Mine Life

GMT 502 Exploration Geology SMK

 Mining Geology and Exploration

How much metal is available?

What is a mineral? What is ore?
What is Ore Grade ?

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 Economically Important Metal
Concentrations in Earths Crust
Concentration
Metal (% by weight)
Aluminum 8.0 Note for comparison:
Iron 5.8 Silicon 28%
Copper 0.0058 Oxygen 46%
Nickel 0.0072
Zinc 0.0082
Uranium 0.00016
Lead 0.001
Silver 0.000008
Gold 0.0000002

GMT 502 Exploration Geology SMK

 What is a mineral?
A naturally occurring inorganic solid compound having
a definite chemical composition, ordered atomic
arrangement and characteristic crystalline structure.
Examples:
quartz - SiO2 (an oxide)
hematite - Fe2O3 (another oxide)
covelite - CuS (a sulphide)

GMT 502 Exploration Geology SMK

 What is an ore deposit?

An occurrence of minerals or metals in

sufficiently high concentration to be
profitable to mine and process using
current technology and under current
economic conditions.

GMT 502 Exploration Geology SMK

 What is ore grade?

Ore grade is the concentration of economic

mineral or metal in an ore deposit.

Weight percentage (base metals)

Grams/tonne or oz/ton (precious
metals)

GMT 502 Exploration Geology SMK

 Economically Important Metals
Typical Grades of Ore Deposits

Typical Grade
Metal (% by weight)
Aluminum 30
Iron 53
Copper 0.5-4
Nickel 1
Zinc 4
Uranium 0.3
Lead 5
Silver 0.01
Gold 0.0001-0.001

GMT 502 Exploration Geology SMK

 What is Mining?

Mining is the extraction of valuable minerals or other geological materials from

the earth.

Any material that cannot be grown from agricultural processes, or created

artificially, is usually mined.

Materials recovered by mining include

Coal , copper, gold, silver, diamonds, iron, precious metals, lead, limestone,
nickel, and phosphate.

GMT 502 Exploration Geology SMK

 Mining Industry

Two sectors
Specialization in exploration for new resources

Typically made up of individuals and small mineral resource

companies dependent on public investment

Specialization in actual mining

Typically large and multi-national companies sustained by mineral

production from their mining operations

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 Risks Associate With Mining

Laws
&
Regulations

Market Credit Risk

Risks
Interest
Rate
Environmental &
Foreign
Exchange

Operational

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 Life Cycle of a Mine
The life cycle of a mine or a mine district (both terms require that something
be extracted for profit)is essentially a function of the depletion process.

Mines, like people, pass through the stages of youth, maturity, and old stage.

Unlike people, mines are often resurrected or at least rejuvenated.

Two periods of rejuvenation in the life cycle

-first as a result of technologic improvements and

-later as a result of a sudden increases in metal price.

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 But

All mining activities has an end due to:

Exploitation of the ore reserves

or
Uneconomical mining activities

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 There are many reasons of early closure of mines. i.e. Mines
are closed other than depletion of ore reserevs

Economical: Low commodity prices or high costs

Geological: An unpredicted decrease in grade or size of the ore body

Technical: Adverse geotechnical conditions or mechanical/equipment failure

Regulatory: Safety or environmental problems

Policy changes: Occurs from time-to-time, especially after government changes

Social or community pressures: Particularly from non-government organisations

Closure of downstream industry or markets

Flooding of the mine

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 Phases of a Mine Project

Exploration

Feasibility Study

Planning & Design

Sustainable Closure planning &
Development implementation
Goals Constructions

Operations Completion
(relinquishment)
(Progressive reclamation)

Closure

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 STAGE 1 - Exploration and Assessment

STAGE 2 - Construction

STAGE 3 - Operation

STAGE 4 - Closure

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 Mine Life Cycle

STAGE 1 - Exploration and Assessment (1-10 years)

Exploration - Geophysics

Exploration - Drilling (1/10)

Geology - Analytical and Mineralogical Assessment

Economic Feasibility Assessment (1/10)

Ore body Modeling (1/10)

Mine Planning and Metallurgical Test work

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 3-D Ore body Model for Mine Planning

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 Mine Life Cycle

STAGE 2 - Construction( 0.5-2 years )

Mine

Shaft-sinking & tunnel/stope development (U/G)

Adit & tunnel/stope development (mountain-top)

Top soil removal, key-cut, haul road development (Open-Pit)

Plant

Site Preparation, Foundations, Construction of buildings

Procurement and Installation of Equipment

Waste and Tailing Disposal

Site Selection and Preparation

Construction of Initial Coffer Dam for tailing disposal

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 Mine Life Cycle

STAGE 3 - Operation ( 3 - 400 years )

Mine

Blast, Load, Haul, Dump

Transport (hoist, convey, truck, rail), Stockpile

Safely Store Waste (on site or in-mine)

Mill

Crush, Grind (combination)

Physical Separation (maybe chemical) (beneficiation)

