Professional Documents
Culture Documents
A) Preliminaries
1) Delineation: Exploratory Drilling
Development Drilling
4) Definition of ORE
exploratory
drilling
stops
when
there
is
c.~. .C
_ development drilling:
\-
.'
(--
-.
Cut-off Grade (COG)
The ore grade yielding an ore value equal to the
operating cost on a unit basis.
Costs included in operating cost:
stoping
transportation
milling
smelting
refining
selling
administrative (administration, head office,
exploration, etc.)
Mineralized material greater-than-or-equal-to this
grade is ore; less than'this grade it's waste.
METRIC
AZIMUTH
ID.D.H. No.
FALCONBRIDGE LIMITED
DIP
EASTING
NORTHING
ELEVATION
DATE COMPLETED
I
D.O. SETUP LOCATION
PAGE . OF ...
IMPERIAL
.\
SECTION
DEPTH
SIZE
IPROPERTY
REMARKS
DEPTH
I
DIP
AZIMUTH
FROM
TO
ROCK
o ~KS
CA
'it
NI
Cu
AND OR DESCRIPTION
ASSAYS (0/1
Co
Au
Aa
Pd
When core is available from diamond drilling, it is first logged. This means that a careful
record is made of: -rock type and lithologic description
-texture, weathering
-structure
-alteration features
-depth & length of core run
-condition of core, recovery
For more thorough geotechnical logging:
After logging, mineralized zones are split along the axis of the core; one half remains in
the core librairy, and the other half is split into sample lengths (about 1m) and sent for
assay. There are several assay techniques: -wet or chemical assaying (leaching &
titration)
-fire assaying (roasted, get a button)
atomic absorption (chemical treatment
-puts minerals in solution and analysed
by atomic absorption)
Ore reserves are classified in order to give the user (geologist, mining engineer, financial
analyst...), an estimate of the confidence level in the results.
Two classification schemes are in use at the moment: the original categories of
1)PROVEN, PROBABLE, POSSIBLE and INFERRED.
2)MEASURED, INDICATED and INFERRED.
1) PROVEN: historically, ore that is "blocked out", ie, measured, sampled, and assayed
on four sides.
2) MEASURED : " ore for which tonnage is computed from dimensions revealed in
outcrops, trenches, workings, and drill holes, and for which the grade is computed from
the results of detailed sampling. The sites for inspection, sampling and measurement
are so closely spaced and the geologic character is so well-defined that the size, shape
and mineral content are well established." (White Pine Michigan: sufficient drilling is
about 1000ft spacing).
INDICATED: " ore for which tonnage and grade are computed partly from specific
measurements, samples, or production data and partly from projection for a reasonable
distance on geologic evidence.
measurement are too widely or otherwise inappropriately spaced to outline the ore
completely or to establish its grade throughout." (White Pine, Michigan: sufficient drilling
is about 3000 ft spacing).
INFERRED : "ore for which quantitative estimates are based largely on a broad
knowledge of the geologic character of the deposit and for which there are few, if any,
samples or measurements. "
4
r \ \L
-,
I~) 1 ~
'- .' \...;'
\\
(._ t-:x..'j
. '\Cbc
u""'- .
In Canada most mines still use the older system of proven, probable and possible, but
in the USA where tabular, vein-type deposits are rare, people have mostly adopted the
USBM classification of measured, indicated and inferred.
People have however, felt the need for subdivision of these categories, to further reflect
the level of knowledge and confidence in the reserves. One major company uses the
sub-categories: developed, semi-developed and undeveloped, to further rank proven
reserves.
,~c:>,,-'r<""'> ()O...:>-\..~
_~'<'\,J...'
.'-'
~c . ,
~.
t-r'-c.. . cy, -_ Vvli
Sl'~
. \
(" .~'---~
"
~-'L~
_.<.
.,
LC .. ,JJ...c.
_..:...... .....
.1, 'V'
t .. L<.:..\;' ~\'\..Z..........L.~Ci\~
"
'.
v..;
,'.
\.l
'.
ll...\...~.'-~'---v
"j
\...
(,
\ ....
