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By Phillip N. Yasnowsky

"In this Bureau of Mines report, the Federal income tax treatment of mineral exploration and development expenditures is summarized, and changes in the tax treatment of these expenditures since 1951 are detailed and analyzed. Although no attempt is made to establish causal relationships, major tax changes favorable to exploration and development activities did occur in 1951 and 1966 when the Nation was engaged in military actions and the economy was expanding. More recent changes have been unfavorable to exploration and development and were parts of major tax reform efforts. INTRODUCTIONThis Bureau of Mines report discusses the Federal tax law provisions relating to mineral exploration and development expenditures. These provisions, contained mainly in sections 616 and 617 of the Internal Revenue Code of 1954 (Title 26 of the U.S. Code), apply specifically to minerals (other than oil and gas), and thus are of interest to the Bureau of Mines.Bureau of Mines involvement in this subject stems from the legislative mandate in the 1913 amendments to the Organic Act of 1910 (the Act creating the Bureau) to conduct economic investigations of the mineral industries. Congressional concern with the financial conditions in the economic and mineral industries was expressed more recently in the Mining and Minerals Policy Act of 1970 and in the National Materials and Minerals Policy, Research, and Development Act of 1980. The General Accounting Office recommended in 1976 that the Department of the Interior ""identify and evaluate laws and agency programs that affect maintaining and developing a sound and stable domestic mining and minerals industry"" (17, p. iii). 2Taxes, a source of revenue to governments, are a cost to private firms. Thus, taxes directly affect private sector profits, and unique tax provisions are designed to encourage (or discourage) activities such as agriculture, construction, or mining. Even the international competitiveness of the domestic mineral industries may be affected by taxes because many minerals are traded in world markets."

Jan 1, 1985

By Sidney Katell

This Bureau of Mines study estimates capital investment, operating costs, and selling prices for three underground bituminous mines producing coal with annual production ranging from 1.03 to 3.09 million tons. It is assumed that the mines have a 20-year life. Wages and union welfare payments are considered as of November 12, 1973, under the Bituminous Wage Agreement of 1971, and costs for material and equipment are based on 1973 indexes. Initial capital investment ranges from $12,938,200 for the 1.03-million-ton-per-year (MJ.Vl tpy) mine to $31,435,500 for the 3.09 MM tpy mine. Total capital investment ranges from $21,607,200 to $51,982,000 for the same mines. Corresponding selling prices for the coal range from $9.11 to $8.06 per ton, assuming a 12-percent discounted cash flow rate of return after Federal income taxes.

Jan 1, 1974

By Harold Vance

EMPLOYERS of engineers have not always been satisfied with the training that young graduates have received in the conventional four-year course. Specifically, employers of petroleum engineers for a number of years have believed that a four-year course does not allow sufficient time for the student to secure a fundamental engineering background plus the fundamentals of petroleum engineering. A group of California employers went so far as to set up a type of curriculum for a petroleum-engineering course, which was based on four years of undergraduate work and one year of graduate work, with most of the petroleum-engineering courses included in the graduate year.

Jan 1, 1944

By C. W. Van Noy

The procedure suggested in this report is intended for the use of engineers, esters, accountants, etc., in estimating the cost of chemical-type operations. It is intended to over operating costs, not investment costs, as the latter have been covered numerous other publications. However, as capital investment costs are reflected to a high degree in operating costs, it is important to point out that accuracy of investment costs is highly essential. Therefore, all factors that might be included under plant -capital costs should be considered, such as requirements of shops, employees' housing, etc. The procedure is designed primarily for use in types of chemical oper¬ations, such as the production of synthetic liquid fuels, anhydrous ammonia, and others of like or similar nature. Yet, no attempt has been made to cover the entire chemical industry.

Jan 1, 1949

By H. E. Hilliard

The Bureau of Mines investigated hydrometallurgical procedures for concentrating precious metals from a mechanically processed metal fraction of obsolete military electronic scrap. Feed material for the leaching procedures described in this report was the high-tension-separated metal concentrate obtained as a fraction from mechanically processing partially stripped electronic units. Initial pretreatment with a 20-wt-pct-NaOH solution solubilized most of the aluminum. After washing, the resulting residue was incinerated to destroy any organics attached to metal particles. The incinerated residue was leached with 20-vol-pct H2S04 solution using two methods, countercurrent pressure and ultrasonic-aided leaching to solubilize the base metals, predominantly copper. Silver was recovered from the base metal leach residue using 50-vol-pct HN03, and gold contaminated with several percent palladium was recovered from the silver leach residue using aqua regia. The impure silver and gold plus palladium products represent about 1.5 wt pct of the high-tension-separated metal concentrate. Included is a three-step process evaluation study of mechanical processing of general electronic scrap and two hydrometallurgical procedures for leaching high-tension-separated metallic concentrates obtained from the mechanical processing step. Process evaluation concluded that only mechanical processing is economically viable.

