Search Documents

By C. Guria

A modeling, simulation and optimization study of a complex industrial fluorspar beneficiation plant (Kadipani, Gujarat, India) with fourteen/ten flotation banks is carried out to find an optimum/near-optimum circuit for the given quality of feed ore. The phenomenological flotation model developed by Mehrotra and Kapur (1974) is used for circuit optimization. Two different optimization problems are formulated and solved. The first optimization problem involves a single objective function, which uses available plant data to estimate the feed-characterizing parameters, i.e., the flotation rate constants, by minimizing the weighted sum-of-square errors between the computed and plant values. The second optimization problem involves two objective functions to obtain several simplified circuits. The number of non-linking streams and the overall recovery of the concentrate, i.e., the acid-grade product, are maximized simultaneously in this problem. The single-objective variant (SGA-II-mJG) of the binary-coded elitist non-dominated sorting genetic algorithm with the jumping gene adaptation, NSGA-II-mJG, is used for the first problem, while NAGA-II-mJG (Guria et al., 2005 a) is used for the second problem. Simplified circuits with a few split streams are proposed on the basis of the present optimization study, which enhance the recovery of the acid-grade product without affecting its quality, for a given total volume of the flotation cell-bank. Even though the optimal solutions have certain drawbacks, they suggest a meaningful direction in using an iterative fitting of parameters to such optimal circuits, followed by re-optimization. Key words: Froth flotation, Mineral processing, Industrial fluorspar beneficiation, Feed identification, Circuit/network optimization, Global optimal, Jumping gene, Genetic algorithm, Multi-objective optimization

Jan 1, 2009

By M. A. Islam, H. Mischo, G. Barakos

Among the thirty-five declared critical raw materials (CRM) in the United States, there is no sustainable domestic production for the fourteen of them, while for some others domestic supply does not meet the national demand. Numerous potential critical raw material projects are in advanced exploration stages. However, the price uncertainties for many of these commodities put feasible future production into question and come into contrast with overly optimistic price forecasts published in all feasibility studies related to such exploration projects. Thus, in this work, a newly developed smart computational tool is used to evaluate the real perspectives of several CRM exploration projects implementing actual commodity prices, and to conduct reverse calculations in order to find the prices at which each project can be viable.

Mar 2, 2022

By Henry R. Linden

The demand for natural gas continues to increase at higher than anticipated rates, partly because of its widening price advantage over most other fossil fuels when the cost of air pollution control is included. However, there are clear indications that natural gas supply from the contiguous 48 states and continental shelves will not indefinitely keep up with this rapid growth in demand. Projections are presented which define the extent of potential deficiencies from the 1970's to the year 2000. Among the sources of supplemental gas - imported pipeline natural gas from Canada and Mexico, tanker import of liquefied natural gas, and synthetic pipeline gas from coal and oil shale - by far the most abundant at potentially competitive costs is pipeline gas from coal. The state of development and relative economics of the various coal gasification processes are reviewed. It is shown that synthetic pipeline gas could become a very substantial market for bituminous coal and lignite at current minemouth prices - 60-70 million' tons of coal for each trillion cubic feet of synthetic pipeline gas produced. This corresponds to only slightly more than the current annual increase is gas demand.

Jan 1, 1969

By S. Norman Kesten

The Galena mine is located astride the Polaris fault in the Coeur d'Alene district of northern Idaho. The surface installations are about a mile up Lake Gulch, the mouth of which is about 2.4 km (1 112 miles) west of the old town of Wallace. The mine had its beginnings when the first claims were located in the early boom days of the district in the 1880s and when the first underground ore bodies were opened up in 1917. During the ensuing 14 years, ore was mined from which were recovered 5.4 Mkg (12 million lb) of lead and almost 14.2 Mg (112 million oz) of silver. Workings consisted principally of a vertical shaft from surface to the 800 level and an offset underground shaft to the 1600 level, together with extensive lateral openings. High-grade silver-copper ore was discovered near the Silver Standard fault in the Sunshine mine, a few miles to the west, on the 1700 level in 1930. By 1937, the Sunshine and adjacent mines were producing silver-copper ore on a regular basis. In 1943 additional ore of a similar type was found along the Chester fault, to the east of the principal Sunshine workings. The interest of American Smelting and Refining Co. (renamed ASARCO in 1975) was aroused and the company's geologists determined that the Galena mine, idle since 1931, provided a geological environment in which similar ore might be found. After negotiations were initiated with the owners of the property, Callahan Zinc-Lead Co., the property in question was deeded to Callahan's wholly owned subsidiary, Vulcan Silver-Lead.

