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By Stephen G. Wright

Jan 1, 1985

By G. L. Boxer, C. B. Smith, W. J. Atkinson

Since the inception of the Ashton (formerly Kalumburu) Joint Venture in 1972 the parties have expended $24 million in exploration for diamonds in the Kimberley region. This has resulted in the discovery of the currently subeconomic Ellendale deposits in 1976/77 and the economic Argyle - Smoke Creek Deposits in 1979/80. In addition to Argyle and Ellendale, some 90 kimberlitic and lamproitic bodies have been discovered grouped broadly into three provinces, on the west, east and north margins of the Kimberley block. These bodies range in size from dyke-like features less than 1 m (3 ft) in width to pipes with a surface area of 128 ha (316 acres). The bodies with larger surface area are volcanic crater deposits, infilled with air-fall and water deposited tuffs and epiclastic sediments. Diamond content ranges from trace to economic concentrations. The exploration discoveries were facilitated by early recognition that the petrography, mineralogy and chemistry of the diatremes varied from the classical kimberlites of Kimberley, South Africa, to unusual more highly fractionated, alkaline, silicic varieties having affinities with leucite-lamproite. Indirect methods of exploration were used, primary reconnaissance work being stream gravel sampling for kimberlitic indicator minerals. Evaluation showed Ellendale diamonds are 90% gem and near gem, but the low grades and tonnage render the deposits unpayable at today's diamond prices. After discovery in late 1979 and completion of a feasibility study by the end of 1982, evaluation studies proved Argyle to be economic. Alluvial diamond mining commenced in 1983 producing 6.2 million carats (Mct) that year, 60% being of industrial quality. Open-pit mining of the AK1 lamproite should start in 198511986 at a rate of 3 million t/a (33 million stpy) and produce 25 Mct/a, making this mine, and Australia, the world's largest producer of diamonds by weight. The revenue from diamond deposits is a function of the grade and the value of the diamonds. The grade is the product of the frequency of occurrence of the diamonds (stone density) and the mean stone size; the value of the stones is strongly related to their size distribution. During evaluation of the West Australian deposits, the diamond distribution was found to vary markedly in stone density and stone size. These variations corresponded with changes in the rock type hosting the mineralization. As a consequence, geological mapping of individual lamproites within the multiple vents and careful monitoring of the diamond distribution became an important part of the evaluation work. Similar variations in stone size and frequency were found to accord with separate alluvial terraces and fan gravels derived by erosion from the Argyle AK1 lamproite.

Jan 1, 1985

By Anthony Tuke

Members of the Society of Mining Engineers may well regard it as rather unusual that a paper on this subject is being presented by someone whose first taste of mining came at the age of 60 or so - someone who last heard of cathodes and anodes in 1938. On the other hand, the title does refer to the financing of a mine and at least I can claim to have spent all my business life since the war until 1981 in the world of banking, though this inevitably means that I have been used to looking at these and other problems through what you might regard as the wrong end of the telescope. The lending of money, and more particularly the provision of finance for commerce and industry, is the central job of a banker and I have been involved in this in various ways over many years, but regrettably only very marginally in the world of mining. As you will see from what follows, the rather specialised form of finance which RTZ required was, to my regret, not provided by the British banking community since the great majority of the finance came from American banks and, to a lesser extent, from German banks. I am most indebted to Mr. Roy Wright for a great deal of the nuts and bolts in this paper. He was one of the three central figures in the growth and expansion of RTZ during the 1950's and 1960's and was right at the centre of the negotiations with bankers, with governments and with many others. The going, as you will see, was far from easy. The essential basis for the financing of each of the RTZ group's mining projects was a firm long-term sales contract for sufficient of the output of the particular mine to produce the cash flow necessary to service the loans. Wherever possible, loans were raised in the same currency as the sales contracts were made. Each sales contract was designed to give the customer the product he wanted with a long-term assurance of supply and at the same time to give the bankers the protection they required. Thus the marketing concept and the financing concept for a particular mine formed one overall plan, and talks with the customers and the bankers were conducted in parallel until a satisfactory marketing/financial package was agreed in principle. Preliminary talks were begun soon after the discovery of a potentially viable orebody. As confidence about a discovery increased, customers were persuaded to enter into contingent sales contracts before the very detailed and costly business of the economic and technical feasibility study of the mine was launched; such a study might cost 10% or more of the estimated total capital cost. At the same time provisional understandings were reached with the bankers. The contingent sales contracts usually gave a period of grace of eighteen months to two years, during which time the decision whether or not to continue with the mine had to be made. This decision rested mainly on the result of the feasibility study and also on coming to a firm agreement with the bankers. If all went well and the mine went ahead, then the contingent sales contracts became firm, but they fell away if the decision was negative. The Company was fortunate that during the whole period when its major mines were being developed, world trade was increasing rapidly and Japan was becoming a dominant industrial power. The Japanese supported many of the mines, including Hamersley Iron Ore, Lornex Copper, Bougainville Copper to name a few, with the basic long-term sales contracts that enabled their development. The Germans supported Palabora and to a lesser extent Bougainville. The mines were financed as individual projects generally with a loan/equity ratio of about 65/35, without legal recourse to RTZ for the loans. RTZ was, however, responsible for providing any capital overruns required to bring the mines into commercial operations. Nevertheless, the RTZ management regarded itself as morally responsible to the lenders because, Palabora aside, the sales contracts had either a fixed selling price (like Hamersley), an indexed price (like the Elliot Lake Uranium Mines and Mary Kathleen), or a floor price (as in Lornex, Bougainville and Rossing). Thus the Company believed that any financial failure would have been due to poor management or technical

