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By Maria I. De Rosa

The U.S. Bureau of Mines performed experiments to determine if primary gas toxicities that evolve during the early (~300° C) and later (~.400° C) combustion stages of polyvinyl chloride and chlorinated brattices could be predicted by a smoke particle characteristic, which could be used as a simple and inexpensive test parameter. The experiments were conducted in an approximately 20-L furnace at set furnace temperatures of 2500 and 1,0000 C, for 14 min duration, with an airflow through the furnace of 10 L/min. The variables studied, as a function of time, were the hydrogen chloride (HCl) and carbon monoxide (CO) concentrations, sample and furnace temperatures, the sample mass weight loss, the average smoke particle diameter (dg and number concentration (no), and the product of the average smoke particle diameter and concentration (dgno)' Results show that the inverse of the smoke particle diameter-concentration (l/dgno) correlates directly with the primary gas toxicities evolved during both stages of combustion.

Jan 1, 1989

By N. V. Peterson, R. S. Mason

The violent explosion of Mount St. Helens in the state of Washington on May 18, 1980 showered volcanic ash over vast areas of the Northwest. It was another eruptive episode in a long history of similar occurrences in the region, which extends from Canada to California and reaches several hundred miles inland from the Pacific Ocean. Pumice, pumicite, and cinders are products of explosive volcanic eruptions. Pumice and pumicite are produced by the violent expansion of dissolved gases in a viscous silicic lava such as rhyolite or dacite. Scoria is the mafic counterpart of pumice. Pumice is a light-colored, cellular, almost frothy rock made up of glass-walled bubble casts. It may occur as coherent, massive blocks composed of highly vesicular glassy lava in either a flow or vent filling, or it may be more or less fragmented by violent eruption. Pumicite, the diminutive of pumice, has the same origin, chemical composition, and glassy structure, differing only in particle size. Particles less than 0.16 in. in diam are designated pumicite. Pumice usually is found relatively close to the vent from which it was expelled, while pumicite may be carried by winds for great distances before settling as an accumulation of fine-grained ash or tuffaceous sediment. Mount St. Helens lofted an estimated 5 billion cu yd of ash and pumicite. The volcano, unlike most of the High Cascade peaks, is composed largely of dacitic material with only minor amounts of andesite and basalt. Volcanic cinders are the reddish to black vesicular fragments which pile up during explosive eruptions of volcanoes of basaltic composition. Most cinder deposits occur as cones or mounds of stratified fragments ranging from a fraction of an inch to several inches in diameter. Individual cones or mounds may be several hundred feet in diameter and up to 500 ft high. Properties and Uses Low bulk density, good heat and sound insulating properties, and excellent abrasive capabilities make pumice and pumicite useful in industrial applications. Cinders, though less cellular and somewhat heavier, also have a variety of industrial uses. The main use of pumice and cinders continues to be in the construction industry as road-surfacing material, railroad ballast, and building block aggregate. Pumicite is used in sizable quantities as a pozzolanic additive to monolithic concrete where it increases workability, strength, and durability of the concrete and reduces the heat of hydration. Volcanic cinders generally are denser and more coarsely cellular than most pumice. Markets for cinders include aggregate for road construction and surfacing and use in lightweight concretes, particularly blocks. Some producers having access to both pumice and cinders offer a variety of blends of the two materials to block manufacturers. Table I lists the principal applications of industrial pumice. Tables 2 and 3 show US sales and uses of volcanic products. Most pumice deposits are unconsolidated and usually have a minimum of overburden. Mining is by open pit and can be easily carried out with conventional loading equipment. Sometimes air drying precedes hauling to a crushing and screening plant which yields the size product desired. Multiple bins at railroad hauling facilities permit blending if desired. Pumice for abrasive use may require more sophisticated processing by fine grinding and air classification before being bagged for market.

Jan 1, 1983

By W. M. Merritts

The control of coal dust created and released during the operation of continuous mining machines in bituminous-coal mines of the United States is a problem. The interest manifested in this problem indicates the seriousness of the hazards involved, particularly when the dust has not been abated at its source and has become air-borne. Officials of the Sunnyside No. 1 mine, Kaiser Steel Corp., were confronted with the problem of abating the coal dust created by operation of a recently installed continuous-mining machine, and they requested the aid of representatives of the Coal-Mine Inspection Branch, Bureau of Mines, United States Department of the Interior, in developing an effective method of allaying the coal dust at its source.

