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By Tim Gitzel

Thank you for your introduction, and thank you to the CIM for inviting me to make a presentation to you today. This is my first opportunity to report to you on the status of the Canadian uranium industry and I am pleased to tell you that the industry is in good shape, and well positioned for the future. As you will no doubt be aware, Saskatchewan benefits from the world?s largest known highgrade deposits of uranium as well as from a high level of provincial, public and northern community support. It is within this unique combination of geology and community that our industry operates. Uranium markets have been extremely competitive for a number of years for several reasons. First, deregulation in the nuclear electric power industry has tended to encourage fuel buyers to use up their large inventories built up at a time when rapidly increasing demand was anticipated. Second, alternate sources from surplus commercial stocks, military materials and reprocessed fuel have presented a major additional source of uranium supply. Today, these secondary supplies are meeting about half of uranium reactor feed requirements. Canada (that is, Saskatchewan) is the world?s largest ?natural? uranium producer with about a third of the global production. Saskatchewan?s mines produced more than 30 million pounds of yellowcake in 2002. Despite low prices, steady demand for uranium will continue. In fact, an increase in world uranium production in 2002 helped feed a more than 3 per cent increase in reactor fuel demand. Low cost production is important for surviving low market prices, but investments are based on longer-term strategies rather than simply responding to market cycles. Cost is not the only issue. In these times of increasing regulatory and public scrutiny we must continue to earn the trust of our stakeholders by adopting the highest standards and staying on the leading edge of technical, social and environmental developments. Managing these issues is as important as traditional concerns of ore grade and cost of production. The last two decades of the 20th century saw the Province of Saskatchewan rise to prominence as the leader in uranium production from facilities, which were at the time deemed world class. These facilities are now either at - or nearing - the end of their production years. We are now bringing on new facilities that will position Saskatchewan to remain the world leader in uranium production for many years to come.

May 1, 2003

? CONSTRUCTION AND MINING COSTS ARE HIGH IN THE ARCTIC ? VERTICAL KIMBERLITE PIPES WITH HIGH STRIP RATIOS ? SITE SPECIFIC GEOMETRIC CONSTRAINTS ? OPEN PIT FOLLOWED BY UNDERGROUND MINING ? HIGH KIMBERLITE UNIT COSTS TRACK INSTALLED ON PIT WALL ? INTENDED TO REPLACE MAIN HAUL RAMP ? 5 MIN HOIST CYCLE TIME ? KEY ADVANTAGES - REDUCED CYCLE AND STRIPPING RATIO ? TECHNOLOGY EXISTS IN OTHER APPLICATIONS

May 1, 2003

By Joe Price

Canada?s energy future will increasingly depend on a supply of light, sweet crude oil derived from the Athabasca oil sands deposit of North-eastern Alberta. Billions of dollars are being spent on the construction of new and expanded mine and bitumen extraction plants, in situ recovery facilities, pipelines, upgrading installations and all the infrastructure needed to support these projects. The success of the existing operators has also inspired new players, anxious for ?a piece of the action? to come forward with exciting project proposals of their own. None of this investment and spin-off economic activity would be taking place today if events had unfolded differently in this part of the world some one hundred million years ago. The accumulation of sand in rivers, estuaries and in the near-shore marine environment created the great reservoirs that host the enormous oil deposits these projects are designed to exploit. Mine operators of all stripes will likely agree that there are few good ?geological surprises?. With specific reference to oil sand deposits, the geological history determines the distribution of sand, silt and clay bodies, which in turn controls the ore grade. Important design factors including everything from stable pit slope angles to tailings properties reflects events that took place millions of years before. An understanding of the sequence of events that resulted in deposition and preservation of the sediment and oil are important to sound design for both mining and in situ facilities. A geological history of the region is described. Site-specific examples from Syncrude?s operating mines are used to illustrate some of the geological factors that can present design challenges.

