24-MMP-A4 Mine Valuation and Mineral Resource Estimation · May 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-May. 3 hours duration; closed book, with one handwritten 8.5×11 in. reference sheet (both sides) permitted; only an approved Sharp or Casio calculator allowed. Question 1 is compulsory (40 marks, parts 1.1–1.9); 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); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, cut-off grade theory, incremental analysis); Gentry & O'Neil, Mine Investment Analysis (Canadian mining taxation, cash flow/risk, smelter contract terms, NSV/NSR); SME Mining Engineering Handbook, 3rd ed. (ore deposit models, mineral exploration/evaluation stages, equipment utilization); O'Hara, T.A., “Quick Guides to the Evaluation of Orebodies,” CIM Bulletin, Feb. 1980 (parametric capital-cost estimating); CIM Definition Standards for Mineral Resources and Mineral Reserves / National Instrument 43-101 (resource/reserve classification and reporting).
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.
Copper (the complex case). A copper mine typically sells CONCENTRATE, not metal, under a negotiated smelter contract. Revenue is built up from the assayed grade, LESS a unit deduction (a percentage-point haircut on the payable grade), converted to payable pounds of metal, valued at the quoted metal price, and then reduced further by treatment charges (per tonne of concentrate), refining charges (per unit of payable metal), impurity/penalty deductions, price-participation clauses and freight from mine to smelter. Each clause allocates a specific risk (metallurgical loss, market/price risk, handling risk) between mine and smelter, and the cumulative effect of unit deduction plus TC/RC plus freight can leave the mine realizing well under the headline LME price — the “as little as 50% of street value” outcome named in the question typically arises for a low-grade or impurity-penalized concentrate shipped a long distance, where deductions and charges consume a large share of the gross payable value.
Gold (the simple case). Gold is normally recovered on site to a high-purity doré bar (or, for some operations, direct cathode/bullion), which a refiner assays and pays out at close to 99–99.9% of contained gold value, less a small, fixed refining charge quoted in dollars per ounce or a flat percentage. Because doré is a near-final product with a liquid, transparent daily market price (the LBMA AM/PM fix), there is no equivalent of a smelter's TC/RC/unit-deduction chain, no long-distance concentrate freight, and essentially no assay-grade risk once the doré bar itself is assayed — revenue is close to (ounces produced × gold price × payability), a single simple multiplication rather than copper's multi-clause chain.
The underlying reason is metallurgical: gold can be concentrated all the way to a near-pure metal product on site (gravity/cyanidation/electrowinning or smelting to doré), while base metals like copper are recovered only to a sulphide concentrate that still requires an external, capital-intensive smelting/refining step, and it is that extra industrial step — and the contractual allocation of its cost and risk — that makes copper revenue estimation the more complex of the two.
