CHAPTER 1

EXAMINATION OF MINERAL PROPERY A mine examination is careful scrutiny of a mineral property made in order to form an opinion or judgment of its present worth or possibilities The term !mine"# in its strict sense" represents any artificial exca$ation made for the purpose of winning mineral $alue %t therefore includes both open&pit and underground" metal and coal wor'ings" as well as (uarries and oil" gas" salt" and sulphur wells" but excludes borrow pits" railway" sewer" and water tunnels" and all diggings made for commercial purposes other than the exploiting of minerals Although gra$els" roc' )coarse and crushed*" sand" and clay are not ordinarily classed as minerals" they ha$e commercial $alue for construction and industrial1 purposes" and their examination" estimation" and exca$ation do not differ" in most instances" from those of a true mineral deposit +uch wor'ings will be here included as mines The term also co$ers all plant e(uipment" machinery" etc " used either directly or indirectly in wor'ing a mineral deposit A sur$ey of an entirely unde$eloped region to determine its mineral possibilities might be termed a !mineral sur$ey # !,re"# as defined by the - + . +" 1 is !a natural aggregation of one or more minerals from which useful metals may be profitably extracted # %t thus includes not only mineral in its natural place in the earth/s crust but also mine dumps"
DEFINATIONS
1

-nited +tate .eological +ur$ey

tailings piles" etc" which can be rewor'ed at a profit A broader definition" in line with common usage" would co$er extraction of non metallic mineral products as well as metals The distinguishing point between !ore# and !metal or mineral bearing material# is the grade abo$e which extraction of the end product is profitable under a gi$en set of cost&price circumstances Economic factor are important to this determination 0ithout change of grade or location what is !mineral bearing material# at one time may become !ore# at another through de$elopment of cheaper mining or extraction processes or because of change in one or more of the factors entering into cost of production $s sale of product 1i'ewise" the mere transfer of a property at forced sale may so reduce the capital charges to the new owner as to ma'e the operation profitable
PURPOSE ----------- E$ery

examination has a definite purpose" although its scope may be limited or broad %t may deal solely with a single phase of the business or it may encompass the entire operation This condition is necessarily true because clients/ circumstances differ and because each mine represents indi$idual problem 2o two mineral deposits are a li'e" no two companies operate a li'e" no two localities are fa$oured with the same economics conditions" and no two examiners are of the same temperament A mine may be in any stage of de$elopment from a mere prospect pit to a fully e(uipped an operating plant3 it may be in its extreme youth" in its prime years" or in its declining old age 4 Examination of mineral property is usually called for in the following circumstances 4 1 0hen change of ownership is considered" either by out right purchase or sale" or through consolidation with other properties 5 Appraisal for tax purposes 6 0hen fund are to be solicited trough sale of stoc' or bond or by ban' loan 7 0hen planning broad re$ision of operating methods or installation of important" long&life e(uipment
TYPE AND SCOPE OF EXAMINATION ----------- The

type of examination to be conducted is dependent upon the client/s reason for instituting the in$estigation" and its scope and thoroughness are related to the other factors named abo$e %n general" all mine examinations may be grouped into two classes" preliminary examination and formal examination Preliminary examination may be defined as rapid sur$ey of a property co$ering only the more essential featured touching lightly upon the others %n the case of a property up for sale" the object of such as an examination may be merely to disco$er the reasons for selling the mine Preliminary examination usually includes some sampling )important chec' points" etc*" a brief geological sur$ey" some mapping" a short study of methods" a rough cost set up" and an estimation of management The sur$ey should be so planned that the data ta'en and the results deri$ed may be augmented without repetition if a formal examination is warranted Formal examination is a detailed sur$ey of a property to determine completely the fact regarding the mine and its future prospects %t is an expensi$e and long process" usually re(uiring from one to six months and often in$ol$ing a large force of experts and wor'men A formal examination should ne$er be instituted until a preliminary examination has shown that expense will be justified 8ormal examinations are usually

conducted when consolidation of properties or the purchase of an operating mine under consideration.
RESPONSIBILITY OF EXAMINING ENGINEER ----------- The engineer

