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By Patti J. Best

The Southern Powder River Basin (SPRB) now commands 30% of the US utility, coal market due to the region's low mine production costs, competitive rail rates and low sulfur content. In 1997, production exceeded 240 Mt (265 million st). This was an in¬crease of 104 Mt (115 million st) since 1989 and 4.5 Mt (5 million st) above 1996. Continued growth is expected as the second phase of the Clean Air Act Amendments (CAAA) approaches. This growth will be the greatest in the southern part of the Basin where coal quality is higher. Coal characteristics SPRB coal is classified as subbituminous due to its low heating value and high moisture content. The coal is characterized by low sulfur and ash contents, low ash fusion temperatures and high reactivities. In 1997, the average heating content was 8,593 Btu/lb, with an average sulfur and ash content of 0.79 lbs S02/million [ ] Btu and 5.13%, respectively. The distinguishing characteristic of SPRB coal is its low sulfur content. Most SPRB coal contains less than 1.2 lbs S02/million Btu. This is the approximate definition of "compliance" coal for Phase II of the CA AA. Much of the coal, particularly in the southern part of the Basin, is referred to as "super-compliance" coal due to SO2 contents of between 0.4 and 0.7 lbs SO2/million Btu. The SPRB is divided into three geographic clusters based on coal quality. Mines located in the southern part produce coal with the lowest average sulfur content and highest heating content, almost 400

Jan 1, 1998

By F. Letowski

A column reactor was applied for leaching with simultaneous flotation a complex sulfide ore in ferric sulfate-solution under oxygen pressure. Elemental sulfur and the flotable, nonreacted sulfides were collected in the froth and separated from the insoluble, nonflotable gangue minerals and solid particles formed during pressure leaching. The two-stage laboratory unit, built from Corning-glass elements is described. Results of the continuous leaching/flotation experiments conducted under 20-40 psig of oxygen pressure are presented, as are supplementary batch leaching experiments with iron precipitation under 150 psig oxygen pressure. High zinc extraction to solution and near total accumulation of lead sulfate in the nonflotable fraction are easily attainable. Relatively poor flotation of pyrite is probably caused by the partial oxidation of its sulfidic sulfur to sulfate.

Jan 1, 1988

By R. A. Seitz

This paper presents a framework for analyzing the theory and industrial practice of coal flotation and gives some examples of its use for understanding flotation phenomena and optimizing/controlling flotation circuit performance. It is based on extensive laboratory and in plant test work conducted over the past several years by researchers at MTU as well as an analysis of the literature. Previous researchers have usually considered either the surface chemistry or the kinetics of coal flotation behavior, only rarely have these factors been considered together. However, these factors must be considered together in order to gain a clear understanding of the theory underlying coal flotation such that its practical application can be optimized. Fortunately, this complex objective can be achieved by considering the recovery and rate of recovery of the different types of particles present in the feed to coal flotation circuits and the fundamental mechanisms responsible for these recovery phenomena. The influence of three major groups of variables must be considered: control variables (reagent additions, aeration rate, etc.); disturbance variables (feed pH, percent solids, etc.); and circuit design variables (number of cells, circuit arrangement, etc.). Each of these groups of variables affects process kinetics in a clearly understandable manner, which, once determined, is extremely useful in circuit design and optimization. This paper includes a discussion of the use of the proposed framework to explain the effects of some coal characteristics on flotation performance. In addition, an example of using this analysis to optimize the performance of a coal flotation circuit using frother and collector addition levels is included.