Jan 1, 1951

By W. H. Fertl, S. J. Pirson

Well logging techniques, as used successfully in oil and gas exploration, can also be used to give a detailed evaluation of drill holes through industrial mineral deposits such as sulphur. This paper describes the logging tools used gives the theory behind the well-log interpretation and discusses the application of the method in sulphur-bearing limestone and m more complex sulphur deposits.

Jan 1, 1970

By T. M. Morris

A SEARCH of the literature reveals that no measurements have been made of the forces acting between a small solid particle whose surface is hydrophobic, and an air bubble to which the solid adheres, both immersed in water. Analyses have been made of the forces acting to support a greased solid on the surface of water, and the forces acting to cause a solid, whose surface is hydrophobic, to adhere to an air bubble in water. The latter analysis T. M. MORRIS, Junior Member AIME, is in the Department of Metallurgical Engineering and Mineral Dressing, School of Mines and Metallurgy, Rolla, Mo. New York Meeting, February 1950. TP 2734 B. Discussion of this paper (2 copies) may be sent to Transactions AIME before Feb. 28, 1950. Manuscript received May 16, 1949. This paper is the result of work done for part of a doctor's thesis at the Missouri School of Mines and Metallurgy. is often incomplete, however, because the internal pressure of the bubble has been neglected. It will be demonstrated that the internal gas pressure is not a negligible factor when dealing with bubbles of the size encountered in flotation. A study of the forces acting between an air bubble attached to a large flat surface is informative. It must be borne in mind, however, that this is not the condition present in a flotation cell, where the particle is small compared to the size of the bubble. The bubble is allowed to spread to its maximum contact angle on a large flat surface in the first case, whereas in the second case, the spread of the bubble is limited to the surface of the small particle which is presented to the bubble. Kabanov and Frumkinl studied the forces acting to cause adhesion of bubbles of hydrogen to a large surface of mercury, which served as an electrode in a dilute sulphuric acid solution. The force acting to hold the bubble to the mercury surface was found to be the vertical component of the surface tension between hydrogen and the sulphuric acid solution. The forces tending to cause the bubble to separate from the mercury surface were found to be: (1) the force exerted due to the internal pressure of the bubble acting upon the area of contact between the bubble and the mercury surface, and (2) the buoyant force of the bubble minus the hydrostatic force acting at the base of the bubble. These investigators photographed bubbles that were just on the verge of separating from the mercury surface. From these photographs, they measured the contact angle between the mercury surface and the tangent to the hydrogen-solution interface at the point of contact between bubble and mercury surface. They calculated the volume of the bubble and the internal pressure of the bubble. The equivalence between the upward acting and downward acting forces was remarkable. Wark2 pursued an investigation similar to that of Kabanov and Frumkin, and at the same time. His deductions verified those of Kabanov and Frumkin. He also considered the conditions present in flotation and was aware of the effect of the internal pressure of the bubble. Further, he proposed several conditions under which a small solid particle would adhere to an air bubble in water. In 1922, Edser," an English physicist, made the following statement. "It must be remembered that no particle could float stably, but for the possibility of variation of the contact angle, for if this were a constant, a slight tilt would inevitably cause the particle to sink." Wark criticized this statement, maintaining that the contact angle does not vary. The experimental data to be presented indicates that Edser was correct. Experimental Procedure: Briefly, the experimental procedure was as follows. A bubble of air was generated in distilled water. A rod of known diameter, one end of which was water repellent, was attached to this bubble. The weight of the 'rod was measured. The internal pressure of the bubble was measured with a manometer. The hydrostatic head from the surface of the water to the bottom of the rod was measured. The angle between the horizontal projection of the end of the rod and the tangent to the bubble at the circle of contact be-