Jan 1, 1990

By Jens Gutzmer, Helmut Mischo, George Barakos

"It has been nearly eight years since rare-earth elements (REE) became the subject of frontpage headlines. It was when the controversial Chinese export policy for these critical commodities was epitomized in a maritime border dispute with Japan in September 2010 that resulted in the big REE crisis and price spike of 2011 (Barakos et al., 2016c; Mancheri, 2015).The world was dismayed, especially in REE-importing countries such as the United States that was, and still is, totally dependent on Chinese production and exports (Barakos et al, 2016c; Kennedy, 2015). The short-lived alarm initiated a treasure hunt by way of exploration for REE deposits all over the world. The continuously growing demand on the one hand, and the Chinese sovereignty of the REEmarket on the other, led the rest of the world to explore their own REE resources. In just a few years, more than 400 projects were initiated to explore REE deposits outside of China (ERECON, 2015; Goodenough, 2016).The prices of REE, however, dropped rapidly in late 2017 and were in six-year lows, before the 2011 crisis (Barakos, 2017). The viability of even major established producers is being challenged, not to mention the development prospects of potential REEmarket entrants (Barakos et al., 2016b; Rollat et al., 2016). Production cutbacks and industry consolidation in China have impelled REE market experts to forecast that prices have already reached their lowest point and have nowhere to go but up (Adamas, 2015; Roskill 2015). Yet, expectations for increased REE prices are limited and drastic changes are unlikely to happen in the near future, as there is still excess supply in the overall REE market (Barakos, 2017). Nevertheless, the low prices of rare earths are not the only reason that potential producers are struggling to enter the global REE market. Among other parameters, the separation process of the individual elements seems to be the most important factor, as it is technically challenging and expensive to build and to operate."

Jan 8, 2018

By Daniel M. Flanagan

"Editor’s note: Each year, Mining Engineering features an industrial minerals review. Several people put in a fair amount of time in developing the material for this issue, all the while doing their own jobs. Thank you to the industrial minerals annual review editor, to the Industrial Minerals & Aggregates Division technical committee chair and vice chairs, and to the authors of the individual commodity profiles. Jim Norman, member SME, of Tetra Tech, is the industrial minerals annual review editor.Joe Garska, member SME, of Imerys, is chair of the Industrial Minerals &Aggregates Division’s Technical Committee.The technical committee vice chairs include:• Hyunjung Kim, member SME, of Chonbuk National University, agricultural materials.• Xihui Lin, member SME, of Kemira, ceramics and refractory materials.• Nikhil Gupta, member SME, of Virginia Tech, chemical raw materials.• Adam Rodriquez, member SME, of Penn State, construction aggregates.• LeDeana Roberts, member SME, of Imerys, fillers and pigments.• Harsha Kolla, member SME, of ChemEOR, sorbents, filters and process aids.• Edgar Blanco, member SME, of FLSmidth, specialty minerals.Their help makes possible this July industrial minerals issue. On behalf of ME readers, the editors thank them.During the past 25 years, U.S. ball clay production (the quantity sold or used by domestic producers) increased from 788 kt (869,000 st) in 1990 to an alltime high of 1.31 Mt (1.44 million st) in 2003 (Fig. 1). Housing construction within the United States, a leading market for ball clay-based ceramics and sanitaryware, began to decline in 2005, which resulted in a considerable decrease in sales of ball clay that continued through the 2008-2009 economic recession. After bottoming out at 831 kt (916,000 st) in 2009, ball clay production steadily increased through 2015 (Fig. 1). Estimated sales in 2015 were 36 percent higher than those in 1990 and 18 percent lower than those in 2003.Four companies (H.C. Spinks Clay Co., Imerys S.A., Old Hickory Clay Co., and Unimin Corp.), mined ball clay in five states during 2015. An estimated 1.7 Mt (1.18 million st) of ball clay valued at an estimated $47.5 million was sold or used by U.S. producers, a 4-percent increase from 1.03 Mt (1.14 million st) valued at $45.2 million in 2014. Approximately 65 percent of total ball clay production was air-float, 25 percent was crude or shredded and 10 percent was water-slurried"

