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) Ordinary kriging (OK). Estimates a block/point grade as ΣλiZi with the constraint Σλi=1, so it does NOT require the population mean to be known – it re-estimates a local mean implicitly within each search neighbourhood, making it robust to a gently drifting global mean (local stationarity only).
(b) Simple kriging (SK). Estimates a RESIDUAL from a known, stationary global mean m: Z0−m=Σλi(Zi−m), with NO sum-to-one constraint on the weights (they may sum to less than one, with the shortfall implicitly assigned to the known mean m). SK requires the analyst to supply a reliable, deposit-wide stationary mean up front – a much stronger assumption than OK's local-mean re-estimation.
(c) Indicator kriging (IK). Transforms the continuous grade variable into a binary indicator I(x;zc)=1 if Z(x)≥zc, else 0, for one or more chosen cutoff grades zc, then krige EACH indicator variable (its own indicator variogram) separately using ordinary kriging. The output at each cutoff is a direct, distribution-free estimate of the PROBABILITY (or local proportion) that the block grade equals or exceeds that cutoff, avoiding the assumption of any particular grade distribution (e.g. lognormal) that OK/SK implicitly carry.
(d) Resulting output values. OK and SK each directly produce a single estimated GRADE Z0 at each block, plus its kriging (estimation) variance σ2OK or σ2SK. IK instead produces, for EACH chosen cutoff zc, an estimated PROBABILITY (proportion) that the block is at or above that cutoff – i.e. IK's raw output is a set of points on the block's local cumulative distribution function, not a single grade.
(e) Post-kriging calculations for (b) and (c). For SIMPLE kriging, the block grade must be recovered by adding the known stationary mean back to the estimated residual: Z0=m+Σλi(Zi−m) – the SK weights alone give only the mean-corrected residual. For INDICATOR kriging, the set of estimated probabilities at multiple cutoffs (F(zc)≡1−probability(≥zc)) must be assembled into a full local cumulative distribution function, order-corrected for any cutoff-to-cutoff non-monotonicity, and then the EXPECTED grade of the block is recovered by numerically integrating that CDF (E[Z]=∫(1−F(z))dz) – a materially heavier post-processing step than OK/SK's direct grade output.
(f) Recovering tonnage and grade above cut-off from IK. Because each indicator-kriged probability directly estimates the LOCAL PROPORTION of the block at or above that cutoff, the tonnage above cut-off is obtained simply as (block tonnage)×(estimated probability at that cutoff), summed over all blocks in the model. The GRADE above cut-off requires one further step: from the assembled local CDF (part e), compute the conditional mean of the distribution restricted to the interval above the cutoff – i.e. integrate z·(the local probability density implied by the CDF) over z≥zc, then divide by the probability mass above zc to get the mean grade of just that above-cutoff fraction. Because this is derived from the FULL local distribution rather than a single point estimate, IK-derived tonnage/grade-above-cutoff curves are markedly more reliable at high cutoffs (where OK/SK single-point grade estimates are known to be conditionally biased/over-smoothed) than an equivalent calculation built from an OK or SK block model alone.