May 1, 2003

By S. Goodman

Successful exploration for and exploitation of a mineral deposit requires an accurate understanding of the deposit architecture in 3D, and of the development of the mineralizing system through time, which requires a thorough comprehension of the structural framework of the deposit. The integration of geological, geophysical and geochemical datasets to arrive at a 4D structural framework is well-established and has been successfully applied by SRK Consulting in projects from deposit to regional scale. In some cases, we can go beyond this, applying the SEEBASETM technique, which utilizes a ?bottom-up? approach to basin analysis. SRK?s approach primarily relies on the interpretation of magnetic and gravity data, calibrated with many other datasets including mapped geology, topography, event histories, wells/drillholes and seismic data. The SEEBASETM model is a culmination of this data integration and is produced through an iterative process of structural interpretation and geophysical modeling, where an interpretation of basement composition and 4D structure is used to constrain depth-to-basement geophysical modeling, and the modeled depths are then used in conjunction with the structural interpretation to constrain contouring of the basement topography. The result is a rigorously calibrated, 3D view of the basement surface, which can be used to understand the basement and basin architecture, and thus serves as a predictive exploration model. This technique, which was developed for use in the petroleum industry, is now finding success as a predictive tool in mineral exploration.

May 1, 2003

By Bruno Bussière

Acid Mine Drainage (AMD) from mine wastes is one of the most environmental challenge currently facing the mining industry. AMD is the result of the natural oxidation of sulphides exposed to air and water. When mining wastes have the potential to produce AMD, these reactive wastes have to be managed to meet existing environmental regulations. The LTA site (property of Barrick Gold Corp.) contains sulphide tailings that have the potential to generate AMD. The closure option Barrick selected was to construct a multilayered cover with capillary barrier effects (CCBE). The main objective of this CCBE is to prevent the production of Acid Mine Drainage (AMD) from the tailings stack covering an area of approximately 60 ha. Since its construction in 1996, the cover has been monitored to evaluate its performance. Two of the measured parameters are volumetric water content and matrix suction. This paper presents some of the main results from the monitoring program that started seven years ago. The results show that the cover is largely able to maintain a high degree of saturation (greater than 85%) in the moisture-retaining layer. The actual performance of the CCBE on the flat surface of the 60 ha site is even better than expected at the design stage. The area that requires more specific attention with the LTA cover is the influence of slopes that can reduce the performance of the CCBE during dry periods. However, these effects seems to be local and do not significantly affect the overall performance of the CCBE to mitigate the production of AMD at the LTA site.

May 1, 2003

By Paul Harvey

Following initial discovery in 1991, BHP Billiton Diamonds Inc opened Canada?s first diamond mine, the Ekati Diamond Mine TM (Ekati) in the Northwest Territories on October 14th, 1998. Four short years later on November 29th, 2002, saw the opening of North America?s first underground diamond mine - the Koala North mine. Nestled between the original Panda open pit and the new Koala pit which is in the early stages of production, Koala North represents the only underground kimberlite mining venture in arctic conditions outside the new underground mines being developed by ALROSA in the Yakutsk region of eastern Russia. Extensive underground kimberlite mining has been practiced in the Republic of South Africa for much of the 20th century and continues today. Underground mining represents a key component of the long term business plan for the Ekati. As various open pits reach their economic limit, continued recovery of high value ore at depth is dependent upon the ability to productively mine the kimberlite pipes by underground methods. As a function of its location, size, and value, the Koala North pipe is ideally positioned to host the first underground mine at Ekati . In addition to being a production source for the operation, Koala North is designed as a learning mine, from which to gain valuable experience in preparation for the potential mining of other larger, higher value pipes by underground methods in the future. Fortuitously Koala North was available for development so the learnings could be integrated into the Panda mine design prior to completion of the Panda pit. Establishing our first underground diamond mine, and applying the open benching mining method in arctic conditions brings a unique combination of mining challenges together in a harsh climate and remote environment. This paper examines the design and establishment of the Koala North mine. Discussion includes experiences gained from the first year of development, production start-up, and provides a brief overview of our potential underground future at Ekati .