Jan 1, 1985

By L. Hartsell Cash

INTRODUCTION Created in 1944 to help rebuild those economies, principally in Europe, which were seriously damaged or destroyed during the Second World War, the World Bank--or to use its correct name, the International Bank for Reconstruction and Development-began its operational phase by making a loan to the Government of France to accomplish two tasks: (i) to import coal for space heating purposes; and (ii) to buy new machinery and equipment to help rehabilitate its coal mines. Once the thrust of reconstruction in postwar Europe was largely accomplished, the World Bank Group (for today the World Bank has three separate lending windows) turned to mobilizing funds to improve living standards in developing countries, which remains its primary goal today. Over this period of time, the World Bank Group has continued to assist the world mining industry in various ways and, since 1955 the World Bank Group has financed mining or mineral processing projects with loans/credits totalling $1.5 billion. The World Bank Group consists of two institutions--the World Bank itself and the International Finance Corporation (IFC), which was founded as a separate institution in 1956 and three separate lending windows--the World Bank, the International Development Association (IDA), and IFC. The World Bank loans are provided at commercially-related interest rates but have grace periods usually of up to 3 to 5 years and repayment periods ranging from around 15 to 20 years. Since the World Bank raises its operating funds on the international capital markets in varying currencies and in varying interest rates, it relends a basket of currencies at floating interest rates which are fixed every six months to reflect the Bank's own borrowing cost. At the present time, the interest rate is just below 10% per year and in addition, a one-time front-end fee of 1/4 of 1% is charged. Also, a commitment fee of 3/4% per year is charged on the undisbursed amount of the loan itself. For loans to industrial and mining projects, it is normal to charge an additional guarantee fee of 1 to 1.5% in addition to the annual interest rate. This guarantee fee is payable to the government of the country in which the project is carried out since, by its charter, the World Bank is required to have the guarantee of the host government for each loan made in a specific country. By far the greatest source of lending funds within the World Bank Group is that of the World Bank itself and for the fiscal year ending June 30, 1984, the World Bank approved loans totalling $12 billion. The second lending window within the World Bank Group is IDA which performs the same functions as the Bank itself and has the same staff. Nevertheless, its loans (called credits) are made on much softer terms and are made to the poorest nations only. IDA funds are subscribed by the wealthier countries, usually as grants, and these are relent as credits to those countries with the lowest per capita income. IDA credits are made for 50 year periods, including 10 years of grace, to the government itself. The credits are interest free, but there is a service charge of 3/4% per year on the amount withdrawn and outstanding to defray the administrative costs of IDA. Credits approved during fiscal 1984 totalled $3.5 billion. The third lending window is IFC. While IFC is a separate corporation and operates quite separately from the World Bank and has its own staff and regulations, it works very closely with the World Bank on its overall approach to the mining sector and to a particular country. IFC's mission is essentially to supply venture capital and to stimulate development of the local private sector in capital markets as well as to promote the international flow of private capital to developing countries. Unlike the World Bank and IDA, the IFC does not lend directly to governments

Jan 1, 1985

Andy H. Vassiliou – Introduction Ladies and gentlemen,.good evening and welcome to the Paul F. Kerr Memorial Symposium dinner. I believe we are all here to honor the memory of a great teacher and advisor, and a true friend -- Professor Kerr, or Dr. Kerr, or to most of us who were his students, "Pappy" Kerr. Most of us who attended the Paul F. Kerr Memorial Symposium earlier today at the New York Hilton had the opportunity to read, or listen to, or discuss scientific papers presented in honor of Dr. Kerr. In addition, all of the speakers had the opportunity to reminisce about their association with Dr. Kerr, who was credited as having contributed substantially to their graduate education and the development of their careers. Dr. Kerr's two daughters -- Ruth and Nancy -- who attended the Symposium at the Hilton are also here with us tonight. I think we should keep tonight's festivities on an informal basis since we are all old friends or former students of Dr. Kerr. Some of us may want to say a few words about our experiences at the time we were students at Columbia, and hopefully include some anecdotes relating to Professor Kerr. I would like to invite everyone to do so, but first we have arranged for two of us to be the lead speakers, whom I will introduce in a few moments.

