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By R. W. Metsger

The metamorphic zinc-iron-manganese ore in the Grenvillian rocks of the Reading Prong m Sussex County, N.J. is unique. The singularity of its mineral composition and associations has fueled controversy among economic geologists and mineralogists for more than a hundred years. The silicate-oxide ore, in two synformal concentrations has been mined since about 1838. The Franklin mine was depleted in 1954, while the one at Sterling Hill is still producing. Although the two mines are perhaps best known for their almost three hundred mineral species and have been a mecca for collectors, they -- as importantly -- have provided a window through which to observe more than a billion years of geologic history. When pieced together, studies reveal a sequence of probable sedimentary deposition, intense folding, pseudo- viscous flow with attendant negative diapirism, uplifting, erosion, karstification, hydrothermal alteration, burial, faulting, igneous intrusion, uplift , saprolitization, and glaciation.

Jan 1, 1985

By Thomas W. Wälde

BACKGROUND Foreign investment has been a major factor in bringing about the substantial mining industries of Chile, Peru, Bolivia, Venezuela, Brasil and Guyana. But economic nationalism and sentiment against foreiqn domination of vital national industries grew in the 1960s and most major mining projects were transferred into state owner ship. Among the state mining enterprises formed were CODELCO - Chile, MINERO-PERU/ CENTRCMIN - Peru, CCMIBOL - Bolivia (in 1952), Hierro-PERU, GUY-BAU/BIDCO - Guyana, etc. New investment during that time was discouraged because it was subject to the restrictive conditions of the investment regulations of the Andean-Pact, a grouping of Chile, Bolivia, Peru, Ecuador, Venezuela and Colombia. The philisophy was that mineral resources were to be developed exclusively by national enterprises. Essential foreign inputs had to be acquired "depackaged" as separate purchases of equipment and technical assistance services. As a result of the worldwide economic recession which hit the mining industries in 1980-1982, many projects that were viable in 1970 were not developed by the new state enterprises due to lack of capital, managerial and technical abilities and due to problems with marketing. As a consequence of the long-term decline of metal prices, governments experienced difficulty in getting investment organized through national or foreign enterprises and have had to face up to the trade-offs between national control and active mineral development. A change has since taken place in governmental policies. The 1981 Peruvian mining law, the 1982 mining law of Uruguay, the 1979/1980 mineral promotion laws of Argentina, all witness the gradual shifting of emphasis from restriction to promotion. The investment rules of the Andean Pact have been progressively softened through national regulation and today are more or less irrelevant. Nationalizations and forced renegotiations have not occurred in the last few years. Countries have gone to great lengths (without much success) to re-attract foreign investment on terms that accommodate the political sensitivities of the South American countries and the practical requirements of investors and financiers. For this analysis, three contracts have been selected which reflect this accommodation in three South American countries, where miner a1 production plays a major role in the national economy. These con tracts reflect both the attitudes and traditions of the individual countries, but also mark the shift in mineral investment policies that has taken place. EL INDIO AGREEMENT The 1977 investment agreement between Chile and St. Joe Minerals marked a dramatic relationship between Chile and foreign mining investor s. In Chile, mining of copper has played a major role in the country's history. Large scale copper mining was initiated and developed by Kennecott and Anaconda. The nationalization of these two companies under the Allende government in July 1971 started a wave of nationalizations of foreign-held mining and petroleum operations since then in many parts of the world. The military government supported the new Chilean state mining companies ((30DELCO and ENMI) , but it also attempted to accelerate mineral development by prom ting foreign private investment, thus reversing the nationalistic policies followed by the Allende and the preceding Frei government. The new policy by the military government is expressed in Decreto-Ley 600 (1974) which governs foreign investment in Chile. Decreto-Ley 600 is