Jul 1, 2016

By J. H. Kim

Since the Hardy Cross numerical algorithm was applied to the solution of mine ventilation networks, there have been numerous developments in ventilation network analysis procedures. The Newton-Raphson method, the linear theory method, and the second-order approximation method are three of the additional approaches that have been applied. The efficiency of a ventilation network analysis procedure depends not only on the method of solving the system of equations derived from ventilation networks, but also on the method of deriving the equations through selection of the meshes. This paper investigates the impacts of three mesh selection methods on the efficiencies of four ventilation network procedures. The minimum-resistance spanning tree method is the most popular procedure for selecting meshes. The shortest-path method was suggested by Epp and Fowler (1970) for improvement of the Newton-Raphson method. The minimum-resistance-path method is suggested here as the third method of selecting meshes. The effects of these three methods on the Hardy Cross method, the Newton-Raphson method, the linear theory method, and the second-order approximation method are analyzed in this paper. These network analysis methods have been summarized in the paper by Kim and Mutmansky (1991).

Jan 1, 1992

By D. R. Tesarik, T. C. Trancynger, W. G. Pariseau

The Davis detector cavern was excavated on the 4850 Level of the former Homestake Mine in the mid- 1960s to house a novel neutrino detector developed by Nobel Prize winner Dr. R. Davis. The original cavern was about 9.1 x 16.8 x 9.7 m high, excavated in a Precambrian amphibolite known as the Yates unit and enlarged in 2010. In 2009, the National Science Foundation selected the site for development as a national Deep Underground Science and Engineering Laboratory (DUSEL). This retrospective rock mechanics study of the Davis cavern is intended to inform design of the much larger caverns and laboratory rooms being considered for the same 4850 Level. Provision for rock mass variability, sequential excavation, jointing and wall damage from blasting are included in analyses that were done using two different computer codes and methods (FLAC3D and UTAH3). The results are in agreement with observations and show that cavern stability is indeed the case. The main conclusions are: (1) if conventional scaling of laboratory rock elastic moduli and strengths is done, then 0.25 and 0.50 scale factors are reasonable, (2) measured statistical and spatial variability in rock properties should be incorporated into geomechanical analyses to better reflect reality, (3) discontinuities (“joints”) are essential to reliable analysis of excavation safety and when properly taken into account eliminate the need for empirical “scaling” of laboratory rock properties, (4) major geologic features such as rhyolite dikes and breccia zones may be important to excavation safety at Homestake and should be explicitly represented in analyses and (5) quantifying wall blast damage is important to engineering design of underground excavations.

Jan 1, 2012

By F. Mielli

Mine operation managers are constantly tasked with identifying new ways to produce more, while using less. Mine effectiveness and reliability is the foundation of improving operational performance. Timely decisions need to be made in order to identify production waste. Intelligent data needs to be visualized in real-time. Operational events need to be captured with impacts quantified and root causes identified. Unfortunately, complex information technology solutions often have a very poor success rate, with some reports suggesting 30 percent of complex projects are canceled before completion.

Feb 27, 2013

By J. S. Lewis

Beneficiation and physical and chemical processing of non-terrestrial materials borrow strongly from terrestrial experience, but also involve the necessity of handling literally un-Earthly feedstocks, reagents, and environmental conditions. The present state of scientific and engineering understanding of the processing of non-terrestrial minerals, gases and hydrocarbons is reviewed with the production of rocket propellants, life-support fluids, structural metals, and refractories as the goal.

