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By Henry J. Sandri

ACQUISITION JUSTIFICATION There are many reasons why companies consider acquisitions as a means to expand their operations. Some wish to reduce the impact of business cycles on their businesses. Others seek firms within the same industry for expansion and increased market share. Still others diversify in order to avoid takeovers. Whatever the reasons or justification, an evaluation of an acquisition candidate should be systematic and thorough. To many financial managers the concept of a systematic acquisition evaluation indicates the need for a regular set of evaluation criteria. While these are available from numerous sources, one basic parameter frequently overlooked is the application of these criteria to an industry which is different from the acquirer. This becomes particularly important when evaluating firms within the mineral industry. The mineral industry is significantly different from other industries to require different valuing techniques. • This paper will present a number of reasons why an acquisition candidate in the mineral industry should be evaluated differently from other acquisitions, including by other mineral firms. Additionally, this paper will review the most appropriate means of valuing a mineral firm. • Firms considering the acquisition of a mineral firm should understand the nature of the industry before ever making a tender offer. Some of the general considerations include the following: • Level of Capital Intensity: In the mid-1980's the start up cost for a gold mine has been between 20-200 million dollars and 500-1,500 million dollars for a bauxite operation. • Global Nature of Competition: Except for certain industrial minerals, most minerals and metals are traded worldwide and many on national exchanges, such as COMEX. • Start-Up Time: Many mining operations in developed and developing countries have long lead times, 7 to 10 years in some cases, prior to the start-up of production. • Long Term Nature of Investment: For most mineral operations payback usually occurs at least 7 years after production has started. Additionally, many mining operations will continue producing for 80-100 years. • High Level of Risk: The number of factors that a mining firm cannot control such as grade, volume, world supply and demand, plus the long payback periods tend to classify mineral firms at a higher than average risk compared to other investments. • Cyclical Nature: The mineral industry is cyclical in nature, experiencing long troughs and explosive peaks, thus making timing a critical issue. • Labor Intensive: Even with the large capital requirements needed to operate a mine, most mines are labor intensive in proportion to their capital equipment. • Location: Obviously, the nature of this industry requires operators to work in difficult locations, frequently far from civilized localities, in poor weather conditions and without proper supply and distribution infrastructure. One of the most important considerations is an understanding of asset replacement and asset value. Unlike manufacturing concerns, firms in the mineral industry are working toward the elimination, through depletion, of their asset base. Product flexibility is not available to a mining operation. A mineral firm basically has two options as its resource base is depleted: 1) replace the asset with new production, or 2) deplete the asset and close down operation, as in the South African gold mining model referred to later in this paper. An understanding of the

Jan 1, 1985

By Richard Thomas Newcomb

Chapters 5a, 5b, and 6 discuss the long- run supply of minerals and the characteristics of reserve search and production peculiar to extractive industries. It is now necessary to complete the picture by examining supply and demand in commodity markets to show how mineral prices are determined and how both price and production trends might be predicted over long periods of time. These practical interests can be served best by reviewing first some of the characteristics of the short-run static market models familiar to all readers of elementary economic texts, and then extending the theory to models of a more dynamic nature. It is important at the outset to note that economic theory provides a wide variety of economic models based on varying assumptions concerning the behavior of economic agents, the properties of the goods, the time period considered, and so on. Each variety of model offers certain analytical advantages and suffers certain shortcomings. The art of the applied economist or practioner lies in knowing enough both about the technology and practice of his problem and about theory to select the appropriate models for his analysis. In our approach it will be useful first to consider the role of markets for minerals and mineral products in relation to the efficient determination of what and how goods are produced in the whole economy, i.e., a general system of markets, before getting down to the task of analyzing supply and demand conditions in specific markets. The former study is called general equilibrium analysis, while the latter is called partial. By equilibrium is meant a state of the sys- tem under study in which supply equals demand in each market, and the prices which equilibrate the quantities offered and asked are called equilibrium prices. The tendency of prices to return toward equilibrium values if temporarily displaced, or to converge to new equilibrium values if important new conditions for supply or for demand are placed, defines "stable" equilibrium systems. The short-run describes a period in which adjustments to fixed capital are not made, although variable factors such as labor or materials can be adjusted. The long-run envisions a period in which fixed capital and other such constraints can be adjusted. Thus, it may take a sharp increase in price to bring out additional supply of a factor in the short-run with existing plant, while new capacity might permit additional quantities in the long-run without an increase in supply price.

