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By Y. Mitani, M. Zhang, M. Takeda, T. Esaki

Despite their inadequacy, assumptions of isotropy and homogeneity are often applied to the analyses of in situ permeability tests. In this paper, we exam the effects of anisotropy and heterogeneity on Pressure Pulse Test (PPT) and Constant Head Injection Test (CHIT) by means of numerical approaches. Some new findings that offer practical considerations in properly interpreting in-situ permeability tests are presented. Malgré leur manque de précision inhérente, les assomptions d'anisotropie et d'hétérogénéité sont souvent utilisées lors de test de perméabilité in situ. Dans cette étude, nous examinons les effets de l'anisotropie et de l'hétérogénéité sur le test par pression pulsée et le test à injection à charge hydraulique constante par le biais de la simulation numérique. Des nouveaux résultats permettant une interprétation pratique et claire des test de perméabilité in-situ sont présentés. Trotz ihrer inhärenten Ungeeignetheit werden häufig Annahmen über Isotropie und Homogenität auf Analysen von in-situ Permeabilitätstests angewendet. In diesem Papier untersuchen wir die Effekte von Anisotropie und Heterogenität auf Durck-Impuls-Test (PPT) und Konstant-Kopf-Einspritztest (CHIT) mit numerischen Ansätzen. Einige neue Befunde, die zu praktischen Erwägungen zur richtigen Interpretation von in-situ Permeabilitätstests führen, werden vorgestellt.

Jan 1, 2003

By M. Grodner

Underground excavations exhibit different hangingwall conditions in response to varying geotechnical and mining situations. These differences need to be quantified so as to accurately determine the effectiveness of the mining and/or support strategies. A useful tool for the quantification of these differences is hangingwall profiling. Two methods of hangingwall profile measurement are described?termed irregular and periodic methods. Several data analysis techniques are reviewed for these methods and the suitable ones are discussed in detail. For irregular data the suitable techniques are the determination of the length, the average of the profile and the average absolute deviation from the mean of the profile. All of these techniques as well as determination of the moving average of the height and examination of the spectral image of the profile can be successfully applied to regular data. The effect of preconditioning on the hangingwall is discussed as an example and it is quantitatively shown that it results in improvements of conditions. The techniques described allow the engineer to quantitatively identify the appropriate support type or mining strategy and thus represent a valuable decision-making tool. It is suggested that these techniques should be employed on a routine basis by the rock engineers on the mines as part of their geotechnical classification, as well as support manufacturers to quantify the effectiveness of various support types.

Jan 1, 2000

By J. V. Simmons

Composite rock mass failures involve intact rock material as well as fracture and shear on existing defects. Experiences from open-cut coalmining in the Bowen Basin of central Queensland are that failures of this nature occur suddenly with little warning, and are much more common than classical structurally controlled failures. Geological conditions and mining practices in the Bowen Basin are described. The circumstances of a sample of composite failures are described in detail in the paper. From this experience it appears that several aspects of conventional geotechnical investigation and design practice have not contributed significantly to either predicting or controlling the risks associated with sudden failures. These practices are described as myths for reasons outlined in the paper. On the other hand, the reality seems to be that high initial stresses and stress changes caused by excavation lead by a process of extensional deformation to a critical stress condition within the rock mass, and that sudden collapse follows when that critical stress condition can no longer be sustained. It is concluded that learnings gained from underground excavations in rock may be more applicable to open pit excavations than previously thought, and that the processes of prefailure deformation require more careful study if we are to develop more reliable risk management controls.

Jan 1, 2006

By G. Hangone

Paper written on project work carried out in partial fulfilment of MSc thesis This paper investigates the effects of thiol collectors: xanthates, dithiophosphates, dithiocarbamates and mixtures of these on the froth flotation performance obtained with a bornite-rich copper sulphide ore from Okiep Copper Mine with a feed grade of 1.8%copper. Batch flotation tests were used to assess the performance in terms of mass-water recovery, sulphur grade-recovery and copper grade-recovery relationships and the Klimpel rate constant for copper recovery. The results showed that the di-ethyl-dithiocar-bamate (di C2-DTC) was the weakest collector of copper sulphide minerals. Highest copper recoveries were obtained with the di-ethyl-dithiophosphate (di C2-DTP), which were accompanied with more watery froths and lower copper grades demonstrating frothing properties in addition to collector action. Superior copper recoveries were obtained with the 90% ethyl xanthate (C2-X):10% di-ethyl-dithiophosphate (di C2-DTP) and 90% ethyl xanthate (C2-X):10%di-ethyl-dithiocarbamate (di C2-DTC) collector mixtures compared to that obtained with ethyl xanthate at an equivalent collector dosage of 0.139 mol/ton ore (a dosage equivalent to 20 g sodium ethyl xanthate per ton ore). A superior copper grade was obtained with the 90% ethyl xanthate: 10% di-ethyl-dithiocarbamate collector mixture at a dosage of 0.0695 mol/ton ore compared to that obtained with ethyl xanthate at the same equivalent dosage. Keywords: flotation, collector mixtures, copper sulphide ore