Jan 1, 1985

By Marc W. Bodine

Insoluble residues from three sequences of Paleozoic marine evaporates (Retsof salt bed in western New York, Salado Formation in southeastern New Mexico, and Paradox Member of the Hermosa Formation in southeastern Utah) are rich in trioctahedral clays. Chlorite (clinochlore), corrensite (mixed-layer chlorite-trioctahedral smectite), talc, and illite (the only dioctahedral clay) are the dominant clay minerals; serpentine, discrete trioctahedral smectite (saponite), and interstratified talc-trioctahedral smectite are sporadically abundant. These clay-mineral assemblages differ chemically and mineralogically from those observed in most continental and normal marine rocks, which commonly contain kaolinite, dioctahedral smectite (beidellite-montmorillonite), illite, mixed-layer illite-dioctahedral smectite, and, in most cases, no more than minor quantities of trioctahedral clay minerals. The distinctive clay mineralogy in these evaporate sequences suggests a largely authigenic origin. These clay minerals are thought to have formed during deposition and early diagenesis through interaction between argillaceous detritus and Mg-rich marine evaporate brines.

Jan 1, 1985

By C. A. Rowland, M. D. Flavel

There are seven basic comminution circuits that can be used to prepare beneficiation feed from the product of a primary crusher. This paper gives a comparison of these circuits based on average process and economical data. The paper is principally devoted to a discussion of the test work required to obtain the process data needed to evaluate each circuit. The results of the test work in conjunction with geographic and economic factors can be used to narrow down the choice of possible circuits to one, two, or three before making a detailed engineering study.

Jan 1, 1985

By Elizabeth L. Robinson

INTRODUCTION The financial structure of the mining industry has changed strikingly over the last thirty years. The changes that have taken place in the last ten years include both the acceleration of adverse trends in familiar balance sheet numbers and ratios, and the subtle but extensive increase in the complexity and diversity of funding sources, both on and off the balance sheet. The objectives of this paper are: 1. to briefly trace the evolution of trends in the mining industry's financial structure; 2. to focus in more detail on changes in the last decade; and 3. to analyze those trends both within the framework of capital structure theory, and in the context of changes in business and economic conditions. This survey focuses primarily on the mining companies listed on the major U.S. stock exchanges, since financial data for these firms are readily available. The producers of minerals are a diverse lot, however, and the quantitative data on "the mineral industry" as characterized in this survey fails to encompass the financial arrangements for the bulk of production worldwide, whether owned by governments or private-sector enterprises. Even large portions of the U.S. minerals industry - subsidiaries of still larger firms, medium-sized privately-held companies, and the small miners - were not included in the quantitative part of the analysis. THE EVOLUTION OF THE INDUSTRY'S FINANCIAL STRUCTURE In the aftermath of the business failures of the Great Depression, most borrowers and lenders considered minimal debt on the balance sheet the soundest policy. By the 1950's, however, a body of literature was developing which demonstrated that the use of leverage could improve the value of the firm, given a corporate tax structure which allows interest, but not dividends, to be deducted from income. Optimal Capital Structure The objective of undertaking a new project is to improve the wealth of the current owners of the firm. If internally-generated funds are insufficient to allow growth at the desired rate, the company can raise funds either by issuing new equity, or by incurring debt. The most attractive source is the one which will provide the funds for the lowest cost. Both stockholders and lenders expect to receive compensation for use of their funds at a rate which reflects two things: (1) the return they could earn in alternative investments, and (2) the riskiness of the projected return. Factors which increase business risk include the variability of demand, sales prices and input prices, and "operating leverage", or the proportion of fixed to variable costs. In addition, from the investors' point of view, the use of financial leverage concentrates risk onto the shareholders, because lenders enjoy a prior claim in the event of bankruptcy. So although financial leverage can increase a project's expected rate of return, and therefore, presumably, earnings per share, too much debt will be perceived as uncomfortably risky by equity investors, and have a negative effect on stock prices. In theory, then, there should be an optimal level of debt which the firm's managers should seek to obtain in its financial structure. The desirable proportion of debt should in general be lower for a firm with a higher inherent business risk. In addition to their own judgement, financial managers are sensitive to the attitudes of lenders, rating agencies, and investment bankers in setting financial targets (Scott and Johnson). In practice, financial structure will also depend upon the company's growth rate and level of profitability, and conditions in the capital markets at a given time.

