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.
(a) Cut-off grade is the minimum grade at which a block of material is worth sending to the process it is being classified for (mill vs. waste, or mill vs. stockpile), rather than treated as waste.
(b) Marginal (short-run) cut-off grade covers only the INCREMENTAL, avoidable cost of processing one more tonne once the mine/mill's fixed costs are already committed — this is Lane's short-run milling cut-off, appropriate for deciding whether to run already-mined, already-hauled material through an already-operating mill during, e.g., a temporary low-price period.
(c) Full-cost (long-run/breakeven) cut-off grade must recover ALL costs attributable to that tonne over the project's life — mining, milling, smelting/refining and distribution charges, applicable taxes and royalties, and a required return to shareholders' equity — and is the correct cut-off for LIFE-OF-MINE reserve/resource classification and long-term production planning, since it is the grade at which the tonne genuinely creates, rather than merely defers destroying, value.
Downstream extraction variables and the rock-face cut-off. Although the cut-off is APPLIED at the rock face (it decides whether to load a block to the mill or the waste dump), its VALUE is set by everything that happens to that tonne afterward. Mill recovery (crushing/grinding liberation, flotation cell residence time and reagent performance) determines what fraction of the in-situ grade actually reports to a saleable concentrate — a lower recovery means each rock-face tonne must carry a HIGHER in-situ grade to break even, raising the rock-face cut-off even though nothing at the rock face itself changed. Concentrate transport cost (distance/mode to the smelter) is a per-tonne-of-CONCENTRATE cost that, once divided back through the ore grade and recovery, likewise raises the effective rock-face cut-off for a mine located further from its smelter or port. In short, the rock-face cut-off is not an independent geological threshold; it is the point at which the FULL downstream revenue chain (recovery × payability × price, less all downstream costs) just balances the cost of mining and delivering that tonne to the mill.
