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This paper provides a financial perspective to the valuation of Australian resource companies and projects. Valuation exercises need, however, to be seen in the broader context of a thorough business appraisal, one that incorporates all disciplines employed in the resources industry. Fine tuning a discount rate or determining a particular capital structure is likely to be less important to valuation than an adequate understanding of industry dynamics and a company's likely performance in future years.

Jan 1, 1989

Having worked as a consultant for most of his 40-year working life, mostly as a mineral property valuer, the author has seen many poor valuations. Most were valuations of exploration tenements where the selection of the rather subjective, but necessary, geological inputs raised the main concerns. Those valuations involving iron ore prospects raise particular problems due to the special characteristics of such deposits. Iron ore is more like an industrial mineral rather than precious or base metals and Reserves are determined not by a traditional cut-off grade but by customer specifications. This is intended to be an overview/keynote paper on the current state of the growing (yet consolidating) Australian Iron Ore industry. It has now moved beyond Western AustraliaÆs æPilbara Big TwoÆ of Rio/BHPB (with the emergence of the irrepressible FMG and Hancock Prospecting) to include the YilgarnÆs æMidwest ManyÆ (including US re-entrant Cleveland Cliffs through Portman) and projects in other States. Ore types have moved from haematite Brockman to martite-goethite Marra Mamba (including the RobeÆs mesas and below water table Yandicoogina CIDs) and magnetite ore types. There are DSOs and secondary process feed. Mineral valuers have to reflect today upon these and many other determinants of value when choosing the most appropriate methodologies to adopt when technically assessing and valuing exploration tenements containing iron ore. Set against a frame work of the JORC Code (2004) and VALMIN Code (2005), the general valuation issues involved in using the cost methods (eg multiple of exploration expenditure), market methods (eg comparable sales, rules-of-thumb and joint venture terms) and income methods (eg synthetic discounted cash flow (DCF)/net present value (NPV) modelling) are discussed. Relevant factors when valuing iron ore properties are discussed, eg ore type, lump/fines ratio, stripping ratio, water table, impurities and grade, particularly the JORC confidence category of the identified mineralisation. Remoteness and access to existing rail infrastructure is a key consideration.

Jan 1, 2007

How the Australasian and Canadian Codes (VALMIN and CIMVal) approach mineral property valuation is described. Brief comment is also made on the International Valuation Standards CommitteeÆs interest in a global valuation standard for Mineral (Extractive) Industries and the South African SAMREC initiatives to adopt a VALMIN-like Code. The conventional tripartite classification of valuation approaches into those that are Market-based, Income-based and Cost-based is outlined. It is best practice to use as many of these approaches as possible (and as many methods as reasonable in the particular circumstances), given the quantity and quality of the data available on the Mineral Asset (which depends upon the state of development of the mineral property). The use of specific methods must satisfy the basic considerations of logic and reasonableness and the purpose of the valuation. The competence, judgement and repute of the valuer are critical factors, since all valuations are time and circumstance specific. What constitutes æMarket ValueÆ in the different jurisdictions is discussed and definitions are given. Challenges facing the globalisation of a VALMIN-type Code for the international Minerals Industry are the influence of real estate valuers and the US jurisdictional idiosyncrasies. This is mainly due to a fixation on real property rights with a preference for using real estate-like comparative sales techniques (Market Approach) to the exclusion of Income-based approaches; a regulatory reluctance in the US to accept that Resources have considerable value; and the International Accounting Standards BoardÆs preference for Historical, rather than Current Value, accounting.

Jan 1, 2002

This paper examines the issues involved in the technical audit and valuation of exploration prospects. Certain methodologies are more appropriate to use depending upon whether the mineral property valuation is of an exploration area, a project under development, or an operating mine. Valuation approaches that are reviewed include the Multiple of Exploration Expenditure, Joint Venture Terms, Rules of Thumb, and particularly the Kilburn Rating Method. The DCF/NPV Financial Simulation Method, even modified by the use of Expected Values, is not considered appropriate for valuing exploration prospects. The choice of the most appropriate methodology and its successful application depends primarily upon the amount of reliable input data available and, more importantly, the experience and judgement of the valuer. It must be remembered that all valuations are time and circumstance specific and will be generally subject to revision as more data becomes available.