Jan 1, 1976

By William R. Chedsey

ALTHOUGH few changes can be reported in educational methods at the mineral technology schools during 1940, other events have taken place of direct interest to, and that will have a profound effect upon, mineral industry education on the United States. In the erection of new buildings, some notable changes have been made on the campus, The U.S. Bureau of Mines Experiment Station at the University of Utah, Salt Lake City, was dedicated on May 20. The construction and equipment of this building cost between $300,000 and $400,000. It will be the general headquarters for the metallurgical division of the Bureau and will have a pronounced effect upon the mineral industries research program at the University.

Jan 1, 1941

By Francis A. Thornson

WITHOUT desiring to perpetrate an Irish bull I think we may safely say that the major developments of the year in mineral industry education have taken place outside of the field itself. I refer to the remark- able and-to us of the Education Di- vision-most gratifying growth which is taking place in Institute consciousness regarding its responsibility for the recruitment and adequate training of student personnel and for the successful bridging of the difficult gap between graduation and achievement of professional status. Outstanding in this respect is President Jackling's interest in the students and schools of the mineral industry. Recalling his own hard struggle to ac- quire a technical education, Mr. Jack- ling is evidently anxious to smooth the path for the youngsters of this generation. Witness his splendid gift to the

Jan 1, 1939

By William B. Plank

AN outstanding development in the field of education for the mineral industries during the past year has been an unprecedented eagerness by young men for college training in this field. The enrollment of students in the 53 mineral technology schools in the United States in 1936-'37 reached the all- time high of 7190. This represented an increase of 43 per cent in two years and was about ten per cent of all engineering students. Of these 7190 students only 980 graduated and were available - for positions in the industry. That the supply of graduates did not equal the demand can be substantiated by every school dean and by the personnel agents of many mining, metallurgical, and petroleum companies. Some of these companies last summer inaugurated the plan of employing, for the

Jan 1, 1938

By W. B. Plank, A. C. Callen

WAR and normalcy do not walk hand in hand, whether it be in industry, the educational field, or in the daily lives of individuals. Schools and departments offering curricula in mineral engineering have been seriously disrupted, beginning with 1942 and reaching a low during 1944. Selective Service regulations and voluntary enlistments have effectually stopped the flow of college-trained men into the mineral industry, and the flow into the colleges is little more than a dribble. The year just closed has been a most serious one for our institutions. Until March many of our faculties had been kept reasonably intact because of the large training programs of the Army and Navy. Although the number of

Jan 1, 1945

MINERAL INDUSTRY EDUCATION DIVISION Established as a Division January 15, 1932 Harry H. Power, Chairman J R. Van Pelt, Vice-Chairman J. Donald Forrester, Secretary-Treasurer Missouri School of Mines and Metallurgy, Rolla, Mo

Jan 1, 1952

Development of Technical Education for the Petroleum, Industry. By H C GEORGE (Min & Met, June, 260 2000 words) With a growth of 718 per cent in the petroleum industry from 1901 to 1931, there was a corresponding increase in the demand for technically trained men in the industry This was first met by increasing numbers of college graduates from the old established courses m chemistry, geology and engineering However, there began to be felt a need for scientists and engineers specially trained for the petroleum industry In 1912 the University of Pittsburgh established the first department in any university in the world that offered major work in petroleum engineering and petroleum geology In Europe, the first major work in petroleum engineering was offered in England in 1913 at the University of Birmingham The University of California and Stanford University offered major work in petroleum engineering in 1915 Since that time at least 10 other American universities and colleges have offered major work and at least 12 others are now offering some courses dealing with petroleum, and the petroleum industry.

Jan 1, 1935

By Charles H. Fulton

THE Engineering Education group began its sessions Tuesday morning, Feb. 16, as a Committee and wound up the day as the Institute's fifth " Division." C.II. Fulton presided. The first paper for discussion was entitled "Teaching Management in Engineering Schools,"' by Eugene McAuliffe, president of the Union Pacific Coal Co., space for which may be found later in these pages. In it, Mr. McAuliffe argued that an engineering student should be taught the knowledge of men, much as a medical school teaches surgery. He then went on to indicate, out of the wealth of his administrative experience, the problems an executive needs to be equipped to handle, and said that every student engineer should look on himself as a potential manager.

