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By S. Wegerer, M. Semel

The search for minerals typically starts with a reconnaissance phase. After finding a promising target area, further prospecting work will be conducted. Finally with growing confidence of having encountered an ore deposit with commercially viable concentrations of relevant minerals, an extensive exploration campaign will verify its potential. Best practice and reliable, efficient tools for mineral resource estimation of massive sulfide deposits in the deep sea have to be established yet. Therefore, a new seabed exploration system is in development. Various challenges are caused by the extreme environmental conditions in the deep sea and by the nature of massive sulfide deposits. Information of past and ongoing expeditions were gathered to form the basis of an in-depth requirement analysis. System functions and corresponding process times were derived. The experience from the existing MeBo seabed drill rigs serve as starting point for the concept study and following development. Initial MeBo system was built for maritime research purposes and now has to be converted into a new design, suitable for efficient and economic resource exploration. The new system configuration is modular structured to adapt easily to different application scenarios and challenges. To achieve an extension of the deployment depths, the overall equipment weight has to be limited through light weight construction and material. The drilling module contains a range of geotechnical coring tools to face the varying soil conditions of heterogeneous massive sulfide formations. The major challenge to overcome is the touch down sequence on uneven, 25° inclined, rough terrain in up to 4.000 m water depth. Furthermore, high precision of the final unit positioning is necessary. Landing sub-system proof of concept is validated in laboratory environment with small scale model. A novel seabed exploration system capable to land and operate safely on highly inclined slopes of mineral deposit is described. Obtaining high quality samples by wire-line coring technique is the objective.

Feb 22, 2026

By Jacques J. Eksteen

Metallurgical accounting around toll treatment smelters pose a number of challenges. This paper reviews the requirements for good sampling practice, and how conflicting requirements for good furnace operation and design often makes reliable closure of the metallurgical balance tenuous at best. Typical physical causes of variance and bias will be identified. The propagation of error (in the form of variance) will be discussed for a copper smelter.

Jan 1, 2006

By Dan Brown

Renewal and revitalization of transportation presents a challenge in the need for replacement, repair, and improvements of existing bridges, as well as increased construction of transit systems within existing transportation rights of way. Difficulties with conventional deep foundation systems occur because of the limited site access, adjacent structures, the need to maintain traffic, and other constraints on construction activity. Major projects are often performed in a design-build contract environment in which the schedule is aggressive, and where speed and reliability represent major considerations. Foundation designers are confronted with a need to solve problems with a construction-oriented mindset, where typical experience with lowest cost solutions may not reflect the most effective approach. This presentation presents an overview of the challenges that may affect design and construction of deep foundations in this environment and the methods that have successfully been employed on several large transportation projects in the U.S.

Jan 1, 1900

By J. Hadjigeorgiou, J. Wesseloo

Mining companies employ a multitude of risk management tools. The effectiveness of these tools for decision-making and communicating risk has not been addressed. This paper investigates the use of verbal probabilistic expressions in communicating geomechanical risk. Analysing survey data obtained from a group of mining geomechanics professionals, it identifies limitations of common probabilistic expressions. The paper concludes by making specific recommendations to avoid the use of certain expressions that may result in increased uncertainty, thus compromising the use of risk management tools.

Jan 30, 2026

By Marco Sonnenschein

As time is costly, engineering companies have developed methods, procedures and mechanical equipment to tunnel faster. But the best excavation method will not be able to cope with the time pressure if there is not a reliable backup system. Therefore, the application of belt conveyors for tunnel boring machine (TBM) drives as well as for drill-and-blast driven tunnels assure a quick and smooth removal of excavated soil in order to enhance the efficiency of the tunneling equipment. During the last 10 years, belt conveyor systems have achieved ?state-of-the-art? levels and have become the first choice for muck removal systems in both TBM and drill-and-blast driven tunnels. Because time has become such a key criterion in tunneling projects, it is essential that all equipment is operated so as to derive optimum efficiency and minimize costs. Efficiency also means to think about new tasks for existing technologies.

