24-MMP-A4 Mine Valuation and Mineral Resource Estimation · May 2016
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, 2016-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 1.1–1.6); candidates then select THREE of the six optional Questions 2–7 (20 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, inflation and financing effects on DCF yield, smelter/refining contract terms, net smelter return); SME Mining Engineering Handbook, 3rd ed. (mineral exploration/evaluation stages, ore reserve classification, ore deposit models); CIM Best Practice Guidelines and NI 43-101 (Canadian Securities Administrators).
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.
5.4.a) Engineering. The currency of the engineering firm's home office/billing currency (often USD or the evaluator's own domestic currency for a Canadian-led study, e.g. CAD) – engineering fees are typically invoiced and paid in the consultant's own operating currency regardless of where the project sits.
5.4.b) Construction. A BLENDED currency reflecting the actual cost mix – local/site currency for local labour and locally sourced materials, and the currency of origin (often USD or Euro) for imported major equipment (mills, crushers, electrical gear) – construction cost should never be modelled in a single currency when the underlying cost base is genuinely mixed.
5.4.c) Operating. The LOCAL (site) operating currency – for a Canadian mine, CAD – since the large majority of ongoing operating cost (labour, power, consumables, local supply chain) is incurred and paid locally.
5.4.d) Product sales revenue. The currency of the commodity's GLOBAL BENCHMARK PRICE, almost always USD, regardless of where the mine physically sits – base and precious metals, and oil, are priced globally in US dollars (LME, COMEX, NYMEX), so revenue should be modelled in USD and then converted to the reporting/operating currency at the projected exchange rate, rather than modelled directly in local currency.
Because revenue is USD-denominated while a large share of operating cost is local-currency, a mine outside the US carries INHERENT foreign-exchange exposure that is itself a material project risk requiring its own sensitivity analysis (and sometimes hedging), independent of commodity-price risk itself.