Jan 1, 1985

By Michael L. Maniocha

Most magnesia (MgO), whether of natural or synthetic origin, is used in the dead-burned or periclase form as refractory linings for the production of steel. Continued research in refractory science, combined with good refractory maintenance and improvements in steel-making processes, have resulted in decreased use of magnesia. To make up for this loss of business, producers of synthetic magnesia have started to manufacture a variety of magnesium-based chemicals that are used in many industries. There are three primary methods of producing MgO. The first involves the calcination of naturally occurring minerals species. Most of the magnesia produced by this method uses the rhombohedra1 carbonate mineral magnesite, MgCO,. To a lesser extent, the mineral brucite, Mg(OH), is calcined to magnesia. Magnesia produced by the calcination of minerals is called natural magnesia. The second production method uses magnesium-rich brines, or sea water reacting with lime or calcined dolomite to produce magnesium hydroxide. The magnesium hydroxide is subsequently calcined to magnesia. Material produced in this way is called synthetic magnesia. The third major method of production uses saline lake brines to produce magnesium chloride. Magnesium chloride brine is sprayed into a reactor where it thermally decomposes into MgO and HCl. The magnesia is purified by slaking to magnesium hydroxide followed by calcination. Magnesia produced in this manner is also know as synthetic magnesia (Duncan and McKracken, 1994). The degree to which the magnesium minerals or the synthetically prepared magnesium hydroxide is calcined governs the physical properties of the resulting MgO. It is the physical properties that dictate the end use for the product. The terms used to describe magnesia vary along with the degree of calcination. Table 1 summarizes the terminology used when discussing the various forms of magnesium oxide.

Jan 1, 1997

By E. G. Joe

Introduction Uranium mining has been actively carried on in Canada for over twenty-five years mainly in Ontario at Elliot Lake in Bancroft, and in Northern Saskatchewan at the operations of Eldorado Nuclear Ltd. During this period, approximately one hundred million tons of mill tailings have been created and lie mainly on the surface close to the mining and milling installations. If all of the present reserves of uranium ores in Canada are mined, a further eight hundred million tons of mine tailings could be created in Ontario, Saskatchewan, the Northwest Territories, Labrador and British Columbia. The present control of effluents from existing tailings is managed by the operating mines under the regulations of both federal and provincial control agencies. It is the long-term effect of these tailings on the environment that has not been clearly defined or measured. Several years ago, the Canada Centre for Mineral and Energy Technology of the Department of Energy, Mines and Resources, embarked upon a program of research directed at the long-term effects of uranium mine tailings. Much of the research to date has been on tailings in the Elliot Lake, Ontario area where some tailings piles have existed for over twenty years. The program consists of two projects, one to address the problem of existing tailings and the other to examine alternatives in the management of current and future tailings. TAILINGS CHARACTERISTICS Uranium tailings are generally the result of sulphuric acid leaching in which the uranium and alkaline minerals such as carbonates and chlorites are leached out. If the ore contains sulphides, these minerals potentially present an additional hazard of acid generation over time and could increase the mobility of heavy metals and some radionuclides such as thorium-230. Except for the extracted uranium, most of the radionuclides from the ore remain in the tailings pile. Uranium ores in Canada span a wide variety of mineralization and associated gangue composition. Uranium minerals include pitchblende, uraninite, uranothorite, brannerite and the phosphate uranium minerals autunite and saleeite. Gangue minerals vary from acid consuming carbonates, and chlorites to acid producing sulphides and inert silicates. With such a wide variety in ore composition, the characteristics of the resultant tailings in Canada are in many cases site specific and the solutions to the long-term effects of these tailings may also be site specific.

Jan 1, 1980

By B. Govindarajan, T. C. Rao, M. Vanangamudi

The results obtained from hatch, flotation experiments on two coals were used to develop relationships between the recoveries of water and solids into the concentrate. When the recovery of non-ash material (RN) for any size fraction is plotted against a parameter X, defined as [x _ Amount of (W) recovered x Collector dosage (C)in the concentrate (cc)(kg/t)] a single "non-ash recovery curve" is obtained. Non-ash recovery curves thus obtained from different size fractions are used to get a unique "modified non-ash recovery curve" for a given coal, using the reduced efficiency curve concept. Similar observations have been noted in the case of recovery of ash material (RA) also. The amount of water recovered into the concentrate is plotted against a parameter "Water Recovery Factor (WRF)," defined as [WRF = T.F.(1+C)] where T is time (in sec) and F is frother dosage (in kg/t). Plotted in this form a characteristic water recovery curve, for a given coal is obtained that may be defined by the following equation: [W4=W_(1 pWRF-e] The above relationships have been verified against the experimental results obtained from three more coals and are found to give satisfactory predicted values.