Jan 1, 2012

By Bruce D. Hebb, Shahin Shadlou

Fiber Reinforced Polymer (FRP) is an excellent material choice for a broad spectrum of corrosive fluids and, in many cases, offers the best value per dollar. FRP Flanges present the greatest design challenge of all standard piping components. The theory underlying the design of flanges is very complex. In addition, due to the nature of FRP material, proper fabrication of the flanges is as critical as the design. In this review, the challenges of making FRP flanges along with the design techniques and best practices of fabrication that will lead to a high-quality flange will be discussed.

Feb 1, 2024

By L Lorenzen, H Muller, L Bernard

Australian companies and consultants are becoming ever more involved in projects in African, South American, East European and Middle Eastern countries. However, significant differences in culture and approach to projects sometimes make these projects challenging for reasons that are not purely technical. Often the challenges are rather related to how the project owner and local authorities perceive the reality. These perceptions and sometimes unrealistic expectations regarding project costs and potential outcomes need to be addressed by the æWesternÆ project developer and consultant.This paper will discuss the specific experience of Snowden in studies commissioned by companies from such countries for the development of very large, low-grade gold deposits in some of the most inhospitable areas in the world. The paper will further review similar projects undertaken in other ænew worldÆ countries and compare these to the initial Snowden experience.As the process operating costs of operations in many of these countries are extremely competitive when compared to the typical Australian operating costs, the paper will review the operating costs and the factors which may be pertinent to a large project of this nature, both in the Australian and the ænew worldÆ context. Will Australian-based operations be able to compete in the global gold market when the gold price softens again, as it will do at some stage in the possibly not-so-distant future?CITATION:Muller, H, Lorenzen, L and Bernard, L, 2013. Challenges of developing low-grade deposits in ænew worldÆ countries from a mining consultantÆs perspective, in Proceedings World Gold 2013 , pp 307-314 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Sep 26, 2013

The prime objective of geometallurgy is to improve the profitability of mines through the use of spatial models of rock properties that have a significant impact on value. Although a key property is the grade of the component of interest, because it directly influences the revenue from saleable material, increasingly attention is being focused on other attributes. These 'non-grade' variables may have a less direct, but equally profound impact on value, either by reducing potential revenue (eg lowering recovery, deleterious elements, etc) or increasing mining or treatment costs (eg comminution, grindability, throughput, reagent use, etc). Collectively, these variables have been described as 'geometallurgical'. There are three main areas of activity required to realise the value of geometallurgy: 1. acquisition of appropriate data through sampling and measurement, 2. building spatial models of geometallurgical variables, and 3. using these models to optimise value. Each of these is built on the foundation of the preceding step. In building reliable spatial models, it is critical that the amount of error introduced to data by the sampling and measurement processes is understood and quantified, in order that the inherent variability of the component of interest can also be properly understood. Management of the quality of grade variables is now applied (with different levels of diligence and success) across nearly all sectors of the mining industry, not least because of the necessity to adhere to Codes of practice (eg JORC, 2004). The necessity for quality management and at least the broad framework of what to do in practice is reasonably understood by many relevant professionals. There are also a number of tools, including software products, statistical analyses and presentation formats, available for those managing grade data. It is also abundantly clear, that in many cases people have little understanding of why they are doing particular quality control activities, or how to sensibly interpret the results. The same is not true for many geometallurgical variables. In almost all instances the authors have seen, the magnitude of sampling and analytical/measurement error variance embedded in geometallurgical test data is untested and unknown. This is partly because until relatively recently, metallurgical data has mainly been collected for the purpose of process and mill design, with few, expensive tests carried out on 'average' samples of the orebody. Increasingly however, there is a move towards collection of much larger data sets from spatially distributed sampling, and thus a growing necessity to understand the errors inherent in both sampling and analysis of these types of variables, and how to manage them. In order to understand how the quality management practices applied to grade variables can be extended to geometallurgical variables, it is essential to understand the theoretical foundation that supports these practices. This requires an analysis of the concepts that underpin the 'principles of additivity' (Matheron, 1963), the 'theory of sampling' (Gy, 1982, Pitard, 1993), and 'statistical process control' (Shewhart, 1930). Relevant concepts are then integrated to form a foundation to develop methods to improve the quality management of geometallurgical variables. Application of this framework will significantly increase the integrity of geometallurgical data, the reliability of geometallurgical models and ultimately the value derived from implementing geometallurgy. This is an ABSTRACT ONLY no paper was prepared for this presentation.

