24-MMP-A4 Mine Valuation and Mineral Resource Estimation · December 2013
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
EGBC National Exam — Mining and Mineral Processing Engineering, 09-Mmp-A4 Mine Valuation and Mineral Resource Estimation, 2013-Dec. 3 hours duration; one handwritten 8.5×11 in reference sheet permitted (not an open-book exam); only approved Sharp or Casio calculators allowed. Question 1 is compulsory (40 marks, parts 1.1–1.7); candidates then select FOUR of the six optional Questions 2–7 (15 marks each) to complete the paper.
Reference texts: Isaaks & Srivastava, An Introduction to Applied Geostatistics (variogram modelling, kriging estimators, compositing and support); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (NPV/cut-off grade methodology, cost estimating, financing structures); Torries, Evaluating Mineral Projects: Applications and Misconceptions (SME) (mine valuation, cost of capital, inflation treatment); Gentry & O'Neil, Mine Investment Analysis (net smelter return, smelter/refining contract terms); SME Mining Engineering Handbook, 3rd ed. (mineral economics, capital and operating cost estimating).
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
1.6.1 Geographic location. A remote, poorly-served location raises the cost of capital both directly and indirectly: infrastructure gaps (power, water, roads, port access) increase capital intensity and execution/schedule risk, which lenders and equity investors price as a higher risk premium; skilled-labour scarcity in remote camps raises operating-cost uncertainty; and climate/terrain constraints on construction and logistics add further contingency that flows into the discount rate. A project in an established mining camp with existing infrastructure and a proven regulatory pathway commands a materially lower required return than an equivalent frontier-location project.
1.6.2 Political stability. Jurisdictions with a poor track record of political stability – expropriation risk, resource nationalism, contract-sanctity concerns, currency controls, permitting unpredictability – carry a country-risk premium that lenders and investors add on top of the project's own technical/commercial risk premium; sovereign credit ratings and political-risk insurers (e.g. MIGA, EDC) explicitly price this. A poor stability record can also restrict the pool of available capital altogether (some pension funds and ESG-constrained lenders will not finance in high-risk jurisdictions at any price), forcing reliance on costlier capital sources and further raising the project's effective weighted-average cost of capital.