Jan 1, 1992

By Paul F. Gnirk, Ralph A. Wagner, Joe L. Ratigan

This thermomechanical analysis used the finite element method to investigate the behavior of crushed salt backfill in a waste disposal room situated in a salt dome repository. The first of two objectives was to determine the transient temperature rise and degree of thermomechanical consolidation that occur in the backfill as a function of drillhole depths. The second objective involved the evaluation of closure due to salt creep of unlined emplacement drillholes and the determination of pressure on steel sleeve liners in the drillholes should liners become necessary for canister retrieval. The retrievability period was considered to extend for 25 years after waste emplacement. The canisters were assumed to contain ten-year old high level waste with a thermal output of 4.3 kW at the time of emplacement.

Jan 1, 1981

By A. Noble

"A supply of sustainably sourced rare earth elements (REEs) is critical for several high-tech industries, renewable energy technologies, and defense applications. Recent studies have shown that REEs exist in coal and coal combustion byproducts at elevated concentrations and in quantities that could meet domestic demand. Despite these promising findings, declines in rare earth prices, volatile commodity markets, and challenging geo-metallurgical conditions have jeopardized this potentially valuable REE resource. While the dilute REE concentrations inherently necessitate low-cost separation technologies, the ultimately operating cost threshold for economic extraction must be based on commodity price projections and market demand. In this paper, the micro-pricing principle is used to develop a rigorous economic model assessing the inherent value of REEs in coal materials. This model is based upon basket pricing of individual elemental oxides, and elemental distributions of coal samples from various basins. These results may be used to assess the economic viability of potential REE concentration and refining technologies INTRODUCTION Recent efforts by US Department of Energy (DOE) and the National Energy Technology Laboratory (NETL) have suggested that rare earth elements (REEs) may exist in coal and coal byproducts at concentrations suitable for economic extraction and processing. While the knowledge of REE occurrence in coal material dates back over 50 years, recent supply restrictions and material criticality considerations have prompted a national interest to establish a sustainable domestic supply of REEs. REEs are not “rare” in the sense of crustal abundance; however, few natural processes lead to concentrated ore deposits. As a result, the elevated concentrations found in coal material may provide a potentially promising resource for these materials. While the term “rare earths” is often used to describe a singular concept, the 15 rare earth elements actually have varying and sometimes contrasting scarcity and cost profiles. Various authors have proposed classification systems to provide information on REE criticality (e.g. Seredin and Dai, 2012, Zhang et al., 2015). The most straightforward classification is provided on the basis of geochemistry with designations for “light”, “medium” and “heavy” rare earths. Light rare earths (those to the left of the periodic table: Ce, Pr, Nd, and Sm) tend to be more common and less valuable when compared to their medium (Eu, Gd, Tb, Dy, and Y) and heavy (Ho, Er, Tm, Yb, and Lu) counterparts. While light rare earths are often found in traditional ore deposits at economic concentrations, the heavier rare earths are almost exclusively found as ion-absorbed clays (Seredin and Dai, 2012)."

Jan 1, 2016

By J. Philip Neal

Feldspar is no example of special mineralization in isolated spots: it can usually be found within a mile or so of almost anywhere. Along with silica sand, it is a major part of our world's total mineral composition. This fact imparts to it an economic status different from a sulfide ore, or potash, or phosphate. While every feldspathic "stringer" does not possess economic potential, the generous distribution does yield a high statistical frequency of good feldspar ore bodies: the adjective "good" being subject to some flexibility of interpretation. The strong chemical bonds of this alkali aluminum silicate give it certain use advantages, but under present technology its individual elements cannot practically be separated to create aluminum, potassium, sodium, silicon - or their oxides. Its present uses rely upon chemical inertness - as in fillers; and on its physical melting characteristics and their effect in glass, enamel, or ceramics.