Mar 1, 2010

By William J. Schloemer

INTRODUCTION The history of coal mining the Ostrava Region of the Czech Republic goes back nearly 250 years. Both coking coal for steelmaking and thermal coal for the production of energy are mined here; however, it was the coking capabilities that subsequently turned the region into a major steel-producing area in the early 1800?s, something that continues to this day. Ostrava lies in the northeast corner of the Czech Republic, near the southern border of Poland, and falls within the Upper Silesian Coal Basin. The region contains over 400 seams of coal of which about 150 have been mined over its history and continue to be mined. Eighty percent of the Upper Silesian coalfieldlies in Poland and is presently mined by about 35 coal mines; the remaining 20% falls in the Czech Republic, which presently has four mines operated by OKD, a.s., a subsidiary of Amsterdam-based New World Resources. Traditionally, all the mines in this region have employed the longwall method of mining, of which subsidence is an unavoidable consequence. In fact, due to the long history of longwall mining here, there are areas where the overall subsidence has exceeded 37 meters (121 feet). The region is fairly densely populated with residences and industry, and a considerable amount of coal lies under some of these areas where subsidence is not allowed or has to be minimized. It is this reason that has driven OKD to consider alternate methods of mining that will not create subsidence. The decision was made to consider the room and pillar method of mining in order to leave stable pillars of coal to support the surface. After considering several locations, OKD chose the shaft safety pillar at the CSM mine as a test mining location. To say the least, this is a very challenging location in which to conduct a test. As with the entire region, there are many faults from tectonic activity, the seams are pitching at 12 to 20 degrees, the area is affected by high horizontal stress, and the depth of 750 to 900 meters is perhaps the deepest room and pillar coal mining ever attempted.

Jan 1, 2014

By P Clark, P A. Kirsch, R Tapia Rivera

Community members’ sources of information about companies’ social investments are often influenced by the messages in a variety of communication channels, such as newspapers, television and social media. In this sea of communication channels, corporate communications may not always have the desired effect in influencing community perceptions. This paper explores the efficacy of communication between mining companies and communities in Chile through content analysis of corporate sustainability reports and newspaper reporting.Chilean media reporting between 2005 and 2013 is examined to identify community perceptions of corporate social investments made by mining companies. Content within the Chilean newspapers El Mercurio (national) and Soy Chile (regional) is contrasted with content from corporate sustainability reports published by The National Copper Corporation of Chile (Codelco) and Barrick Gold Corporation, Canada (Barrick) for the same period. The objective is to identify differences in the way that corporate social investments are reported by companies in sustainable development reporting and by media in newspapers.Overall, the study demonstrates that the media’s framing and reporting of corporate activities was more negative than positive. Moreover, media outlets tended to focus upon the ‘negative impacts’ or ‘damage’ to communities brought about by mining developments. Conversely, companies’ public communications were largely focused upon direct improvements in livelihoods (health, education, etc) of neighbouring communities. This preliminary study provides a baseline for the development of new formats of effective communication with neighbouring communities. The paper advocates for an increase in participatory mechanisms with affected parties, which could lead towards a greater mutual understanding of the impacts and draw parties closer together.CITATION:Tapia Rivera, R, Kirsch, P A and Clark, P, 2014. Challenging Perceptions? Sustainability Reporting, the Media and Mining, in Proceedings Life-of-Mine 2014 , pp 413–426 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Jul 16, 2014