Jan 1, 1993

The aim of this paper is to broadly review the purposes of valuations and the methods used to calculate them. Examples are provided by coal and alluvial gold properties. Important factors are consistency, how to deal with uncertainty, and the selection of discount rates. The purposes of valuation are seen as: 1.  valuations for sale; within this category are sales to third parties, sales between partners, and vendor valuations for prospectuses; 2.  to provide bankable estimates for financing; and 3. to provide values for local body rating. The methods used depend on the purpose of the valuation and the amount of information to hand.

Jan 1, 1988

This paper examines the methods and people required for the evaluation of project or corporate acquisitions. Experience over the past five years has shown that some growth can be achieved by carefully evaluated acquisition of gold projects within regions where the acquiring company has gold processing facilities. Many Western Australian companies have participated in this process and the trend seems likely to continue with a diminishing number of larger producing companies controlling through joint venture or direct purchase of widely spaced ore deposits. In some cases the acquisition may include ore processing facilities, however an increasing number of smaller project acquisitions, involving small open pit gold deposits, which are within trucking distance of the acquiring company's mill. Whilst gold prices remain at the current depressed level we can expect to see this trend continue.

Jan 1, 1989

Mineral Sands - "An Industry for the Future"The mineral sands industry is matched only by the gold industry in relation to its current buoyancy. The strong demand for the various mineral sands products, creates a positive environment in which to review the technical and commercial factors affecting the future of this industry. This conference is clearly being held in the right place at the right time.My role today is to put forward a few ideas that may help Australia to assert its rightful role as a major downstream player in an industry which it has dominated for 25 years as a raw material supplier.

Jan 1, 1986

By S Cossfo Torres

Minera PenmontÆs gold mine, La Herradura, is located at the northwestern Mexican state of Sonora and consists of an open pit mine and heap leaching facility for the recovery of gold. The production began in July 1998, and today La Herradura produces about 200 000 oz of gold per year. Standard sampling and assaying protocols were established during exploration based on heterogeneity tests. However, at deeper zones of the pit, coarse gold became evident and it was necessary to develop a new sampling protocol in order to minimise the fundamental error and improve the metallurgical accounting. This new sampling protocol requires cyanide leaching the whole pulverised sample from the blasthole, assaying pregnant solution and fire assaying 50 g of tailings. A sampling study was performed on 195 blasthole samples analysing gold under the standard and new protocols. The new protocol demonstrated that the original one underestimated gold grade by approximately 27 per cent, with impacts on ore misclassification and metallurgical accounting. According to the ore grade control system, mineral with gold grade above 0.35 g/t was sent to the leach pad and mineral with lower grade was classified as waste. Based on the sampling study, it was decided to classify a low-grade ore with gold assay between 0.20 and 0.35 g/t which was stored for future treatment under better gold prices or should mine production decrease. These two conditions were present during 2005 and 2006, when about 3.5 Mt of low-grade ore were leached.