Thicken and Filter (dewater)

Safely Store Tailing

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 Mine Life Cycle

STAGE 3 - Operation ( 3 - 400 years )

Waste Disposal

Dump

Contour, Spread top soil

Hydro-seed and plan for final drainage

Tailing Disposal

Plan for Lifts as Tailing Dam builds

Control Water Levels

Recover water for recycle

Re-vegetate dam walls

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 Mine Life Cycle

STAGE 4 - Closure( 1 - 20 years )

Mine

Flood Pit

Seal Underground workings

Long-term Acid Rock Drainage plan for waste dumps

Mill

Salvage Equipment

Raze Buildings

Contour and reseed site

Long-term ARD plan for tailing dam

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The Life Cycle of a Mining Operation
Between the beginning of the cycle and the end, there are the overall
characteristics illustrated in following figure:

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 The Life Cycle of a Mining Operation
1. Early production from exposed
orebodies.
2. Major mine began production from
small orebodies (1909).
3. New company formed to develop
copper ore (1913).
4. Major mine began production from
deeper orebodies (1916).
5. Major mine closed. Mills continued
operating on custom ore (1942).
6. Price of gold raised from $ 20.67 to $
35 per ounce (1934) followed by
redefinition of ore reserves& reopening
of mines.
7. Wartime shortage of labour &
equipment.
8. Wartime closing of gold mines (1942).
9. Postwar mining attempt (1948).

GMT 502 Exploration Geology San Francisco (Oatman) mining District, Arizona.
SMK
 The Life Cycle of a Mining Operation

The final phase, abandonment, is not necessarily connected

with the physical depletion of the orebody.

A mine may be prematurely abandoned by reason of higher

taxes, higher operation costs. or a lowering of mineral price.

The cost of meeting such emergencies as large inflows of

water may be higher than the value of the remaining ore.

Prolong strikes , expropriation or wartime closing orders

may bring an operation to an untimely end.

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 Why is it of interest?

Experience with abandoned mines shows that having

improperly closed mines cause:

Safety and health hazards

Degradation of land use
Downstream environmental impact
Difficult remediation conditions
Public intolerance

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 Why is it of interest?

Poorly closed and abandoned mines cause bad legacy for

governments, communities and minerals companies and, hence
finally, tarnish the mining industry as a whole.

As the resources becomes limited, effective closure processes

and satisfactory mine completion becomes critical to a
companys ability to develop new projects.

Poor planning and inadequate financing commonly increase the

costs of closure and decrease overall profitability, which
jeopardize a companys ability to develop new projects.

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 Mine Closure is necessary in order to:

Ensure public health and safety

Protect physical and chemical deterioration of
environmental resources
Provide beneficial and sustainable after-use of the
mine site in the long term
Minimize adverse socio-economic impacts
Maximize socio-economic benefits

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 Taxation of Mines

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 Taxation
Taxes on mines have experimental aspects and, like mineral laws,
reflect an intended balance between goal and capacity.

The goal is to obtain maximum and steady revenue; the capacity is

always somewhat lower, its limits are technologic and geologic.

With a favorable level of technology and the right geology, tax

incentives (reduced rates or initial exemption periods) can bring
exploration and industry into a country.

But how much incentives is enough? If the balance point is too

closely set, an increase in costs or a fall in mineral prices will swallow
the incentive and shut down the mines.

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 Taxation
The type as well as the amount of taxation levied on mines has a direct
bearing on the kind of exploration target to be sought.

The three principle types of taxes are the:

1. Ad valorem tax

2. The severance tax or royalty and

3. The income tax

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 Ad Valorem Tax
The ad valorem tax is based on the assessed value of the plant and the
ore reserves. The tax payment is a fixed cost of operation, applied to the
entire mine without regard for the level of production.

As a cost of operation, the anticipated payment of a high ad valorem

tax affects an exploration target by raising the acceptable cut-off grade-
the grade of the weakest mineralization that can be mined at a profit.

This reduce the effective tonnage in an orebody, and if the entire

deposit is marginal in grade, it may be completely invalidated as an
economic target.
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 Ad Valorem Tax

Since ad valorem tax is levied whether the mine is operating or not, it

has an advantage to the state in providing a steady, predictable source of
revenue. But the advantage has limits.

If the tax becomes unrealistically high, the source of revenue goes

elsewhere.

GMT 502 Exploration Geology SMK

 Severance Tax or Royalty
Severance tax or royalty is levied against each unit of mineral that has
been mined and shipped. It is a variable cost rather than a fixed cost of
operation.

Like the ad valorem tax, it raises the cutoff grade of a potential ore body,
but unlike the ad valorem tax, it does not penalize the miner for outlining
future ore reserves and it does not apply unless the mine is operating.

This kind of tax is sometimes used to encourage local smelting and refining
rather than the shipping of ore and concentrates out of the state; the tax is
simply reduced for material that has undergone additional local processing.