Jan 1, 2005

At Namdeb, submerged beaches are earmarked for sampling and future mining and various sampling configurations are tested for optimality through the use of spatial simulations. For the creation of these virtual orebodies, basic statistics and variograms are needed, but in this specific instance no data exists from which the necessary parameters can be determined. The best that can be done is to use proxy data from onshore beaches, with adaptations where needed. The reworking of raised beaches during periods of rising and falling sea levels in some cases destroyed the internal beach structures, and it is very difficult to determine the variograms. A method is proposed whereby simulated annealing is used to adjust the sample locations to align the data pertaining to beach crests or cliff lines, thus improving the variogram structure along the shoreline in the direction of the highest geological continuity.

Jan 1, 2014

By C. M. D. Majola, K. E. Langerman

Energy efficiency is a cost-effective way of both bolstering energy security and limiting the harmful effects of energy use on the environment. Mining is an inherently energy-intensive activity, and the 2008 revision of South Africa’s National Energy Efficiency Strategy (NEES) set a target of a 10% reduction in energy consumption by 2015 for the mining sector. In this study, we investigate the effectiveness of the NEES in improving energy efficiency in the South African coal mining sector by surveying energy intensity at a number of operations, and analysing energy efficiency trends and energy use by process and energy carrier at an underground coal mine in Mpumalanga. Most mines surveyed exhibit an increase in energy intensity over time. At the case study mine, the increase was primarily due to increased energy use in the beneficiation and discard reclaiming processes. Trends in energy consumption are a poor reflection of trends in energy intensity, as a decline in energy consumption is most easily achieved by reducing production. A more appropriate metric for energy efficiency at coal mines is energy intensity, defined as energy use per unit of saleable product, relative to a multi-year baseline. The evidence suggests that the NEES has been ineffective in promoting energy efficiency in South African coal mines. We propose that greater success could be achieved by monitoring and reporting on energy intensity at the process level, and by incentivizing energy efficiency gains.

Sep 6, 2023

By C. Daly

The Faculty of Engineering at the University of New South Wales (UNSW) offers a core first-year engineering design and innovation course, ENGG1000, undertaken during the first and second semesters. This course is highly regarded in the sense that it provides an introduction to many concepts and activities that students will experience over the four-year minimum for which they are undergraduates at UNSW. Approximately 1400 students enrol in the semester 1 course across the Faculty, typically 80 of which undertake the Mining Engineering stream. Students in teams of between six and eight design and construct a physical model to represent an aspect of their chosen discipline. For example, in 2013 the mining engineers designed and built a model dragline. This paper concentrates a major aspect of the course ? the involvement of team members in group activities and the development of the associated skills of peer assessment and peer review as the course progresses over a period of 12 weeks. The term ?peer assessment? in this paper refers to the requirement for students to assess the design components of their peers. This course has a structured requirement in terms of how a successful design is a result of a sound design process rather than a ?try and see? approach. Each student must describe in detail the process they undertook to achieve their final design ? hence the approach is independent of the discipline and/or project selected. Peer review is a process whereby students review the contribution of their team members to the overall design. This activity encourages team involvement and interaction. The final assessment mark can be moderated by the outcome of this peer review, although it is run twice during the semester. The first ?run? is for feedback only during week six and hence no moderation is undertaken. It was found through consultation with students and from questionnaires that both processes are well accepted and highly regarded by students, as they give them a degree of ownership of the assessment process. In addition, the processes provide rapid and relevant feedback on the progress of individual students. Peer review and peer assessment are also considered to be very valuable tools for use in courses in succeeding years. For instance, many of the courses in mining engineering rely heavily on group assessment tasks.