Jan 1, 1985

By John R. Duda

The Bureau of Mines is developing estimates of capital investment, operating cost, and selling price for underground mines producing bituminous coal by various mining methods. This study estimates the required capital investment, operating costs, and selling prices for two hypothetical mines designed to produce 1.3 and 2.6 million tons per year (MM tpy)3 by using a longwall system in conjunction with a continuous-mining system. The coal properties being mined are assumed capable of sustaining a 20-year production period. Wages and union welfare payments used in this study are those in effect as of December 6, 1975, as set forth under the National Bituminous Coal Wage Agreement of 1974. Costs of materials and equipment are based on January 1976 indexes. Initial capital investment is $34.6 million for the 1.3-MM-tpy mine and $63.5 million for the 2.6-MM-tpy mine. Capital requirements, including deferred investments, were estimated to be $50.8 and $92.2 million, respectively. These figures translate into total capital investments of $38.51 and $34.91 per ton of annual production. Assuming a desired 15-percent discounted cash flow (DCF) rate of return, with Federal income taxes at 50 percent, the required selling prices would be $13.41 and $12.27 per ton for the 1.3- and 2.6 -MM- tpy mines.

Jan 1, 1976

By Lawrence Devon Smith

"The concept of risk is well established in the mining industry. It is acknowledged when estimates of reserves are expressed as proven or probable, when mining and metallurgical recoveries are applied to the ore, and when contingencies are added to costs. However, it is difficult to provide a quantitative assessment of risk. The significant sources of risk in a mineral project and how these are addressed in project evaluations are discussed. The discount rate is examined as a fundamental means of reflecting risk in discounted cash flow evaluations. Current industry practice is discussed, and a methodology for the analysis of risk levels is proposed that assesses the constituent components of the discount rate: real interest, mineral project risks, and country risk.IntroductionThis paper examines the components of the discounted cash flow discount rate and proposes a method of estimating project-specific discount rates. The motivation for this work comes from experience of project evaluations in which owners and purchasers had agreed on virtually every aspect of the evaluation except how much the project was worth. Agreement was reached on reserves, grad~, recovery, capital costs, operating costs, taxes, and, by combining these components, even on the fmal cash flow values. The only difference in opinion concerned the discount rate to be used in the calculation of the net present value. Depending on the life of the project, such differences of opinion can cause a variation of more than 50% in the value placed on a project! This is illustrated in Figure 1."

Jan 1, 2003

By O C. Aitken

Mining project developers are committed to taking on all the challenges and obligations of financial risk management. It is interesting that our current models of project finance have not changed markedly in principle for some 700 years, yet the rules which prepare the way for effective project assessment and subsequent loan management still do not seem to be well understood by project or corporate developers. Probability and gravity fill the opposing trays of the golden balance of financial risk. Understanding the relationship between these opposing, but intimately related elements is critically important for successful risk management. It is important to move beyond the qualitative approach and use quantitative methodologies to measure the financial impact of the occurrence of each major risk. We live in a world where the only constant is change and thus it is not surprising that a bankerÆs life is still governed by assessing, measuring and pricing risk. Banks are attracted to funding well managed companies with strong cash flow projects. But we are more risk averse compared with the credit appetites of late last century. This attitudinal shift has resulted in tougher term sheets for the early 21st century, encompassing more conditions, warranties, undertakings and stronger cash sweep provisions. Banks require well balanced portfolios to achieve an acceptable spread of risk, thus there is a more restricted market for small company lending than that available to large multi-project corporate entities with less concentrated risk profiles. Because of this focus, junior company debt finance remains comparatively expensive and especially so for more challenging geographical and political environments.

