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.
For a single-product (copper-only) concentrate, the smelter contract fixes: the assay/payable basis (typically assayed grade less a fixed "unit" deduction, e.g. 1 percentage point, not paid); the treatment charge (a flat USD-per-dry-tonne-of-concentrate fee for smelting); the refining charge (a USD-per-pound-of-payable-copper fee); freight and insurance to the smelter; moisture and impurity penalties; and the metal-price quotational period (an average LME/COMEX price over an agreed window around shipment, which also creates provisional-vs-final pricing risk). Net of all these deductions, the realized ("street") revenue an operation actually nets is typically on the order of 85–95% of the headline published metal price, depending on concentrate grade (a richer concentrate dilutes the flat treatment charge over more payable metal) and contract terms negotiated.
A polymetallic copper concentrate contract additionally prices BYPRODUCT metals contained in the same shipped concentrate — commonly gold and silver (paid above a small deductible ounce-per-tonne threshold, at a stated payable percentage of assay), and sometimes molybdenum, zinc or lead (each with its OWN treatment/refining terms, or in the case of an incompatible element such as lead, a PENALTY rather than a payment, since it contaminates copper smelting). Molybdenum in particular is often significant enough in value to be separated into its own concentrate by a dedicated Mo flotation circuit rather than shipped with the copper concentrate, because its unit value per pound greatly exceeds copper's. Overall smelter-contract costs therefore fall into three families: (i) processing charges (treatment + refining, scaling with tonnage and payable metal respectively), (ii) logistics costs (freight, insurance, port/handling, demurrage for shipment delays), and (iii) quality-related deductions (moisture, impurity penalties, minimum-payable clauses, price participation/escalation clauses that share metal-price upside/downside between miner and smelter).