Jan 1, 1985

By David S. Butts

There are many solution mining operations that use solar ponds as a mineral recovery step. Other locations in the world are now under investigation to recover minerals by solution mining but require the cheap energy of solar ponds to make the recovery viable. This paper shows a step-by-step material balance system that can be used in both simple and complex solar ponds. Use of this system will help the engineer determine if solar ponding efficiency can be improved or if solar ponding will work at all with a given set of conditions. Even the most complicated solar pond can be reduced to six flow streams. These are (1) feed, (2) exit, (3) leakage, (4) entrainment, (5) salts, and (6) evaporation. The equations developed in this paper will allow the solar pond engineer to easily evaluate the effect of each of the flow streams on the mineral production of a pond or pond complex.

Jan 1, 1985

By Peter J. Szabo

INTRODUCTION The time period from the detailed feasibility study to the post investment audity usually ranges from three to eight years depending upon the nature of the mining project considered. It is the only after the post investment audit that we know the adequacy of the assumptions made concerning operational risk assessment in the detailed feasibility or acquisition economics. The post investment audit results from numerous mining projects can best be described by a verse by John Greenleaf Whittier's Maaud Muller. It reads "For all sad words of tongue or pen the saddest are these 'It might have been!"' Dissecting the negative results of numerous mining projects we find faulty assumptions concerning markets, geology, capital investment and operational risk assessment. Although in hindsight many of these assumptions could have been considered impossible or impracticle to have forecast with any degree of certainty, we find that refined assumptions concerning operational risk assessment could have been made with only a modicum of additional "Due Diligence". Anyone who invests in a mining property should employ a much higher discount rate of future cash flow, (usually in the minimum range of 25%-30%), than he would expect from such safe investments as Treasury Bills or high grade Utility Bonds. The nature of this steep discount translates to a large uncertainty concerning the timing and actualization of assumptions contained in the detailed feasibility study. We must remember that when a project gets beyond 20 years, any contribution to the value of the project of cash flow is minimal due to the nature of the discounting process. Thus for each full or partial day lost in the development or early operation stage of a project, the financial impact will be greater than similar lost days later on in the project. Adequate operational risk assissment is particularly critical when bidding on competitive tenders for coal deposists in remote locations such as the Bowen Basin in Queensland, Australia. Because of the market attractiveness of these coal deposits for supplying end users in the Far East, Middle East and Europe, state governments require competitive tender biddings via the Authority to Prospect process. Front end bonuses and super royalty payments must be commited before the actual mining conditions are known. Time to submit firm offers from the actual request for proposal vary from 90 to 120 days. Thus any operational risk assessment must be detailed, realistic and reflective of the actual project. When one searches the literature, one finds limited qualitative data on operational risk assessment in valuation papers. Usually this facet of valuation takes a secondary role to such areas as reserves, markets, and environmental considerations. When one comes to the question of operational risk assessment more often than not one finds the use of "rules-of-thumb", such as tons per man shift, average production, average seam height, etc., are used to forecast results on which banks and other financial institutions are required to make investment decisions. Because of the extremely competitive environment of the 1970's and 1980's numerous financial institutions approved loans without adequate "Due Diligence", and are currently paying a steep price in terms of non performing loans and charge offs. One must always remember that each operation is unique with its own characteristic