Jan 1, 1985

By Joseph E. Worthington

The present-day Northumberland gold mine is one of the deposits generally characterized as a Carlin-type occurrence. It lies at the crest of the Toquima Range in Nye County near the center of Nevada. Gold mineralization occurs in two modes, in argillaceous and in silicified limestones, and is generally very fine-grained or micron gold. The Northumberland district has had a history that is typical of many western gold districts: minor production prior to World War II and intermittent exploration thereafter until a combination of geological insight, improved economics, and the advent of heap leach technology created the Northumberland gold mine. Nye County, Nevada, was sparsely populated and little explored in the early years of the settlement of the west; the Northumberland district was not established until 1866. Initial interest was in silver and the district operated as a very small producer for the next seventy years. The disseminated gold occurrences in silicified limestones were recognized and Northumberland Mining Co. was organized to develop the property in the late 1930s. Northumberland Mining Co. actually conducted drilling operations (over 200 drill holes) and mined from small open pits in the silicified limestones. They ultimately produced almost 936 kg (33,000 oz) gold before being shut down by War Production Board Order L-208 in 1942. After World War II gold mining activities were essentially nil for over a decade due to the poor economics of gold production. The property was, however, a known gold producer and attracted recurrent exploration attention. About 45 holes were drilled under the direction of Peter Joralemon for private interests between 1959 and 1963. Next Kerr McGee drilled about 25 holes during 1963 and 1964. Some- what later, in 1968, Homestake drilled 20 holes. The property was then acquired by Idaho Mining Co. which drilled about 30 more holes between 1972 and 1974. By this time the Northumberland mine was becoming somewhat shopworn with over 300 holes drilled. Interest in gold prospects was increasing substantially in Nevada, how- ever, due to rising gold prices in late 1974, and several companies were interested in continuing exploration at Northumberland. In 1975 Cyprus Mines Corp. was successful in obtaining a joint venture arrangement with Idaho Mining Co. for further exploration and development of the property. The overall Cyprus exploration program was under the direction of James G. Hansen, Vice President Exploration. The geologist recommending acquisition of Northumberland was Peter E. Chapman who reported to Joseph E. Worthington, Manager of U.S. Exploration for Cyprus. The basis for selection of the Northumberland mine as an exploration target for Cyprus by Chapman was essentially prior knowledge of regional and 16cal geology and of the mine. Exploration for the next few years was directed by Chapman under the supervision of Worthington. During 1975 and 1976 rotary and check core drilling were conducted that indicated that a substantial Carlin-type or disseminated, low-grade gold deposit occurred in two separate bodies. Drilling was based on geologic mapping and rock chip geochemical sampling. Both ore zones were reflected at the surface as gold and arsenic anomalies in rock chips. Heap leach tests attempted in 1977 were aborted by a flash flood, but were completed in 1978. Engineering studies occupied the next couple of years until the property achieved production in the fall of 1981. It is now producing by open-pit mining with gold recovery by heap leaching and cyanide extraction at a rated capacity of approximately 2722 t/d (3000 stpd) ore. Metal recovery has been projected (probably conservatively) at 5 10 kg/a (18,000 oz per year) gold and 1.6 Mg/a (59,000 oz per year) silver. Reserves are reported to be adequate for ten to fifteen years of production. REFERENCES Anon., 1981, "Gold in Nevada," Span Magazine, Vol. 21, No. 3, Standard Oil Co., pp. 6-9. Koschman, A.H. and Bergendahl, M.H., 1968, "Principal Gold- producing Districts of the United States, Professional Paper 610, US Geological Survey, p. 193. Kral, V.E., 195 1, "Minerals Resources of Nye County, Nevada, Bulletin, Vol. 45, No. 3, Geology and Mining Series 50, Nevada University.

Jan 1, 1985

By John D. Nelson

Jan 1, 1985

By Michael Chender

INTRODUCTION The project financing described elsewhere in this book is available to major mining companies on the basis of a strong balance sheet, a significant equity position in a project of proven feasibility, and a demonstrated ability to bring ore deposits into production. "Junior" mining companies, which are most active in Canada, Australia, the US, and South Africa, by definition do not meet these criteria. In many cases, junior companies will need to raise money simply to cover the costs of acquiring and exploring potential deposits. In what follows we will look primarily at junior financing practices in the US and Canada, although the same general principles will apply in Australia and South Africa. The principal vehicles for junior mine company financing are limited partnerships, the private placement of securities and debentures, and public offering of securities, and property deals with stronger companies, in the form of leases, earn-ins and co-ventures. The cost (in terms of dollars or equity) and, to some extent, the applicability of using these difficult approaches varies with the stage of development of the property and with the corresponding degree of risk to the investor. Much junior company fund raising is, in fact, "interim" financing in that it allows the company to improve its properties and develop its assets to the stage where more favorable financing arrangements may become available. Companies will therefore often use several of the approaches described above during the development life of a specific property. LIMITED PARTNERSHIPS Limited partnerships and syndications are a popular way of structuring the initial private financing of mine developments because of their attractive tax consequences for the well-to-do investor. Costs of exploration and development can in many countries be passed through as deductions to the limited partners, who are thus able to gamble on a possible windfall at little real cost. In addition to private Canadian funds, much German money flowed into Canadian exploration ventures on this basis, but stopped in 1982 due to economic conditions in West Germany. In the US, recent regulations have, in the great majority of cases, taken away the ability to "shelter" income in mining limited partnerships. Deductions taken by the individual investor cannot exceed the amount of money he actually has at risk. Nevertheless, the allowable deductions are still attractive and some of the major mining companies are now beginning to look at limited partnerships as a vehicle for attracting additional exploration funding. Ranchers Exploration and Development has successfully put together several drilling funds on this basis. THE PRIVATE PLACEMENT Initial funding for the acquisition and preliminary exploration of prospects is often accomplished through a private placement of unregistered securities or, where it is not a problem to carry debt on the statement, by a private placement sale of debentures. A fledgling company wishing to do a public offering may well be advised by an underwriter to accomplish a small private placement as a precondition of the larger offering. In this way, the sale of the registered securities is not inhibited by the company starting out with a debt-ridden balance sheet and no demonstrated ability to secure the additional financing generally necessary beyond the proceeds of that offering. In the US, the securities offered in a private placement are not registered with the Securities and Exchange Commission (S.E.C.) but are restricted as to their resale, and could be further restricted by a underwriting agreement