Jan 1, 2004

By Lotfollah Nahai

India is one of the fortunate countries that has substantial reserves of many raw materials for producing steel; however, for historical and economic reasons these resources have not been aggressively developed until recently. Production of steel on an industrial scale started in 1912, but annual output was below 1 million tons3 in 1938 and about 1,500,000 tons in 1951. Expansion of the steel industry became one of the objectives of India's economic planning after independence in 1947. The Planning Com¬mission's 1951 report emphasized the importance of steel production, but financial obstacles, emphasis on river valley projects, and priority for increased food production in the First 5-Year Plan (1951-56) did not permit large-scale expansion of steel capacity. The 1956 planned target for crude steel, only 1,650,000 tons, was actually exceeded by production of 1,737,900 tons. In the Second 5-Year Plan (1956-61), however, construction of steel plants received a high priority. Currently three new steel plants, each with an annual capacity of approximately 1 million tons of steel, are nearing completion in Rourkela, Dorgapur, and Bhilai. Simultaneously, the two privately owned steel plants and the small State-owned plant in Mysore have been enlarged and modernized. As a result, India's crude steel capacity will be about 6 million tons in 1961, almost evenly divided between Government-owned and privately owned plants. Actual production in 1960 totaled 3,254,000 tons compared with 2,434,000 tons in 1959. Assuming that the population will be 430 million and that capacity production will be achieved, the 1961 per capita steel output will be only 31 pounds compared with 200 pounds for Japan in 1959. Some Indian experts feel that development of steel-consuming industries merits greater emphasis in the Third 5-Year Plan (1961-66) than expanding existing steel-producing facilities. Nonetheless, the Third 5-Year Plan calls for a 10 million ton annual capacity by 1966 to be achieved by expanding the Government-owned plants in Bhilai, Durgapur, and Mysore, and by establishing a new integrated Government plant in Bokaro, in the State of Bihar.

Jan 1, 1961

By Karl E. Starch

This Bureau of Mines report is a background study of severance taxes on mineral production. The rates, bases, and other features of State severance tax legislation as of March 1978 are presented, as are the amounts of State severance tax collections for fiscal year 1977, Some statistical comparisons between severance tax collections, total State tax collections, and total value of mineral production in the States involved are presented to portray the relative importance of severance taxes both in State tax revenue systems and in mineral industry revenues. A general discussion of the purposes and principles of taxation, the unique nature of a mining enterprise, the various types of taxes imposed on mineral production, and the character and rationale of the severance tax and its impacts on mining firms sets the severance tax in perspective. A bibliography of materials on the severance tax is included.

Jan 1, 1979

The Bureau of Mines, through its Minerals Availability Program (MAP), investigates the mineral supply potential of the United States and market economy countries (MEC's) for a number of minerals considered essential to the U.S. industrial base. Major activities include identification of important mines and mineral deposits, estimation of their mineral resources and production costs, and availability and sensitivity analyses. Products include data print-outs of geological and engineering information, discounted- cash-flow rate of return (DCFROR) analyses of individual mining operations, commodity availability appraisals, and analytic services to Government agencies. These products are used in assessing the mineral supply position of the United States: in setting priorities for research aimed at reducing production costs and minimizing adverse environ- mental impacts and regulatory compliance costs of mining and mineral processing operations; and in formulating and evaluating Government policies that affect minerals. Bureau MAP data and analyses have been provided to the executive and legislative branches to aid in consideration of trade, tax, and stockpile policy issues. A study of the economic potential of selected seabed mineral resources supports the regulatory responsibilities of the Department of the Interior in the U.S. Exclusive Economic Zone. Analytic studies of mineral project viability, industry competitiveness, and import dependencies were also undertaken for, or in cooperation with, U.S. and foreign government agencies, industry and trade organizations, and international lending institutions.

Jan 1, 1987

By C. L. Schaidle

Computers and communications technology have revolutionized many industries. In earthmoving, this revolution has just begun. The major changes are still to come, but they are just around the corner. This paper presents a vision of this up-coming revolution in our industry. This vision is comprehensive. It includes basic communication, machine monitoring and diagnostics, job and business management, planning and operations, and machine control. For our industry to realize maximum benefits from the information age, we must have a vision of the future that is shared by technologists, machinery producers, and miners.

Jan 1, 1994

Banks' focus in using cash flow methods can differ markedly from that of equity investors. This paper attempts to explain and describe bankers' approach by: ò outlining the fundamental difference between banks' and investors' risk / return profiles. ò describing lenders' consequent use of cash flow methods in mineral valuation. areas. explaining lenders' specific treatment of key risk Fundamental to understanding banks' appraisal of mineral projects is the appreciation that lenders have a basically different risk profile and outlook from those familiar to equity investors. Lenders do not normally participate in any project upside. The economics of lending dictate that banks can only accommodate a low probability of loan default and consequently banks' principal focus in mineral ""valuation"" is ensuring an acceptably comfortable probability of debt repayment. A simple conceptual explanation of lenders' risk / return position is outlined.