,_\.:-... -~.7.1~ .. \ .
f'\
For some operations, particularly gold mines where the geology is extremely complex,
it is very difficult to adopt these classifications. They often generate their own.
For
example, in 1948, prior to the start of production, the staff at Giant Yellowknife could not
call anything proven, even though it had been thoroughly drilled.
considered "impolitic" to
Since it was
call it only possible, and still go ahead with the project, they
proposed a new terminology: "Estimate of Developed Ore: Estimate of available ore (ie,
above a production level) outlined by diamond drilling in detail sufficient for stope
layouts."
In most cases, and particularly in base metals, by the time the exploration program is
finished, and the orebody is ready for development, there are generally two categories
of ore reserves: geological reserves and minable reserves.C$L.
r\',~""':'"
"::'."
1) Geological reserves mayor may not have been estimated using a cut-off grade.
2) Minable reserves were definitely determined with a cut-off grade, and also with mining
parameters such as :
Falconbridge Limited
Kidd Creek
Division
Falcondo (2)
Collahuasi
Project (2)(3)
Raglan
Project
100%
100%
85.26%
50%
100%
14,777
10.762
24,551
2,488
29,199
1,070
1.983,942
4,488
8,834
Toral Proven/Probable
25.539
27.039
30.269
1,983,942
13,322
1,983.942
19,282
0.83
3.18
0.87
Percentage Ownership
Possible Reserves
12,847
5.133
22.057
Total Reserves
38,386
32.172
52.326
1.67
1.55
Possible Reserves
Nickel (%)
Copper (%)
Zinc (%)
Silver (grams per tonne)
1.25
1.18
1.73
2.79
5.53
69
66
134
3.361
17,169
fatal Resources
3.561
17,169
1.59
4.84
3.04
0.90
1.72
0.83
10.59
80
5.960
1.625
1.123.931
414
967
1.625
1.123.931
1,381
0.82
2.62
0.75
1.32
1.85
8.43
207
Notes:
1. All ore reserves are at December 31,1995. The ore reserves at the Sudbury Division, Kidd Creek Division, and Collahuasi are mineable
ore reserves. The are reserves at Falcondo and the Raglan project are geological ore reserves. The mineral resources are geological resources.
2. The ore reserves. at Falcondo and the Collahuasi project are shown on a 100% basis.
3. Falconbridge and Minorco have each agreed to sell a 6% interest to a Japanese consortium. This transaction is expected to close by mid-1996.
tAl Reserve - that part of a resource which can be mined at a profit under curli rent or reasonably anticipated economic conditions which are specified. In
addition to the information required for a resource estimate, technical, operating, legal and financial factors must be considered in a reserve estimate.
Proven reserve - that portion of a measured resource for which technical
and economic factors have been established at a high confidence level
and is generally restricted to that part of a reserve which is being developed or mined or for which there is a detailed mining plan.
Probable reserve - part of an indicated resource for which economic
viability has been demonstrated at a confidence level which would
;ustify a commitment to major expenditures.
25
Increasing
Technical and Economic Assurance
I
n
c
r
e
a
s
e
0
Resource
Reserve
g
lr,VI;
J.
J.
f~..k/d '
A
s
(ed' /
..
a
n
c
e
Fig.2
2 Axis System
Exploration
Information
IResourc,es
IReserves
Inferred
01-
Indicated
~~----------~.
Probable
~.----------~.
Proven
Measured
a) Tonnage:
b) Grades:
(22~0
Ibs)
metals)
In order to obtain reliable estimates of ore reserves, one needs to collect, treat and
document larges amounts of data:
sample frequency, location, collection, preparation and analysis. This is not typically the
realm of mining engineers. Get experienced and conscientious people to work for you.
Types of samples: diamond drill core (split and assayed)
channel sampling (not as common now)
grab samples from scoop buckets
rotary drill cuttings
unrealistic expectations.
- CUT-OFF GRADE: "minimum grade which can be mined at a profit under economic
conditions existing at a particular point in time." The cut-off grade can thus vary in time
depending on prices, operating costs, taxes, etc...
100
c.'"'"
...
100
... 0
.c
'"
::J
N= 380
N =190
In
'"
c.
en
'0
...