Jan 1, 1985

By David B. Campbell

Production of both metallurgical and thermal coal represents a significant sector of the mining economy of British Columbia. The coal measures are located in the Rocky Mountains, and the majority of the coal is produced by open pit mining. The coal seams occur interbedded with siltstones, sandstones, mudstones, and shales. Consequently, large volumes of waste rock are generated in the course of open pit mining. The waste rock is consigned to waste rock piles that of necessity must be developed on moderate to steeply sloping terrain. Some of the waste dumps currently under development will ultimately contain in excess of 500 million cubic meters of material, and some of the proposed waste piles will attain heights in excess of 300 m. These waste piles must be developed in a manner that will assure their stability through all stages of development, as well as over the long term after mining operations have been completed. This paper describes methods of waste dump development, factors affecting stability, modes of potential failure, and a simple method for monitoring movements to provide a warning of pending unstable conditions.

Jan 1, 1985

By V. (“Viv”) R. Forbes

[ ] INTRODUCTION "The Liberal Party believes that the State's mineral resources belong to the people of Queensland and therefore it is essential that the state, on their behalf, obtains maximum benefit from the development of those resources." (Liberal Party, 1980 "Mineral Resources Policy" p.2). "Unless sound policies are implemented.... increased production of minerals will benefit only the already wealthy and the lucky few... A resources tax is essential to ensure that above normal profits are shared by the whole community.... Labor policies on taxation must ensure an adequate return from mining developments to the Australian people." (Labor Party Policy Paper, May 1982 "National Issues relating to rapid expansion of mineral production during the eighties". p.1, 37, 47). Judging from these statements, key political parties in Australia believe that mining profits are lightly taxed and that shareholders get most of the benefits. THE REALITY The Government Share of Income statement in Table 1 attempts to measure the government share of the income generated by the "Big Five" Australian mining companies - Broken Hill Pty Ltd. (BHP), CRA Limited, Utah International, MIM Holdings Ltd., and Western Mining Corporation ("WMC"). These companies control over 70% of Australia's mining industry including all the most profitable mining operations. They dominate the mining and processing of iron and steel, aluminum, manganese, coal, oil and gas, copper, lead, zinc, silver, nickel, gold, ferro-alloys and salt in Australia. They are also major world exporters of most of these products. They are thus a representative sample of the profit-earning side of the Australian mining industry. In their two most recent financial years these five companies had income before tax of A$6,980 million. The Government share of this income was A$6,285 million or 90%. The total market capitalisation of the Big Five is about A$8,480 million. (December, 1982). Governments thus consumed the equivalent of 82% of their total value in just two years. This was taking place while the politicians drafted the above statements calling for an "adequate" share for the people.

Jan 1, 1985

By Simon D. Strauss

INTRODUCTION The changes in ownership, management, and operation of the non-fuel minerals industry since the Second World War have been dramatic. World-leading enterprises have lost their identity; host countries have taken over operations from multi-national firms; marketing practices have been drastically altered - and yet the world industry is supplying minerals on a scale far greater than had been anticipated in projections made at mid-century. The world's known mineral resources have been enormously expanded, despite the doom sayers who for decades have been predicting that depletion of non-renewable resources would impose limits to growth. PALEY REPORT One can set the stage by reviewing how the minerals outlook was regarded in a thoughtful and comprehensive analysis made in the years 1950 and 1951. During the War years, President Harry Truman of the United States had come to appreciate the decisive role played by minerals resources through his chairmanship as a U.S Senator of a committee that investigated the procurement and allocation of natural resources. In 1950, in the Cold War era that resulted in actual military conflict in Korea, he appointed a prestigious five-man commission to study the problems of Materials Policy over the following quarter century. Their findings, published in five impressive volumes in early 1952, became known as the Paley report. The text was prepared by expert scientists and economists who spent 18 months assembling statistics, making projections of future demand, and interviewing leaders in industry, academia, and government. [ ] The Commission had correctly foreseen that aluminum would replace copper as the largest volume non-ferrous metal, but it had fallen short of reality by a wide margin indeed for all three materials. Even though the Commission's expectations for growth proved to be extremely understated, it had concluded its report with grave foreboding about the effect of its estimates of demand in relation to supply, as follows: "Consumption of almost all materials is expanding at compound rates and is thus pressing harder and harder against resources which, whatever else they may be doing, are not similarly expanding. This materials problem is thus not the kind of 'shortage' problem, local and transient, which in the past has found its solution in price changes which have brought supply and demand back into balance. The terms of the materials problem we face today are larger and more pervasive." With respect to some minerals, the Paley Report expressed scepticism that, in fact, supplies would be forthcoming regardless of price. Because the Paley demand forecasts understated the actual growth in demand for virtually every mineral, one could logically have expected frequent and protracted shortages in the years since 1950.