Jan 1, 1992

By Frank F. Aplan, G. Rinelli

INTRODUCTION Coal is a solid, combustible mineral substance resulting from the degradation and alteration of vegetable matter largely in the absence of air. In this natural process of coalification, some non-combustible mineral matter is always associated with the combustible material. Coal preparation or cleaning is the process of removing this inert mineral matter from the coal. Preparation is highly successful in removing the large fragments of inert material, but is not very effective in removing the fine inorganic mineral matter intimately associated with the coal. Of the 600 million tons of coal produced in the United States every year, approximately one-half is produced by coal cleaning methods (1). The bulk of this tonnage is cleaned by coarse or intermediate gravity preparation methods (5 inches to 28 mesh, Tyler). Fine cleaning, say, -28 mesh, is done by shaking tables, washing cyclones, and flotation, or, until recently, the fines were either incorporated into the clean coal or simply discarded--not infrequently, the latter. In 1972, only 13 million tons of raw coal were cleaned by flotation in the United States, and from this 8.4 million tons of clean coal were produced (1). The percentage of clean coal produced by flotation in Europe (England, West Germany, Poland, U.S.S.R., etc.) is substantially higher. However, coal flotation has grown rapidly in the United States from only a few plants in 1950 to 31 in 1960 (2) and 66 in 1970 (1). Virtually all new preparation plants incorporate flotation into their basic flowsheet. The essential difference between ore and coal flotation is that for ores the entire tonnage is ground to flotation size, whereas for coal

Jan 1, 1976

By Ken J. Richards

Industries dependent on pyrometallurgical processing generally find themselves facing a common set of problems, namely, serious environmental restrictions, heavy capital requirements for new facilities and for plant modernization, the certainty of rapidly escalating fuel costs, and the uncertainty of fuel availability. To remain competitive, it has become clear to industry that a new dimension of attention must be given to assuring the maximum performance from plant facilities already in place and from those that are built in the future. In the last decade or so, in response to these needs, there has been an acceleration in the development of new pyrometallurgical process concepts. Their application, though spotty, is increasing. A common factor in this developing base of technology is the need for effective process control. Digital control is an indispensable element of meeting the challenge. We cannot make the point, however, by looking to a general survey of instrumental control of pyrometallurgical processes. Computer control is in its awkward adolescence. Its application is so new that only isolated applications can highlight the trends. For this reason, the authors have chosen to focus on the nonferrous smelting industry to illustrate the status of pyrometallurgical processing and control. We believe this approach will best meet the interests of most readers of this edition and the background of the authors.

Jan 1, 1979

By G. T. Adel

The flotation behavior of a -28 mesh Pittsburgh No. 8 coal sample is investigated through the use of Scanning Electron Microscopy in conjunction with Image Analysis. Release analysis is used to generate the flotation products, which are then characterized to provide the particulate composition in terms of pyrite, mineral matter and carbonaceous material. The results of this investigation indicate that the material recovered in the first stage of release analysis tends to be well-liberated carbonaceous material. This is followed by an increase in the recovery of middlings and fines in the later stages of the process. Any free carbonaceous material remaining in the tailings from the release analysis test tends to be associated with the very fine sizes (-400 mesh). Pyrite recovery is attributed to the hydrophobicity provided by small inclusions of carbonaceous material, since the amount of truly liberated pyrite particles (i.e., 100% pyrite) present in the sample is found to be negligible.

