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.
Net Smelter Value (NSV) is the value of a tonne of CONCENTRATE (or doré, or shipped product) after deducting the smelter's treatment charge, refining charge and any penalties from the gross payable-metal value at the reference price — it is a metallurgical/plant-gate figure. Net Smelter Return (NSR) converts that same value onto a per-tonne-of-ORE basis by dividing NSV by the concentration factor (tonnes of ore milled per tonne of concentrate produced, itself set by head grade, mill recovery and concentrate grade — see Question 4.5.5) and is the figure mine planners actually use for cut-off grade, stope/block economic evaluation and grade control, because it is expressed in the same units (per tonne of ore) as mining and milling costs.
An NSR royalty holder receives a fixed PERCENTAGE of NSR revenue regardless of the operator's costs, capital structure or profitability — it is a low-risk, high-priority claim (paid ahead of the operator's own costs and debt service) and its holder needs only trust the revenue-side calculation, not the mine's cost accounting. A Net Profit Interest (NPI) holder instead receives a percentage of PROFIT — revenue less an agreed schedule of operating and sometimes capital costs — so its value depends entirely on how "profit" is defined in the agreement (which costs are deductible, whether unrecovered capital carries forward) and is exposed to the operator's cost performance and any accounting discretion, making it a materially riskier and less transparent interest than an NSR royalty of the same nominal percentage.