Jan 1, 1985

By G. E. Pralle

INTRODUCTION The decade from 1969 to 1979 saw the crest of a wave of investments by companies and investors, primarily from the major industrial nations, in the metals and minerals industries of the so-called lesser developed countries. This was brought about by two major considerations: 1). The higher ore grades and therefore the higher profit potential of the mineral deposits in the third world countries, and 2). The desire, particularly by the European countries and by Japan, to ensure a safe supply of raw materials not available in their own countries. The decade began with the start of the Toquepala mine in Peru and the major investments in the Bougainville mine in Papua New Guinea and the Ertsberg mine in Indonesia. It ended with the start-up of Southern Peru Copper Company (SPCC) Cuajone mine in Peru and Inco's Soroako mine in Indonesia and the investments in several major alumina or aluminum projects in Australia and Brazil. Concurrent with this huge flow of funds into the mineral resources industry of the developing world was the build-up of a psychological fear in the host countries of exploitation/domination by the foreign investors. This resulted in an increasing trend towards: 1). Nationalization of existing mineral ventures, and 2). Tougher legal/fiscal frameworks for new ones. NATIONALIZATION Nationalization appeared in its earliest form as "Mexicanization" of the petroleum industry in Mexico in the 1930's, followed later by Mexicanization of the mining industry in general. This was enacted with the Mexican Mining Law of 1961 which required that 51% of the equity be owned by Mexican nationals. Later in the decade the equity share for foreign investors was reduced to 33 1/3% for the developers of the Frasch sulphur operations in the Isthumus of Tehuantepec. However, the law was not fully implemented in the copper industry until late 1970 with the purchase of 51% of the ownership in the Cananea Mining Company. The trend toward nationalization of the copper industry progressed to Chile where in 1967 under the Government of Eduardo Frei the major North American copper companies were induced to sell a one-half interest in their Chilean mines to the State. Likewise, in 1970, "Zambianization" took place, when the two major operating companies Roan Selection Trust (Amax) and Zamanglo (Anglo American) were restructured into Roan Consolidated Mines (RCM) and Nchanga Consolidated Mines (NCCM) providing the government with 51% of the equity ownership. Whilst the earlier forms of nationalization in general constituted a fairly priced buy-out (El Teniente, Chile for US$80 million, RCM for US$117.8 million, NCCM for US$178.7 million), the total nationalization of the Chilean mining companies in 1970 under Salvador Allende did not. Later, "Western" countries joined this trend and on October 29, 1973, Mr. Gough Whitlam proclaimed that "overseas capital must continue... in partnership with Australian capital" and "in some special energy cases we have an objective of 100% Australian ownership". In 1974 Mr. Pierre Trudeau stated: "The Liberal Party of Canada sets as an objective that new resources projects in the natural resource field should have at least 50% and preferably 60% Canadian equity ownership". FOREIGN INVESTMENT The situation for the foreign investor in the worldwide resource industry rapidly deteriorated from then on. New features appeared in mineral exploitation and operating agreements, centering not only on local government/local companies ownership but also on increased taxation. The new tax rate (mineral tax, royalty, and income tax) for the semi-government companies NCCM and RCM in Zambia became an effective 73%. Likewise the much publicized and discussed renegotiated Bougainville agreement brought dramatic increases in the total "take" by the PNG Government. More innovative forms of indirect taxation made their appearance and were added to the normal tax burdens of the mineral industry which already

Jan 1, 1985

By Hans W. Schreiber

INTRODUCTION At the end of the day, the decision by the sponsor to proceed with a project and to seek financing, or the decision by the financier to grant financing are made on a judgmental basis. Cash flow projections, sensitivity and risk analysis, the innumerable ratios applied by the financier, the so-called feasibility study, etc. are all only tools, and the degree to which they affect decisions is as highly varied as are the personality differences and business conduct and outlooks of the persons who render the decision of "go or no-go". The independent consultant, then, is expected to provide an additional increment of credulity and/or reliability to the "tools" which others will use in reaching a decision; the consultant is really not in a position to directly recommend a "go or no-go". PROJECT FINANCE INGREDIENTS The project finance situation has basically three ingredients: - The project; - The inherent risks attendant with project failure; - The parties. The project, to be viable for financing, will have certain essential characteristics, namely: 1. Clear title or rights to the mineral; 2. Proven definition/establishment of mineral quantity; 3. Financial viability; 4. Physical access consistent with financial viability; 5. A market for the product at a price and for the quantity consistent with financial viability; 6. Transportation/shipping from the project facility to the market at a cost consistent with financial viability; 7. Availability and demonstrated expertise of the developer of the facility; 8. Demonstrated expertise of the operator of the facility; 9. Production processes do not involve unproven new technology; 10. Availability of management personnel; 11. The property and the facilities have value (and thus can be used as collateral); 12. Government approvals/support, as required, will have been obtained; 13. The political environment is essentially friendly and stable; 14. The owner(s) of the project have the financial, strength to make equity contributions consistent with total required investment capital and project risk; 15. Backing by credit support other than that of the financier (i.e. guarantees); The inherent risks of failure are (Nevitt, 2nd Edition); 1. Completion delays with consequent delays in the generation of revenue 2. Cost overruns 3. Technical failure 4. Financial failure of contractors 5. Government interference 6. Uninsured losses 7. Increased price or shortages of raw materials, supplies 8. Technical obsolescence 9. Loss of competitive position in the market place 10. Expropriation 11. Inadequate/poor management The parties directly or indirectly integral to the project financing are: - The mineral rights owner - The developer - The operator - The equity investor