Jan 1, 1985

By R. F. Sheldon

The discovery of the Carlin deposit was the result of discriminating geologic research and prospecting devoted to the objective of finding a gold deposit that could be mined by open pit methods. By the late 1950s, Newmont Mining Corp. was becoming increasingly concerned about the trend of rapidly rising underground mining costs unless bulk mining methods could be applied. The desirability of finding an open-pittable gold deposit was apparent. The attention of Newmont geologists was directed to Nevada by the publication of two papers: "Paleozoic rocks in North-central Nevada" (1958) and "Alinements of Mining Districts in North-central Nevada" (1960), both authored or co-authored by Ralph J. Roberts of the United States Geological Survey. John Livermore, geologist of Newmont Exploration Ltd., attended a talk given by Roberts in Ely, Nevada in the summer of 1961. These papers and the address by Roberts gave details concerning the Roberts Mountain overthrust, a 483 km (300-mile) long, shallowdipping fault which pushed clastic and volcanic rocks of early and middle Paleozoic age eastward over younger marine formations. Subsequent uplift and doming with consequent erosion had locally removed the upper plate strata exposing windows of lower plate carbonate rocks. Roberts noted that the principal mineral deposits of the region, including gold, were associated with these windows which exhibited a preferred alinement. In the summer and fall of 1961 Newmont's exploration geologists John Livermore and J. Alan Coope began a systematic examination of gold occurrences associated with these windows, aided by further discussion with geologists of the US Geological Survey. Attention was directed to the Lynn and Carlin windows, particularly to those formations lying immediately above and below the Roberts Mountain fault. It was appreciated at the time that many of the gold occurrences in the region were unusual in that no colours were obtained even when panning high grade samples. A large number of rock samples were collected and analysed using fire assaying procedures, and background values for gold were established. This systematic rock sampling resulted in the identification of a distinct area of anomalous gold values, and a block of claims was staked in late October, 1961. These claims, plus an adjoining optioned 32.4 ha (80 acres) of ground, cover the main area of the present Carlin gold mine. Prior to snowfall that winter, one of the bulldozed assessment pits required to establish a claim's discovery exposed 24 m (80 ft) of mineralization assaying 0.007 kg/t (0.22 oz per st) gold. In the spring of 1962 a program of trenching, sampling, and geological mapping followed by rotary drilling was underway. Other properties in the area were acquired. The generally undistinguished nature of the dolomitic siltstones and silty dolomitic limestones hosting the micron-sized gold particles, coupled with the lack of visually associated guide minerals, made identification of the gold bearing areas very difficult. The entire drill column had to be assayed to ensure that values were not overlooked, as very often sections that might be assumed to be waste turned out to be high grade. On September 10, 1962 a high grade intersection of 24 m (80 ft) assaying over 0.03 kg/t (1 oz per st) gold was encountered in the third hole drilled. An expanded program of both rotary and diamond drilling led to the further delineation of the ore body. By December 1963, the exploration program had established an initial reserve of 10 Mt (11 million st) grading 0.01 kg/t (0.32 oz per st) gold. A 1.8 kt/d (2,000 stpd) processing plant was constructed and the first gold bullion was poured in May, 1965, just two years and eight months after the discovery hole was drilled. REFERENCES Roberts, R.J., Holz, P.E., Gilluly, J., and Ferguson, H.G., 1958, "Paleozoic Rocks in North-central Nevada," Bulletin American Association of Petroleum Geologists, Vol. 42, No. 12. Roberts, R.J., 1960, "Alinements of Mining Districts in North-central Nevada," Professional Paper 400-B, US Geological Survey, Article 9.

Jan 1, 1985

By Harry R. Cedergren

Properly designed drainage systems can be of great benefit to many kinds of Civil Engineering works, including embankments, and often are the most economical way to protect such works from the damaging effects of water. To function properly, drains must be able to remove water without also removing soil or becoming clogged with soil or erodible rocks. The first criterion to be used in designing drainage systems, called the filter criterion, can prevent all such problems (erosion and clogging) when properly fulfilled in design and construction. The second requirement of drains is that they must be capable of removing all of the incoming water without the build-up of large amounts of head that can damage the protected works. To insure this kind of perfomance, the discharge capabilities of drains should always be verified by appropriate hydraulic and seepage calculations. This paper describes these two basic drain design criteria and also gives examples of application of seepage principles to the evaluation of the potential benefits of drains and to the design of drains for mine waste embankments.