Jan 1, 1973

By R. T. Langland

The U.S. Bureau of Mines has conducted underground tests and computer analyses to study coal mine roof behavior. Southern Ohio Coal Company provided test sites it) their Heigs mines located near Athens, Ohio. Testing apparatus was adapted for monitoring roof behavior at the face of mining from a remote surface location. Finite element analyses were applied to study the structural conditions present. Test sites were located at three different intersections of entries and crosscuts of the room-and-pillar mine. Electrical read-out instruments were used to record roof bolt loads, roof sag, and roof-floor convergence. They were installed during the roof bolting cycle of a conventional mining section and data was recorded for several months. Normal mining operations continued throughout the test period with minimal interruptions due to the installation and monitoring of the instruments. A computerized data acquisition system, partly underground, partly on surface, permitted continuous monitoring of data and its retrieval, display, manipulation, and storage. The finite element code used to model the test sites accounted for three-dimensional geometry, nonlinear material behavior, and the mining excavation and bolt installation sequences. Results of the test are highly variable. Comparable values between test and analysis results were obtained by applying statistical averaging of. roof test data. Results of the analyses indicate that bolts have a lesser effect on the gross behavior of mine roofs than has been indicated and that bolt load changes are strongly influenced by mining excavation sequence, bolt-placement sequence, and face distance

Jan 1, 1977

By Dan Preston, Shane Yanagisawa, Robert Marshall, Don Deere

Geotechnical Baseline Reports often estimate the number of cobbles that will be encountered in terms of volume or weight. These estimates are practically impossible to verify in the field. ClaroVia Holdings in conjunction with Frontier Kemper Constructors Inc. developed Digital Geologist 2.0 to classify and count cobbles discharged from an EPB TBM at the RSC7 project in Burbank, CA. The system worked by using two stereoscopic laser sensors with a global shutter to scan and count cobbles at 12 frames per second. Results of the effort are revealed along with lessons learned and paths for improvement.

Jun 13, 2023

By D. Symonds, A. J. Richins, M. G. Nelson

Mining activities at Kennecott and Park City are similar in that both districts began operation in the last half of the 18th century, and both operated on a large scale for many years. However, they are different for two important reasons. First, the mines in the Park City district were always underground. The city of Park City was above many of those mine workings. It remained in place after mining activity stopped, and as the town became an up-scale ski resort, property values increased and the tailings dumps became desirable building sites. In contrast, Kennecott eventually became an open pit mine, and the growing pit effectively consumed many of the small towns that had grown up around the underground workings. Even towns on the periphery of the open pit were razed to allow for the disposal of mine overburden. Second, almost all mining activity stopped in Park City in the early 1970s, just as the first rigorous environmental legislation in the United States was enacted. (The Ontario mine operated sporadically until 1982.) Many mine structures, waste dumps, tailings ponds and piles, and tunnels were simply abandoned as the mining companies ceased business or were bought out. Kennecott, on the other hand, has been in continuous operation for more than 120 years, so a closure plan hasn’t been finalized. Nonetheless, environmental and social problems have arisen, and the company has had to address them.