Jan 1, 1985

By J. Boldy

Discovery of the Delbridge massive sulfide deposit in the Noranda district of Quebec resulted from an appreciation of the significance of a mercury leakage halo as a lithochemical pathfinder to blind ore. Its location, relative to a geologically inferred ore-bearing horizon within complex volcanic stratigraphy was also a factor. Systematic sampling of microfractures present in outcrops delineated a diagnostic anomaly, drawing attention to an area considered prospective for buried ore. The massive sulfide deposit was subsequently found to be blind and topped at the 110-m (360-ft) level.

Jan 1, 1985

By John H. Puffer, Andreas H. Vassiliou

The Bemco mine area is within the Precambrian igneous and metamorphic rock terrain of the New Jersey Highlands province. Rocks In the area include a pyroxene granite, a hornblende granite, a quartz-oligoclase gneiss and a pegmatite and its host rock, a lens of amphibolite which becomes a sulfide-rich pyroxenite near the ore zone. The ore-bearing zone occurs along the hanging wall and foot-wall contact of the pegmatite which was emplaced discordantly into the amphibolite-pyroxenite.

Jan 1, 1985

By John C. Robison

INTRODUCTION Sensitivity analysis is a means of gauging the impact of individual risks on a financing. Key risks can occur in three time periods: - Feasibility, engineering and construction phase; - Start up phase (usually through completion); - Operating phase (post completion). If a company has agreed to cover these risks prior to completion, then less attention will be paid to the sensitivity of the project in the first two time periods. Since the operating phase of the project generates cash for both operations and debt service and generally does not begin until two to six years after the loan is signed, it is wise to look at scenarios other than the projected "base-case" scenario in order to determine the project's capability to operate successfully under a broad range of probable future events. Lenders are compensated at a fixed spread over their borrowing base and generally are not compensated if the project is successful beyond expectation. They are also subject to the loss of principal plus funding costs if the project performs below expectation. Because of this, lenders establish sensitivities around the parameters of conservative projections developed in the project feasibility studies and the cash flows resulting from these projections. The initial cash flow projections should demonstrate the project's ability to meet cash costs, debt service requirements (principal and interest), and still have sufficient cushion to cover contingencies such as strikes, price fluctuations, force majeur situations, etc. (See Schreiber, Chapter 10). The selection of the level of sensitivity analysis to be performed is the result of both objective criteria, including probabilistic analysis applied to the technical parameters, and, of equal importance, subjective criteria applied by the analysts, especially with regard to the economic and financial parameters impacting the project cash flows. RISK SENSITIVITY Assumptions used in the cash flow projections should be realistic. Risks identified by the lenders should be identified and cash flows prepared to assess whether these project risks are acceptable. Typical project risks include the following (see also Chapter 9): - Sufficient reserves - quantity and quality - Product price - Production level - Operating costs - Availability of energy and supplies - Transportation and infrastructure requirements and costs - Interest rate - Completion risks - Tax level - Political risks - Cost over-run risks - Operator experience - Management - Technological risks - Environmental permits and risks - Foreign exchange risks - Insurance coverage - Equity of sponsors - Inflation rate - Capital expenditure during project life In order to see the effect on the cash flow projections, each risk should be analyzed for its impact on the cash flow generating capacity of the project. Sensitivities can be examined to see if the resultant cash flow projection will meet the lenders minimum credit standards. 1.Reserve Sensitivity In general, lenders will not assume the reserve risk. However, it should also be noted that lenders receive loan proposals in which reserves range anywhere from proven to possible. Sensitivities are not generally run for various reserve levels and reserve estimates are either considered acceptable or not acceptable by the lenders.