Jan 1, 1985

By Robert L. Davidoff

INTRODUCTION The impact of taxation differs substantially from state to state in a complex fashion that depends on both the physical characteristics of a mineral deposit and on the price of the mineral commodity relative to its costs of production. A comparative analysis of the tax structures of eight states (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wisconsin) showed wide variations in rates of return for any given type of mineral property, with no state having either the most burdensome or least burdensome tax structure under all circumstances. Three hypothetical mineral operations were analyzed: a producing open-pit copper property, a non-producing underground platinum operation, and a non-producing underground gold operation. None of them corresponds exactly to an existing property. Each of these property types is further defined to have ore feed grades at three different levels, leading to three potential profitability levels, referred to in this paper as "economic", "marginal" and "subeconomic". Thus the differential impact of state tax structures is measured for mineral properties of different types, as well as for different profitability levels. Montana is used as the base case. This study does not address the topic of corporate structures or tax consolidation. There are no costs assumed external to the operation of the deposit (e.g. exploration to locate additional deposits). Two types of analyses were performed for this study. The first calculates the total cumulative tax payments in each state using all applicable taxes (including U.S. federal income taxes and examines the resultant differences in discounted cash-flows rate of returns DCFROR's amoung the eight states. The second is a sensitivity analysis that examines each type of state tax separately (i.e. state income, property, and severance taxes) in order to isolate and examine the differences in tax payments that are due to the difference in rates and methods of computing specific types of taxes in each state. The results of this study serve to illustrate the complex nature of interactions among various taxes. For example, property tax is a deduction in calculating severance tax in some state. Changes in property-tax and severance-tax payments both enter into the calculation of state and federal income-tax liability. This, in turn, could change the timing and usage of tax-loss carry forward amounts and investment tax credits. Additionally, the physical characteristics of a property, the method and costs at which the mineral will be extracted, and the profitability level at which each property operates will affect tax treatment. Each mineral operation was evaluated at three different predetermined profitability levels, referred to using the terms economic, marginal and sub-economic. These three profitability levels are defined by the ore feed grades of the primary commodity that yield in constant terms, approximately an "economic" 18% DCFROR, "a marginal." 10% DCFROR, and a "sub-economic" 5% DCFROR, respectively, under the Montana tax structure. In the analyses, the mining and processing parameters for each of the three types of properties were assumed to be identical for each of the eight states. It was assumed that each operation produces at full operating capacity throughout its life. This implies the level of mineral commodity demand will support the inferred commodity price, such that each operation will be able to sell all its output. The analyses performed for this study were done using a comprehensive economic evaluation simulator that is used in the Bureau of Mines, Division of Minerals Availability MAS program to perform DCFROR analyses. All economic evaluations performed upon these data (see appendix 2) were in constant January 1981 dollars. By-product prices used for the analyses were: [Gold $425.00/troy ounce Palladium$200.00/troy ounce Silver $ 10.00/troy ounce] Typical cash-flow calculation layout is given in Appendix 3. The initial step for each evaluation is to define an "economic" profitability level scenario. An 18% DCFROR rate in Montana was considered the

Jan 1, 1985

By Duane L. Whiting

Jan 1, 1985

By Wolfgang O. Gluschke

INTRODUCTION Virtually all countries have general legislation covering most aspects of mining and mineral processing, including investment and tax laws, safety and health regulation, and specific rules applying to exploration reporting procedures. Yet most developing countries negotiate individual agreements with foreign investors for major mineral projects, in particular when all or part of the expected output is exported. Such agreements are known under several different names, as for example concession agreement; technical assistance agreement or service contract; management agreement; production sharing contract; joint venture; or contract of work. The objectives and conditions governing such contracts are as diverse as these titles are. While a mining project is only one among a large mumber of similar undertakings in industrial countries, in most developing countries such projects usually have a dominating position within the country's economy. The general legislation is often inadequate and insufficiently detailed to cover all aspects of large projects with extensive foreign inputs and international markets. Therefore, the need for specific arrangements. Specific arrangements may also become necessary due to the complexity of markets for mineral products, the large number of participants - equity partners, suppliers, financial institutions, buyers, etc. - or economic and political conditions in the host country and fiscal regulations in the home country of the investors. Most agreements are concluded between governments, or government agencies, in developing countries and private industry headquartered in developed market economies - Canada and the United States of America in North America, Western European countries, Japan, South Africa and Australia - or, in some instances, with state-owned firms in these countries. There are fewer agreements between developing countries and the centrally planned economy countries - Eastern Europe and the USSR - which cannot be considered here because of absence of adequate information. Agreements can be concluded at any of the different stages from exploration through closing of a mine. While most contracts are negotiated at the time when a potentially viable ore body has been delineated and investigated sufficiently to anticipate a realistic time for commencement of production, other agreements start with "grass-roots" exploration, during operation of a mine, smelter or refinery or, exceptionally, after a temporary shutdown. While several major provisions are included in all types of agreements, others are covered in much more detail (or not at all) in some contracts reflecting the specific work programme of each project. While it is realized that subdivision and classification of complex contractual relations is necessarily arbitrary to a certain extent, such grouping is useful in practical terms, especially for the non-specialist. The following discussion, therefore, will start with a description of the major forms of contractual relation - concession, investment contract, joint venture, management agreement, service and production sharing contracts. Major issues covered in all, or almost all, agreements will then be dealt with. These include stages of development, corporate structure and control, fiscal arrangements, infrastructure development and environmental law, and dispute settlement and renegotiation. FORMS OF CONTRACT RELATIONS There has been marked change in the type of agreement entered into during the 1960s (and before) and the early 1970s and the period thereafter. While straight "concessions" - granting of exclusive rights to foreign investors over a certain deposit or areas with little restriction or well-defined obligations - were the rule during the first half of this century, more complex agreements have evolved since. Some of these cover every conceivable aspect, foreseen or only possible, and define rights and obligations of all partners to the last detail. Over the years, agreements have without doubt become more beneficial for the developing host countries, in part as a result of well-publicized nationalizations, as for example in Chile, and in part due to changed attitudes in all countries