By R Burke, G Ramage, C Donnelly

Over the decades, Redpath has undertaken a multitude of tunnelling and underground excavation projects for civil and mining clients both domestically and internationally. These projects have been undertaken through varying strata conditions with differing excavation methods in remote locations and in central business districts.With the recent turbulent nature of the global financial environment, project drivers have been challenged with the emphasis being placed on methods to gain early access to orebodies, rapid development techniques, lower capital costs and reduced labour requirements to name a few.A number of mining companies seeking to achieve these objectives have commenced the journey to better understand the operational constraints, challenges and opportunities that may be available with the use of alternative excavation methods.The development of safe and effective alternative excavation methods that comply with both domestic and international mining legislation and regulatory requirements is a challenge the industry needs to embrace. Given the current cost pressures being faced by the Australian mining industry, some alternative excavation methods offer the potential for longer term sustainability and rapid development of resources.More recently work has been undertaken on a project that challenged the norm and implemented an alternative excavation method with the use of an excavator with a rotating drum cutter head.This paper will review this recent project and provide technical and operational insight into some of the challenges faced in implementing an alternative excavation method in the metalliferous industry.CITATION:Donnelly, C, Ramage, G and Burke, R, 2014. Challenging the norm – alternative excavation method in mining, in Proceedings 12th AusIMM Underground Operators’ Conference 2014 , pp 187–190 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Mar 24, 2014

By R Ballantyne, M Adams

Time Usage Models, used as a basis for calculating performance indicators for mobile mining equipment, have developed from very simple to very sophisticated models. This development has paralleled the increased collection and analysis of production data that itself has been enabled by the evolution of underground voice and data communications along with the relevant information systems. A Time Usage Model divides the hours that equipment is (or is not) used into standard components, by a hierarchical breakdown, so that measures of productivity can be used to compare performance of both people and equipment. The calculation of equipment availability, and thus the underlying Time Usage Model, has always been an extremely emotive topic as different groups use time usage information for different purposes. The direct link between measuring performance Key Performance Indicators (KPI) calculated from these models and employee rewards impacts upon the workforce. This paper discusses the conflict in use by various stakeholders and proposes ways to address some of the more contentious issues each supported by case studies. The simple status code functionality used by early systems has proven inadequate, leading to the evolution of “work-arounds”. These workarounds have become the norm and unfortunately have become embedded in the next generation of models and the information systems that incorporate them. This paper contends that the industry should stop building Time Usage Models to accommodate shortcomings in proprietary systems, but rather collaborate with suppliers to develop innovative methods to deal with the fundamental requirements. There are many points of differentiation that are not clear-cut. Pitfalls are discussed as well as threats to success. A framework of rules is developed as guidelines for how a Time Usage Model should be developed and applied. This will hopefully stimulate the on-going discussion as to how Equipment Availability and other components of the model should be calculated.