I
I
I
50
I
\
.c
'"
E
::J
I
I
0
0
1.0
Grode -
1.5
20
Cu
Grode -
(a)
40
%
P2 0 5
( b)
100
100
'"'"
c.
E
'"
N = 320
Q,
en
-...
en
'0 50
...
.,
50
'"
.0
.0
::J
::J
\
\
\
\
\
0
0
0
0.5
Grode -
1.0
%
Mo
10
20
Grode-O /T Ag
(c)
(d)
Level I
I:ll:ll:ll:ll:l
I
u uuuL:J
~r-:ll:ll:ll:l
u u L:J L:J L:J
250
Sublevel
Level 2
00 E
50
Two things are required for tonnage calculations, VOLUME and TONNAGE FACTOR.
- VOLUME is obtained by multipying the area of mineralization outlined in plans and
. sections, by the thickness of material above cut-off grade. The area is measured either
by dividing it into small areas, or by using a planimeter, or nowadays, by digitizing it. In
all cases, measurements should be checked at least three times. The average is then
used as the final measurement.
=Tonnes
2000 Ibs/torl-'
(S.G. x 62.5 Iblft3 water)
= Ib/fe of ore
presence of ore shoots, metal zonations, will become more apparent as the delineation
work progresses. These aspects, although determined entirely by site geologists, are
crucial to the mining engineer.
calculation of a cut-off grade. Achieving a better mill recovery is like raising the grade
of the deposit.
Once the orebody' s geometry is relatively known, the selection of a mining method can
commence, and with that an estimate of MINING RECOVERY and DILUTION can be
established.
8
METHODS OF CALCULATION
There are a few traditional methods for estimating ore reserves tonnage and grade.
These are: -calculation by mining block
"-.-'j
-calculation by polygons
-calculation by triangles
? ["
-calculation by sections
There are also nowadays, sophisticated modeling tools available in commercial
packages. These can be grouped into three broad categories:
-gridded model
-block model
-cross-sectional model
This method was more prominent in vein type deposits. The vein is divided into blocks
which are assigned a width and an average grade from development work. A weighted
average gives the !he grade of the deposit.
Calculation by polygons:
As stated earlier, this is still a popular first approximation when drill-hole data is
available.
method assumes that the area of influence of any sample point, extends half way
to the adjacent sample points. The procedure for constructing polygons is as follows:
a) connect lines between drill hole, b) draw perpendicular bisectors of lines between
adjacent drill holes, c) draw polygon.
Each polygon is then assigned the thickness and grade of the sample point within it.
A twist of the method is to assign a circular area of influence to each drill hole and
proceed in the same fashion.
Proven and probable reserve categories are often based on the "tightness" of the drill
pattern, or in other words, the area of influence of the drill holes.
TThis can be
Calculation by triangles
10
------
0)
\ ..,
..x;y/
\
.
/l
d)
//
.
~
.. ..
'
...
"-
'
8onanz~
"-
'0
.:{
Fig. 7. Construction of polygons. (a) Drill-hole plan. (b)
Connecting lines between drill holes. (c) Construction of
perpendicular bisectors of connecting lines. (d) Construction of final polygon.
Drill Holes
T-1
T-2
T-3
T-4
T-5
T~
T-7
T-8
T-9
T-10
Tons' Ore
26,400
26,400
22,500
22,260
18,550
27,260
26,240
40,500
24,418
28,917
263,445
Tonnage
263,445 st
277,927
. Average grade =
= 1.05% Cu
263,445
Metric equivalent: 1 st x 0.907 184 7 = t.
0-8
_ _ _"'0-9
100 feel
Average Grade
0.91
0.94
0.91
1.23
1.15
0.79
1.07
1.15
1.20
Tons x Grade
24,024
24,816
20,475
27,380
21,332
21,535
28,076
46,575
29,301
34,411
277,927
"
/9,
/ I
"
40
/ 2.20_
10'
/ 2.20
'2t--..Q
_vl'-:'/,\ 12'
.........
1.95
~1~141-
"
'-
/'
'\
/
\
/1. 98
45;-0-::13!-
/
100
50
o
!