Jan 1, 1994

By Glen L. Black

Choosing a mining method for an underground orebody is a complicated and often iterative process. Advances in technology have given design teams an array of possibilities for methods and equip¬ment. Hecla Mining's discovery of the deep Gold Hunter ore body challenged the staff at the Lucky Friday Mine to determine the optimum mining method. Taking an ore body from prospect to production requires traditional resource characterization. This includes drilling, delineating and modeling. Developing the mining plan is an evolving process, changing with each new piece of in¬formation as the project progresses through exploration and development. The Gold Hunter deposit is a steeply dipping vein system in the Wallace Formation of Idaho's Coeur d'Alene mining district. Gold Hunter is a misleading name for the ore body. The vein is a silver-rich, lead-zinc deposit with only traces of gold. The Gold Hunter ore body is located about 1.6 km (1 mile) north to northeast of Mullan, ID. The ore body is mined from the Lucky Friday Mine, located 0.4 km (0.25 miles) east of Mullan. Mining began on the vein from an access drift driven from the Lucky Friday Mine's 4900 level. Production from the ore zone is projected to be 771 t/d (850 stpd). The Gold Hunter ore is combined with Lucky Friday ore and milled in the Lucky Friday mill. The combined ore boosted Lucky Friday's 1998 silver production from 62.2 t/a (2 million oz/year) to more than 124.4 t/a (4 million oz/year).

Jan 1, 1999

By G. W. Johnston

INTRODUCTION For many years mining at the Stobie mine of the Inco Metals Co. consisted mainly of fill-type mining for higher grade ores and block caving or blasthole open stope mining for lower grade ores. Open stope mining, although quite favorable in the initial stoping phase, has always presented problems in the pillar recovery phase, especially at depth. In 1966, sublevel caving was introduced. This method is ideally suited for low-grade ore and can be applied very successfully to intermediate or higher grade ores providing proper controls are enforced. Sublevel caving has three distinct advantages: it is highly adaptable to mechanization; it recovers the ore in one operation; and it provides adequate ground sup¬port and safety regardless of mining depth. This method does, however, make extra demands, particularly for new types of supporting services. The constant presence of rock makes quality control of the grade of the ore being extracted essential. Increased de¬velopment, different types of ventilation, roadways, and maintenance are only a few of the many changes re¬quired. The care and maintenance of the fleets of diesel equipment and the modification of equipment is a con¬stant challenge. CHOICE OF SUBLEVEL CAVING The question arises, why mine by sublevel caving? Fig. 1 shows a typical problem encountered by the open stope or blasthole mining method. Near the surface there is little or no ground support problem. As mining progresses to an intermediate depth, however, ground failure starts to occur in the supporting pillars. If open mining is carried beyond this point, the critical depth is soon reached, accompanied by hanging wall caving, ex¬tensive pillar failure, and the danger of losing control of the mining cycle. The rock caved from the hanging wall mixes with and dilutes the ore being extracted from the blasthole stopes. Ore losses occur when pillar failure pre¬vents drilling and development of part of the ore. The interruption to the mining cycle causes serious curtail¬ment in production until ground failure is controlled and the mining method changed to adapt to the new conditions. Having recognized the limitations of open stope min¬ing, alternatives were sought. The first alternative (Fig. 2) was to fill the open stopes with sand fill be¬fore extensive pillar deterioration occurred, recover the pillar ore by fill mining, and then convert to total fill mining below. If the ore grade is high enough it can support the costly fill method. Recovery will be at a much slower rate and will therefore extend over a longer period of time. On the other hand, sublevel caving gives complete primary mining recovery in a short time and is very adaptable to mechanization, which is now a necessity to combat spiralling labor costs and give greater produc¬tivity per man. Sublevel caving is ideally suited as a mining method for low-grade ore bodies which eventually reach a criti¬cal depth for open stope mining. DEVELOPMENT The development phase comes first and of course its main purpose is to gain access to the ore and provide a route for ore removal from the mine. Initially a 20% inclined service ramp is driven in the footwall rock (Figs. 3, 4, and 5). It is preferable to start at the top of a mining block and drive the ramp down¬ grade so gravity can assist in mucking the blasted de¬velopment round, and also access can be gained more quickly to the initial production area. The ramp nor¬mally turns at 3.1 rad (180°) about every 152.4 m (500 ft) to keep it reasonably close to the rock disposal

Jan 1, 1982

By Reinhold Schulze

Thiourea is being applied as an industrial leaching agent for gold and silver only in a few cases. A CIP technique was developed which eliminates most of the obstacles against its use. Mild conditions for precious metals stripping from the loaded carbon simplifies process conditions in comparison to cyanide CIP technique. Examples are given.