Mar 15, 2021

By Michael J. Peacock

The Powhatan No. 4 Mine is located in southeastern Ohio along the Ohio River in Monroe County. The mine produces approximately 3.2 million tons of steam coal annually from the Pittsburgh No. 8 seam. The Pittsburgh No. 8 seam in this area dips to the southeast in varying amounts from 10-feet to 40-feet per mile. The seam is made up of a main bench coal (4' to 5f' ) containing several thin and variable partings and a rider ("roof") coal (0" to 18") which is separated from the main bench by a parting (0" to 18") that is reasonably consistent in occurrence and position. Strata overlying the seam varies from a bedded to nonbedded calcareous mudstone-claystone (6' to 12') in the north and east regions of the mine to a sandstone (Pittsburgh Sandstone C10' to 40'1 in the south and west regions. The Redstone Limestone (10' to 18' ) overlying the mudstone-claystone in the north and east thins and rises toward the area of sandstone deposition in the south and west. From its opening in April of 1971 until late 1981, primary roof support in the long-1 ived entries at Quarto Mining Company's Powhatan No. 4 Mine had been achieved with 8-foot and 10-foot. 518-inch mechanical roof bolts using a Single expansion shell. These bolts were installed so that the expansion shell achieved a competent anchorage in the limestone. However, as the mine developed westward, the limestone began to trend upward becoming inaccessible as an anchorage medium at the 8-foot and 10-foot horizons. Anchorage achieved in the underlying mudstone-claystone strata was failure-prone due to weathering (after exposure to air and moisture) and inconsistencies in the anchorage horizon, leading to an increase in the incidence of reportable roof falls at the mine. Responding to the threat to safety and productivity posed by the increase in roof falls. Mine Management through its Safety and Engineering Departments, sought solutions to the problem. In seeking a solution to the problem, the safest and en engineering groups examined the reportable roof falls to determine the cause of those failures. Their examination pinpointed two items which were found to be a common link in the majority of those falls; namely, anchor integrity and geologic trends. Analysis of the roof falls indicated that due to effects of air and moisture on the anchoraae zones in the mudstones and clay- itones, the integrity of the anchorage over time could not be maintained. Geologic trends noted included the upward trend of the -main limestone as mining progressed westward, inconsistencies in the amount of roof coal and draw slate in the immediate mine roof and increasing evidence of heavily slickensided immediate mine roof. In the absence of the protective barrier provided by the roof coal, the immediate strata and particularly the draw slate, is susceptible to deterioration due to the weathering effects of air and moisture and thus is prone to "eat out" around the roof bolts and cause roof falls. The presence of heavily slickensided roof creates a need for increased contact surface such as that provided by plank and header blocks to aid in holding up the roof and tends to make the behavior of such roof very unpredictable. Having determined the causes of the roof falls. Mine Management began to identify the kind of roof support which would best solve these problems, while at the same time providing the mine with a safe, cost effective and efficient roof support system. This paper will provide an analysis of how this decision was reached, the background that was researched to aid in forming the decision, the considerations that played key roles in the formulation of the plan, the mechanics of following through and implementing the new roof support system, and an assessment of the resultant gains in safety, productivity and improved costs derived from the implementation of the new roof support system.

Jan 1, 1986

By Bryan Wilson

Background ?Nickel Rim South Mine started production ramp-up in Q2, 2009. ?The main dewatering pumps were put into use in August 2009. ?3 Feluwa?multisafe?positive displacement pumps ?1700m single lift pumping ?Reliability has been an issue due to the amount of slimes and fibers (from shotcrete) at the pumps. ?Critiqued internal dewatering system to solve some issues we were having with our sumps Findings 1.Much of the final dewatering system was not in place. a)Temporary pain. Difficult to say something is not working when the system was not yet in place as per design. b)Not enough capacity to handle slimes within the system. 2.Need to address issues with the final design: a)Ongoing costs: The end design has operating costs of $2.5 million b)Scoops in Sumps: The end design relies on scoops to be used for cleaning the sumps c)Slimes Recovery: The system mixes 3 different products in the sumps along with the fibers d)Pump repair costs: The existing Tsurumi pumps are too light duty for our slimes

Nov 1, 2011

By P Audet, D Doley

The mining industry often embraces mine closure criteria that require the reinstatement of predisturbance or even presettlement (ie historic) ecosystems. However, the extent and severity of disturbance associated with most mining activities mean that critical physical and biological characteristics are irreversibly altered. Consequently, it is rare that a reconstructed landscape can support ecosystems even close to the historic condition, and this rarity is reflected in the small number of mine leases that have been extinguished by attainment of such completion criteria. Novel ecosystems are defined as those in which some or all physical and biotic components are irreversibly different from the historic condition. Recognition of the concept of novel ecosystems allows mine closure criteria to be set according to attainable physical and biological conditions that provide safe, stable and manageable environments with acceptable ecological functions. We propose that a landscape that first maximises physical stability and economy yet will provide a range of environments for vegetation communities and fauna habitats that may be very different from those existing prior to a disturbance should be considered suitable alternatives to, eg targeting idealised historic environments. As a result, mine closure criteria should be established by detailed description of the best attainable physical conditions, with negotiated identification and testing of the most appropriate biological systems for the various parts of the reconstructed landscape. As a general practice, revegetation would use native, but not necessarily local species if the new physical environment is not conducive to the survival and growth of local species. These new ecosystems would need to be managed in perpetuity, although the intensity of management might be low if landscape design and engineering are combined with appropriate species introductions. Here, we suggest an abbreviated procedure that may be adapted in light of local conditions and circumstances for guiding decisions influencing the physical and biological properties of reconstructed landscapes that will enable novel ecosystems to meet realistic closure criteria.CITATION:Doley, D and Audet, P, 2014. Changing restoration priorities in the 21st century – opportunities for novel ecosystem design in mine closure, in Proceedings Life-of-Mine 2014 , pp 649–662 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Jul 16, 2014