Jan 1, 1985

By Herbert D. Drechsler

The objective of this paper is to identify the components of income above that necessary to keep a mine in production and relate those components to the profits of a mining firm. This is a discussion of "Economic Rent". Economic rent is the payment to the factors of production -- capital, labour, entreprenuer and the owner of the mineral deposit -- above the minimum necessary to keep all of these factors cooperating in the production of minerals from a particular deposit. THE SOURCE OF ECONOMIC RENT IN THE MINING INDUSTRY In the mining business each mine has a unique cost of production unrelated to any other mine. The cost of production is developed from many factors such as the technical characteristics of the deposit: depth of deposit, depth of overburden, areal extent, and type of deposit. Furthermore, there are locational factors which also alter cost of production. For example, identical mineral deposits located in Zambia or in the southwest U.S.A. would have different capital and operating costs. These differences occur because of different qualities of labour, ease of acquisition of operating supplies or investment capital and other similar factors. To explain the source of rent, we shall use ideas developed by Alfred Marshall and Kenneth Boulding. Suppose a meteorite with special qualities exploded over earth and sent showers of small meteorites to the ground in various places. At some point in time, people learned of the special qualities of these meteorites and a demand arose and one mine was started. Suppose further that the cost of production to produce these meteorites was different for each deposit. Probably the lowest unit cost mine would commence production because if a higher unit cost mine started-up, eventually someone would discover a deposit that had a lower unit cost of production. The lower unit cost mine would take over the market and the high unit cost mine would cease production. The cost curve for the first mine would look like the following Figure 1. [ ] The output for the first mine is on the horizontal axis with the cost per ton on the vertical axis. The curve labelled AC I is the average total cost of production over the range of possible production that could occur at the property. The total costs are composed of variable costs, which are dependent on output and fixed costs, which are dependent on time. For example, the cost of operating supplies would be a variable cost and normal profit would be a fixed cost.1 The opportunity cost of the investment would also be part of the fixed costs. In our example, all factors of production, are receiving the minimum necessary payment that will keep the mine operating. The average total cost curve is U-shaped because at zero output, the meteorite mine has no variable costs, only fixed costs which, on a unit basis, obviously are very high. To produce a small output of meteorites, the mining firm adds