Jan 1, 2008

By P G. Doig

Recent drops in commodity prices and economic uncertainty have seen many businesses re-evaluate their operational expenditure to ensure mine profitability. The high capital and operational cost of truck and digger fleets has resulted in loading and hauling of material being a significant proportion of a mine’s expenses (Nel, Kizil and Knights, 2011), thus it is often one of the first areas to be considered for cost reduction. If an operation requires additional trucks to maintain or improve productivity, a robust justification is crucial due to the expenditure involved.Mining schedules form the basis of productivity and cost estimations for mining operations and therefore must have a significant level of confidence with regards to achievable quantities and rates. Traditionally, a mining schedule is produced without detailed consideration of the trucking capacity or requirements. Although some mine planning software incorporates haulage predictions into schedules, most cannot model the dynamic nature of dumping and haulage. Previous studies have shown that it is necessary to have detailed haulage analysis instead of the traditional mining block centroid to dump block centroid methods for more realistic mining schedules and cost estimation (Doig and Kizil, 2013).Recent developments in software have allowed the dynamic integration of haulage analysis with mining schedules. Engineers can now create mining schedules in conjunction with dumping schedules, allowing mining schedules to reflect the restrictions created by the number of available trucks, combined with dynamic consideration of available in-pit and out-of-pit dumping locations.A study has been completed producing a mining schedule in conjunction with a dumping schedule and haulage analysis. Multiple schedules were run with various haulage strategies (including minimising rehabilitation liability) and truck availability to identify the impacts on coal production, and hence revenue. A financial analysis was then completed where a net present value (NPV) was calculated for each scenario. The study showed that trucking shortfalls can significantly impact mining schedules and cost estimations, both in terms of cost as well as revenue lost when trucks cannot maintain forecast production rates, thus dumping schedules and haulage analysis should be completed simultaneously. If dumping and haulage is not considered when planning the mining schedule, a mining business is ignorant to the impacts trucking has on the mine production, closure risk and profitability.CITATION:Doig, P G, 2014. Value impacts of truck limited scheduling, in Proceedings Life-of-Mine 2014 , pp 513–524 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Jul 16, 2014

By M Gill, A Mathias

The mining industry has always been cost-focussed but in recent times mining companies have moved towards obtaining a competitive advantage through the implementation and sustainability of best practice in the areas of improved safety, operating costs, quality and productivity. This is the concept of Value In Use û that mining companies see value generated all the way to the bottom line through improved change, and those changes become an established mine practice. Many mining companies do not have the resources or the knowledge to sustainably achieve such an outcome. This has led to companies looking to their suppliers to deliver measured value to their business through partnership arrangements. Suppliers have been able to leverage their knowledge of products, product applications and services to offer alternative supply agreements that bring greater returns to their businesses while improving supplier/client relationships. Orica has developed such a partnership with Coal & Allied in the form of a Continuous Improvement Program. Coal & Allied is based in the Hunter Valley region of NSW and is the largest coal producer in that region. Both parties are contractually bound to jointly deliver Value In Use projects to Coal & AlliedÆs Hunter Valley Operations and Bengalla mine sites. It is the request of the Orica and Coal & Allied Steering Committees that this paper does not include the details of actual projects or the costs or key performance indicators associated with the program. This is to maintain the competitive advantage to both Orica and Coal & Allied through the implementation of such a program. It is in the writersÆ opinion that this paper does not lose any significance through this restriction as the most important component of the Continuous Improvement Program is not the projects themselves but the methodology behind them. With this in mind the paper will discuss the development of Value In Use offerings, the key aspects of the Coal & Allied and Orica joint program, what is a Value In Use project, how to measure its value, finally why and even more importantly what makes this program is a success.