SeQ I e 100
Calculation by Section :
This method is based on regularly spaced cross sections, which define a block of ore.
-
~--
...
-------
The total
volume is then calculated by multiplying each section by its distance of influence, which
is the section spacing, if it is regular.
There are various ways of interpolating between sampling points, either within a section
or between sections. The two simplest are:
value
of
the
nearest
DDH
intersection or section)
b) rule of gradual change ( linear change
of values between holes and between
sections)
..... '
These methods and variations of them have been used for many years, with success.
There is often however, a discrepancy between the tonnage and grade milled and the
original reserves. This is generally accounted for by adjusting the dilution and mining
recovery factors.
Quote from a geologist of Bralorne mine, B.C.,: " The staff of any gold mine that has
produced for 30 years, has been worried for 30 years, because calculated ore reserves
do not agree exactly with the ore mined."
South Africans have looked at all sorts of factors to try and explain these discrepancies
: .~athematical bias, underground sampling bias, assay problems, unaccountable
underground and surface losses of gold. This research has improved the technical status
from "factor of ignorance", (Mortimer, 1949), to one involving a "mine call factor", also
referred to as "assay plan factor".
T-I
SECTION 100 N
50
1~=~=~!
Scole
In
f ,
SECTION 200 N
Fig. 11. Cross sections of the Big Rat copper vein. Metric
equivalent: 1 ft X 0.3048 = m.
sophi~ticated
estimation
methods were devised. Ore reserve estimates give a fairly accurate picture of the total
amount of ore material. This is useful for preliminary work, and even for the feasibility
study, however, for daily production needs, one would like to be able to model the
orebody more accurately. This is why 3 0 modeling was developed, and although not
easy, it can provide a more detailed picture of individual mining blocks. There are three
broad categories of geological modeling packages:
Gridded Models
This method is useful with bedded, essentially 2 0 deposits such as coal or phosphate.
The gridded model is a set of two dimensional matrices, each representing a surface or
a value. These surfaces or values are obtained by interpolation from a set of irregularly
spaced data.
Block Models :
In a block model, the deposit is divided into regular blocks of given dimensions. Each
block is defined by the coordinates of its centre, and it carries a grade which is obtained
by computing the influence of all samples within a set distance.
12
To review:
13
Many mining companies are turning to geological models and geostatistics to improve
their ore reserves estimates. Many packages are now available on the market and they
all offer various estimation or modeling tools.
Commercial packages popular in mining :
Datamine (USA)
Gemcom (USA)
Vulcan (USA)
Med-Systems (USA)
Mrcfumine (Australia)
Geostat (Montreal)
These packages offer the entire range of modules, from drill-hole log entry, section
drawing, traditional and more sophisticated reserve estimates, to open pit
and
underground mine design. Many of these programs were initially designed for geology
and / or open pit design, and are weaker in underground mine design.
2) What is Geostatistics ?
It is
based on work by Georges Matheron and Danie Krige (from South Africa).
Geostatistical methods are smoothing methods involving the following steps:
Generating a variogram
Fitting a model to the variogram
Using the variogram to determine search areas for assigning grades
Smoothing the data on teh basis of the surrounding values
14
Limits of M
68.26%
95.46%
x +2u(x)
> M >
x -2u(x)
99.73%
x +3u(x)
> M >
x -3u(x)
The reliability of these estimates depends on the quality and number of samples, and
their distribution in space, but also on the continuity of the mineralization.
Classical statistics, as was said earlier, assume that samples are randomly selected and
independent of each other. This means that samples taken a metre apart should be no
more correlated than samples taken on opposite sides of a deposit. This is in fact, not
true and we don't want it to be true, because we want closely spaced samples to be
correlated, to indicate some measure of continuity in the mineralization.
Unlike classical statistics, geostatistics recognizes that samples in a deposit should be
spatially correlated with one another, and that closely spaced samples will probably not
be independent.
The technique is based on the idea of "regionalized" variables, ie, variables associated
with a volume (called "support" in geostatistics), and a position in space.
It is thus
15
RANGE:
The distance h at which the variogram levels off is called the range.