May 1, 2003

By Andrew Abraham

Continual improvement is the key to success in today?s competitive global arena. You require tools that promote dynamic quality management, deliver cost savings to your bottom line and provide the foundation for process improvement. ISO 9000 and ISO 14001 management systems and OHSAS 18001 are those tools. Since their inception, the benefits of ISO management systems and registration have been touted as the way to achieve better bottom line results. This spurred many companies to embark upon the road to registration with high expectations. The potential benefits of ISO management system implementation and third party registration that are commonly provided by Registrars and consultants are compelling adverts for success. ISO 9001:2000 is promoted as an essential tool for systematic efficient and affective management controls that provide a framework for analyzing errors and improving a company?s internal operational processes. It also allows companies to comply with internal and external customer and regulatory requirements thus continually improving the quality of their products and services and thus enhancing customer satisfaction. This, in turn, leads to greater customer recognition and increased market share. ISO 14001 implementation and registration may assist your company in reducing its litigation risk, raw material and energy consumption, waste disposal costs and possibly non tariff trade barriers. It should also provide continuity of operations, enhanced operational efficiency and consequently a competitive advantage in the market place. Registration of your ISO 14001 management system should also improve your company?s profile and credibility leading to regulatory flexibility and improved community goodwill. All of this will be a catalyst for improved morale and pride by employees and management alike. Likewise, OHSAS 18001, the latest certification specification for Occupational Health and Safety Management Systems supports Occupational Health and Safety legal and regulatory obligations and compliance, manages & controls Occupational Health and Safety risks and improves performance, safety culture and efficiency. OHSAS 18001 is an audit certification, and not a legislative requirement. Suggested benefits of implementation include reduction in accidents, lost time and associated liability and insurance costs and improving reputation and credibility through demonstrated commitment to health and safety. The foregoing increases access to new customers, joint venture partners and financing The skeptics say these are motherhood statements and lack corroborative evidence, i.e., ?Show me the money!?

May 1, 2003

By Emmanuel Henry

Hanging wall deformation monitoring at the Kiruna Mine is a major concern for Luossavaara- Kiirunavaara AB (LKAB) since underground production is deepening towards the Kiruna Town. In the quest for more effective monitoring techniques, LKAB decided to evaluate satellite-borne Synthetic Aperture Radar (SAR) interferometry?s ability to monitor ground subsidence by generating continuous deformation maps from satellite radar images. While adopted by other geoscience-related industries, SAR interferometry is still relatively untested in the Mining industry. This paper describes how subsidence is actually monitored on the Kiruna Mine?s hanging wall and gives an insight on SAR interferometry?s principle. The encouraging results are discussed as well as the technique?s benefits (continuous deformation mapping, low cost, fast, etc) and limitations (sensitivity to snow and vegetation cover).

May 1, 2003

By Mark Richards

Highland Valley Copper is a large, open-pit copper mine in the southern interior of British Columbia. Reclamation has been in progress on the site since 1987. Some 6,300 hectares will have been disturbed at the end of the mine?s life, the majority of which will eventually be reclaimed. The establishment of vegetation and the development of a self-sustaining vegetative cover are the central components of the mine?s reclamation plan. The present vegetation-monitoring program for the reclaimed area represents a significant commitment of resources and only addresses a small portion of the site each year. In an effort to expand the area surveyed while improving the efficiency of the monitoring, the use of remote sensing is being investigated. Airborne multispectral imagery was acquired in the summer of 2001, and the results of the multispectral classification were compared to ground observations made during the routine 2000 and 2001 monitoring program. A thematic map with 17 vegetation classes was produced. Within the vegetation classes, there was a strong spectral separation between ? dry grasses? and ?legumes? with further separation according to their density. Green biomass could also be quantified remotely across a wide variety of vegetation types. During summer 2002, further aerial imagery was acquired in combination with a targeted ground-truthing program to determine characteristic vegetation types associated with recognized spectral signatures, which can be used in a supervised classification. It is anticipated that after some fine-tuning, it will be possible to shift the ground-sampling effort from areas where the aerial classification confidence is high to more complex areas.