Jan 1, 1998

By Simon W. Houlding

This paper summarizes recent developments in computer modelling and estimation technology. Significant improvements in computational and modelling efficiencies have advanced technical computing to the stage where, for the first time, it can be realistically applied to short-term mine planning and production control. Real-time interactive grade estimation of complex shapes, volumes and grade distributions, based on immediate turn-around of production sample grades, is now possible. An added benefit is the ability to produce complete geostatistical estimates which include confidence limits. These can be incorporated into the decision making and risk assessment processes of production control. Why the need for new technology? What is wrong with the conventional methods which have sufficed for the last thirty years? The response is manyfold. They suffer from inefficient computational processes and conflicts with geostatistical theory. They are responsible for constricting the flow of information between the disciplines involved in the mine production process. Finally, it is illogical to approximate irregular geological and mining volumes with orthogonal sets of rectangular blocks. Geological materials do not occur in block formation; and mining methods which excavate rectangular blocks have yet to be developed. Other computer based technologies have evolved out of the dark ages of rectangular approximations and have successfully dealt with irregular three-dimensional geometries. It is time for computing in the mining industry to follow this example and take full advantage of available technology. To provide the necessary background, consider the basic requirements for successful implementation of technical computing within the mine production process.

Jan 1, 1992

By B. Mishra, A. Staley, D. Kirkpatrick

The major waste product of the alkaline extraction of alumina from bauxite (Bayer Process) is known as red mud. Approximately one ton of red mud is produced for every two tons of bauxite mined. The red mud produced from Jamaican bauxite is rich in hematite, alumina and titanium oxide. It has been shown that more than 90% (by weight) alumina can be recovered from red mud by soda ash sintering and caustic leaching. Hematite can be carbothermically reduced with a degree of metallization of more than 94%, resulting in attempts, for magnetic separation. These separations are desirable because there are no waste products generated. Consequently, there is an opportunity for complete utilization of the waste material. Conversely, the preseparated material could be charged through the tuyeres in an iron blast furnace, or it could be smelted to produce pig iron. If smelted, the concentration of titanium oxide in the slag would be high enough to justify its recovery by an established acid-leach process. This paper describes the results of alumina recovery and the plans for titanium oxide recovery from red-mud. In addition, the situation of ongoing efforts in iron extraction, particularly, the method of magnetic separation of the reduced material. The problems associated with the use of reduced red mud as an alternative to direct-reduced iron (DRI) is also discussed. A critical assessment of the recovery sequence chosen for the products is described based on economics. Key words: Red mud, Waste product utilization, Alumina recovery, Titanium oxide, Iron

Jan 1, 2003

By G. A. Dawe, E. G. Kelly

Because of the nature of the breakage in the Barmac vertical spindle impactor, the 80% reduction ratio is very small, so that when an energy efficiency is calculated from Bond's method, it appears to be very low. However, the product size distribution contains a high proportion of fines. It is argued that the production of these fines accounts for the high energy consumption, and Bond's method is modified to account for this, by considering the crusher to be, effectively, a number of smaller crushers in parallel, each having a different reduction ratio.