Jan 1, 2004

By I Minniakhmetov, J Ashford

Orebodies constitute naturally occurring, commonly highly variable concentrations of minerals in the earth’s crust formed through varying and highly unpredictable processes. Orebody knowledge is a core foundation of a mining company’s asset base underpinning all decisions about Mineral Resource and Ore Reserves, future production, development and ultimately the profitability and competitiveness of a mining enterprise. The decision to invest in a mineral project is usually based upon a techno-economic evaluation of the project and having clear approval pathways to gain local community support and address social and environmental impacts. The main objective of the techno-economic evaluation is to determine the optimum development sequence for the particular orebody in question and to estimate the economic viability of the project and the future return on investment to its stakeholders, balancing the inherent value of the mineral in the ground against the costs of development and market pricing. With the exception of market-driven commodity prices, virtually all revenue and cost estimates fundamentally stem from the understanding and subsequent modelling of the orebody. A reliable estimate of the ore deposit grade and other geological value-drivers is the foundation upon which the business case for future mine development and operation is intricately dependent. Orebody knowledge is, therefore, the fundamental driver of the mineral project cycle, influencing the progression of studies and consequently, the resource company’s ability to declare Exploration Results, Mineral Resources or Ore Reserves which govern the source and cost of funding available to the project. Drilling provides a ‘vector’ to the true nature of the orebody and effectively buys time to manage the technical risk associated with the orebody. Despite its perceived high cost, in both time and money terms, drilling is the only available technology for acquiring the necessary orebody knowledge to support technical and economic studies and to minimise orebody-driven cash flow uncertainty and volatility. However, like all costs, pressure to minimise drilling budgets is ubiquitous across the minerals industry. Paired with inappropriate key performance indicators, drilling is often regarded as a cost to be minimised, rather than an investment to be optimised. Furthermore, as future deposits get deeper and more complex, the collection of orebody knowledge is increasingly on the critical path for project development. The increasing cost of data collection pertaining to these deposits increases the temptation to minimise orebody knowledge gathering at the cost of long-term value as the reduction or postponement of drilling results in greater orebody knowledge risk at all stages of the value chain. Indeed the true cost of the decision to drill less is rarely known until the mine is in operation, well after the mine project evaluation team has moved on. This paper aims to promote orebody knowledge as the fundamental source of endogenous project financial risk and, consequently, its critical importance in project financial evaluation. Furthermore, the report documents experimental research into the development of an econometric model for valuing orebody knowledge. Using the density of drilling data as a proxy measure of orebody knowledge, the proposed approach integrates well-established stochastic grade modelling techniques with the mathematical mechanics of Decoupled Net Present Value (DNPV) which, combined with stochastic grade modelling (conditional simulation), lends itself to the financial International Mining Geology Conference 2022 | Brisbane, Australia and Online | 22–23 March 2022 3 assessment of orebody knowledge risk. Based on this approach, a metric is formulated, representing the minimum value of the orebody knowledge added by additional drilling

Mar 22, 2022

By B Cooper

During the design of a new production facility for a greenfields or significant brownfields expansion many design decisions are made driven by an unquestioning objective to achieve 'lowest cash-cost' production costs. In many cases this translates to a design and operating philosophy based on largest-available, single-line equipment. Although acknowledged as an approach that is efficient from an operating cost perspective does this approach always maximise shareholder value? There is an increasing awareness in the mining industry of the value of project flexibility, robustness and value options. The design of a new production facility creates a window of opportunity which should be structured to ensure that project value options and robustness are understood and exploited. This requires the use of emerging valuation methodologies, such as Value-at-Risk and Real Options, as well as tried and trusted NPV/IRR approaches. The paper provides an overview of the basis and application of these less well known techniques in the context of metallurgical plant design. Design guidelines that demonstrate how value options and flexibility can be quantified from both a risk and value perspective are presented. Issues such as use of single versus multiple line equipment, optimum cut-off grade and improved exploitation of the inherent variability of the orebody are also examined. Finally the management issues and approaches to achieving this will be briefly discussed; for example it is common during project development to drive towards increasing certainty as rapidly as possible to facilitate 'accurate' estimation of costs. Understanding and exploiting value options requires a project culture that tolerates, and revels in, ambiguity and uncertainty û something that would make many project teams uncomfortable!

Jan 1, 2008

Members of The Australasian Institute of Mining and Metallurgy are engaged in locating, extracting, processing, marketing and converting the worldÆs mineral wealth for its consumption in a useful form. We have an ethical responsibility as professionals to carry out our roles in such a way that we seek to optimise the recovery of that wealth for the benefit of the community, not only now, but also in the future. To be able to optimise, we must be able to measure with confidence the value of the commodity through the various stages of treatment from discovery of a geological anomaly to the end use. This introductory paper will provide an overview of some aspects of the issue, including the possible extension of the coverage of The InstituteÆs Codes to production accounting and reporting.

Jan 1, 2002

By M Warren

The professional geologist or engineer on a mining operation has a particular view of their operation. This is based on the factors of the operation that have a direct impact on the daily work program of the professional, such as production rates and grades. The view that would be taken by a financier who is called upon to support the project may be somewhat different. The value of the operation to the financier is in its ability to generate surplus cash for its owners and thus repay the debts to the financiers, with as low risks profile as possible. A number of tools are used to test the sensitivity of the project to variations in the key cost/revenue drivers. The Financier may call on a team of technical specialists to assist with the assessment of the cash flow and risk profile and to monitor the development of the project. The ability to offset this risk, as all projects have some degree of risk, may be a key factor in determining the level of financial support to be offered.

