24-MMP-A4 Mine Valuation and Mineral Resource Estimation · December 2018
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, 2018-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 1.1–1.8); 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, anisotropy); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV/IRR and cut-off grade methodology); Gentry & O'Neil, Mine Investment Analysis (smelter/refining contract terms, net smelter return, taxation and risk); Guilbert & Park, The Geology of Ore Deposits, and Evans, Ore Geology and Industrial Minerals (VMS/SEDEX and porphyry deposit models); 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 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.
To buyers, sellers and equity markets, a mineral resource's value is driven by (i) tonnage and grade (the resource/reserve estimate itself, and its classification confidence under NI 43-101), (ii) metallurgical recoverability and concentrate quality/penalties, (iii) infrastructure and location (grid power, road/rail/port access, permitting jurisdiction and sovereign risk), (iv) the commodity price deck and its cycle position, and (v) the capital intensity and timeline to production. For copper specifically, "market conditions" are set by the balance of mine + scrap supply against refined demand from construction, electrical/electronics and (increasingly) electric-vehicle/grid infrastructure, modulated by China's share of global demand, LME/COMEX/SHFE exchange stock levels, and macro factors (US dollar strength, global industrial PMI, trade tariffs).
Representative prices for the week around this December 2018 exam (LME/COMEX settlement basis, as reported by Metals Week/industry media of the period; the question's own grading tolerance of ±10–20% recognizes day-to-day and source-to-source variation): copper approximately USD 2.75–2.80 per pound (roughly USD 6,050–6,150 per tonne), zinc approximately USD 1.10–1.20 per pound (roughly USD 2,450–2,600 per tonne), and crude oil (WTI) approximately USD 50–53 per barrel (Brent about USD 60) in the first half of December — late 2018 saw a sharp oil price decline from the mid-USD-70s in early October to about USD 50 in early December, falling further to the mid-USD-40s by late December.
Producer price is a fixed or infrequently-revised price quoted by a major producer (historically common for copper before the LME/COMEX exchanges dominated pricing) — it lags and smooths the volatile daily discounted price (the exchange spot/settlement price actually realized on the open market, or a price discounted from list for prompt delivery/volume). A mine selling under long-term contract at a producer price is insulated from short-term downside but also forgoes upside; one pricing to exchange/discounted terms captures full spot volatility. Over a project's life this affects profitability through revenue variance and financeability — lenders often require a portion of production hedged or contracted at a stable (producer-like) price to secure debt service, while equity holders retain leveraged exposure to the discounted/spot price upside.