This distance
reflects the concept of "Area of Influence", Beyond this distance, sample pairs are no
longer correlated and thus independent.
(o~t.v"",,-,-,,,, ~~ <)f'-~:
2h
~ 3/4 ~ ~')
SILL: (C+C o)
This is the plateau value of the variogram function
y(h).
variance of the assay values, because at a distance r > a, the sample distribution is
essentially random.
NUGGET EFFECT:
= O.
of assay values at very small values of h. This effect is particularly common in precious
metals.
A high nugget effect value with respect to the sill, is an indication that the mineralization
is either poorly disseminated, highly disjointed (ie, post mineralization discontinuities
have been ignored), or that sample preparation and assaying
procedures were
inadequate.
DIRECTIONAL ANISOTROPY:
Since variograms are computed in various directions, they can lead to a much better
understanding of the grade distribution within the deposit.
The construction and interpretation of variograms are not trivial matters.
This work
should be done by the mining company's geologists, since they possess the most
intimate knowledge of the deposit, and they can benefit the most from the information
contained in the variograms.
17
THE VARIOGRAM
a) The first step is to determine potential geologic controls on the grade of the
mineralization, either through geological deduction, or with the help of statistics,
correlating grade with rock type, alteration, fracture density, etc...
b) Then comes the computation of variograms within each geologic domain, identified
in a). The variogram will numerically describe the way in which an orebody parameter,
like grade, thickness, etc.. , is spatially correlated.
The variogram function to be plotted is:
y(-h) = 1/2n
Li=1
Z(x i)
Z(x j + h)]2
Xi'
Xi
,and Z(x j + h) is
The vector notation indicates the directionality of the equation. All samples are taken
in the same direction, either along strike, across strike or down-dip, or in the direction
of maximum fracturing, to name a few possibilities. These directions would have been
identified in a).
The process is repeated for different values of (h), and then plotted as y(h) vs h. The
result is called an experimental variogram because it is based on samples.
r:,(3
h)
16
1. Conlinuous Type -
'6(r)
c'
...,:::-----h
i.CONTINUOUS TYPE
lL-_ _--..:._.-.J
F'
Y (h)
.-------h
0.25
Y(hlL":h
0.20
::.,.;:o...,...---........
"
:>
,.e
-~--"'~...".,,-:'"
0.10
Y(hl=h
0.05
fY'-', / "....
0'
/,./'
D -
+ __ +
NE -sw Direclion
- -.
NW-SE Direction
Distance H
(meters)
5. TRANSITIVE TYPE
(:)(h J
'~-~~
0.5
/,;
0.4
02
~/f
O.
. 1. '
IlL
o
r~l-, -
---
II
06
0.3
-- - - - f----
-- ---
0.7
(~
(il
c;>
--
II
- -roO'-
(~
--
----- ------1----
~
(~-
(~
I--
(.
(~
IC . c'
I
I
I
II
yOI
II
I
5
10
15
Vlrtical
~
o
o
o
o
-'
Averoqe Horizontal
k=
-a
EXPERIMENTAL VARIOGRAMS
I
I
I '" - - '"
lQet Eltecl_
4. RANDOM TYPE
Y (h)
lJ
/ ./
/
>.:::~: . .
.... -1
~~:~o
Model.
0.15
3. NUGGET TYPE
nH: ... ~.
"SPh.e~_c.a_I'.'_va_ri.oQ.ram
(selected
~~~~~~~~~o/~:______
.' ..
2.L1NEAR TYPE
~igure
r--a--i
LAG
Figure IS.-Excellent transitive va rio gram from a large strata-bound Canadian uranium deposit, which
is believed by the writers to be of sedimentary origin. The regionalized variable in this case is the tenor
in uranium of a long \VNW-ESE line of vertical packsack D.D.H.s (100 per cent core recovery) at
regular 15-metre intervals. This transitive variogram shows the total lack of grade correlation when the
holes are separated by a distance greater than 63 metres (lag of 4.2). This significant metallogenic feature probably denotes the width of buried channels of uranium accumulation.
.,o
Definiton :
consideratons.
