Mining and Minerals Engineering

CSM3384 - Mineral Economics & Feasibility Studies (2012)

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MODULE TITLEMineral Economics & Feasibility Studies CREDIT VALUE15
MODULE CODECSM3384 MODULE CONVENERMr Paul Wheeler (Coordinator)
DURATION: TERM 1 2 3
DURATION: WEEKS 10
Number of Students Taking Module (anticipated) 39
DESCRIPTION - summary of the module content

The mining industry is booming, driven by strong demand for commodities and high metal prices. To meet this rising demand numerous mining projects and expansions are being developed, each of which requires a preliminary assessment or feasibility study to demonstrate its economic viability. At the same time the industry finds itself struggling with significant cost inflation and other operational pressures.  This module examines the various components and inputs to these financial appraisals and discusses the key drivers behind metal prices, input costs and production trends.

AIMS - intentions of the module

This module aims to help candidates to understand both the macro-economic and the industry specific economic environment in which mines and projects operate and are evaluated. It provides an understanding of how technical and operational parameters influence the revenue stream and cost structure at mines.

 

The various types and stages of Feasibility Studies are discussed and selected aspects of such studies are investigated in more detail, notably resource/reserve estimation, cost estimation and financial analysis. It prepares students for the month long Feasibility Study Exercise, module CSM3332, conducted after the second semester examination period.

INTENDED LEARNING OUTCOMES (ILOs) (see assessment section below for how ILOs will be assessed)

Module Specific Skills and Knowledge:

1

Candidates should be able to recall, recognise and understand the facts, concepts and techniques covered in the syllabus.

2

Candidates can acquire, analyse and interpret types of economic and cost data covered in the syllabus, recognising the inconsistencies or errors in such data and methods.

3

Candidates can obtain metal price data from a range of sources; generating and justifying price forecasts for use in a financial analysis. Understand how price data is integrated with production forecasts, smelter contracts etc. to generate revenues.

4

Candidates understand and can apply a variety of cost estimation techniques to mining methods. Capital and operating cost estimates can be developed for mine development and production/stoping activities; following a provisional approach to equipment selection and production scheduling.

5

Candidates can undertake a first-pass assessment of costs for mineral processing, infrastructure and other aspects of project development and combine these with mine costs and production/development schedules to derive projections of capital and operating costs.

6

Combine the revenue and cost data generated into a cashflow statement and use this to undertake   a financial analysis of mines and projects . Understand the methodology and rationale behind using Net Present Value and Internal Rate of Return (NPV or IRR) calculations to evaluate mines and projects.

7

Know the main data collection and manipulation methods used in resource estimation; both traditional and geostatistical techniques; and appreciate how industry uses software for the more complex modelling and geostatistical interpolation situations.  

8

Explain the conversion of resources to reserves for mine production and the influence of mining methods on cut-off grades, dilution and recovery factors.

 

 

Discipline Specific Skills and Knowledge:

1

Candidates plan and manage their time and access additional supporting resources to provide adequate and efficient independent study in support of the syllabus.  

2

Candidates can choose appropriate data gathering / research and analysis methods from the repertoire of those available.

3

Candidates can conduct and present financial appraisals and valuations with awareness of industry standard assumptions and/or exercising personal judgments into their work.

4

Candidates are capable of identifying and commenting on the inputs required for mineral resource estimation. They will have detailed knowledge of the significance that resource/reserve estimates have to a mines successful development and operation.

 

 

Personal and Key Transferable/ Employment Skills and  Knowledge:

1

Group working skills are developed through various assignments and in-class exercises.

2

Candidates will have opportunity to refine their general research skills

3

Candidates will further develop data-assessment and software based analysis/presentation skills, particularly with the use of Excel spreadsheets calculations for cost estimation and financial evaluations exercises.

4

Candidates will have further opportunity to develop their report-writing skills.

 

SYLLABUS PLAN - summary of the structure and academic content of the module

Mine Feasibility Studies. The main factors that control mineral investment - capital intensity, long pre-production periods, high risks, infrastructure, environmental constraints and non-renewable resources. The types of feasibility studies (scoping, preliminary, definitive); their objectives, contents and the level of accuracy of estimates compared to the engineering work actually completed.

Mineral Economics. Industry fundamentals and macro-economic environment.  The effects of supply and demand in perfect markets and the real world, key price drivers that effect mineral commodity prices.  Development of price forecasts and metal market studies. Introduction to capital expenditure, operating  costs and unit/cash cost curves.

Resource/reserve estimation. Introduction, data collection/manipulation, traditional estimation techniques. Variography in resource estimation. Local estimation techniques, block modelling and IDW. Geostatistical estimation (variography and kriging) Resource classification, conversion of resources to reserves.

Production and Revenue Forecasts. Tonnage, grade and recovery calculations and the development of production schedules. Smelter contracts, Net Smelter Revenue calculations and hedging.