Jan 1, 1990

By G. Swiatnicki, w. Chruscielewski, T. Domanski

INTRODUCTION The inherent errors of simple passive track detectors /SPTD/ used for estimation of exposure to the radon daughters /RnDP/ amount to about 30% /Do75/ while for active detectors only reach about 3 - 4% /Ph78, Du79/. The large error inherent in SPTD is the result of strong dependence of its calibration coefficient on the equilibrium Rn RnDP in the vicinity of detector /0r80/. Nevertheless the SPTD shows many advantages and seems to be very useful for to the estimation of individual exposure of miners to RnDP /Do81a/. For this reason the investigations are undertaken to improve SPTD so that it might provide information about the equilibrium Rn : RnDP during exposure. If the equilibrium would be known then one could use a suitable calibration coefficient yielding a better precision of the measurement. So far, some investigations of the improved type of SPTD have been conducted. One was based on the concept of using the so called diffusion barrier permitting to differentiate the tracks originating from Rn and RnDP /Fr77/. Such improved detector has been named a passive differentiating track detector /PDTD/. However, own investigations have shown /Do81b/ that this type of detector cannot provide precise informations about equilibrium Rn : RnDP. For this reason the investigations of the new idea of PDTD have been carried out. The new model presented below is based on the use of the absorbers of alpha particles. THEORETICAL CONSIDERATIONS The first variant of the concept is as follows: The differentiating detector consists of two portions of detective foil /track detector/ but only one is covered with an aluminium absorber. Thickness of the absorber is carefully selected so that only RaC' particles /7.7 MeV/ can pass the barrier. The second portion of the detective foil records all alpha particles originated from Rn and RnDP i.e. works like a SPTD. The scheme of such a detector, the so called two-fields passive differentiating track detector /PDTD-2/ is shown in the Fig. 1. It is possible to introduce a parameter that can characterize the equilibrium Rn RnDP, namely, the so called track density ratio /TDR/. The definition of this parameter for the considered type of detector is TDR2 = D1•D2-1. One can expect the simple proportion to hold: [ ]

Jan 1, 1981

By Terry McNulty

There are many potential pitfalls in the commercialization of innovative technology. The failures often are remembered longer than the successes, thereby serving as deterrents to subsequent attempts. The mineral industry's future depends on effective innovation. So it is essential that the causes of failure are understood. Innovation can be examined equally well in the context of geophysics, geology or mining. However the author's experience has been in mineral processing and chemical engineering. So the following discussion is limited to processes and/or plants for producing mineral concentrates, metals or inorganic chemicals. More of what follows has to do with underachievement or failure than success. But this article demonstrates that there is a strong element of predictability in the former. Furthermore, it is a credit to the minerals industry and to the engineering profession that a very high percentage of projects succeed in achieving design capacity and forecast operating costs. Innovation means the introduction of something new. In this article, the words "innovative technology" are used broadly. They include new processes and novel combinations of established unit operations, as well as novel types of processing equipment or largest-ever equipment models. The discussion of project outcomes is based on personal experience or on published information. Citations are given for technical publications that provide either project information or insights into the methodology used to analyze project performance. However, specific projects have not been identified due to the rather negative connotations of some of the conclusions drawn about the less favorable outcomes.

Jan 1, 1998

By C. Patrick, T. Combs

The purpose of this paper is to provide a method for analyzing the sequencing of mining production processes and predicting the effects of any planned changes. Included is a description of the development and utilization of a project-scheduling simulation that combines analytical scheduling with stochastic-activity durations. The simulation is demonstrated in two realistic examples: a longwall face-to-face transfer sequence and the effect of varying advance rates on longwall development sections. Statistical data that can provide a basis for more informed production decisions are generated in the form of project activity/path criticality and project-duration distributions. In both examples, a quantitative risk assessment, regarding subjective decisions in underground production sequencing, is presented.

Jan 1, 1996

By M. A. Ouederni, G. C. Chorosz, E. P. Déliac

This paper deals with the heat flow problems in deep workings (depth greater than 1000 m in France). The approach benefitted from experience gathered in France and South Africa. Deep mines are located in the East of France (coal in Lorraine and potash in Alsace), where the geothermal gradient can reach 4 'C per 100 m (Virgin Rock Temperatures, VRT, around 50 'C). This paper is concerned with the following topics: method of studying the heat flow problem on a mine-wide basis, specific models for heat and moisture pick-up, interfacing of heat and ventilation calculations and a case history in the Lorraine collieries. The heat flow problem on a mine-wide basis is studied in a fashion similar to ventilation networks. Each branch is considered as a "black box" where the air picks up heat and moisture (or is cooled, in the case of an air-cooler). Each box is therefore modeled as a heat transfer unit, hence the calculation of outlet temperatures (wet- and dry-bulb) from the intake ones. The whole network can thus be computed as a sequence of boxes from the air intakes towards the outlets. The second section reviews a number of models used for the assessment of heat and moisture pick-up in the "boxes", with emphasis on stopes and development ends, which are particular to the mining method in use. Two types of stopes are considered: longwall (horizontal and inclined) and cut-and-fill (subvertical). Mechanized rock breaking and blasting can be accounted for. A particular attention is given to development ends, especially complex from the heat flow point of view (rock characteristics, wetness factors, etc.) and usually quite hot. These workings, which are critical in order to secure new production areas, are studied on an average basis as well as in extreme conditions. The calculation takes into account the history of rock temperatures. The interaction between ventilation and thermodynamic calculations is still under development. The idea consists of coupling ventilation calculations with the "box" models: the first step determines the direction of air flow, hence the sequence of the boxes; thereafter the calculations yield the effect of temperature and presssures on air flows. The final section reports on the validation of the whole approach against field data. It concerns several heat flow surveys aimed at checking the models for shafts, stopes and development ends. The accuracy of the method is found very satisfactory.