Jan 1, 1932

By Reynolds JO

This contribution by. The Australasian Institute of Mining and Metallurgy has three main thrusts. First, an Institute (and industry) view on academia and the need for more entrepreneurship at top academic levels, second the need to lift our technological game, and third, professionalism and the perceived role of mineral industry education. While I will deal with each of these separately they are of course inter- related and can be brought together under the frequently used, but insufficiently practised title, "communications". First then, The Institute and industry view of academia. There are some academics in the audience and I imagine they may wish to reply to my remarks with an academic view of industry. That is not unreasonable. Like all human institutions, academic institutions vary in quality and characteristics. Some are successful and some less so. Some historically are well renowned. Others that were once successful schools have declined. Lesser known schools have grown into prominence. What is it that sets apart 'good' highly regarded schools from those that are not so well regarded? It comes down to one main ingredient - "leadership". The strong mining schools in the past 100 years have been strong because they have had outstanding and clearly identified leaders. Strong clearly identified leadership has always had rapport with, and the support of the industry. The two go hand- in-hand, each nourishing and supporting the Other.

Jan 1, 1986

Mining and metallurgy are more capital intensive than all other industry in Australia. Capital demands are met by domestic and foreign sources of finance for whom the major constraints are the supply of funds and factors of risk and uncertainty. in both mineral development and institutional financing policies, specific options are available to administrators which would allow mining to benefit from a more reliable supply of capital. The strength of major partners involved and overseas participation are important aspects of financing mineral developments. Future changes in financing for the mineral industry are considered most likely in variable interest rate funding, in the leasing of major plant items, and in the development of flexible techniques to ease the burden of infrastructure costs. In a consultancy sense, financiers are available to mining to assist with and to advise on optimal develop- ment of mineral industry projects.

Jan 1, 1975

By Hillary W. St. Clair

Mining activity began in colonial times with ironmaking operations scattered along the eastern seaboard. Iron furnaces and forges manufactured iron implements from bog iron ores using charcoal from the extensive forests as a fuel. Lead ores were mined in the Mississippi Valley and copper ores in the Lake Superior region. However, the real beginning of the American mining industry did not occur until the 19th century. The history of American mining is organized around three epochal events. The first was the discovery of gold in California in 1848, which marked the beginning of a period of apprenticeship in mining and metallurgical techniques. The second was the discovery of the fabulous Comstock Lode in western Nevada in 1859, which expanded mining throughout the Far West and led to large-scale underground mining and the development of smelting techniques for lead, silver, and copper ores. The third event was the building of a transcontinental rail-road system after the Civil War, which brought about the consolidation of the industry from a large number of independent mines, mills, and smelters into integrated operations run by large corporations. Thus developed the mining industry that today supplies the energy and critical materials for the great-est industrial complex the world has known.

Jan 1, 1977

By Alvin Kaufman

At the turn of the century the U.S. had a gross ALVIN KAUFMAN Mineral Economist U.S. Bureau of Mines area slightly in excess of three million square miles, a population of 76 million, a gross national product of $37 billion (constant 1929 dollars) and a mineral production valued at $2 billion (1929 dollars). Some 60 years later its area had increased by 600 thousand square miles, population had risen 140%, gross national product was seven times greater and mineral production had grown to a value five times that of 1900. Of perhaps greater significance, however, were the changes wrought by technology. It was during this period that the "American Way of Life" was revolutionized by the introduction of the airplane and the automobile; man also took his first probing steps in the utilization of nuclear energy and pre- pared to unlock the secrets of space. It was during these six decades, also, that he learned to create additional new materials, some of which were from old sources such as plastics from petroleum and coal. These new materials have created competition and attendant problems for the traditional materials such as iron, copper, lead and zinc. Additional problems undoubtedly will be created by technologic advances in the future.

Jan 2, 1963

In this issue, the Bureau of Mines announces the availability of the latest of its Mineral Perspectives series: ?MP-4, mineral Industry of Western Europe." This publication describes the mineral industries of 19 Western European countries. For readers unfamiliar with this new series, reproduced below and on the two succeeding pages, is the section dealing with the mineral industries of France. Information regarding acquisition of this publication is found inside the back cover of this issue. FRANCE France is a moderately important producer of minerals, including iron ore, coal, potash, fluorspar, and uranium. In addition, France is a significant processor of imported minerals, chiefly for its own consumption. In general, it has exportable surpluses only of a little iron ore (low-grade ore exported to Luxembourg) and some nonmetallics.

Jan 1, 1977

By A. M. Gaudin

In the first place, let me thank you for inviting me to appear before you today to speak to you on "Mineral Industry Problems - Present and Future". It is a distinguished honor for me to have this opportunity, and I am highly appreciative of this distinction. The beautiful surroundings of Gatlinburg and the pleasantness of a summer occasion are a wonderful tonic for all of us, yet they should not blind us to the seriousness of our Industry's problems No doubt, because of my past appearances before members of the Society of Mining Engineers, at which I discussed wholly scientific topics, or research in the Applied Sciences, you may be expecting me to revert to these subjects. But I intend to venture in a field that is new to me, yet old to all of us, the field of Economics.