GMT 502 Exploration Geology SMK

 Severance Tax or Royalty
Royalties are easier for a state to assess and collect than most other
kinds of tax, so much so that they are almost too easy to increment past
the threshold of what mines can pay.

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 Income Tax
The income tax is generally levied on a graduated scale, and since it
applies only to profit, it is neither a fixed nor a variable mining cost.

It has less effect on cutoff grade than the other two types of tax. It does,
however, affect the annual cash flow, and the depletion allowance- one of
the tax credits involved in income taxation.

The income tax is by far the most appropriate for conservation of mineral
resources.

The other forms of taxation may cause lower grade ore to be left in the
ground and they may delay capital improvements for mining and processing.
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 Producer Nation Agreements

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What is a Mineral Agreement?

A Mineral Agreement is an agreement between a Contractor and

the Government wherein the Government grants to the Contractor
the exclusive right to conduct mining operations within, but not
title over, the contract area.

Mining operations that are allowed under Mineral agreements

include development/construction and utilization of mineral
resources including the continuance of exploration works during
the conduct of development/construction/utilization activities.

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Classification of Mineral Agreement?

Mineral Agreements are classified into:

(1) Mineral Production Sharing Agreement (MPSA)- a mineral agreement

wherein Government shares in the production of the Contractor,
whether in kind or in value, as owner of the minerals. In return, the
Contractor shall provide the necessary financing, technology,
management and personnel for the mining project.

(2) Co-Production Agreement (CA) - a mineral agreement wherein the

Government provides inputs to the mining operations other than the
mineral resources; and

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(3) Joint Venture Agreement (JVA) - a mineral agreement wherein the
Government and the Contractor organize a joint venture company with both
parties having equity shares. For its share, the Government is entitled to a
share in the gross output of the mining project aside from its earnings in the
equity of the company.

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 The economic and political power or leverage available to organized
groups of mineral exporting countries has become especially apparent in
recent year.

The total impact of the oil embargo action taken in the early 1970s by
the Organization of Petroleum Exporting Countries (OPEC) on world energy
mineral prices, supplies, and exploration pattern was, and is, almost too
much to measure in understandable terms.

The council of Copper Exporting Countries (CIPEC) has had a substantial

effect on world trade, and there are measurable effects from groups of
bauxite, uranium, and mercury producing countries acting in concert.

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 The ideas are to stabilize markets, to obtain large share of mining
profits, to promote domestic mineral processing, and to use minerals to
political advantage.

These ideas are attractive to mineral exporting countries, and they add
a dimension in raw materials strategy to the considerations that go into
selecting exploration targets.

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 The effects of strategic control by groups of mineral producers
(companies as well as countries) depend on a geologic condition:
inhomogeneity.

A square km of Jamaica in underlain by more mineable aluminum ore

than an equivalent area in Norway; the Norwegian area produces more
electricity, and a square km of Holland may contain the market for
aluminum metal- representing Jamaican bauxite and Norwegian
electricity.

A one world concept is needed, but since it is not yet a reality.

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 PSC and JVA in Bagladesh

A major activity of Petrobangla is organizing, supervising and administering the

Production Sharing Contracts (PSC) with the International Oil Companies (IOC).

The major block bidding and awards took place under the 1974 offshore round, the 1993
bidding round, the 1997-2000 bidding round, offshore bidding round 2008 and offshore
bidding round 2012.

in 1993 when 23 onshore and offshore blocks were offered. At that time, 8 blocks were
awarded to four companies which were Occidental (OXY) blocks 12, 13 & 14, Cairn Energy-
Blocks 15 & 16; Okland-Rexwood-Blocks 17 & 18 and United Meridian Corporation (UMC)
block 22.
Another PSC round was initiated in 1997 under which four blocks were awarded. This time,
Tullow/Chevron/Texaco/BAPEX was awarded block 9; Shell/Cairn/ BAPEX was awarded block 5
& 10 and Unocal/BAPEX was awarded Block 7. During this round, a mandatory 10 percent
carried interest was introduced and implemented for BAPEX for all blocks.

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Just after, the delimitation of the boundary between Bangladesh and
Myanmar in March, 2012 by ITLOS, Petrobangla reshaped the blocks
considering the new boundary and announced a bidding round in
December 2012. Under this round, three shallow water PSCs have been
signed.

ONGC Videsh Oil India & BAPEX joint venture has signed two PSCs for
blocks SS-04 and SS-09. On the other hand, Santos, KrisEnergy and
BAPEX joint venture has been contracted for block SS-11. Deep water
bids received in January 2014 are now being processed.

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 GSB Geological Survey of Bangladesh

investigate in detail such areas as are indicated by geological mapping to be

favorable for accumulation of industrial rocks, mineral fuel, ground water and other
natural resources.

investigate in detail and conduct extensive geophysical, test drilling and geochemical
operation in order to evaluate the known mineral deposits.

Monitor work activities, technical agreement and report government about their
progress

To advise the public and private organizations in all matters connected with geology
and resources of the earth.

GMT 502 Exploration Geology SMK