Cost Estimation. Capital costs - the methods available for estimating both fixed and working capital costs, depending on the type of study being carried out. Cost indices, and a description of various approaches to cost estimation. Development of pre-production and sustaining/ongoing capital cost requirements. Operating cost estimations: methods, analysis and key data inputs and cost drivers. Cost trends and pressures in the mining industry.

Financial Analysis. Role of cash flow modelling & detailed financial analysis/valuation of mining projects and operations. Coverage of the main technical and engineering components of such an analysis. General production rate optimisation methods for mineral ventures. General coverage of risk/sensitivity  analysis, the main factors considered and the techniques used in mineral project evaluation and feasibility studies.

LEARNING AND TEACHING
LEARNING ACTIVITIES AND TEACHING METHODS (given in hours of study time)
Scheduled Learning & Teaching Activities 52.00 Guided Independent Study 98.00 Placement / Study Abroad
DETAILS OF LEARNING ACTIVITIES AND TEACHING METHODS

Category

Hours of study time

Description

Mineral economics & feasibility studies: lectures and integrated tutorials

40 hrs (c.8*5hrs per week)

Formal contact time. Lectures and seminars presenting module’s taught content. Worked practical examples are used throughout the formal contact periods to illustrate concepts and provide practice for the assignment and examination.

Geostatistical resource estimation lectures, tutorials and computer workshops

4 x 3 hrs

Formal contact time, activities as above.

Associated private study

Variable c.100 hrs guidance

Private study time is an important element of support to the formal contact time and includes specific directed reading and time required to complete coursework

 

ASSESSMENT
FORMATIVE ASSESSMENT - for feedback and development purposes; does not count towards module grade
SUMMATIVE ASSESSMENT (% of credit)
Coursework 50 Written Exams 50 Practical Exams
DETAILS OF SUMMATIVE ASSESSMENT

Form of Assessment

 

% of credit

Size of the assessment  e.g. duration/length

ILOs assessed

Feedback method

Examination - Provides a summative assessment of module content and comprises selection of data manipulation/short-answer evaluation exercises and/or longer questions requiring more in-depth knowledge of specific aspects of the syllabus.

50%

1 hour

Module Specific ILOs 1-8

Examination mark reported back through tutor system.

Assignment – Cost estimation analysis and calculation exercise

20%

4-6 sides of A4 text plus supporting tables and examples of spreadsheets diagrams etc. in a short report format equivalent to 2000 words

Module Specific ILOs 4-5.

Written feedback sheet with comments

Assignment - Cashflow modelling exercise

15%

3-4 sides of A4 text plus supporting tables and  spreadsheets, diagrams etc. in a short report format equivalent to 1500 words.

Module Specific ILOs 3-6

Written feedback sheet with comments

Assignment - Computer based geostatistical data manipulation and interpretation exercise, with associated report.

15%

4-6 sides of A4 text plus supporting tables and examples of plots, diagrams etc. in a short report format equivalent to 2000 words

Module Specific ILOs 7 and 8

Written feedback sheet with comments

 

DETAILS OF RE-ASSESSMENT (where required by referral or deferral)

Original form of assessment

Form of re-assessment

ILOs re-assessed

Time scale for re-assessment

Summative Assessment

Additional Summative assignment

Weighting as above

August Ref/Def period

Examination

Additional Examination

Weighting as above

August Ref/Def period

 

RE-ASSESSMENT NOTES

As above 1 piece of CW 50% and/or 1 Exam 50%

RESOURCES
INDICATIVE LEARNING RESOURCES - The following list is offered as an indication of the type & level of
information that you are expected to consult. Further guidance will be provided by the Module Convener

Basic reading:

 

Gentry D.W. & O'Neil T.J. 1984 Mine Investment Analysis. Society of Mining Engineers of AIME, New York.                            

 

Begg, D. et al., 1991. Economics (3rd or later editions). McGraw-Hill.                                                                          

 

Kernot, C., 1991. Mining Equities: evaluation and trading Woodhead Publishing: Cambridge.                                                        

 

Gentry, D.W. and O'Neil, T.J., 1984. Mine investment analysis American Institute of Mining, Metallurgical and Petroleum Engineers: New York.

 

Hartman, H.L., 1992. SME mining engineering handbook (2nd edition). Society of Mining Engineers of AIME.                                        

 

Webster & Oliver 2001 Geostatistics for Environmental Scientists, John Wiley & Sons                                             

 

Evans 1995 Introduction to Mineral Exploration, Blackwell Science                                                                               

 

Annels 1991 Mineral Deposit Evaluation, Chapman&Hall                                                                                    

ELE – College to provide hyperlink to appropriate pages

Reading list for this module:

There are currently no reading list entries found for this module.

CREDIT VALUE 15 ECTS VALUE 7.5
PRE-REQUISITE MODULES CSM3303
CO-REQUISITE MODULES
NQF LEVEL (FHEQ) 3 (NQF Level 6) AVAILABLE AS DISTANCE LEARNING No
ORIGIN DATE Monday 12 March 2012 LAST REVISION DATE Wednesday 17 October 2012
KEY WORDS SEARCH Mineral economics, feasibility study, project appraisal, financial analysis