By Ryan W. Siggelkow

Mines today use various methods of mining to extract ore. Because of the dangerous nature of many of these processes, remotely controlled LHD machines are being used to extract the ore from the draw point. The remote control system, although being made safer all the time, has remained virtually unchanged for many years. The basic functionality is an operator switching the machine to remote control, getting out of the cab, walking up a stand, operating remotely, returning to the cab, switching to manual, driving manually, switching to remote, and switching to manual. It seems repetitive, and time consuming, does it not? Networking, convergence, video, voice, and data infrastructures, and other technologies are growing by leaps and bounds in virtually every industry and region, except for mining. From the comfort of the living room couch, a Canadian can play hockey online with full voice conversations over the Internet with someone in Russia in real time. Yet, a mine superintendent must jump through hoops to have a private conversation with the front line supervisor underground. "Is Joe around anywhere?" If Joe hears the message, he will respond. If not, who knows? Maybe he's hurt. Maybe he's not. Where is Joe? Nobody really knows, and that is scary. Today, surface knows that the workers disappeared into the cage at 7:00 a.m. They also know that the workers will probably and hopefully return at 3:00 p.m. Is there not a better way to handle this? With such a complex industry, it seems as if, for the most part, the introduction of new technology into mining has either been overlooked or has been met with some resistance. It is time to step back, look at the process, and see how it can be improved. Key areas of focus will be safety, productivity, dependability, and cost-effectiveness.

May 1, 2010

By Karl J. C. Harries

"1.1. WHAT ARE AGREEMENTS AND HOW ARE THEY FORMED?In order to have an agreement, at common law, there must be an offer, acceptance of that offer, and consideration passing between the parties. In addition, the material terms (i.e. the basics or substance) of the agreement must be discernible, preferably by means of documentation. Although these concepts may appear simple and straightforward, the law relating to them is voluminous and complex. Some brief comments are worthwhile.• Offer/acceptance: Both offer and acceptance should be in writing, but they need not be. The actions, conversations, and/or correspondence of the parties may constitute either or both of them. Notwithstanding, the local law or practice of a jurisdiction will impose some specific requirements for certain types of agreements. If these requirements are not met, the agreement may be unenforceable. For example, Ontario’s Mining Act requires transfers of unpatented mining claims to be evidenced in writing and recorded.1• Consideration: Consideration is usually thought of as being money, but it can be virtually anything, even “the premises” (i.e. the mutual covenants or promises contained in the agreement itself). In addition, if one party, relying upon the offer of another, does something to his detriment, then the doing of the act can be considered to be an acceptance of the offer and, under the legal concept of “detrimental reliance”, can also be consideration. Whether or not detrimental reliance exists will depend upon the circumstances of each case.2• Material terms: The requirement that the material terms of an agreement must be discernible does not mean that all of the terms of an agreement must be documented or even have been considered, just the basic or material ones. In addition, it will be up to a judge to decide what is material – not necessarily the parties. In order to establish the material terms, a Court may look at all relevant documentation and may hear oral evidence. It will resist “writing the agreement”"

