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.
Because cut-off grade is the boundary between "mine it" and "leave it/waste it" at the rock face, ANY downstream cost or recovery change ripples back into that boundary: a cheaper grinding circuit (finer liberation at lower energy cost) or a more efficient flotation circuit (higher recovery per tonne fed) both LOWER the grade needed to break even, pulling more marginal material above cut-off; conversely a longer/more expensive concentrate haul (rail vs. truck, or a longer route) RAISES the effective cut-off, because more of each tonne's value is consumed before it reaches the smelter. Cut-off grade is therefore not a fixed geological number but a moving economic boundary recalculated whenever metal price, recovery, or any downstream unit cost changes — which is why operating mines re-optimize cut-off (and sometimes stockpile intermediate-grade material) as conditions change, rather than mining to a cut-off fixed at the feasibility study.
1.8.1 Cut-off grade is the grade at which the value of processing a tonne of material exactly equals the cost of processing it — below cut-off, processing destroys value and the material is waste (or stockpiled).
1.8.2 Marginal cut-off grade considers only the INCREMENTAL (marginal) cost of processing ADDITIONAL material through already-committed capacity (mining, milling and G&A costs already being incurred regardless) — it is the lowest of the four cut-offs and is used for short-term stockpile/blending decisions on an operating mine with spare capacity.
1.8.3 is the operating cut-off grade: the grade covering the FULL sum of ongoing mine and mill operating costs (mining + processing + site G&A) but not capital recovery, debt, or downstream/tax obligations — the standard cut-off used for routine ore/waste classification at an operating mine.
1.8.4 is the full (internal/reserve) cut-off grade: 1.8.3's operating costs PLUS capital recovery/debt service, smelter treatment/refining and distribution (freight) costs, taxes and royalties, and the return required by shareholders — the highest of the four cut-offs, and the one properly used to define ORE RESERVES (as opposed to merely material worth processing once a mine already exists), since it is the grade at which the venture as a whole, not just the next tonne, remains viable.