May 1, 2003

By V. Polotski

This paper describes a platform for autonomous operations in open pit mining environments. A typical operation consists of: (1) Initial locomotion toward a remote worksite; (2) Pattern navigation within the worksite; (3) Worksite manipulations and (4) Return locomotion to the start location. The platform includes precise localization module based upon the fusion of odometry, inertial and GPS measurements. The guidance module starts from a set of way points specified on a GPSreferenced map and plans and executes the mission. A typical mission includes specified manipulative tasks along the navigation path. During motion execution the on-board system continuously verifies that the path is free of obstacles and that the hardware is not overloaded. Momentary losses of external positioning measurements does not adversely affect the performance, owing to the redundancy in position and heading estimation. A rehearsal phase follows planning and allows the supervisor to examine the kinematic behavior of the platform during motion, thus reducing the need for continuous monitoring during execution and providing protection against potential losses of communication.

May 1, 2003

By Peter Heine

Diavik Diamond Mines Inc. (DDMI) has treated systems development as an integral part of the construction project when it built Canada?s second diamond mine. Fully aware that the proper collection and processing of operational data is needed to drive business decisions during production and planning, key Performance Indicators (KPIs) were defined to effectively manage operations when the mine went into production. The Production Information Management System (PIMS) allows KPIs to be measured, reported, and transferred to other systems in a reliable and convenient manner. PIMS provides a mechanism to collect real time production data from the various control systems around the site and acts as a tool to ?drill-down? and establish the important cause-effect relationships that impact the value of a KPI. Thus PIMS provides a data collection, storage, management, and an environment in which cause-effect relationships can be analysed and statistically verified. This understanding of the real cause-effect relationships, close to the source of the data and in the context of the operation, can be used to improve both operations and maintenance performance. The PIMS includes the PI Database implementation, its associated external interfaces with the various Control Systems, Cleaning Packaging Weighing System, Environmental System, Enterprise Asset Management (EAM) System, and Diamond Tracking System (DTS), as well as laboratory data collection, custom applications (downtime tracking, data reconciliation) and user clients. The interface with the EAM system provides material flow quantities and equipment availability on which the plant performance reports are based. The transfer of equipment usage to the EAM system is fed into the maintenance notifications and work orders functionality in the EAM. The environmental system interface provides the mechanism for capturing water consumption data required to generate the various regulatory reports. The interface to the cleaning-packaging-weighing system provides the mechanism for capturing batch data for transfer to the DTS for diamond product tracking at the production splitting facility in Yellowknife. The PIMS lab application provides a means of getting sample data into the system for critical metallurgical metrics, and the data reconciliation application provides a means of manually verifying the data before it is published or passed onto other systems.