Jan 1, 1962

By R G. Barker

The NZ Minerals Industry Association has continued to advance the interests of the minerals sector through leading the establishment of a Minerals Industry Advisory Committee, and the preparation of a technology strategy with funding assistance from the Foundation for Research, Science and Technology. The current moves mirror those of more than 30 years ago when a government initiative led to a resurgence of exploration through amending the mining legislation, redirecting Government research priorities and tax changes. The economic and political and commercial environment in 2001 is very different from that of the 1960s and success of these new initiatives depends on the continuing support and involvement of all sectors of the minerals industry, and building an improved relationship with the Government and the public.

Jan 1, 2001

Polluted air and water, despoiled land and excessive noise are the unwelcome results of the population growth and a rising standard of living. The consumption of goods and services, including metal products and minerals, by all people is increasing so rapidly that civilization is in danger of destroying the environment in which it lives. This is true because every human activity affects the environment, whether it is air, water or land. While E. F. Osborn, director, U.S. Bureau of Mines, says . . . "some members of the mineral industry are reluctant to recognize environmental demands" . . . William T. Pecora Under Secretary of the U.S. Department of the Interior.. . says that, "to maintain levels of resource development and environmental quality needed to satisfy our affluence, we must trade off values rather than turn off troublesome operations." What it seems to boil down to is how much control of its operations is the mineral industry willing to accept-internal policing or strict government control? The answer lies in how well the mineral industry maintains a balance between mineral development and environmental quality.

Jan 1, 1971

This report is the first in a "final" series of publications on the Juneau Mining District (JMD). This volume summarizes the results of Bureau of Mines (Bureau) investigations in the JMD during the period 1984-1988. Volume 2 consists of a detailed description of Bureau investigations of mineral de-posits, prospects, and occurrences. Volume 3 is a report on industrial minerals within the district. This study has identified and examined more than 300 mines, prospects, and occurrences containing gold, silver, copper, zinc, lead, nickel, cobalt, tungsten, molybdenum, chromium, and PGM. More than 20 of these were discovered during this study. An additional 20 prospects not mentioned in the literature were rediscovered during the JMD study.

Jan 1, 2012

By Kenneth Maas

The Bureau of Mines devoted portions of the 1987-1988 field seasons to investigate the mineral aggregate industry in Juneau, Skagway, Haines, and Gustavus, Alaska, as part of the Juneau Mining District study. Statistics compiled for current suppliers include location, activity, reserve estimates, expected mine life, and types of commodities available. Each population center, except for Gustavus, is well endowed with suitable mineral aggregate to last at least 20 years. The Bureau of Mines quantified the mineral aggregate resource in many large potential sites within each area. Sampling, engineering and soil-index testing, site descriptions, deposit dimensions, and gold recovery information is described. Refraction seismic studies performed at three localities revealed gravel thicknesses in excess of 40 to 80 feet. In the Juneau area the Herbert/Eagle Rivers outwash area, East Fork Lace River. Antler/Gilkey Rivers, and Grizzly Bar (Taku Inlet) individually contain in excess of 60 million yd3 of excellent-quality aggregate with minor accessory gold credits. Haines is also well endowed with aggregate resources; large, quality deposits occur along and at the confluences of the Chilkat, Katzehin, Klehini, Tsirku, and Kicking Horse Rivers. Large deposits of granitic aggregate exist in the Skagway River and East Fork Skagway River.

Jan 1, 2012

By Dale William Avery

Thirty mines and prospects were studied; 22 are within the Dolus Lakes RARE II area. Three properties within the area and one adjacent to it were determined to have indicated or inferred gold, silver, or molybdenum resources (fig. 1 and table 1) associated with quartz veins and shear zones or quartz-pyrite stockworks in granodiorite. Five other properties in the area and three just outside have potential for the discovery of gold and silver resources. Minor amounts of very fine-grained placer gold are in glacial outwash in and near the area. The John G. Carlisle Mine (fig. 1, no. 9) produced 120 oz (3.7 kg) of gold between 1897-1899. The Independence Mine produced 481 oz (15 kg) gold, 197 oz (6.1 kg) silver, and 189 lb (86 kg) of copper between 1926 and 1935. These mines are adjacent to the study area's northern boundary.

Jan 1, 1983