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24-MMP-A4 Mine Valuation and Mineral Resource Estimation · December 2014

Question 25 of 27: 6.5: NSV, NSR and Mine NSR Calculation

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, 2014-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, volume–variance relations); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV and cut-off grade methodology, mineable reserves); Gentry & O'Neil, Mine Investment Analysis (Canadian mining taxation, smelter/refining contract terms, net smelter return); SME Mining Engineering Handbook, 3rd ed. (mineral exploration/evaluation stages, ore reserve classification); CIM Best Practice Guidelines and NI 43-101 (Canadian Securities Administrators).

Question 6.3–6.5: NSV, NSR and Mine NSR Calculation (9 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.

Given.

SymbolMeaningValue
MGrade of concentrate28% Cu
DUnit deduction1 percentage point
Exchange rateUS → CDN1 US = 1.10 CDN
PMetal priceUS 1.80/lb
rRefining chargeUS 0.90/lb
TTreatment chargeUS 100.00/DMT concentrate
CPrecious-metal creditsUS 40.00/DMT concentrate
Transport (6.5)Mine → smelter freightCDN 125.00/DMT concentrate

Find. NSV (CDN, per DMT concentrate); NSR (CDN, per DMT concentrate); NSR at the mine after transport.

Approach. Convert the payable copper grade to payable pounds per DMT of concentrate, value it at the metal price for NSV, then subtract refining/treatment charges and add precious-metal credits for NSR, and finally subtract transport for the mine-gate NSR — converting each US$ figure to CDN$ with the given exchange rate.

  1. Payable metal content. The unit deduction removes 1 percentage point from the assayed grade before payment: $$\%\ \text{Cu payable}=M-D=28-1=27\%\ \Rightarrow\ 0.27\ \text{t Cu/DMT concentrate}$$ Converting to pounds (1 tonne = 2204.62 lb): $$\text{Payable Cu}=0.27\times2204.62=\boxed{595.25\ \text{lb Cu/DMT concentrate}}$$
  2. NSV (6.3). Gross value of the payable metal at the market price, before any deductions (carrying the unrounded 595.2474 lb through the chain): $$NSV_{US}=595.2474\times1.80=1{,}071.45\ \text{US/DMT}$$ Converting to Canadian dollars: $$NSV_{CDN}=1{,}071.45\times1.10=\boxed{1{,}178.59\ \text{CDN/DMT concentrate}}$$
  3. NSR (6.4). Subtract refining and treatment charges, add the precious-metal credit: $$\text{Refining}=595.2474\times0.90=535.72\ \text{US/DMT}$$ $$NSR_{US}=1{,}071.45-535.72-100.00+40.00=475.72\ \text{US/DMT}$$ Converting to Canadian dollars: $$NSR_{CDN}=475.72\times1.10=\boxed{523.29\ \text{CDN/DMT concentrate}}$$
  4. NSR at the mine (6.5). Subtract the CDN$125.00/DMT transport cost from the smelter's NSR: $$NSR_{mine}=523.29-125.00=\boxed{398.29\ \text{CDN/DMT concentrate}}$$
QuantityValue
Payable Cu595.25 lb/DMT concentrate
NSV (6.3)1,178.59 CDN/DMT concentrate
NSR (6.4)523.29 CDN/DMT concentrate
NSR at mine (6.5)398.29 CDN/DMT concentrate
Check
T and C are stated in the source as "US$/DMT metal"; this solution treats them, per standard smelter-contract convention (and consistent with T and C being flat per-shipment charges rather than per-pound-of-metal charges), as US$/DMT of concentrate shipped — the customary basis for treatment charges and precious-metal credit lump sums in a base-metal contract.