Jan 1, 1985

By G. S. Derrickson, R. A. Golobic

Any type of agitation within a confined vessel is primarily concerned with two parameters: a level of agitation describing the homogeneity of the constituents (whether it be suspension or mixing), and the energy efficiency with which this level of agitation is accomplished. The following is an attempt to present a solution to the problem of adequately defining and optimizing these properties. A discussion is included of the application of good design practices to the determination of a mechanically efficient shape to the blade elements of the propeller. These practices, excluding several appropriate modifications, have been known, but not well understood, in aircraft fluid mechanics for a number of years. Having optimized the direct impartation of energy to the medium being agitated, attention is turned to one of the more perplexing phenomena of multi-phase systems - definition and prediction of agitation levels. The result of recent study and testing is a method of scaling that the authors believe provides a lucid understanding of governing physical parameters within the agitator itself, allowing one to scale up and down with confidence.

Jan 1, 1985

By C. Allen Born

INTRODUCTION As the title of this paper suggests, the author does not believe that risk can be managed. Rather, the objective is to identify the risk which will be present in a given venture and assess the level of that risk which is acceptable. More often than not, the risk which is present is subject to little or no modification. After identifying and measuring the risk a corporation will decide to accept it and proceed in such a way that it will be less exposed, or it will decide not to proceed at all. The exercise for a corporation is different only in degree from everyday judgements made by average people in average situations. However, that word "degree" means that it is considerably more complex on the corporate level. There is good reason for the additional complexity of corporate risk evaluation. The variables influencing a company's decision can be more numerous and the penalties for miscalculation much greater than those normally encountered by an individual. It should be understood that no analysis of risk, certainly not one as brief as the following, can do more than touch on some of the high points. Before examining the sorts of risk which affect the development and operation of specific mines, let us consider the broader aspect of the term with which mining companies, and all other business corporations, must deal. Companies must determine their long-term objectives and strategies within the context of a constantly changing world. To plot their direction they must attempt to read the future by seeking answers to questions such as: How will society evolve? Which businesses will thrive? In which of these should we place our emphasis? If a company hopes to be around five or ten years from now it must make the attempt to answer such questions in order to judge the impact of changing patterns in the evolving business environment. Information is available to allow the lessons of the past to be projected on the future. We have data on birth rates, economic booms and busts, patterns of conflict within and between nations, drought and other forces of nature as well as individual events which cannot be predicted, but which over time, do seem to occur in regular cycles. Ultimately the question "where will we be and what will we be doing a decade from now?" must be answered by one or more senior people with responsibility for the company's future. The compilation and interpretation of hard data by competent support staff, can only be used up to a certain point in determining future corporate strategy since there will be alternative possible futures and a high degree of risk will always remain. At this point those elusive qualities of experience, instinct, and - "gut feeling" - become important factors in choosing a long-term corporate direction. The goals of a company have a significant bearing on its attitude towards risk. This in turn dictates the "hurdle rate of return on investment" which a project decision-maker will require. The hurdle rate is the minimum-discount-percentage-rate applied to forecast cash flows to give a present value of zero to the All-Equity-Funded Investor. The feasibility study for a project is a fundamental tool in the management of risk. An experienced team has an established and well-understood set of ground rules for the preparation and assembly of a feasibility study. The necessary degree of conservation is built in at all levels of study data and, if the project is technically feasible, the hurdle rate becomes a catch-all measure of risk in a base-case project cash flow.

Jan 1, 1985

By L. Adler

A fairly complex analysis is required to select or evaluate a piece of excavating and bulk handling equipment for its performance. At present, there is little agreement as to what points should be considered, and even less on what procedure to follow. This paper provides both of these in a consistent and direct form. The analysis applies to all types and sizes of equipment. The importance of the equipment characteristics, job activities, and work conditions are stressed. Separate analytical stems are established in a flow chart for these. They are combined using suitability tests in: problem statement; natural conditions; suitability guidelines; appropriate equipment types; operational activities; encumbered space; geometric design; equipment sizing; failure and limits; performance and consumption; public policy checks; and costs and profitability. Public policy and economics receive emphasis towards the end. The procedure is iterative, containing distinct feedback loops. Specifying the steps and sequence provides a necessary structure which has long been overdue.