'
~ '."-c O ""-\,.,..~
= Li=1 n Ai Xi = A (X
where
+ A2 x2 + ....+
Anx n
Xi
Ai'
18
-,4. Geostatistical methods do not cut high grades. They re-allocate them into the deposit
by reducing the high grade and lifting the low grade. The result is usually an increase
in tonnage and a decrease in grade with respect to classical methods.
19
= (1
/dn /
Li=1 n(1/d j )
where d; is the distance between a particular sample and the centre of the block.
And e is the selected distance weighting exponent (1,2,3 ...).
In both methods, inverse weighting distance and kriging, a 3 D search ellipse is generally
set up. Information from the variograms is extremely useful to choose the appropriate
ellipsoid.
NOTE
All methods assume corresct data. None allow for sample bias, so correction for this
must be done prior to ore reserve calculation, and is ususally based on experience.
20
Copper:
Silver
Gold
If final assay is less than 26% Cu, deduct 1.0 units; if greater
than 26% Cu, deduct 1.1 units; and pay for 98% of the
remainder at the LME Wirebar Settlement for the quotational
period
Deduct 0.8 oz, pay for 95% of remainder at the London
Spot/US Equivalent for the quotational period, less $0.25/oz.
Deduct 0.03 oz, pay for 95% of remainder at London Initial
and Final gold quotations averaged for the quotational period,
less $5.00/oz.
Treatment charge : $85 per dmt, subject to cumulative annual escalation of 7% per
year.
Refining charge:
Quotational Period :
The BEG is a single static criterion, which is independent of quantity, time or locality.
-- '_--.
Whereas the concept of ore and ore reserves and therefore CUT OFF GRADE is a
dynamic one which reflects "the cumulative effects of changes in geological, technical
and economic conditions in terms of material which can be mined at a potential profit."
So, Break-Even Grade is a static solution to a dynamic problem.
CUT-OFF GRADE: "is any grade that for any specified reason, is used to separate two
courses of action : ~~, to mill ~!..J~_d~."
Thus a cut-off grade is an ~i!:!-~~C?~~~~]"a~._
Pasieka and Sotirow describe cut off grade as a "standard of value, determined for the
purpose of classifying mineral reserves as economic or uneconomic in a specified time
frame."
Under a particular set of circumstances, Break-even and Cut-off grade may coincide, but
in some cases the use of
break-eve~de can
~----
----....."-------------_.--..._--
.....
-._.~---
T;here may\be a need for a different cut-off grade for the entire deposit, for lateral
fringes, for already
broke~
23
Definition: "minimum grade which can be mined at a profit under economic conditions
existing at a particular point in time. " The cut-off grade can thus vary in time depending
\.
All existing mining operations use a cut-off grade, and if one were to do a fancy analysis,
they would probably arrive at the same result.
optimized their system, so that in most cases, they are operating at the optimum level
within the limitations of their infrastructure.
operations or planned expansions. This is when the "usual" cut-off grade may not apply
anymore.
METHOD OF CALCULATION
Traditional methods
These methods have traditionally been used to calculate a cut-off, which is actually a
break-even grade.
BREAK-EVEN GRADE: "grade from which the recoverable revenue exactly balances
the costs of mining, treatment and marketing however these may be defined."
I3E6
Co So
r: e _
77 '1Ie;-A)(,;(
1<'
_C
R
'--
Cost
treatment cost includes smelting, refining, penalties and transportation to the smelter
other costs include transportation from the mine to the mill, administration and services,
and amortization and depreciation.
21
'1. Price increases lead to a lowering of the BEG. This means that the _~r.9.ge-9!ade._______/
/ d~s, andJ:Lnless ~~_~, less t"IletaU~~~9IlXP!.od~c~d.Reasoni~~
higher price is used to mine material which would otherwise stay in the ground. This
__
..
....
---
are high, the mine should be increasing the quantity of metal produced, even if that
--
The problem of non-included costs: There have been long-standing arguments over
this. For example sunk costs are unaffected by any future decision, however something
had to pay these costs .