Jan 1, 2014

By C. Daly

"The Faculty of Engineering at the University of New South Wales (UNSW) offers a core first-year engineering design and innovation course,ENGG1000, undertaken during the first and second semesters. This course is highly regarded in the sense that it provides an introduction to many concepts and activities that students will experience over the four-year minimum for which they are undergraduates at UNSW. Approximately 1400 students enrol in the semester 1 course across the Faculty, typically 80 of which undertake the Mining Engineering stream. Students in teams of between six and eight design and construct a physical model to represent an aspect of their chosen discipline. For example, in 2013 the mining engineers designed and built a model dragline. This paper concentrates a major aspect of the course - the involvement of team members in group activities and the development of the associated skills of peer assessment and peer review as the course progresses over a period of 12 weeks.The term ‘peer assessment’ in this paper refers to the requirement for students to assess the design components of their peers. This course has a structured requirement in terms of how a successful design is a result of a sound design process rather than a ‘try and see’ approach. Each student must describe in detail the process they undertook to achieve their final design - hence the approach is independent of the discipline and/or project selected.Peer review is a process whereby students review the contribution of their team members to the overall design. This activity encourages team involvement and interaction. The final assessment mark can be moderated by the outcome of this peer review, although it is run twice during the semester. The first ‘run’ is for feedback only during week six and hence no moderation is undertaken.It was found through consultation with students and from questionnaires that both processes are well accepted and highly regarded by students, as they give them a degree of ownership of the assessment process. In addition, the processes provide rapid and relevant feedback on the progress of individual students.Peer review and peer assessment are also considered to be very valuable tools for use in courses in succeeding years. For instance, many of the courses in mining engineering rely heavily on group assessment tasks."

Jan 1, 2014

By N. R. Williams

Black Mountain, a polymetallic base metal mine located in the Northern Cape territory of South Africa has been blessed with high grade economic ore for many years. Now that the Broken Hill orebody is nearing the end of its life, a lower grade orebody (Swartberg) is being exploited to supplement production from Broken Hill. In addition, ore from stopes in the upper levels of the Broken Hill orebody is considerably tarnished (oxidized). As a natural result, the remaining ore contains a higher percentage of magnetite, pyrrhotite and pyrite than in earlier years. Bismuth, cadmium and cobalt also occur in the ore in higher quantities. The life of the mine has been lengthened with the discovery of further deeper-lying ore reserves extending from the Broken Hill orebody suitably called the Deeps section. However, to bridge the gap between development of the new reserve and the exhaustion of the old reserve, these lower grade and tarnished (oxidized) ores have to be treated. The mine has had reasonable success in identifying unfavourable or problematic ore types and stockpiling them separately to blend in small quantities with more favourable ore. Bench and plant scale tests have aided identification of the various ore types and significant improvements in flotation metallurgical results have been seen. Copper, lead and zinc metal occur as sulphides in the ore. The mill consists of a differential and sequential flotation process that extracts copper concentrate, lead concentrate and zinc concentrate respectively with silver metal recovered in the copper and lead concentrates. This paper describes the ore blending strategy employed at the mine to maximize the econo-metallurgical efficiency of the operation.

Jan 1, 2001

By M. Wong-Kian, L. A. Cornish, A. van Bennekom

Samples of four different satellite materials were prepared by either hot isostatic pressing (HIP) of the powder or tungsten inert-gas welding of rod onto a 316 L stainless-steel substrate. The samples were subjected to a series of comparative erosion corrosion tests, and generally the Hipped samples experienced between 13 and 24 per cent less loss in mass than the equivalent welded alloys. Resistance to erosion corrosion increased with increasing carbon, chromium, and tungsten contents. Metallographic studies indicated the differences in carbide content between the different satellite materials, and the differences in morphology between the Hipped and welded samples. Finer and more homogeneous microstructures were

Jan 1, 1995

By J. H. deur Potgieter

This paper, 'A review of the biological treatment of cyanide-bearing waste water' discusses the necessity for the treatment of cyanide-bearing waste water with a view to the avoidance of environmental pollution, and the limitations of the available chemical and physical processes are referred to briefly. The sources of cyanide-bearing waste waters are mentioned. The mechanisms of production and utilization of cyanide by fungi and bacteria are discussed. The work done in connection with the biological removal and destruction of cyanide is summarized, the successes achieved are described, and the relevant processes are listed. In conclusion, some advantages of biological processes for the removal of cyanide are mentioned.

