russell's talk was entitled "Valuation of industrial

Jan 1, 1990