Jan 1, 2003

By Karl J. C. Harries

"11.1. INTRODUCTIONA royalty is the most common form of interest retained by an owner who is disposing of his property or by a joint venturer who ceases, voluntarily or otherwise, to participate in the joint venture.1 Rarely does a non-participating party have a direct interest in the property and/or assets of a project, except during the period when a non-participating joint venturer may be having his interest diluted.2 In fact, it is most unwise to permit a non-participating party to have such an interest. It may give rise to significant problems that could prevent or substantially delay the development of an orebody and require a considerable amount of time, effort, and money to correct.3In negotiating a royalty, it is important to be aware that there is no law or convention that says, “You just don’t do that in a royalty agreement.” As with any agreement, inventiveness and flexibility on the part of the negotiator are not just assets, but virtual necessities. It is also for this reason that it is essential to read the royalty provisions, particularly the definitions, fully and carefully, especially if you are the recipient. On the other hand, if your inventiveness and flexibility cause your accountant to question the advisability of one of your ideas, pay close attention to him.4 He will, no doubt, have had experience with many royalties, and no competent professional adviser disparages a client’s ideas without good reason. Besides, he will probably be the person who will be determining the royalty or certifying the determination of it. At the very least, he will be auditing your general financial statements, which must, of course, reflect the royalty determination. Heeding his advice not only may make the determination easier but also will probably save you money in professional fees later on. Nevertheless, do not simply accept his comments or recommendations without understanding what they mean, why they have been made with respect to your royalty agreement (sometimes professionals have comments that they make as a matter of course and, even though they may be valid, you should require them to be justified to you), and how they will affect your royalty determination.It is surprising how many corporate payors insist that their standard royalty provisions5 be used as a matter of policy, thereby effectively tying the negotiator’s hands. It is even more surprising, and to professional advisers frightening, how many of the senior employees who insist that such a policy be adhered to, virtually without variation, do not know what is in the standard provisions and would be hard-pressed to explain them to a property owner. If standard provisions are appropriate, by all means use them, but do allow experienced and sensible negotiators some flexibility and make sure that everyone within the corporation who may have to use such provisions – negotiator and supervisor alike – knows what they contain and why they are as they are. For example, there are often good and convincing reasons to describe a deduction in a certain way or to include a certain specific type of deduction. On the other hand, quite often the answer to the question “why?” is that “it has always been there”; this is, or should be, an unacceptable answer. In any event, if you, as the negotiator, appear to know what you are talking about, are familiar and comfortable with your royalty provisions, and are backed up by your boss with the same words or reasoning, a property owner cannot help but be satisfied that you are knowledgeable, even if he still does not agree with your provisions. Finally, if you do use standard provisions, make sure that they are reviewed and updated regularly."

Jan 1, 2003

By Karl J. C. Harries

"12.1. NO DEPRECIATION/GAAPAll calculations and computations relating to the Royalty shall be carried out in accordance with generally accepted accounting principles consistently applied to the extent that such principles are not inconsistent with the provisions of this Schedule and the agreement attached hereto, it being specifically agreed that nothing herein contained shall permit, or be construed to permit, the Operator to deduct any amount for depletion, depreciation, amortization or any deduction that represents a non-cash outlay.Comment: In cases like net profit royalties where recoupment of prior expenditures is permitted, care should be taken to avoid any implication that depreciation may also be taken. It is only logical and equitable that Property Owners should not be permitted an apparent ability to “double dip” with respect to deductions. A provision like this example should accomplish the task. It will be noted that the example specifically contemplates that the negotiated arrangements will prevail over any requirements of GAAP. Accordingly, if the parties agree to an unusual formula for recoupment, it will not be set aside to accommodate GAAP requirements. Under GAAP, revenues and expenditures are accounted for on an accrual basis. In addition, it specifically prohibits the taking of non-cash deductions, which is in keeping with the concept of recoupment.Although in some ways the example states the obvious and could be considered redundant, its presence, especially in provisions contemplating recoupment, makes it clear to the financial people that there may well be some variations from normal practices dictated by GAAP, while at the same time confirming the availability of GAAP to fill any voids.The accounting profession often makes the caveat that application of GAAP is an “art”, not a “science”. GAAP do not provide a cure-all and can create problems that will have to be addressed. For example, GAAP contemplate that asset costs are to be reduced by investment tax credits, which can cause a problem for a payor with more than one mine."

Jan 1, 2003

By Karl J. C. Harries

13.1. RIGHT TO RECEIVE ROYALTY CONTRACTUAL ONLY1

Jan 1, 2003