Mar 2, 2022

By Maurice Grieves

GC. Waterman Mr. Grieves' paper on "Shaft Sinking Today--A Boring Business Tomorrow" in the Dec. 1981 issue of MINING ENGINEERING is an excellent description of recent improvements in speed and costs of shaft sinking. However, shaft boring techniques are not a recent development. In 1935-36, the Idaho Maryland Co. (gold), Grass Valley, CA, bored the vertical 1.5-m-diam Idaho No. 2 ventilation and supply shaft to a depth of 346 m. The equipment was designed and perfected by Branner Newsome and was, I believe, described in "Transactions." Pickands Mather later bored a 1.8-m-diam shaft to a depth of about 305 m using Newsome's design. The Idaho No. 2 shaft cut through hard gabbro, diabase dikes, soft serpentine, very incompetent ankeritized serpentine and a strong fault zone. The completed shaft did not require timber support; the fault zone was cemented. Equipment consisted of a rotating 1.5-m or 3-m core barrel with a slotted bottom which cut a 76-mm kerf. The cutting agent was chilled steel shot introduced into the slot as needed. The driving mechanism and core barrel were lowered into the shaft, the former secured to the wall and the inshaft "engineer" operated the motors which controlled core barrel rpm and advance. After an advance of 1.5-3 m the equipment was lifted out of the shaft, a half(?) stick of powder cut off the drilled core, and it was hoisted to the surface with a cable attached to an eye bolt at the tope of the core. A "shift" consisted of three men: hoistman, equipment operator (down the shaft), and a surface laborer. Advance was variable as equipment and techniques were perfected. Near the end of the job advance was, as I remember, 1.5-3 m per shift. Costs were, as I recall, about $115/m. Up to 4 m cores were lifted out in one piece and swung to the dump by a stiff leg derrick. The Newsome equipment was relatively inexpensive to build and operate and his method should be (more than?) competetive with the methods described by Grieves. W.E. Hawes The author, in mentioning the South African developments of the cactus grab, ignores the parallel development of the Cryderman mucker in this hemisphere. Perhaps a slightly longer history of blind hold drilling would have been in order. Blind shaft boring got a major boost at the Nevada Test Site, as part of the nuclear weapons development, when it was essential to be able to quickly assess depth for weapons testing. One of the early civilian attempts to utilize this technology occurred when Kerr McGee drilled the shaft at the Section 19 Mine at Ambrosia Lake, NM. This twin masted drill rig belonged to a subsidiary of Kerr McGee, not Shaft Drillers. This was a difficult hole, due to bentonitic shales that decomposed. Later advances in drilling fluids eliminated this problem. The Conoco project referred to is not entirely correct, and needs minor amplification: The depth of the development (not pilot) shaft drilled was 684 m, at a diameter of 3.05 m, with a 2.16 m ID hydratatic casing being installed to a depth of 669 m. Conoco Inc., not Challenger, executed the drilling, however Conoco did use Challenger Drilling Company's Rig 14-S. Rig 14-S is unique in that it is specifically designed for shaft drilling, rather than being an oil field rig used for this service. All work was planned and directed by Conoco personnel. Deviation of the aforementioned shaft from vertical was 31 cm. Two smaller shafts (pilot shafts) were drilled with the same rig. These smaller ones were drilled 1.8 m in diameter, to depth of 665 m and cased with .91-m-diam casing, to depth of 650 m to be used as pilot holes for 5.5 m diameter shafts. The total elapsed time for all drilling, casing, cementing, and rig moves was 50 weeks. The constraints mentioned of vertical accuracy, torque, wall collapse, rig set up time, lining time etc., pumping out, etc., may not be as serious as the author implies. First, vertical accuracy: The record achieved by Conoco indicates that with reasonable care, good accuracy can be obtained, primarily by having a fair amount of weight in tension, rather than on the drill bit. Second, the amount of torque that can be applied to the drill stem has been greatly increased by the introduction of larger diameter drill stems, such as the new Hughes rig uses. Third, risk of collapse of shaft walls is minimal with the proper mud program. Basically, the walls are supported by the weight of the mud and it is not removed until some type of casing is installed and grouted in. Here in the real challenge of blind drilling shafts to devise a more economical method of lining bored shafts than using steel casing. The remaining issues were minor at Conoco, provided adequate planning and scheduling takes place. An excellent paper, "Shaft Drilling--Crownpoint Project" by Hassell H. Hunter, presented at the Fifth Uranium Symposium in Albuquerque in Sept. 1981 contains details of this project. A combination of blind boring, with enlargement by either mechanical means (boring machine, or tunneling type shield) or slabbing down, with muck removal through a larger bored shaft would seem to be the future trend in shaft development. The economics, especially for wet conditions, favor this concept over conventional sinking, as has been demonstrated at Kerr McGee --Churchrock, UNC--Churchrock and Conoco at Crownpoint.