Jan 1, 2002

Downstream value-adding is a strategic issue for a country like Australia, which has a resources-driven sector of a scale that has significant impact on the national economy. The question of why producers are not doing more to ævalue-addÆ is often asked. In Australia this debate takes place within the context of: an era of unprecedented growth in demand for resources driven by the rapid urbanisation of China, India and others;impending legislation and uncertainty around carbon pricing;rapidly rising energy costs;significant supply-side shortages including infrastructure, skills and manufacturing capacity; andsignificant industry consolidation of primary resource producers with commensurate improvements in market power.There are several examples of resource-based industries which have developed their business along the complete value-chain; for example large oil and gas producers successfully span upstream and downstream operations including refining and petro-chemicals as well as retail distribution of fuel and other products. Relevant frameworks that provide insight and understanding into the strategic issues around value-adding are reviewed and examples of the application of these frameworks to companies and industries which have successfully adopted a strategy of integrating along the value-chain, as well as those players who have focused on parts of the value-chain are presented. The issues around value-adding in Australia are then reviewed with reference to these frameworks and it is concluded that the issue is a conflict between the objective companies who wish to maximise financial value versus the desire of governments to increase economic benefits. An approach to aligning these objectives is proposed.

Jan 1, 2008

By R Polmear, G Mauger

You wouldnÆt start excavating before testing core samples, so why would you approve a project plan before all factors have been identified, reviewed and addressed? Even a champion sports team made up of the best players canÆt produce optimal results without a well understood and agreed game plan. Could an F1 racing team produce their outstanding performance without rigorous evaluation and testing of the factors for successful performance? Why would we expect a capital works project team to be able to get it right without an understanding and an involvement in setting and implementing the overall game plan and without an understanding of all stakeholder requirements? For International PowerÆs Hazelwood (IPRH) mine in Victoria, the challenge was development and delivery of a 40 year mine plan, ultimately involving relocation of existing mine operations into an adjacent new coal field, land acquisitions and major environmental and other approvals to allow diversion of three streams, a highway, an Over Dimension route and other infrastructure in a political and environmentally sensitive atmosphere. The lessons from International Power HazelwoodÆs (IPRH) experience are: that the clear set of project principles and guiding values ensured delivery of a robust plan; a robust plan can withstand significant change; and value management (VM) played an important role in providing assurance, to all, that the plan was sound at both the strategic and micro levels. This Hazelwood mine project included five major VM workshops. The first was a critical review process in addition to design and cost reviews. This VM workshop was used to analyse, at a high level, the preferred coal mining sequence and design concepts, together with the interaction between design elements, risks and costs. In addition to this, the workshop provided an agreed common pathway for all downstream decisions. A second VM study was conducted to ensure that the proposed plan and design for relocation of the conveying systems from the existing mine into the new field were planned for optimum achievement from a whole of life cost, time, operational and maintenance perspective, plus the logistics of continuing operations while relocating assets. A third study followed to review the Conveyor Transfer Alliance and review functional design. A fourth VM study workshop was formed at the start of Phase 2 Alliance to ensure that the best value for money was being achieved through the current design, schedule and project arrangements and that all interfaces between parties had been reviewed and responsibilities were clear and understood. Other studies are outlined later in this paper. This paper details the evaluation criteria and processes used in the project evaluation that led to the WestField Mine Development.