Any major change in mine or mill capacity (mine cannot produce, mine or mill
expansion, mill shutdown) can seriously alter the applicability of the accepted cut-off
grade during times of stability. This is particularly true if the rate of output, and therefore
the unit costs, are altered.
J~
!Ct:>i'- C .
IP'
AUQ,
24
HISTORICAL REVIEW
This review was prepared by Taylor and is presented in the paper, "General Background
Theory of Cutoff Grades", IMM, 1972.
He grouped previous work into five categories:
1) The first group starts with Berry in 1922. He applied the Present Value Theory to
justify an increase in Cut Off Grade as time goes by. He failed to recognize that the
financial advantage would decline as time went by.
3) The third group includes Mortimer, Langton and Krige, amongst others (South African
perpesctive, dominated by gold mines of the Witwatersrand). Mortimer gave a definition
of the cutoff problem which, according to Taylor, "cannot be bettered" :
5) The last group comprises authors who took grade distribution, tonnage balance and
economics into account.
Based on certain assumptions, Henning derived formulae for cutoff grade that showed
that:
a) sunk costs have no direct relevance.
b) that true maximization of Present Value demands a declining cutoff grade.
25
K.F. Lane is regarded as the pioneer of serious CUT OFF GRADE work.
His great
contributions were:
a) to distinguish the three main stages of mining activity, which are:
Mining
= Ore
hauling)
Treating = Ore treatment (U/G
Separating)
Marketing = Product Treatment ( Smelting, Refining, Selling)
b) he showed that capacity constraints in each stage imposed different Break Even
Grade requirements.
These serve as
between them.
c) he confirmed the need for a declining COG in order to maximize Present Value.
In the same paper, Taylor suggested a distinction between Planning and Operational
COG:
Planning COG: used to define the geological reserve (no mining constraints), and the
minable reserve and the intent here is to make a "fair prediction of the total ore that may
at some time be mined or treated."
26
STATIC CRITERION
COG AS AN OPERATING CONTROL, OR AS A STANDARD OF VALUE
BROKEN ROCK
CHANGE IN MINE AND MILL CAPACITY CAN ALTER THE APPLICABILITY OF THE
ACCEPTED COG. PARTICULARLY TRUE IF RATE OF OUTPUT, AND THEREFORE
UNIT COSTS ARE ALTERED.
29
TAYLOR, 1972
HISTORICAL REVIEW
1)
BERRY, 1922
3)
II
5)
TAYLOR, 1972
PLANNING COG: USED TO MAKE A FAIR PREDICTION OF THE TOTAL ORE THAT
BE MINED OR TREATED.
LONG RANGE
PLANNING COG: THIS IS THE LOWEST GRADE OF ORE FOR WHICH THE MINING
THIS COG IS
CALCULATED ON THE PREMISE THAT EACH TON OF ORE WITH THIS GRADE
MUST GENERATE REVENUE EQUAL TO ALL ALLOCATED CAPITAL, OPERATING
AND FINANCIAL COSTS, INCLUDING ALL TAXES AND ROYALTIES DURING THE
MINE'S LIFE.
31
SHORT RANGE
This category of COG is used on a yearly basis and its economic basis is the net cash
flow (NCF).
BREAK EVEN COG: HEAD GRADE FOR WHICH THEANNUAL CASH FLOW EQUALS
ZERO (NCF = 0). IT IS THE GRADE THAT GENERATES A REVENUE EQUAL TO ALL
CASH EXPENSES (INCLUDING FIXED AND VARIABLE COSTS), CORPORATE AND
MINING TAXES AND ALL ALLOCATED CAPITAL- EXPENDITURES THROUGHOUT
THE OPERATING YEAR.
MINIMUM (MARGINAL) BREAK EVEN COG : SAME AS ABOVE BUT DOES NOT
INCLUDE ALLOCATED ADMINISTRATIVE AND OTHE FIXED OPERATING AND
CAPITAL COSTS. THIS COG COVERS ONLY THE VARIABLE OPERATING COSTS.
IT IS USED TO SEPARATE ORE FROM WASTE WHEN EITHER: IT IS ALREADY
BROKEN, OR MINING IT FREES UP MORE VALUABLE MATERIAL.
32