Jan 1, 1987

By Dan Nilsson

INTRODUCTION A company must have an objective, and that usually is to earn money. In some countries an objective can also be to reduce unemployment in an area or to develop nonindustrialized areas. Government-owned companies can also have as an objective that of serving the com¬munity. This discussion is limited to the consideration of normal companies wanting to earn money. Such an objective, however, has to be defined in more detail. It is not satisfactory only to maximize the total annual profit from, for example, a mining project. In comparison with most other branches, the mining in¬dustry is very capital intensive. When starting a new project, the mining company must invest a lot of money in mines, ore treatment plants, etc. It is normally many years before any income is received from the ore. Fig. 14 illustrates the payments for a new mining proj¬ect with an expected lifetime of 10 years. Whether this project is a profitable one depends on a lot of things. If the company has a shortage of money, it can be impossible to finance the project. Even if the company has enough money, the management may think that perhaps the project may not return the money fast enough. Such limitations will not be discussed here. Suppose that the company has internal funds from its own operation or can borrow them. Since the mining company must invest the money in advance, it is not satisfactory only to add all of the costs during the mine's lifetime and compare them with the total income during the lifetime. The company must include the time value of the capital. In this appendix, the basic investment theory neces¬sary to judge the profitability and costs of mining proj¬ects will be discussed. INVESTMENT THEORY Time Value of Money If a private person has a dollar and puts it into a bank, he or she will receive interest. If the interest rate is r%, the value after one year will be $(1 + r), after 2 years $(I + r)2 , etc. The interest rate represents the time value of money. If the same person wants to have $1 in the bank af¬ter one year, he or she has to put $(1 + r)-1 in the bank today. If the person wants $1 after 2 years, it is neces¬sary to put $(1 + r)-2 into the bank today, etc. So one dollar today is worth more than one dollar tomorrow. It is, of course, not correct to compare money at differ¬ent times since each dollar has a different value. It is necessary to transform all payments to the same point in time. That is called the calculation of the capital value of a cash flow, and to do this an interest rate is used. In the same way, the cash flow from a project like that shown in Fig. 14 can be translated to any other point in time. Most common is to translate all payments to the beginning of the mining period. That capital value is often called the present capital value. Interest Rate What interest rate will the company use? A com¬pany, just like an individual, has the basic alternatives of keeping its money in the bank and receiving interest, or borrowing money from a bank and paying an interest rate. The interest rate represents the time value of money for the company. If the company has a shortage of money, or many good potential investment projects, it has to use a higher interest rate than if it has a lot of money available. Most companies also increase their interest rate as a hedge against the risk involved by using money for uncertain investments, because of taxes, etc. Capital Value When the interest rate has been decided, it is possi¬ble to estimate the capital value of a project. Here the discussion will be limited to the estimation of present capital values. Suppose that one wants to know the present capital value of $1 (Fig. 15), which will be received after n years. To transform it n years back in time, one must multiply it by the factor (1 + r)-, where r is the inter¬est rate the company uses. Table 1 gives these factors for different years and interest rates. Example: At the end of year 5 a mining company has to invest $50 million in a new mine. What is the present capital value at the end of year 0? The company uses an interest rate of 15%a.

Jan 1, 1982