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24-MMP-A4 Mine Valuation and Mineral Resource Estimation · May 2013

Question 7 of 13: Net Smelter Return and Net Smelter Value

Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)

Notes on this paper

EGBC National Exam — Mining and Mineral Processing Engineering, 09-Mmp-A4 Mine Valuation and Mineral Resource Estimation, 2013-May. 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, volume–variance relations); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV and cut-off grade methodology, mineable reserves, selective mining units); Gentry & O'Neil, Mine Investment Analysis (Canadian mining taxation, smelter/refining contract terms, net smelter return); SME Mining Engineering Handbook, 3rd ed. (mineral exploration and evaluation stages, ore reserve classification).

Question 1.7: Net Smelter Return and Net Smelter Value (5 marks)

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.

Net Smelter Return, NSR. NSR is the cash value, expressed per tonne of ORE (or per blast-hole sample, per block, or per bench, depending on the application), that the mine actually nets once the ore's contained metal has been converted to concentrate and sold to a smelter under the prevailing smelter contract terms: NSR = Σmetals (grade × mill/metallurgical recovery × smelter payable fraction × metal price) − (treatment, refining, transport and penalty charges, allocated back to the same tonne of ore). Because it nets ALL of the downstream metallurgical and contractual deductions back to a $/tonne-of-ore figure, NSR is the standard quantity used for ore/waste discrimination, cut-off grade calculation and blast-hole grade control – a block or blast-hole pattern with positive NSR (net of the relevant costs still ahead of it) is sent to the mill; a block with NSR below the break-even threshold is waste or low-grade stockpile.

Net Smelter Value, NSV (also called Net Smelter Return per unit of contained metal, or simply the smelter's payment schedule). NSV is the more restricted quantity of dollars the smelter actually pays for a given unit (tonne, ounce) of PAYABLE metal delivered in concentrate, after the smelter's own recoveries, deductions and treatment/refining charges are applied to the concentrate assay – i.e. NSV is computed at the concentrate/metal level (per tonne of concentrate, or per payable unit of metal), whereas NSR is that same net value re-expressed back to a per-tonne-of-ORE basis by folding in the ore-to-concentrate mill recovery and grade. In short: NSV answers "what does the smelter pay for this concentrate", while NSR answers "what does the mine net for the ore that produced it."