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Lecture No. 4

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Average grade, % Value per ton ore

Metal Price US$ Price/ton Low High Low High

Gold 1,600/oz. $51.4M 0.0003 0.0008 154.2 411.2

Silver 27/oz. $0.87M 0.0015 0.003 13.05 26.1

Copper 3.50/lb $7,700 0.5 2 38.5 154.0

Nickel 7.50/lb $16,500 0.8 3 132 495.0

Zinc 0.85/lb $1,900 1.5 10 28.5 190.0

Iron ore 2.1/unit $135 50 65 67.5 87.8

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Future price of metals Most sensitive and most important factor in

valuation of a project Prices depend on international market No control Hedging can mitigate some price variations

but at a cost Law of supply and demand

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Supply

Scarcity of commodity

Industry structure

Timing of supply response to varying demand

Demand

Development of economies Economic growth

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Forecasting world’s future supply anddemand for a commodity

Movement in inventory levels For resource projects – a cut-off grade is

applied based on economics Mining operations produce less metal as price

increases When prices fall, mining companies produce

more metal to compensate

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Production capacities For base metals (Cu, Zn, Pb) – consider

mining AND smelting capacities Russia and China – reliability of production

figures Secondary scrap supply – recylcing Mines – finite reserves

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Correlation with industrial production Increase in manufacturing results in increased

demand for metals

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Stock to demand (liquidity) ratio rises – copper price decreases

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Lecture No. 5

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Exploration – deals with techniques to find amineral prospect

Reserves – methodologies used to determinethe amount of minerals that can beeconomically recovered

Classification of reserves and resources – 

standards for defining the differencesbetween a resource and reserve as set byorganizations – Philippine Mineral ReportingCode

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Mining production -methods for extractionof near-surface and deeper mineral deposits

Mineral Processing – processes undertakenfor concentration of the ore to reduce thetonnage for transport to refineries

Infrastructure – mine and mineral processingplant and auxiliary facilities

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Refining – recovery of metals from themineral concentrates – by use of heat

(pyrometallurgy, smelting) or dissolution(hydrometallurgy, leaching) to produce afinished product

Marketing – selling of the final product and itsrole in the viability of the project

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1st and often most critical stage Hardest assessment due to lack of “hard”

data Value-added component can be many times

the initial value of the exploration company

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Review of existing literatures MGB files

Generally available information Known economic occurrences located nearby Identify rock types in the area Aerial photographic images Satellite imagery

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To locate some form of anomaly Magnetic – related to the amount of

magnetic minerals Gravimetric – variations in the gravity field,

which is related to rock density Radioactive – gamma radiations to locate

radioactive elements

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Electrical and electromagnetic methods – used to map variations in electrical

conductivity. Metallic rocks are goodconductors. Geochemistry – make up of soil and rocks to

identify abnormal chemical patterns. Metalions have migrated to the surface throughweathering and erosion

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Portion of the orebody that is above thewater table.

Water is source of oxygen – oxidizes themetals Lower in specific gravity Softer Water becomes acidic and further oxides the

ore

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Primary ore metals – stable in anaerobic dryenvironments

Acid water – rich in dissolved metals, maymove down through the oxide zone Deposit the metals in a high grade zone

called the supergene zone Cu – chalcocite, bornite Pb – supergene galena Ni – violarite, Zn: supergene sphalerite

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Exploration drilling – done on areas identifiedby airborne and surface reconnaissance

Rotary air blast – cheapest but least accurate Reverse circulation - drill cuttings are forced

up the hollow center of the drill bycompressed air

Diamond drill core – rock is cut like a cylinderto produce a “core” 

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HoleNum-

ber

North-ing

East-ing

Inter-val fr-

to, m

Inter-cept,

m

Grade(units/

mt)10500 10000 500 50-65 15 4.5

10600 10000 600 55-62 7 3.8

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Airborne geophysics

Satelllite imagery

Ground geophysics

Soil geochemistry

Rock, RC sample or

core assays

$25/km aeromagnetics $125/km gravity

$25-50/sq. km

$50-20000/km

$20/sample

$20/sample

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Air photointerpretation

RAB drilling

RC drilling

Diamond core drilling

$200-500/ sq. km

$20-25/m

$50-100/m

$100-200/m

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Grade Continuity of the deposit

Confidence level increase with no. of datapoints Varies greatly with type of ore deposit and

grade

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Figure 5.4

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Figure 5.5

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Hole # Northing Easting Interval Intercept Grade

Met-25 10000 500 50-60 10 4.5

Met-26 10200 600 53-62 7 3.8

Met -27 10200 700 55-60 5 3.1

Met-1575 10150 750 58-64 6 3.2

Met-15 10100 500 60-66 6 3.0

Met-16 10100 600 63-69 6 3.1

Met-17 10100 700 66-70 4 2.9

Met-05 10000 500 69-72 3 2.8

Met-06 10000 600 71-73 2 2.5

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500 600 700 800

10200 •  •  • 

• 

10100 •  •  • 

10000 •  • 

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Volume x specific gravity Holes are 100m apart, area is 100 x 100 m.

Met-16: 100 x 100 x 6 = 60,000 cu. M.

Tonnage = 60,000 cu.m x 2.5 = 150,000 MT

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Hole # Area volume Tonnage Grade Metalcontent

Met-25 10000 100000 250,000 4.5 1,125

Met-26 10000 70000 175,000 3.8 665

Met -27 10000 50000 125,000 3.1 387.5

Met-1575 7500 38000 190,000 3.2 608

Met-15 10000 60000 150,000 3.0 450

Met-16 10000 60000 150,000 3.1 465

Met-17 10000 40000 100,000 2.9 290Met-05 10000 30000 65,000 2.8 182

Met-06 10000 20000 50,000 2.5 125

TOTAL 87,500 468,000 1,255,000 4,297.5

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500 600 700 800

10200 •  •  • 

• 

10100 •  •  • 

10000 •  • 

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500 600 700 800

10200 •  •  • 

• 10100 •  •  • 

10000 •  • 

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Ave value of each of the nearby holes – usedin determining the grade

Weighted average grade– function ofdistance Linear weighing Square or cube of the inverse – lower

confidence for points further Procedure to select non-linear weighing – 

Kriging, (Danile Krige)

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Generate a semi-variogram – graphicallydepicts the spatial relationship between

points Calculating the average squared difference

between any two points over a specificdistance

Relationship is considered over a specificdirections

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Simultaneous calculations (kriging) For a selected block – distance to each

exploration hole within the range iscalculated A value is determined from the semi-

variogram model A set of simultaneous equations is solved that

determines a set of weighing factors to beapplied which minimizes the statistical error

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Weighing factors add up to 1 A measure of the statistical error can be

generated

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Back-testing and ore reserves To check the validity and optimise the model,

krige a data point – compare with actualvalue Ore blocks are kriged and total ore reserves

calculted Account for the geology of the rock Several kriging procedures have been

developed