Mining and Minerals Engineering

CSM3044 - Mining Economics and Design (2020)

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MODULE TITLEMining Economics and Design CREDIT VALUE15
MODULE CODECSM3044 MODULE CONVENERMr Paul Wheeler (Coordinator)
DURATION: TERM 1 2 3
DURATION: WEEKS 0 11 0
Number of Students Taking Module (anticipated) 20
DESCRIPTION - summary of the module content

Ongoing demand for commodities and depletion of mining assets drives the continued need for new mining projects and expansions, each of which requires a preliminary assessment or feasibility study to demonstrate its economic viability. This module examines the various components and inputs to the financial appraisal of mines and discusses the key drivers behind metal prices, input costs and production trends.

In parallel, the module provides training on leading industry mine design software (Deswik); simulating the mine planning and design processes required to provide engineering data for production schedules and cost estimates. 

AIMS - intentions of the module

This module aims to help you to understand both the macro-economic and the industry specific economic environment in which mines and projects operate and are evaluated. Although strong demand for commodities and high metal prices has significantly boosted sales revenue; at the same time the industry finds itself struggling with significant cost inflation and other operational pressures. This module 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, computerised mine design, cost estimation and financial analysis.

Design experience with software tools such as Deswik/Datamine/Micromine is seen by industry as a key skill for new mining engineering graduates, and the training provided will enhance student employability.

The module builds on practical elements learnt throughout the programme and prepares you for the three week long Feasibility Study module (CSM3332), conducted after the second semester examination period.

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

On successful completion of this module you should be able to:

 

Module Specific Skills and Knowledge

1. Demonstrate an ability to undertake engineering design tasks within industry-standard mining software; preparing and presenting computer-generated graphical and numeric output.

2. Acquire, analyse and interpret types of economic, metal price and cost data covered in the syllabus, recognising the inconsistencies or errors in such data and methods and generating and justifying data forecasts for use in a financial analysis.
 
3. Understand and apply a variety of cost estimation techniques to mining methods and undertake first-pass assessment of costs for mineral processing, infrastructure and other aspects of project development. Capital and operating cost estimates can be developed for mine development and production/stoping activities; following a provisional approach to mine design, equipment selection and production scheduling.
 
4. 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.
 
5. Explain resource estimation processes and classification, 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

6.conduct and present financial appraisals and valuations with awareness of industry standard assumptions and/or exercising personal judgments into their work.
 
7. identify and comment on the inputs required for mine planning and design and gain familiarity with software used in mine development and operation.

 

Personal and Key Transferable / Employment Skills and Knowledge

8.  Develop data-assessment and software based analysis/presentation skills, particularly with the use of Excel spreadsheets calculations for financial evaluation exercises.
 
9. develop technical report-writing skills.
 
 
SYLLABUS PLAN - summary of the structure and academic content of the module

Mine Design Software.

You will undertake mining software training using one of a range of packages, most typically Deswik or Micromine. At the end of the module you will complete an individual coursework assignment based on the training and using the software tools. 

Basic training: This part of the course will familiarise you with the main elements of the software, introducing core tools, data types and file/database management. Computer aided design (CAD) tools will be covered in detail, along with drillhole visualisation, basic triangulation/block modelling and plotting.

Open Pit Design: The open pit design element of the course will show you how to create, visualise and modify open pit benches, haul roads, leach pads, dumps, and stockpiles within the software. Creation of ramps and haul roads and triangulation manipulation will be covered. Pit optimisation software will be demonstrated, which provides initial shells for detailed mine design.

Underground Design: The objectives of the underground design course are to introduce methods for creating shafts, drifts, cross-cuts, ramps, and stopes within a given orebody model; leading to a conceptual mine design suitable for planning/scheduling purposes. More detailed underground modelling tools will allow refinement of designs and the labelling and dimensioning of development ready for level plans to be plotted. Volumes and reserves of the underground features will be run for reports.

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 and local estimation techniques, block modelling. 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 60.00 Guided Independent Study 86.00 Placement / Study Abroad 0.00
DETAILS OF LEARNING ACTIVITIES AND TEACHING METHODS
Category Hours of study time Description
Scheduled learning & teaching activities 24 Mining economics: lectures and integrated tutorials.  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.
Scheduled learning & teaching activities 40 Mining software; introductory lectures, tutorials and computer workshops.  Formal contact time, introductory lectures spread over several weeks plus more intense tutorial/workshops.
Guided independent study 86 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
Form of Assessment Size of Assessment (e.g. duration/length) ILOs Assessed Feedback Method
       

 

SUMMATIVE ASSESSMENT (% of credit)
Coursework 50 Written Exams 50 Practical Exams 0
DETAILS OF SUMMATIVE ASSESSMENT
Form of Assessment % of Credit Size of Assessment (e.g. duration/length) ILOs Assessed Feedback Method
Examination - Provides a summative assessment of mineral economics parts of module content and comprises selection of short-answer exercises and/or longer questions requiring more in-depth knowledge of specific aspects of the syllabus. 50 1.5 hours 1-5 Examination mark reported back through tutor system.
Assignment – Cashflow modelling and cost analysis exercise 15 6-8 sides of A4 text plus supporting tables and examples of diagrams, spreadsheets etc. in a short report format 2-4 Written feedback sheet with comments
Assignment - Computer based mine planning and design exercise, with associated report. 35 6-8 sides of A4 text plus supporting graphics,  tables and examples of plots, diagrams etc. in a short report format. Electronic submission of mine design files. 1, 3, 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 Asessment As Above August Ref/Def Period
Examination Additional Examination As above August Ref/def Period

 

RE-ASSESSMENT NOTES

As above, 1 piece of coursework 50% and Examination 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:

ELE: http://vle.exeter.ac.uk/

 

Web based and Electronic Resources:

Available as e-books through Electronic Library (Knovel database)

Web based and electronic resources; including supervised access to CostMine, Mining Cost Service (InfoMine USA Inc.)

 

Other Resources:

 

Reading list for this module:

Type Author Title Edition Publisher Year ISBN Search
Set Rudenno Victor Mining Valuation Handbook - Mining and Energy Valuation for Investors and Management 3rd John Wiley & Sons 2009 [Library]
Set Maxwell P and Guj P Australian Mineral Economics - A Survey of Important Issues Australasian Institure of Mining and Metallurgy 2006 [Library]
Set Peter Darling Mining Engineering Handbook 3rd Society for Mining, Metallurgy and Exploration, Inc Colorado 2011 [Library]
Set Sinclair, A.J. and Blackwell, G.H. Applied Mineral Inventory Estimation Cambridge University Press 2002 [Library]
CREDIT VALUE 15 ECTS VALUE 7.5
PRE-REQUISITE MODULES None
CO-REQUISITE MODULES None
NQF LEVEL (FHEQ) 6 AVAILABLE AS DISTANCE LEARNING No
ORIGIN DATE Thursday 06 July 2017 LAST REVISION DATE Wednesday 18 December 2019
KEY WORDS SEARCH Mineral economics, project appraisal, financial analysis, computerised mine design, mining software