Jan 1, 1951

By T. M. Morris

A SEARCH of the literature reveals that no measurements have been made of the forces acting between a small solid particle whose surface is hydrophobic, and an air bubble to which the solid adheres, both immersed in water. Analyses have been made of the forces acting to support a greased solid on the surface of water, and the forces acting to cause a solid, whose surface is hydrophobic, to adhere to an air bubble in water. The latter analysis T. M. MORRIS, Junior Member AIME, is in the Department of Metallurgical Engineering and Mineral Dressing, School of Mines and Metallurgy, Rolla, Mo. New York Meeting, February 1950. TP 2734 B. Discussion of this paper (2 copies) may be sent to Transactions AIME before Feb. 28, 1950. Manuscript received May 16, 1949. This paper is the result of work done for part of a doctor's thesis at the Missouri School of Mines and Metallurgy. is often incomplete, however, because the internal pressure of the bubble has been neglected. It will be demonstrated that the internal gas pressure is not a negligible factor when dealing with bubbles of the size encountered in flotation. A study of the forces acting between an air bubble attached to a large flat surface is informative. It must be borne in mind, however, that this is not the condition present in a flotation cell, where the particle is small compared to the size of the bubble. The bubble is allowed to spread to its maximum contact angle on a large flat surface in the first case, whereas in the second case, the spread of the bubble is limited to the surface of the small particle which is presented to the bubble. Kabanov and Frumkinl studied the forces acting to cause adhesion of bubbles of hydrogen to a large surface of mercury, which served as an electrode in a dilute sulphuric acid solution. The force acting to hold the bubble to the mercury surface was found to be the vertical component of the surface tension between hydrogen and the sulphuric acid solution. The forces tending to cause the bubble to separate from the mercury surface were found to be: (1) the force exerted due to the internal pressure of the bubble acting upon the area of contact between the bubble and the mercury surface, and (2) the buoyant force of the bubble minus the hydrostatic force acting at the base of the bubble. These investigators photographed bubbles that were just on the verge of separating from the mercury surface. From these photographs, they measured the contact angle between the mercury surface and the tangent to the hydrogen-solution interface at the point of contact between bubble and mercury surface. They calculated the volume of the bubble and the internal pressure of the bubble. The equivalence between the upward acting and downward acting forces was remarkable. Wark2 pursued an investigation similar to that of Kabanov and Frumkin, and at the same time. His deductions verified those of Kabanov and Frumkin. He also considered the conditions present in flotation and was aware of the effect of the internal pressure of the bubble. Further, he proposed several conditions under which a small solid particle would adhere to an air bubble in water. In 1922, Edser," an English physicist, made the following statement. "It must be remembered that no particle could float stably, but for the possibility of variation of the contact angle, for if this were a constant, a slight tilt would inevitably cause the particle to sink." Wark criticized this statement, maintaining that the contact angle does not vary. The experimental data to be presented indicates that Edser was correct. Experimental Procedure: Briefly, the experimental procedure was as follows. A bubble of air was generated in distilled water. A rod of known diameter, one end of which was water repellent, was attached to this bubble. The weight of the 'rod was measured. The internal pressure of the bubble was measured with a manometer. The hydrostatic head from the surface of the water to the bottom of the rod was measured. The angle between the horizontal projection of the end of the rod and the tangent to the bubble at the circle of contact be-

Jan 1, 1951

By J. G. Strasser

"There has been considerable output over the last three decades from the social sciences concerning man and his working environment. In the mining industry at large, however, authoritarian, hierarchical control systems remain the norm, and it can be argued that something less than optimum effectiveness in terms of both productivity and worker satisfaction has resulted.Recently (/975), Campbell Chibougamau Mines Ltd. devised a most interesting organization and incentive system that links the underground production of a standard ton of mined output at controlled grade to an incentive payment scheme. A parallel scheme in the mill complex is based on maximizing recovery of copper and gold from available feed. A key part of both minsystems is the formation of groups who have considerable autonomy, particularly when compared to the still prevalent traditional mining industry relationships between the worker and supervisory levels.This paper traces the development of Campbell Chibougamau's system . Attention is drawn to qualitative and quantitative measures of the success of the method through the commentary of those miners involved in the scheme, and by reference to the favourable records on productivity, absenteeism, safety, turnover and grievance activity.IntroductionPyramidal or hierarchical management control systems, coupled to piece-work incentive schemes, predominate throughout Canada's underground mining industry. Although specific details of such systems vary from site to site, they , are generally understood and accepted as fact by the majority of the work force.Normally, a front-line supervisor (shift boss) directs a number of workmen and assigns them to tasks and working locations commensurate with their abilities, knowledge, training and skills. This front -line supervisor may direct or supervise from as few as 12 to as many as 75 or more workmen. He issues orders according to his assigned production objectives and ensures that these directions are fulfilled in accordance with standard mine practice . Several shift bosses are usually directed by a mine foreman or mine captain. The mine captains report to a general foreman or directly to the mine superintendent or his assistant, depending on the size and scope of the operation."