May 1, 2003

By Knud Sinding

Mining firms are widely criticised for their adverse impacts on the environment. At the same time many firms in the industry devote extensive resources, both financial and managerial, to the reduction or elimination such impacts. Very considerable improvements have been made, although these are sometimes overshadowed by a few high-profile accidents, such as the occasional collapse of a cyanide-containing tailings dam. In parallel, much effort is also directed at projecting a positive environmental image, as witnessed by extensive environmental reporting, both on paper and increasingly through web-platforms. Mining projects today almost invariably involve some form of environmental protection. In industrial countries regulations in this area are extremely stringent, as is enforcement. In less well developed countries, regulation and enforcement may be weaker, but firms are in many cases and for a number of reasons committing themselves to high levels of environmental protection, even if they might get away without doing so. Research in the area of environmental performance of mining firms has so far paid much attention to concepts such as sustainability indicators and the sustainability of individual firms. Given the still raging debates about the appropriate way to determine the degree to which any given firm is sustainable (Welford 1995) as well as the usefulness of what will in the final analysis be a value judgement, anyone on the sidelines of the debate will come back to the fundamental issue, how is knowledge that a particular firm has been judged ?sustainable? going to be made use of. This issue remains unresolved, which may explain the lack of progress in formulating a useful definition of a sustainable firm The question addressed in this paper is not so much about what firms are doing on the ground or in any particular case of environmental protection, but more in the subsequent use of these efforts - and by extension - on the overall direction of corporate environmental strategy. The fundamental problem facing all mining firms is that they cannot easily benefit from unilaterally reducing their environmental impact. The firm can of course avoid liability and keep a variety of stakeholders happy and hence experience lower costs of obtaining the [input] resources they need (in a broad sense, not just minerals), but this represents only part of the opportunities available form pursuing an environmental strategy (Reinhardt 2000). The other part, which may have an enormous potential, involves the concepts of competitor management and product differentiation. The logic of keeping stakeholders happy has been most forcefully argued by Pfeffer and Salanchick (1978) who link the behaviour of firms in all domains to their ability to obtain the resources they need, at a cost that is lower than it would otherwise be (Pfeffer & Salanccik 1978). Several varieties of strategy can be included under this heading, including cost reduction and risk management. The alternative logic is to convince customers that they want to pay more for minerals supplied by mining firm X or directly attributable to mine Y, or by making all mineral users pay more. These two strategies, which may be referred to as product differentiation and competitor management, respectively (Reinhardt 2000) are related to the demand side of mineral supply, whereas cost reduction and risk management are related to the supply side. Mining firms have not pursued the demand side very much, if at all. This is probably due to the extreme difficulty of moving mineral products, bulky and unglamorous as they are, away from their

May 1, 2003

By René Dufour

Jusqu?à son acquisition par MM René Dufour et Alain Robin en 1994, les claims miniers et les droits de surface de la propriété étaient détenus depuis 1953 par la société Québec Columbium, une filiale de la socité américaine Kennecott Copper qui y a réalisé d?importants travaux miniers. En 1995 la compagnie NIOCAN inc. fut incorporée; ses actions furent inscrites à la bourse de Montréal en 1997, et à la bourse de Toronto en décembre 1999. Jusqu?à maintenant, NIOCAN a investi plus de 7 millions de dollars dans le développement de sa propriété minière de niobium située à quelques 40 kilomètres au nord-ouest de Montréal. Le haut rendement économique des deux gisements principaux que compte exploiter la compagnie, le S-60 et le HWM-2, a été établie par des études de faisabilité effectuées par le consortium Met-Chem/SNC-Lavalin. La mission que s?est donnée NIOCAN inc. consiste à mettre en production ses deux gisements et à devenir ainsi productrice de ferroniobium dans les plus brefs délais. Figure 2 Le projet est présentement à un stade avancé d?obtention du certificat d?autorisation du ministère de l?Environnement. À plus long terme, la compagnie compte aussi exploiter les sous-produits de ses gisements (apatite, forsterite, magnétite, calcaire et terres rares).

May 1, 2003

?General Facts:Barrick?sFirst Mine in Peru Production started in November 1998 ?The Facilities:Open Pit, Primary and Secondary Crusher Valley Fill Heap Leach PadMerrill Crowe PlantRefinery Environmental Facts: High Rainfall - Average Annual Precipitation of 1,200 mm (47 inches) Rainfall Events: Common 20mm daily events High Altitude Site - Elevations range from 3900 to 4250m. Steep topography - Terrain ranges from 3:1 slopes up to cliffs. Water Issues: Sediment Control - Open Pit PAG Encapsulation - Waste Dump Stormwater control - Leach Pad Erosion Control Techniques ? Offsite impacts mitigation Social Issues: 11 communities surrounding the property Town of Huaraz