Jan 1, 1991

By R. M. Lamya

The kinetics of copper cementation during atmosphere leaching of a Ni-Cu matte in CuSO4-H2SO4 solution was studied as a function of initial copper ion concentration, initial acid concentration, temperature, stirring rate, particle size distribution and pulp density. It was found that all these process variables influenced the rate of cementation. A two-stage rate of reaction was observed inmost of the experiments, with the rate of cementation in the initial stage being slower than that of the subsequent second stage. The increased rate of cementation in the second stage was attributed to the enhancing effect of the surface deposit. The cementation process was found to take place by two different rate-controlling mechanisms. At a temperature range of 50?70°C, an activation energy of 74.6 kJ/mol was obtained, indicating a surface reaction controlled process. At higher temperatures (70?80°C) a lower value of activation energy was observed (18.2 kJ/mol), indicative of a process controlled by diffusion through surface layers. The structural characteristics of the cemented deposit could not be determined in the investigated system where the deposit was mixed with the leach solid residue.

Jan 1, 2005

By M. Sephton

Slat-band chains, currently manufactured from Type 430 ferritic stainless steel, are used as conveyors in various industries. A process to strengthen these chains?with the aim of prolonging the lifetime of the conveyors?was developed recently. The process entails heat treating the cold-worked chain at 475°C,strengthening the material by precipitation of the Cr-rich phase a? at relatively long periods of aging. In the present work, it was found that increasing the interstitial content by solution heat treatments (at 880°C or 930°C) prior to cold rolling and aging, causes an increase in strength at shorter aging times as a result of the precipitation of chromium-rich carbides and nitrides. The solution treatments can introduce martensite into the microstructure if carried out at a sufficiently high temperature. This, along with the deformation caused by cold work, also increases the strength. Corrosion resistance is not affected by the treatments, but ductility is lowered. However, calculated critical crack lengths indicate that solution treatment at a temperature below the Ac1allows for a larger critical flaw size, and that the lifetime of the chains will probably be determined by fatigue. Although the duration of the service of the chains are reportedly controlled by wear, with these treatments the tensile strength of the material is increased to within acceptable limits for conveyor chains. The tensile strength is an indication of the wear or abrasion resistance of a material. It is expected that after the treatments, the wear resistance will be improved, but since embrittlement occurs, the fatigue resistance is lowered. It is concluded that the preferred processing route for the chains would be solution treatment at 880°C, fast quenching to trap the interstitial atoms, cold rolling and then aging at 475°C for 8 minutes.

Jan 1, 1997

By T D. Sullivan

Risk lies at the heart of all mining and nowhere more so than in pit slope design. Mining is principally about two areas of risk; safety and economics. This paper addresses the main elements of pit slope design and presents a view of the state of the art in terms of safety, design, prediction of performance, success and pit slope management. There has been a recent trend for serious injury and fatalities due to stability in open pit mines. The causes and contributing factors are analysed in relation to geotechnical knowledge, pit slope design and management. Currently there is no standard classification system for mine slope designs and it is considered doubtful if a universal system is possible. Designs are usually formulated in accordance with many different methodologies, various engineering principals and a number of different philosophical approaches, with results often presented in terms of Factors of Safety or Probabilities of Failure. However wide experience has demonstrated that even with apparently detailed engineering investigation and analysis at Feasibility Level, at the Operating Stage mine slope angles are regularly subject to large changes. The general experience is that these changes are ± 5° and 16° overall, which is considerably outside the accepted order of accuracy. For large deep mines these are huge changes and represent significant risks to the operations. The current state of practice in pit slope design is examined for two stages, feasibility and operating.

Jan 1, 2006

By S. Chatterjee, F. Suparno, A. Paithankar

Estimating reserves and quantifying resources stand as pivotal and intricate endeavours within the realm of coal mining operations. Intricate geological formations compound the challenges in resource estimation, thereby complicating reserve calculations. The uncertainties tied to geological attributes of coal, encompassing parameters like tonnage and coal quality, wield significant sway over resource and reserve computations within coal mines. This research delves into the domain of geological uncertainties, with a specific focus on calorific value, aiming to numerically characterise resources and reserves within an open-pit coal mine situated in Indonesia. To quantify resources, the coal seam geometry underwent simulation via a multipoint geostatistical technique known as single normal equation simulation. A geologically established coal seam served as the training image for generating 20 equiprobable coal models. To simulate CV, 50 realisations were generated for each simulated coal seam, utilising sequential Gaussian simulation. Deviations of the simulated coal seams ranged from -0.07% to 5.48% in comparison to the training image. The CV simulation yielded an average value of 5,920.29 kcal/kg, accompanied by a standard deviation of 586.54 kcal/kg. However, the average CV spanned from 5,305.26 kcal/kg to 6,526.55 kcal/kg across diverse simulations. For reserve calculation within the context of geological uncertainties, an algorithm rooted in maximum flow graph theory was employed to construct the ultimate pit for the coal mine. Within this final pit, the average stripping ratio was 1.62, coupled with a CV value of 6,019.66 kcal/kg. When juxtaposed with the deterministic model, the findings underscore that the stochastic ultimate pit delineates a more expansive excavation, accompanied by a heightened undiscounted cash flow.

