24-MMP-A4 Mine Valuation and Mineral Resource Estimation · May 2017
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, 2017-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 five optional Questions 2–6 (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, smelter/refining contract terms, net smelter return, transportation logistics); SME Mining Engineering Handbook, 3rd ed. (cost-estimating relationships, mineral exploration/evaluation stages, ore reserve classification); Evans, An Introduction to Ore Geology and Guilbert & Park, The Geology of Ore Deposits (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.
(a) Charges and deductions. A typical Cu concentrate smelter contract levies a treatment charge (TC, $/dry tonne of concentrate, compensating the smelter for smelting cost) and a refining charge (RC, $/lb or $/tonne of PAYABLE copper, compensating for electrolytic refining to cathode), plus a fixed unit deduction from the assayed copper grade (commonly ~1–1.1 "units," i.e. percentage points, deducted before payable metal is calculated – see the worked NSR chain in Question 6.4) that compensates the smelter for unavoidable metallurgical losses in the smelting/refining process. Freight, insurance, loading and representation costs are additional deductions, generally borne by the mine (FOB mine-gate contract terms) but sometimes shared depending on the specific commercial terms negotiated.
(b) Copper refining accounting. Only PAYABLE copper (assayed grade less the fixed unit deduction) is refined and paid for; the refining charge is applied per pound (or tonne) of that payable copper, not of the gross contained metal – so refining cost scales directly with the metal actually recovered and credited to the mine, while the unit deduction itself represents copper the mine is never paid for regardless of how much is ultimately physically recovered at the refinery (Question 6.4 works this through numerically).
(c) Effect of lead on revenue. Lead is not a payable metal in a standard copper concentrate contract; instead, because Pb (along with As, Sb, Bi and other impurities) degrades smelter furnace performance, corrodes refractories, and complicates off-gas/effluent handling, it is typically treated as a PENALTY element – the smelter charges a $/tonne (or $/dry-metric-tonne-unit above a threshold) penalty once lead content in the concentrate exceeds a specified deleterious-element limit. Since the question states lead grade is only "slightly less than" molybdenum (itself a low-grade by-product, per Question 1.4(b) typically ~0.005–0.02%), lead is likely BELOW the typical penalty threshold (commonly ~1–3% Pb in concentrate) and may incur no material penalty at all – but this must be checked explicitly against the specific smelter's penalty schedule, since even a small lead penalty directly reduces net smelter revenue with no offsetting payable credit.
(d) Gold and silver accounting. As established in Question 1.4(e), Au and Ag report almost entirely into the copper concentrate (not the moly concentrate). The smelter contract applies its OWN fixed unit deduction to precious metals (commonly ~1 g/t Au and ~30–50 g/t Ag deducted from assayed grade before payable ounces are calculated), then pays a high percentage (typically ~90–95%) of the remaining payable ounces at the LBMA gold/silver fix on the contract's specified pricing date, net of a small refining charge per payable ounce – structurally identical in form to the copper payable-metal mechanism (deduction → payable fraction → price × payable − refining charge) but using the precious-metal-specific deduction and refining terms.