Jan 1, 1981

By H. Beecher Charmbury

Water is a most remarkable substance. It is essential for life of all kinds. Not only can no one live without water, but man has always needed water for farming, raising animals, manufacturing, transportation, and recreation. When our country was young and inhabited by few people, the streams, rivers, and lakes were able to provide all the clean water needed by man and take away all the wastes created by man. However, with our growing population and our ever-increasing demand for goods and services, the public, industry, and government at all levels have become aware of the need to more efficiently manage the water resources of this nation. Coal has helped this nation to become the greatest industrial nation in the world. Coal has generated our electricity, run our railroads, and helped arm our nation during wartime. The result has been the highest standard of living in the world, a time of widespread prosperity, and a national defense potential that has delivered the hardware during four wars in this century. The use of water in coal mining is somewhat different than in most industries. With the exception of the small amount of water used in cleaning plants and for fire protection, most of the water encountered in coal mining operations is unwanted since it serves no useful purpose. In other words, it must be removed, otherwise it will interfere with mining operations by flooding. In the past, removing water from working areas of most mines was usually a fairly simple matter. Pumps with piping were installed at sumps or low spots in the mine and the water was pumped to the surface. Ditches were often used to drain the water by gravity to the outside or to main sumps for pump discharge. In either case, the water was allowed to flow into the nearest stream or river. The concept of "water is water" was generally accepted without too much concern over what

Jan 1, 1973

By Fred W. Gordon

The North Chicago Rolling-Mill Co., of Chicago, have four furnaces at South Chicago, built during 1881. Each furnace is 20 feet diameter of bosh, and 75 feet total height, the hearth being 11 feet diameter, and the top 15 feet 4 inches. They are blown through seven 7-inch tuyeres placed 5 feet 6 inches above the hearth level. Cubical contents, 15,000 cubic feet. Each furnace is supplied with 2 blowing engines, 84-inch blowing cylinder, and 36-inch steam cylinder, and 54-inch stroke. These two have one jet-condenser worked by an auxiliary pump. The blast for each furnace is heated by the aid of three Whitwell fire-brick stoves, each 21 feet diameter and 60 feet high. In the batteries of boilers furnishing steam for four furnaces there are 36 double-length boilers, 76 feet long, 48 inches diameter and 16,000 square feet heating-surface. The plant was designed to produce 3600 tons per week, or 900 tons for each furnace, and was fitted as above with such engines, boilers, and hot-blast stoves as were thought requisite for that production ; hence, calculated from the present make—not the least remarkable feature is the economy of construction—there are less engines, less boilers, and less hot-blast power for the iron made than at ally plant within my knowledge, or it could to-day be duplicated for less money per ton of iron made per week than could any plant now in existence, whether using fire-brick or cast-iron stoves for heating the blast. This is a practical demonstration of my assertion in a paper on fire-brick stoves, read before the Institute," that the application of fire-brick stoves in construction really lessens the first cost. In view of the statements just made, I must be most emphatic in assuring the members that nothing is strained or overburdened.

Jan 1, 1886

By Andrew J. Neale, Brian C. Flintoff

A review of the current literature, combined with the authors' knowledge of the western Canadian coal industry, indicates that the development and implementation of process control in coal preparation, particularly in flotation applications, is significantly lagging behind that seen in mineral processing. The reasons for this include the lack of inexpensive and reliable sensors, incomplete understanding of the flotation process, limited experience of process control in the coal preparation industry and depressed coal prices, all of which have combined to hinder plant automation. This paper illustrates the benefits of process control in coal flotation, provides a general discussion of the control problem and concludes with two examples drawn from Australian experiences.