Jan 1, 2007

Water is an integral and essential part of mining business. Two issues crucial in the management of this resource, scarcity and excess, are increasing awareness of the importance of water and changing the value perceptions of the industry because they affect both the existence and continuation of the business. Therefore its value should be reflected in the water management that is practised on site. Historically water in mining has been perceived to be of low value so management practices have not been good or well implemented. Political and social transformation in South Africa has been accompanied by the promulgation of new legislation. South African water law is now underpinned by Integrated Water Resource Management (IWRM) principles. It impacts water pricing, provides for water pollution charges, prioritises water users, has specific mining and water related components and requires water licensing as part of the licence to mine. Mining no longer has a priority on water resources and has to compete with other water users to gain access to resources. New institutional arrangements are being put in place to implement the regulations. All this requires a paradigm shift in miningÆs view of water. Generally the sector is still catching up with the new requirements, principles and philosophies. However, the way in which South African mining values water is changing. This is demonstrated in partnerships between the industry and other water users. These partnerships are Integrated Water Resource Management (IWRM) in practice and they achieve sustainable development goals. These partnerships are essential for mining to stay in business, expand operational capacity, reduce impacts, prevent legal action and reduce reputational risks.

Jan 1, 2006

A laminar-flow furnace technique was used to study the combustion of 37-53 µm size fraction of Woodlawn copper concentrate containing 7.4 per cent zinc, 5.0 per cent lead and 22.5 per cent copper. Factors studied included the effect of time, temperature and the distribution of volatile elements between the panicles and the fume. Air was used for most of the work but a few tests were carried out using 1 per cent oxygen in nitrogen. Chemical analysis, X-ray diffraction, and scanning electron and optical microscopy of polished sections were used to characterize the reaction products.When the concentrate was combusted at low temperatures (800-900°C), the fume was rich in lead. At higher temperatures, this was diluled by increasing amounts of zinc and copper. 70 per cent of the zinc, 60 per cent of the lead and 40 per cent of the copper were found in the fume after oxidation at 1400°C. Lead, zinc and copper were present in the fume as anglesite (PbSO4), zincite (ZnO) and cuprite (Cu2O) respectively. The major phases present in the panicles were magnetite (Fe3O4) and/or cuprospinel (CuFe2O4), with some zincite and cuprite.Elemental copper was found in the particles oxidized in 1 per cent oxygen. Possible vapour species responsible for the vaporization are discussed.

Jan 1, 1985

By T Baumgartl, D R. Mulligan, D Doley, A Schneider

In arid and semi-arid areas evapotranspiration (ET) cover systems are often used to mitigate contaminated seepage from hazardous mine waste into the adjacent environment. The theory of ET covers is based on the water balance equation with the aim of minimising seepage. While cover systems are commonly trialled, the influences of variability in climate and cover structure on water balance equation parameters are seldom investigated.Water balance equation parameters and their variability were analysed for two ET cover trials constructed from benign waste rock in semi-arid Australia. Seasonal and inter-annual variations in rainfall critically influence cover performance. For successful cover system operation, the average return periods for higher than average rainfall should be taken into account. In addition, failure of ET covers has a higher probability in areas with marked rainfall seasonality. Water holding capacity and plant available water content are low in covers constructed from waste rock. Changes in water holding capacity due to variation in particle size distribution are likely and critically influence cover performance. The application of topsoil can be beneficial for water ingress control through run-off, but a balance has to be struck between run-off, erosion and plant available water. Changes in vegetation composition only influence evapotranspiration water losses at plant coverage exceeding 50 per cent, which is unrealistic in semi-arid areas. This study showed that the capacity of ET cover systems to hold and dispose of received rainfall is often lower than assumed by industry practitioners. Furthermore, in order to improve reliability of long term cover performance, the variability of rainfall and water holding capacity of the cover has to be included in water balance models.CITATION:Schneider, A, Baumgartl, T, Doley, D and Mulligan, D R, 2012. Variability in parameters of the water balance equation and their influence on evapotranspiration cover performance, in Proceedings Life-of-Mine 2012 , pp 293-300 (The Australasian Institute of Mining and Metallurgy: Melbourne).

Jul 10, 2012

Differences in the assay results of replicate samples engender doubts on the reliability of ore sampling and of assaying procedures. An analysis of variance is a technique to estimate the variability at each level of the procedures. In an example, the variability of one-metre core samples was far greater than that of the assaying technique.

Jan 1, 1976