Oct 2, 2025

By M. J. Deats

INTRODUCTION To prepare the reader adequately, reference should be made to the paper 'The Pioneering of Fully Mechanized Longwall Coal Mining in South Africa' by R. T. Naude and M. J. Deats, published in the February, 1967, edition of the Journal. At the time mechanized longwalling had been proved operationally feasible with encouraging results since its inception in South Africa in mid 1965. Subsequently, further top seam panels were successfully extracted with improved productivity and with some modification to equipment. In 1968, after an overseas visit by mine officials, equipment specific to suit local conditions was acquired and lower seam trials commenced. Despite initial obstacles and difficulties the first panel was successfully mined. Modification and improvements to equipment and techniques resulted in the second lower seam panel being extracted economically during 1969-1970 and with productivity exceeding even that of top seam faces. During extraction of the second lower seam panel, gradual and complete surface subsidence occurred over the panel without affecting face operations. Rock mechanics investigations had originally indicated some uncertainty regarding adverse dolerite sill behaviour which could have caused longwall mining to be hazardous. All such doubts have now been removed. RESUMÉ AS AT FEBRUARY, 1967 Mechanized longwalling was introduced in 1965 on an experimental basis in an effort to improve productivity in the newer area of the mine and to increase the quality of the comparatively dirty run of mine feed to the washing plant. In addition advantages could be predicted in the long term by better utilizing reserves of straight coking coal and increasing the life of the mine. The top seam unit was obtained on a rental basis and by the beginning of 1967, two panels, the first having a face length of 215 m, a panel length of 345 m, seam section of 1 219 mm, and the second the same face length, a panel length of 453 m and a seam section of 1 067 mm had been successfully longwalled. At this stage a best month of 24 602 metric tons with an average of 17 364 metric tons per full working month could be reported. Results were sufficiently encouraging for the company to exercise its right to acquire the equipment as its own asset and from 1967 onward, the unit has operated on this basis. From the point of view of rock mechanics, the dolerite sill over the first two panels was known to have 'bridged', only the material below the base of the sill having truly 'goafed'. No adverse pressure effects had significantly affected face operations except for two 'bumps' towards the end of operations in each panel. Gate road maintenance presented no problem. The strong inflows of water experienced on the first face were now known to be associated with an isolated water bearing fault plane and were not experienced on the second face. TOP SEAM EXPERIENCE - MAY, 1966, TO DATE Panel 2 (February, 1966, to November, 1966) The operations in panel 2 (see Fig. 1 for location of panels) continued uneventfully until the final month in this panel. At this stage, the chocks behaved most inconsistently often lowering under the weight of the canopies alone. Roof trouble became so severe that the unit was unable to produce adequately and blasting of chocks became a daily occurrence. Finally 24 m short of the planned limit it was decided that a complete overhaul was the only solution and the extraction operations commenced. At this time, the only fatal accident associated with longwalling occurred when a Non-White inadvertently fell into the panzer conveyor transfer point at the main gate. Some gate road difficulties in this panel were overcome by bolting tapes to the roof as decking and allowing them to pass over the gate chocks and collapse into the goaf. Two cribbed roof falls were also negotiated by the gate chocks at the face ends without undue difficulties. It was decided in the light of maintenance problems encountered on this face that the best solution would be to appoint a foreman solely in charge of face maintenance crews. This step has to a large extent contributed to success achieved subsequently. Panel 2-face length 213 m panel length 456 m cutting height 1 092 mm average monthly output 16 443 t best month 19 130 t Panel 3 (December, 1966, to June, 1967) By the end of 1966 results were sufficiently encouraging for the company to exercise its right to acquire the equipment. This was negotiated and the unit has operated as such to the present date. Prior to installation in panel 3, all face equipment was thoroughly overhauled underground and the chocks boost-tested to yield-load. The costs of overhauling, including almost complete hose replacement, were much higher than anticipated. Advice had been received that complete hose replacement was common practice after +/- 18 months' operation. Shortly after commencement of operations in panel 3 the chocks again failed as they had towards the end of panel 2. At this stage, the suppliers advised that the valve gear should have been repaired during the overhaul as the needle and seat seals could no longer be relied upon. This operation was impossible to carry out on the face and would have been e1ttremely time consuming. Fortunately a new type of valve gear was then available from the suppliers, termed the capsule-type valve, and a complete change over could be made on the face. The encapsulated valve has a delrin pad sealing over a raised