Jan 1, 1985

By D. E. Spiller

Introduction Precious metals recovery from ore can generally be accomplished using gravity concentration, flotation, and/or hydrometallurgical (leaching) techniques. The objective of this paper is to show why gravity concentration can be an important part of recovery systems that employ leaching as the primary unit operation. A brief discussion of modem gravity concentration equipment is also presented. Discussion Gravity concentration of ores has generated increasing interest in recent years. Reasons for this interest include: • Gravity concentration is environmentally attractive. There is little or no use of reagents. Hence, it is relatively nonpolluting. • The cost of cyanide has continued to increase. Therefore, cost savings may be realized whenever leaching feed tonnage can be reduced by preconcentration. • Compared to flotation and leaching, gravity equipment costs are low per processed ton. Field installation costs for gravity circuits usually are less because many' units are supplied as self-contained modules. Also, the cost required to supply services, particularly power, to a gravity plant site are also less. In situations where preconcentration at coarse particle size is applicable, significant grinding equipment savings may be possible. • Gravity circuit operating costs are also relatively low compared to typical flotation and leaching circuits. Reagents, power, maintenance, and manpower savings in a well-engineered gravity plant may be realized. Again, if grinding is reduced, significant power and steel (media and liners) savings are possible. •In recent years, more efficient gravity concentrating devices have been developed. Benefits to Precious Metal Leaching Gravity beneficiation can complement precious metal leaching in two ways. First, the recovery of coarse liberated values before leaching may reduce leach time requirements and may reduce reagent consumption. Second, gravity preconcentration can reduce the size of a leach plant by decreasing the quantity of material to be leached. Coarse gold and silver have been shown to leach rather slowly. Kameda (1949) and Habashi (1967) have investigated the kinetics of cyanide leaching systems. They concur that in a heterogeneous reaction, the rate of gold and silver dissolution is directly proportional to the surface area. Thus, the instantaneous rate of dissolution for spherical 0.37 mm (400 mesh) gold is theoretically -25 times faster than for the same amount of gold at .841 mm (20 mesh), based on data from Fuerstenau, Chander, and Abouzeid (1979). Conversely, coarse liberated, +.841 mm (20 mesh), gold is more readily recovered by gravity concentration than is fine, -.037 mm (400 mesh) gold. Therefore, it is apparent that the two recovery systems complement one another. Figure 1 data demonstrates the potential synergism. A sample of - 3.327 mm (6 mesh) Nevada gold-bearing ore was cyanide leached using conventional bottle-roll test procedures. Gold extraction was determined as a function of leaching time. A second sample split from the same leach feed material was hand jigged to remove a coarse heavy mineral fraction, including virtually all of the +.210 mm (65 mesh) liberated free gold. This second sample, with the coarse gold and heavy minerals removed, was subjected to an identical cyanide leach procedure. Figure 1 presents the resulting comparative extraction data. Note that the percent gold extraction for the sample containing no +.210 mm (65 mesh) free gold includes the coarse gold recovered by gravity. The data show that the sample containing coarse gold required about 72 hours of leaching time to achieve 80% extraction. This compared to about 22 hours of leaching time for 80% gold recovery from the sample that contained only -.210 mm (65 mesh) free gold. Thus, there was a 69% reduction in leaching time. The improved extraction data is not wholly attributable to coarse gold removal, but rather it was the combination of gold removal and rejection of other heavy mineral cyanide consumers or leach retardants. Further investigation was not warranted at this time. Preconcentration is the second manner in which leaching systems can benefit from gravity concentration. The premise is that preconcentration can reduce the quantity of leach feed, which, in turn, may reduce leaching costs. Figure 2 presents preliminary data developed by CSMRI for US Minerals Exploration (USMX). Centennial Exploration Inc., in agreement with USMX, is proceeding with evaluations to determine the suitability of various processing schemes for recovery of gold values from the Montana Tunnels property. The data shows how the ore can be preconcentrated by gravity techniques to result in a reduced feed tonnage to secondary extraction techniques, presumably flotation or cyanide leaching. Testing has shown that Reichert cones, followed by treating the cone concentrate on spirals, can deliver about 88% gold recovery in about 13% weight, that is, 87% weight rejection. Consequently, fine grinding and reagent costs are attributable to only 13% of the plant feed rate. Cost data is not yet available, but the potential exists for significant cost savings.

Jan 1, 1985

By K. R. Price, M. Gauna

A high seam geologic condition exists at Jim Walter Resources No. 4 mine that requires immediate rib support after a continuous miner cuts a place. High seam mining heights are typically 2.4 to 2.6 m (8 to 9 ft) and a thick rock layer is present in the upper portion of the coal rib side. The 610-m (2000 ft) mining depth at No. 4 mine induces horizontal rib line movement after excavating an entry. Horizontal rib movement greater than 305 mm (12 in.) have been noted. When lateral movement occurs in the high seam areas, the thick rock layer, and the coal above the rock layer, become fractured and tend to roll into the entry. If not adequately supported, large rib rolls develop in the place being bolted as well as in previously mined areas that endanger men and equipment. To control this, rib support must be installed in the roof bolting operation as the bolting crew works toward the face. A rib control system has been developed for this high seam mining condition using a mechanical anchor bolt placed at an angle in the rib and installed with a modified Fletcher DDM-15 bolting machine. More than 120 km (75 miles) of entry have been supported with angle rib bolts. These angle bolts constitute 43% to 60% of the total roof and rib bolt footage in the high seam portions of No. 4 mine. The angle rib bolting system has proven safer, more effective, and more efficient than the earlier support method using bolts installed horizontally into the rib. No rib roll accidents have occurred since the angle drill bolting machines were placed in service in 1981. By securing the broken rib material with an angle bolt anchored above the coal pillar, a more effective means of rib control is achieved. Angle rib bolting does not interfere with continuous miner productivity. In addition, bolting crews are now reduced from three to two people. Total drilling supply costs are about 60% the previous cost, when compared to the previous support method using horizontal rib bolts:

Jan 1, 1985

By J. B. Patton

No academic program of reasonable duration can provide a geologist with all the skills that may be needed for applied work in industrial minerals. However, any curriculum that does not provide background in such basis subdisciplines as mineralogy-petrology, stratigraphy, sedimentology, structure, and geomorphology will leave the practitioner handicapped. Enough geochemistry to understand materials requirements, and sufficient geophysics to use geophysical data, are essential. In addition to purely scientific considerations, the industrial minerals geologist must be able to evaluate economic factors. He may also be faced with legal, social, and political problems in land use, zoning, envil.onmenta1 protection, and reclamation.

Jan 1, 1985