Jan 3, 1983

By R. E. McIvor, Brian Cornish, J. A. Finch, Yue Tan, Claude Gagnon

Fred C. Bond is recognized throughout the mineral processing world as the father of comminution equipment applied science and engineering. The Bond Work Index became a universal standard, and is the most widely used measurement tool for comminution energy consumption. This biography is the story of his lifetime of study, work experiences, experimentation, analyses and findings. His numerous published writings are reviewed. His legacy is one of comminution process engineering that will be used in perpetuity.

Feb 1, 2024

By Shankar S. Hegde

In many areas of the United States much of the most readily minable coal is nearing depletion, while at the same time, increased national attention is being given to coal as a major alternate energy source. If some of the thinner, more erratic, deeper and lower quality coals, which comprise the great bulk of U.S. resources, are to be mined efficiently and economically, greater attention must be devoted to careful planning of mines and to preparation facilities. One of the cornerstones to careful and successful mine planning is precise knowledge of coal thickness and areal distribution, roof and floor quality, and seam quality. Data on which this knowledge is based are obtained from various borehole techniques and, in some cases, seismic methods. Despite the many technical innovations that have been made in acquiring subsurface data, little attention has been given to the problem of systematic storage and retrieval procedures of the data and assembling them in a form that can be used for various computer mapping programs now available. (See Bilter and Martin, 1977; Bryant and Zobrist, 1977 and Farrell and Wherry, 1978). The purpose of this paper is to describe a series of user oriented programs developed over the past five years which are specifically designed for precise logging of rock core, accurate storage and retrieval of this data, correlation of seams between logs, tagging seams, computer assisted data posting of maps and preparing maps and profile sections for report illustrations. The entire system stresses increased precision and speed for a series of operations which are now largely manual, time consuming and prone to error.

Jan 1, 1980

By B. Berhe, R. D. Lawrence, J. Hinzer

"The fortunes of mining companies and their implied value are tied to cycles - both economic and commodity – within which they operate. Hence the determination of appropriate future metal prices is one of the most critical factors faced by mineral valuators especially for advanced projects. Price, and hence revenue, is usually the most sensitive input to the valuation model. Empirical studies of past forecasts show that the success rate for commodity price forecasting is very poor. This paper explores various approaches and comments on their strengths and weaknesses. We conclude that careful evaluation of long-term metal prices is a key element and is hardly a luxury that can be left to simple averages or rules of thumb. INTRODUCTION Discounted Cash Flow (""DCF"") analysis, is well suited for the valuation of advanced mineral development assets, for which there are identified mineral resources and some form of economic assessment (Pre-Feasibility or Feasibility Study). The DCF method is also the most commonly used method for determining value for such assets. It provides a means of relating the magnitude of expected future cash flows from profits (or losses) to the magnitude of the initial cash flow (investment) needed for capital expenditures to purchase or to develop an asset for commercial production. The method proves useful in making investment decisions as it allows for the quantification of the Net Present Value (“NPV”), as well as the Internal Rate of Return (IRR) and Payback Period on initial investment capital. Valuation by its very nature is a forward-looking exercise. The DCF method attempts to estimate the NPV of expected future cash flows, by selecting factors that will likely affect future cash flow based on informed analysis. One of the most critical and sensitive factors is the determination of appropriate future commodity prices. “The variables that have the greatest impact on a DCF evaluation are the reserves, the metal prices, and the discount rate.”1 The determination of future commodity prices for valuation purpose or during M&A negotiations is a hotly contested issue. There are a number of analysts, institutions and specialized commercial data suppliers that provide both short and long-term commodities price forecasts. Also, the use of an aggregated mean for all available forecasts, or consensus forecasted prices for valuation purposes is not uncommon. The methods used in making forecasts for each forecaster may vary and in many cases may not be publically disclosed. Nonetheless, the aggregated mean of all forecasted commodity prices of reputed institutions is usually taken to “represent the market’s view of likely future commodity prices.”"

Jan 1, 2016