Jan 1, 1985

By P. B. Barton, P. M. Bethke, R. O. Rye

Rhyolitic welded-tuff wallrocks of the epithermal base and precious metal veins of the Creede district were pervasively altered by the addition of more than two billion metric tons of potassium some 1.5-2 million years before mineralization. Sodium, calcium and magnesium were strongly depleted, yielding a nearly binary quartz + potassium feldspar assemblage containing as much as 13 weight percent K 0. This large-scale metasomatism, originally noted by Steven and Rattle (1965), took place progressively by initial alteration of plagioclase phenocrysts to orthoclase or microcline followed by alteration of the groundmass feldspar to orthoclase and gradual change of the sanidine phenocrysts to more Or-rich compositions. Oxygen isotope and chemical studies show that the metasomatism resulted from the interaction of the tuffs with deeply circulating heated ground water and suggest that the potassium metasomatism of rhyolitic rocks is the facies equivalent of propylitization of volcanic rocks of more basic composition.

Jan 1, 1985

By Robert B. Parsons

Since 1978, new tax measures affecting the mining sector have been relatively favourable, evidencing a moderately enhanced government awareness and sensitivity towards the industry's concerns. Today, although the industry continues to face a complex and sometimes capricious tax system, a wide range of tax provisions offer some excellent opportunities to the industry. This paper examines the basic features of the present tax environment, discusses some of the more important changes of recent years, and comments on the outlook for mining taxation in Canada.

Jan 1, 1985

By Douglas A. Karvonen

INTRODUCTION Although the economy in the Province of Saskatchewan has historically been agriculturally oriented, a major source of wealth has been realized through natural resources such as petroleum and natural gas, coal and uranium and since the 1960's - potash. Potash or potassium chloride, in the form in which it is presently produced in Saskatchewan, is used primarily as fertilizer, a source of potassium, one of three essential elements required for healthy plant growth, with about 5% of production sold to the chemical industry for use in such products as soap and liquid detergent, glass and ceramics, textiles and some pharmaceuticals. Saskatchewan is estimated to have approximately 40% of known world potash reserves and its ten active mines account for some 25% of annual world production. POTASH CORPORATION OF SASKATCHEWAN In an effort to guarantee a fair and lasting economic benefit to the Province of Saskatchewan, the Potash Corporation of Saskatchewan (PCS) was created on February 4, 1975 through an Order-in-Council under the Crown Corporation's Act and later on April 1, 1976, the Potash Corporation Act provided for its continuation. PCS was given the mandate to acquire ownership of a significant portion of the potash mining capacity in Saskatchewan and to establish an organization capable of operating the facilities, marketing the product, and conducting all of the other activities necessary for a successful corporation competing in the world potash industry. The corporation is the largest potash producing and selling organization in the Western World - or third largest in the world. (See also Figure 1). PCS through its wholly-owned subsidiary, PCS Mining, has acquired a whole or partial interest in five geographically distinct producing properties or divisions, representing today more than 40% of Saskatchewan's potash producing capacity. The acquisition of each division was followed by a program designed to exploit and maximize the particular opportunities at each minesite for increased production. To that end, PCS Mining has taken an active lead in expanding to meet future demand and has implemented expansion programs at all properties except for its Esterhazy Division where it has a long-term processing agreement with International Minerals & Chemical Corporation (Canada) Limited. Through its wholly-owned subsidiaries, PCS Mining, PCS Sales and PCS Transport, this provincial crown corporation has the ability to operate as a producer and marketer of Saskatchewan's potash. In certain instances PCS, the parent company, assists in the financing of various projects undertaken by the subsidiaries and in other cases the subsidiary involved arranges its own financing. POTASH RESERVES As a background to the specific issue of financing, it is helpful to describe briefly the nature of the deposit which supports the industry - our collateral, if you like. The potash beds underlying Saskatchewan are sedimentary rock deposits formed by the gradual evaporation of an inland sea during the Middle Devonian period roughly 400 million years ago. Now known as the Prairie Evaporite, this formation stretches from North Dakota and Northeast Montana through Southern Saskatchewan into North-Central Alberta. These beds lie at mining depths ranging from 950 - 1000m (3,000 ft) below the surface, where conventional mining methods can be used, and to 1,650m (5,000 ft), where solution mining must be