By T. Fraszczak, U. A. Peuker, T. Mütze, O. Ortlepp

Dolomite is a calcium carbonate sedimentary rock that can be found all over the world. In its calcined form it is employed for water treatment or as an additive in iron production. Calcined dolomite is produced at the Wünschendorfer Dolomitwerk GmbH in shaft furnaces (kilns). Because of an expansion of the mined deposit, significantly higher extraction costs were expected. Therefore, the existing upgrading processes for the kiln stone fraction had to be adapted and improved. This paper presents a process optimisation which allows for an increase of the yield of calcined dolomite by 10 % due to a redesign of the crusher circuit and by an additional 5 % due to a comprehensive characterisation of the kiln stone fraction itself. Here the interdependency between the pressure drop in the furnace during calcination and the size distribution of furnace stones was used to increase the amount of fine size fractions in the furnace feed without deterioration of the calcination process. Keywords: Dolomite, crushing circuits, kiln stone production, flowability, calcination

Jan 1, 2020

By J. S. Harington

Our purpose is to record and to explain the widely changing numbers of the huge total of black workers on the gold mines of South Africa over the century from 1896 to 1996. These men were recruited from up to twenty territories, and their contributions are examined. The major areas providing labour over this long period have been Lesotho, the former Transkei within South Africa and Mozambique. From 1989 to 1996, for instance, these three areas accounted for over sixty per cent of the total labour force (tlf). Our principal Figure 1 shows the tlf fluctuating through time to reach a peak of 480 000 in 1988. Irregular falls are also documented with the most serious in 1995 to 180 000. Based on this graph we consider the political, economic, sociological and historical reasons behind these changing employment opportunities. These have included external world-scale events such as war or depression, as well as internal changes of national economy and policy. We show the importance for numbers employed of the discovery of gold in the Orange Free State in 1946, the influence generally of the ?Winds of Change? and the firm maintenance by the State of law and order. Varying gold production costs and profitability against high tax rates, allied with increasing wages and a lack of development capital, have led in the last decade to employment falling by fifty per cent, despite an actually higher value of gold output. Finally, this analysis considers the role of the migrant labour system as it affects, and is affected by, conditions in the gold mining industry, with special reference to its less than humane consequences in the numerically dominant territories of Lesotho and Transkei.

Jan 1, 2004

By S. L. Chen

Keywords: copper, concentrate drying, steam dryer, dryers By placing additional demands on energy and gas flow, the moisture content of a copper concentrate has an adverse effect on the smelting process. Different drying technologies, such as directly heated rotary dryers, flash dryers, and steam dryers, are available to solve this problem. The energy requirements of and off-gas generated from different dryer types are compared. The performance of the steam dryer was found to be superior to that of the others. In particular, the rotary steam dryer and its benefits are discussed. Structural properties confer an advantage on the rotary steam dryer, for wear on tube elements is eliminated, and drying efficiency is improved. If steam is available, the rotary steam dryer is an excellent choice for drying copper concentrates.

Jan 1, 2006

By M. R. Samis

The great variability of mineral and energy prices has motivated some governments to incorporate a windfall profits tax into their mineral taxation regimes. Windfall profits taxes are a means for governments to capture additional mineral revenue when mineral prices are considered higher than some historic level. Governments need to be aware of the effects of such contingent taxes on the exploration, development and operating decisions of mining companies. Mining companies need to be able to calculate the full impact of windfall profits taxes on the economics of their projects. This paper examines the valuation of a multi-phase copper-gold project in the presence of a windfall profits tax. Real options Monte Carlo simulation is used to characterise the different exposures of the mine owner and of the government to the risky cash flow streams that they receive from the project. The results highlight that Monte Carlo simulation paired with the real option valuation method is able to account appropriately for the differing risk exposures, while the traditional discounted cash flow valuation model is not. Our key conclusion for governments and mining companies is that the impact of contingent tax and royalty terms can and should be assessed using advanced valuation techniques, and the results used to improve contract designs under the constraint of actual and perceived fiscal system stability.

Jan 1, 2007