May 1, 2003

By James W. Cassie

The Snap Lake Diamond Project is located approximately 220 km northeast of Yellowknife, NT, Canada at an approximate latitude of 63?35?. The project location is within the zone of continuous permafrost; measured ground temperatures are about ?2?C at 10 to 20 m depth below surface. The site is located on a peninsula jutting into Snap Lake. The site is generally barren of vegetation, except for some isolated areas with low trees located in topographic lows and near the shoreline of Snap Lake. As part of phased evaluation process with regards to the mining project, an Advanced Exploration Program was undertaken in 2000 and 2001. This program included the underground extraction of a bulk sample of kimberlite, which was processed on site. A Processed Kimberlite Containment (PKC) area was required as part of this program. The area chosen as the PKC facility was a small inland lake, called Inland Lake #1, on the peninsula. Construction of the PKC area required the construction of two dams, one on either end of the lake. At the south end of the lake, Dam 1 was constructed partially on a talik and partially on continuous permafrost. Dam 2 was constructed entirely on permafrost. The effects of the remote location, selection of suitable construction materials and permafrost conditions on the designs of the dams are discussed. A description of the design elements and construction schedule are provided. A review of the performance of these two dams, in terms of settlement, deformations, pore pressures and thermal regime, over the last several years is provided.

May 1, 2003

By Robert Hamilton

Aur Resources is Canada's leading copper mining company with producing mines and development projects in North, Central, and South America. Copper production from Louvicourt Mine in Quebec, Quebrada Blanca, and Andacollo Mines in Chile had a record of 245 million pounds in 2001. Located 600 km North of Montreal, Louvicourt Mine is a joint venture between Aur Resources (30%), Teck Cominco (45%), and Novicourt (45%). Aur Resources is the mine operator with 280 employees working to produce a copper and zinc concentrate. In operation since 1994, the mine has produced a total of 12,606,000 metric tonnes of ore grading 3.6 % Cu, 1.5 % Zn, 26gr./m.t Ag, 0.9gr.m.t Au. This highly mechanized mine reached full production in August 1995 at 4,000 tpd. From 1996 to 2001, the average mine production rate was more than 4,300 tpd. The Louvicourt Mine continued its record of solid performance in 2002 and is expected to continue to do so for the balance of its 2.5 years mine life.

May 1, 2003

By A. Proulx

Durant les années 1955 à 1961, plusieurs campagnes d?exploration ont été menées sur la zone Bond dans la partie sud-ouest de l?anneau nord de la carbonatite d?Oka (propriété de Niocan, figure 1). Les zones minéralisées HWM1 et HWM2 sont découvertes à l?ouest de la propriété. Un des forages, le S-60, avait intercepté 80 mètres de minéralisation à 0.71% Nb2O5 à l?est des zones HWM1 et HWM2 mais aucun autres travaux d?exploration n?avaient été réalisés sur cette interception minéralisée. En 1995, Niocan réalise une campagne de forage pour mieux définir la zone minéralisée recoupée par le forage S-60. En 1997, une seconde campagne de forage détermine un tonnage de 14.37 Mt avec une teneur de 0.66 % Nb2O5 pour la zone S-60 (Marcotte et Gagnon, 1997). Le complexe carbonatitique d'Oka se situe à environ 35 km à l?ouest de Montréal sur la rive nord du lac des Deux-Montagnes. Sa formation remonte au Crétacé précoce (entre 117 à 123 Ma). La carbonatite d?Oka fait partie de la suite d'intrusions alcalines que constituent les collines Montérégiennes. Le complexe a une forme allongée (7.2 km par 2.4 km) orientée NO-SE (figure 1). Il est intrusif dans des roches précambriennes constituées d?anorthosites au nord et de gneiss charnokitique au sud (Gold, 1963) appartenant à la Formation de la colline d?Oka. Les gneiss au contact du complexe sont fénitisés sur une épaisseur qui peut atteindre jusqu?à 60 mètres. Les roches carbonatitiques forment la série dominante du complexe et elles sont composées principalement de calcite (> 50 %) à gros grain et parfois rubanées. Les minéraux accessoires les plus communs sont la biotite, le pyroxène, la monticellite, la magnétite, l?apatite, la forstérite, la mélilite, le pyrochlore, la pérovskite, la niocalite, la pyrite et la pyrrhotite (Gold, 1963).