Jan 1, 1989

By Pedro Lozada, Juan Prado

El objetivo que hoy se les exige a las técnicas de voladuras controladas es el de minimizar el daño al macizo rocoso remanente protegiendo la integridad de las paredes de la mina y asegurando a la vez la calidad de la fragmentación del material volado facilitando su extracción. Encontrar este equilibrio resulta estar entre los tres principales desafíos que enfrentan las grandes minas a cielo abierto, ya que deben lograr la estabilidad de la mina, dando cumplimiento al diseño de taludes, manteniendo al mismo tiempo buenos resultados en términos de fragmentación y productividad de sus equipos de carguío.

Sep 30, 2022

By Charles H. Wells

This paper presents a review of the state of the art in coal preparation plant instrumentation and a discussion of automation practice that could be applied based on current mineral beneficiation experience and demonstrated foreign technology in coal washing plants. Specific e-mules of applications of remotely controlled slurry values, pneumatic and electronic field transmitters, computers for control and data logging, and on-line analytical instrumentation are given. A program, to demonstrate this technology is described.

Jan 1, 1980

By A. L. Engel

[Thi;. re:9ort presents re3ults of investigations of problema a3signed as ore-testing projects to the Ore-Dressing Section, t.fetal1urgica.l Div:biion, of the Bureau of Ii.fines at the .fississippi?Valley E>"'1lcrimcnt Station in rtolla, Ho., durine the fiscal year ended June 30, 1940.]

Jan 1, 1941

By Kenneth A. Gutschick, Robert S. Boynton

Lime has become a general and loosely used term to denote almost any kind of calcareous material or finely divided form of limestone or dolomite, as well as burned forms of lime. However, according to Webster, lime is only calcined limestone (known as quicklime, unslaked lime, or calcium oxide). It also embraces the secondary product of quicklime, i.e., hydrated lime or slaked lime (calcium hydroxide). There are two basic types of limestone used for lime manufacture-high calcium and high magnesium (dolomitic). The dolomitic quicklimes and hydrated limes correspond to their "high calcium" counterparts. The only difference is that the dolomitic types are a combination of the elements calcium and magnesium, in varying percents, whereas high calicum limes contain less than 5% MgO down to 1/2%. In either case a pure form of limestone of at least 97% combined carbonate content is needed to make salable lime, barring a few exceptions. The calcination of both types is diagrammed chemically as follows: [ ] In the foregoing reversible reactions the limestone is burned (calcined) in lime kilns, with the carbon dioxide content of the stone expelled as a gas. The weight loss during calcination of pure high calcium limestone is 44%; with equimolecular dolomitic limestone, the weight loss is 48%. Since lime has a strong affinity for CO_, particularly if moisture is present, it will readily revert to its original carbonate form. This occurs when quicklime "air-slakes" and adsorbs CO.. from the air. Thus, quicklime is perishable and should be stored in dry, water-tight areas. Depending upon the type of kiln used and the physical structure of the stone, the size of the quicklime may range from sandlike granules to 8 in. lumps. However, pebble sizes ranging from 1/4 in. to 2 in. are the most common. Screened quicklime fines are also com¬pressed (pelletized) into 1 in. pellets. For some purposes ground or pulverized forms of quicklime are used, ranging from No. 10 mesh to dust. Generally a pebble of quicklime is about the same size as the pebble of limestone before calcination (perhaps shrinking slightly). A more stable form of lime is hydrated lime. This is obtained by adding water to quicklime, slaking it into a dry, fine, subsieve size white powder. Because its affinity for moisture has been satisfied, it is not vulnerable to further moisture like quicklime. However, it has the same strong affinity for CO_. The following reversible chemical reactions illustrate how hydrated lime when heated (or dehydrated) can revert to the original oxide form:

Jan 1, 1975

By K. B. Nowels

DATA pertaining to pipe line flow for both oil and gas in horizontal or nearly horizontal pipe lines are both extensive and accurate. However, the pipe formulas used to determine pressure drop for flowing fluids (liquids and gases) under conditions of horizontal flow are not generally applicable to flowing oil and/or gas wells. Except for some data developed in small laboratory set-ups, little or no information was available concerning flow of oil and gas mixtures in vertical pipes, when, in 1928, the writer began the development of a method for computing pressure drops in the pipes of flowing oil wells, as outlined in this paper. In 1929, Uren1 presented some findings based on laboratory experi-ments in which vertical flow of an extremely heavy crude oil was induced, by means of air through a 2-in. pipe, 41 ft. long. The friction factors derived from the experiment, as well as values for pressure drop per 100 ft., are not believed satisfactory in their application to flow problems in the field. Versluys,2 also in 1929, presented a mathematical development of the theory of flowing oil wells, and in 1930, gave a companion paper3 setting forth some principles governing the choice of length and diameter of tubing in oil wells. Since the termination of the study presented in this paper, another. valuable contribution pertaining to the problem, of vertical flow was made by Moore and Wilde.4 Although there were writings dealing with the principles of the gas-lift, a search of the available literature indicated that specific information on vertical flow was lacking with the exception of the writings of Uren, Versluys, and Moore and Wilde, to which reference .has been made.

Jan 1, 1932

By M. Sukhram

In the year 1992, T.A. Utigard published a paper titled "The measurement of the heat-transfer coefficient between high temperature liquids and solid surfaces." In that work, he instrumented an agglomerate of materials with thermocouples to infer the heat transfer coefficient of a high temperature liquid on a solid. The purpose of that research was to help in the design and operation of metallurgical reactors. Since that time there have been many researchers that have worked to characterize heat, mass, and momentum transfer phenomena in high temperature metallurgical processing operations. This paper presents results from the author’s experience with instrumenting thermocouples in copper elements coated with carbon to infer velocity of high temperature liquid metals. It also presents a methodology to determine velocity of a high temperature liquid by inferring the local heat transfer coefficient at a solid-liquid interface

Jan 1, 2015

By J. Lobel, M. Bourassa, J. A. Kozinski, B. Peng

Non-isothermal kinetics studies of the reduction phenomenon of electric arc furnace (EAF) dust generated in stainless steelmaking have been carried out. The dust was mixed with carbon as a reducing agent and dolomite as a binder to form pellets. A Thermo-Gravimetric Analyzer (TGA) was used to determine the weight loss of pellets heated at an average rate of 40 K/min. up to a temperature of 1500°C. The degree of metal reduction was calculated by considering the pellet weight loss, and evaporation of moisture, dust, zinc and lead at high temperature. The reduction process was divided into three different steps. The first covers the 300°C to 760°C temperature range (from 7 to 18 min.), the second step ranges between 760°C and 980°C (18 to 24 min.), and the third covers temperatures above 980°C. Each step is characterized by different chemical reactions. Non-isothermal reduction kinetics equations were set up to describe each step. The kinetics parameters such as apparent activation energies and frequency factors were established. It was found that the first step was chemically controlled, while the second step was diffusion-controlled. Reduction behaviour in the third step was strongly dependent on the initial carbon content in the pellet. Chromium oxide (CrO) could only be reduced in this last step. High temperatures and higher initial carbon content favoured the reduction of CrO.

Jan 1, 2001

By C. H. McGuirk

Computerized Preventive Maintenance is important in maintaining consistent and efficient operation in any industry utilizing sophisticated and expensive equipment on a continuous basis. At today's large bulk materials handling facilities, the problems of continuous operation of complex machines with their thousands of components exposed to abrasion, dirt, dust and the elements, are intensified and multiplied. Effective preventive maintenance can increase profits. Yet, the number of tasks to be performed is so staggering that it is beyond error-free human capacity. The computer must be an essential ele¬ment in any efficient and economical preventive maintenance system. Computerized preventive maintenance techniques have been successfully used in many fields, usually involving highly skilled and specialized personnel working under favorable and controlled conditions. Now, The Pittsburgh & Conneaut Dock Company has developed and is applying a computerized preventive maintenance system that is applicable to the bulk materials handling industry. The "system" has taken many years of intensive effort to develop and has been time-tested and proven during the past years on equipment handling materials with rugged physical characteristics and corrosive and abrasive qualities, under some of the most adverse weather conditions on the Great Lakes.