Jan 1, 1985

By Peter A. Allen

INTRODUCTION Lac Minerals Ltd., a significant North American producer of gold and other metals for over three decades, recently completed the financing for its third discovery in an eight year period. From 1975 to 1982, three important gold deposits in Quebec and Ontario: namely Bousquet, Doyon and Hemlo, were located and tested by company geologists. When current development plans are complete, Lac will have injected $400 million into these deposits. A discussion of these projects and their financing reveals some extraordinary challenges faced by top mining management. Responses to these challenges developed by Lac management may interest executives planning to proceed with new North American gold or base metal mines. MINE DE BOUSQUET In 1976, we explored a property containing a large low grade surface gold deposit. The geologial setting was exciting and we tested recent rethinking about the volcanigenic genesis of gold and base metal occurrences. These ideas helped pus to persist in drilling a nearby conductor and 600,000 ton, 0.22 ounce/ton orebody was outlined. With gold at $Cdn.150 per ounce the feasibility was approved and work started February 1978. Availability of a company custom mill 35 miles away reduced our immediate capital needs to $8.5 million. First of all, understanding the geological significance of results at Bousquet was critical. Mine and surface exploration geologists at Lac are continually and closely working together to better understand the nature of gold deposits in the Shield. This management emphasis on both pure and mine geology meant that a much larger ore reserve could confidently be predicted. (A proposal to quickly develop and ship the ore to a nearby company mine was discarded.) Instead of designing just for the initial plan of 500 tons per day we therefore included headframe, shaft and hoisting capacity for 1,700 tons and provided a compartment for future shaft deepening. These prebuilt additions were welcomed within two years. The type of collaboration whereby surface and mine geologists make study and field projects of each other's problems sets the foundation for this predictive ability. At Lac, the traditional responsibility for and supervision of the mine geologist by the mine manager is modified by this collaboration. This adds interest and scope to the geologist's work and lets him think beyond production requirements. Besides such management considerations, dedicated, professional geologists with integrity and lots of practical experience are needed to plan successful developments like Bousquet. Second, projecting future bullion revenue was critical and our experience selling production for future delivery gave us a way to ensure that loan repayment at term would not be jeopardized by falling metal prices. Output from a single mine is often reduced or curtailed for numerous reasons, so "selling forward" is done best and with least risk by companies like Lac with more than one or two producing locations for that metal. At first, a forward marketing program was considered unwise, speculative and unorthodox by analysts and other producers. Declining markets in the early 1980s prolonged gold project capital recoveries however, and critics were better able to appreciate the usefulness of such a tool. The notion that gold miners shouldn't sell forward is rooted in the belief that long-run gold prices will rise as modern social theory implementation in democracies inevitably erodes currency values. Selling against this trend goes against this industry belief or "ethic" and is at odds with the company shareholder who expects the gold price to rise not fall. Nonetheless, an efficient tool is available to the gold producer (not to most other metal producers) to quickly disengage from adverse price trends or to lock in spot prices instantaneously for two years or more of profits. Gold had recently retreated from U.S.$200 to $104 and now had reversed to $150. Lac had been forced to close several of its producers during the late 1960s because central bank-controlled

Jan 1, 1985

By B. J. Scheiner, A. G. Smelley

The Bureau of Mines, US Department of the Interior, is conducting research on a dewatering technique for fine particles generated during the mineral beneficiation process that will recover a portion of the water now being lost using conventional waste disposal methods and significantly reduce the time required for land reclamation. The technique utilizes a flocculant, polyethylene oxide (PEO), that forms strong stable flocs that can be dewatered rapidly on static and/or rotary screens. Infield tests, phosphate clay waste has been dewatered from a nominal 2.5% solids to greater than 20% solids. In other field tests, coal-clay waste has been dewatered from a nominal 3% solids to greater than 55% solids. In addition, small-scale continuous tests have shown that bentonitic clays can be dewatered from 12% solids to 40% solids.

Jan 1, 1985