May 1, 2003

By Charles Tkaczuk

In order to remain competitive the mining industry must keep up with changes in technology. Many innovative technologies from the mining perspective are commonplace in other industries. A ?Global? review of technologies will often reveal existing technologies that can be innovatively applied in the mining industry. Industries, which are rife with proven solutions include, medicine, biotechnology, security, manufacturing, telecommunications, etc. This paper addresses the communications aspect of mining where greater productivity, lower costs and the ability to quickly react to mining related events is obtained through an increase in remote monitoring and operating control. A review of the communications systems in place globally reveals technologies that, with minimal modification, can be immediately applied to the mining environment. We discuss the concept, advantages and implementation of existing communications technology from an industry that is not usually associated with the mining industry. This technology will form the basis of a solid platform on which can be built a state-of-the-art process monitoring, control, and communication system. This lays the groundwork for providing one solution to the underground mining industry?s most difficult problem, establishing a reliable, maintainable and cost-effective underground bi-directional wired/wireless data, video and analog communications system. We need look no further than our own doorsteps to find such a solution. The cable that you see coming from the simple green or brown box on the boulevard into your home contains hundreds of television broadcast channels, FM radio channels and data channels. And if you have a set-top box, you are in control of it all. The Cable Television Broadcast Distribution System suppliers of today are at the leading edge of converging all the different methods of communications onto a common carrier, coaxial cable or fibre optic cable. There is no fundamental difference between providing a reliable communications network to a city/neighbourhood/home/personal computer than there is to a mining operation/underground level/equipment or person. The principle is the same. Only the application is different. Realizing this, we can capitalize on the efforts of other industrial sectors, to solve our communications problem. Where else can you find a solution to a problem that is mature, having been developed with the input of thousands of engineers, and having hundreds of millions of dollars spent on research and development, manufacturing, distribution, global presence and engineering support?

May 1, 2003

By Michael Samis

The real option valuation method is often presented as an alternative to the conventional discounted cash flow (DCF) approach because it is able to recognize additional project value due to the presence of management flexibility. However, these two valuation methods can be separated on a more fundamental level by their differences in risk discounting. Real option valuation applies the risk-adjustment to the source of uncertainty in the cash flow while the DCF method adjusts for risk at the aggregate level of net cash flow. This seemingly small difference is the reason why the real option method is able to differentiate between projects according to each project?s unique risk characteristics while the conventional DCF approach cannot. This paper provides an overview of the real options and DCF valuation frameworks and discusses the differences in risk discounting that exist between the two methods. Using grade-school mathematics, this paper clearly demonstrates how, with real options, a unique project risk discount can be calculated which is directly linked to the project?s unique risk profile. It also highlights why the DCF method fails in this regard and shows why a call to ?increase the Risk-Adjusted Discount Rate? is an incomplete solution at best. Finally, a heap-leach project and satellite reserve development project are valued with both techniques and the difference in investment conclusions is explained in terms of the risk-discounting concepts discussed here.

May 1, 2003

By Martin Williams

During the coming decade, many of the first generation of ‘super-pit’ gold and base metal mining operations in North and Latin America will reach the end of their economic lives. The closure of such pits in a manner which is environmentally sustainable presents a considerable challenge to the minerals industry. Pit closure often results in the partial or total inundation of formerly dewatered mining operations, and the resultant formation of lakes. The development of techniques for predicting, and controlling, the chemistry, groundwater discharge characteristics and long term hydrospheric impact of these lakes has become a critical aspect of pit closure planning. In this sense, the paper point out that Sleeper Mine was the first of a new generation of open pit gold mines developed in Nevada, USA. The closure of the Sleeper pit exemplifies the use of a range of pragmatic approaches to pit flooding, with applicability to mine closure at many other sites throughout the Américas.

Apr 22, 2003