Jan 1, 1976

By Jerry W. Stengel

The Bureau of Mines subjected two manufacturers' chemical oxygen (K02) self-rescue breathing apparatus to a series of laboratory environmental treatments designed to simulate various conditions in underground coal mines. The environmental treatments consisted of extremes of temperature, shock, and vibration. The tests were designed to be used as predictors of the ability of the self-rescuers to survive those environmental insults with no degradation in their protection to the wearer. Based on the severity of the treatments, simulating conditions more severe than offered by the mining environment, the two apparatus tested should be able to withstand the abuse offered by the mining environment and still function as intended in an emergency. Correlation of these tests with results of long-term field evaluations is needed to provide confidence in the laboratory tests as predictors.

Jan 1, 1982

By E. Kendall Cork

The traditional financial objective for a single mine company has been to operate as frugally as possible and to pay out most of the earnings as dividends. If the business is cyclical (as it is for most metals) the dividends might fluctuate quite widely. When the mine is exhausted the company disappears. This is still quite a viable strategy for a single mine company. It is not however a viable strategy for the world as a whole. The mining industry is built by mine development companies who can mobilize the people and capital to bring new mines into production. Their skills must include marketing, engineering, finance and other politics. It is very rare for a property to be brought in without the support of a major company that can provide all these services. The exceptions will usually have some other form of big brother support, for example the U.S. government uranium contracts at guaranteed generous prices. The mine development company will seek as a minimum to perpetuate itself by developing new mines in order to replace those which are running out. The more common and more ambitious objective is to grow -- that is to add to its ore reserves and current production by developing more new mines. The financial objectives for that company are very different. Obviously if all the earnings were paid out in dividends there would be nothing left to work with. The first financial policy then is to spend an appropriate amount on exploration for new properties. The next is to retain enough of the earnings to provide the capital for new projects at least sufficient for the equity. There is no magic formula as to what proportion of earnings should properly be distributed as dividends by a growth-oriented mine development company. As a rough rule of thumb distributing half or more will probably leave too little to work on and 30% or so is probably a good balance. However the circumstances differ widely from company to company. It may be useful to set an objective for the rate of growth of a company's earnings. Some have picked rates such as 15% per annum compounded. Others have set a target in real terms which might appear as 10 or 11% plus inflation. Obviously the arithmetic of compound interest is very attractive; however in practice there is much variation. Indeed current returns from existing operations swing widely with the business cycle and there is no assurance that economic new properties will be found according to someone's arbitrary time schedule. For example, Western Mining Corporation Limited in Australia explored for 30 years with little to show for it, but then found the great Australian nickel deposits and more recently the huge Roxby Downs copper. That long dry spell could not have fitted anyone's arbitrary calendar of growth and yet they would not have found such orebodies without that long period of effort. Should they have abandoned the search? Once a new property has been found or acquired there has to be a threshold rate of return on the new capital to be invested against which to evaluate the property's economics. Conventionally this seems to be 15% after tax, a number common in other heavy industries as well. In some cases it is expressed as a lower number plus allowance for inflation. Discounted cash flow analysis is a very useful tool but it does not make the decision. In the end a "go" decision depends on judgment of many factors some of which are numbers used in the DCF calculation whose credibility must be examined. It is curious how frequently investment proposals come in with the rates of return very close to 15%. The project advocates know that a number much less than 15% will not fly and that a number much more is not necessary. With much higher nominal and real interest rates of recent years, even though before tax, logic suggests that the hurdle rate should also rise. The power of compound interest is so great that 20% is very hard to achieve in any cash flow projection but 18% may be a sensible yard - stick. Once again it is remarkable how many project proposals come in with an 18% return. On the record the mining industry as a whole has not been overly restrictive in choosing its hurdle rates of return. This is shown by the abundance of metals in recent years and the failure of metal prices to keep up with inflation. All of the foregoing is standard text book stuff.

Jan 1, 1985