Jan 1, 1994

By W. P. Haynes, J. W. Mulvihill, G. B. Taylor, S. Katell

Capital and operating costs have been estimated for separating methane and hydrogen in gas - separating plants designed to produce 90 million scf per day of product gas containing a minimum of 90 percent methane . After a preliminary literature review of various separation techniques , three different processes --moving - bed adsorption using active carbon , oil absorption , and liquefaction -- were chosen for the cost estimates . Three different methane feed gas concentrations , 5 , 20 , and 50 percent ( cases 1 , 2 , and 3 , respectively ) , were chosen as representative methane concentrations for the separation estimates . Capital and operating costs were lowest for the moving - bed adsorption process in all three cases investigated . Operating costs declined from $ 0.24 to $ 0.06 per 1,000 cu ft of product gas , and capital costs declined from $47,490,800 to $7,411,200 as the percentage of methane in the feed gas increased from 5 to 50 percent .

Jan 1, 1964

By William H. Bassett

COPPER is the world's most important non-ferrous metal, and brass is the most widely used non- ferrous alloy. Much of the utility of each may be credited to the work of metallurgists who have constantly improved the quality of the metals and alloys and the methods of fabrication. Standing in the front rank among these is William Hastings Bassett, the newly elected president of the Institute. Mr. Bassett, ,who is technical superintendent and metallurgist for the American Brass Co.,

Jan 1, 1930

By D. A. Karvonen

Although the economy in the Province of Saskatchewan has historically been agriculturally oriented, a major new 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 percent 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 percent of known world potash reserves and its ten active mines account for some 25% of annual world production. The development of this resource was recognized to be important to the development of Saskathcewan. 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.

Jan 1, 1983

By Robert T. Gdagher, Allison Butts

EDUCATIONAL trends as reflected in curricular changes are of interest and importance in engineering educa¬tion both as matters of record and as considerations for the future. The data on which the evidence of this report is based were obtained by sending questionnaires to all schools in the United States granting the undergraduate degree in mining engineering, metallurgy, or metallurgical engineering. The questionnaire had two parts, one inquiring as to the general nature of revisions made or planned, and the other asking for information on specific courses added to or dropped from the curriculum, or given more or less time than formerly. The frequency with which curricular changes are made, even in normal times, is notable. Although it was expected that the period since 1939-40 would show numerous revisions, it was somewhat surprising to find that of 62 mining or metallurgical curricula in existence in 1939-40 and reported in the present survey, 58 had been revised or are shortly to be revised, 52 having already been changed during this period. Moreover, approximately half of the mining schools that have already revised their curricula, and probably a similar proportion of the metallurgical schools, are about to make further important changes.

Jan 1, 1948

By Wilbert J. Huff

For the past 8 years the technical studies conducted by. the Explo- sives Division of this Bureau have been summarized in a series of annual reports.3 This report deals with activities from July 1, 1942, to June 30; 1943. Specific problems have been in immediate charge of section or unit leaders, to whom credit is given.

Feb 1, 1944

By D. E. Sullivan

The Bureau of Mines investigated the availability of potash from 68 mines and deposits in 12 market economy countries (MEC's) containing, at the demonstrated resource level, approximately 11.7 billion metric tons (mt) of potash in assay terms of contained K2O; K2O as used by industry as a standard of comparison for the different forms of potash. These resources include almost 190 million mt in the United States, 9.63 billion mt in Canada, approximately 430 million mt in Western Europe (France, Federal Republic of Germany, Italy, Spain, and the United Kingdom), 1.24 billion mt in the Middle East (Israel and Jordan) and over 220 million mt in other countries (Brazil, Chile, and the Congo). This analysis his determined that future production of potash in MEC?s will most likely continue to be from the large resources associated with producing operations in Canada. Based solely on the demonstrated resources included in this study, potash mining in the United States would decline while overseas production from MEC's can continue into the next century at near current production levels. However, timely development of new or inferred resources would offset any such decline. Producing mines in Canada have the resources to increase and maintain increased production well into the next century. For U.S. potash users, Canada is a long-term stable and secure source.

Jan 1, 1986

By E. Chin

Although Japan is a major producer of crude steel, it is poor in industrial raw materials. This Bureau of fines report describes Japan's raw material needs for chromium, cobalt, manganese, nickel, and tungsten to produce ferroalloys and alloy steels. Japanese imports of these ores or metals by quantity and source are given for 1972-81, inclusive, to indicate (1) the changes in the consumption and supply pattern, and (2) the degree of Japan's dependence on foreign sources. This report also describes measures implemented by Japan to reduce the risk- of supply interruption, and discusses the possible implications of supply shortages.

Jan 1, 1983