is responsible to the client for the examination and subse(uent report stating his judgment and decisions 2on of the factors in$ol$ed in a mine examination is absolutely defined %t is engineer/s problem to consider each of these items in its true aspect in regard to the in$estigation at hand" to weigh each of the parts with respect to the whole" and to arri$e at as close/ an approximation to the true facts of the case as possible The client expects no less of the examiner when he retains him" and the engineer should fell that he owes the client a conclusion based upon his best " unbiased judgment %t is sound practice to be conser$ati$e" especially in mining enterprises" where $aluations must necessarily be based upon estimates of probabilities Too decided a leaning to the conser$ati$e" howe$er" may mean the loss to the client of a good proposition and" therefore" the engineer must guard against timidity as well as again o$er optimism His final decision should represent a true estimate of $alue (ualified slightly on the conser$ati$e side To obtain such as a result" the estimator will gather all his data" consider the respecti$e importance of each item" weigh them all in their true aspects" arri$e at the approximate total figure" and then" if circumstances warrant" apply a proper margin of safety As an example" suppose that there are ten items entering into a $aluation as multipliers of each other and that the whole proposition is slightly speculati$e" to the extent of 19 : %f this 19 : factor is applied to each item before the items are combined" the final result will be 199 x );<19*19 or 9 6=" an underestimate of ==:3 whereas if each item is entered into the whole at its full $alue the result will be 199 : Then the factor of 19 : will produce a final figure of ;9 :" thus gi$ing the desired margin for speculati$e $alue %n the sale or purchase of a mine the examiner should report a $aluation that represents his judgment of the $alue of the property 0hether for buyer or seller" his report should contain the same basic facts To e$aluate these basic facts without bias may re(uire courage" and always demands clear thin'ing and a li$ely regard for the good name of the profession %n the $aluing of a mine for bond issue or loan it falls to the engineer to be especially conser$ati$e The same is true if the $aluation is to be used to induce the sale of stoc' %n this instance" the examiner should bear in mind the many problems that may occur between the ore in the ground and the reali>ation of profit from this ore An engineer is sometime retained by a client to examine a mineral property because of his 'nowledge of the particular mine or district3 more often he is retained because the client has confidence in his ability" integrity" and judgment %f the engineer is not familiar with the district and its particular problems" he may find it to the interest of his client to employ technical assistants who are familiar with local conditions" or specialists in certain phases of the problem These assistants can usually be employed at a considerably lower rate per diem than is paid the examining engineer They are responsible only to him and not to the client The engineer ta'es full responsibility for their wor' and for opinions resulting there from A local attorney can examine abstracts and titles more (uic'ly and thoroughly than can the engineer An assistant engineer wor'ing whit the engineer can

greatly expedite the field wor'" sampling" calculation" etc " and thus sa$e money for the client %f a crucial point in the estimation is the separation of a complex ore and this is not the speciali>ed field of the engineer" the employment of a technical expert is ad$isable
QUALIFICATION OF EXAMINING ENGINEER ----------- the essential

(ualifications of an

examining engineer are4 1 +ound reasoning" that is" the ability to properly weigh component parts and deduce logical conclusions while still retaining a clear picture of accuracy of the facts which he is dealing 5 Honesty" integrity" and straightforwardness 6 A wor'ing 'nowledge of geologic principles and the ability to apply it to local conditions 7 An understanding of sampling theory and practice = ?nowledge of mining methods and their effect upon production cost @ ?nowledge of mineral dressing A Ability to compute production cost and estimate profit B ?nowledge of economic principles and business conditions and their effect upon the mining industry ; An understanding of money $alues
PROFESSIONAL ET ICS ----------To

absolutely unbiased in his opinion" examiner should ha$e no personal or monetary interest in the property which his is inspecting His relations with his client should be purely those of an impartial arbiter retained to render an opinion To guard against criticism" the engineer has a right to demand his fee in money and should ne$er accept payment in scrip dependent upon the feature earnings of the property being examined Cefore entering into any definite agreement whit his client" he should also" as a precaution" assure himself of his client/s integrity and ascertain the true purpose of the examination to ma'e sure that it is entirely abo$eboard and that he will not be furthering any scheme to the disad$antage of the entire organi>ation in$ol$ed 8 0 +perr1 expressed these ethical considerations as follow !E$ery precaution should be ta'en to a$oid the influence of the (uestion of compensation upon the engineer/s judgment and opinion %f the parties are strangers to each other" it is best for both that engineer/s compensation should be wholly or in large part paid in ad$ance" or be well secured for payment upon deli$ery of the report The engineer should be entirely free from the pressure of financial necessities which might possibly influence his judgment or opinions %f there arises the remotest suspicion that the prospecti$e client desires to 'eep the engineer in line/ by considerations" the engineer must decline to underta'e the wor' if he hopes to maintain his good repute as an engineer# The subject of ethics and responsibility has been co$ered in a concise manner also by C 8ran' Allen1 in his text business law for engineers Engineering skill required 0here an engineer or architect is employed in a pri$ate capacity" he underta'es to bring to his wor' the a$erage s'ill of those engaged in a li'e 'ind of wor' %f he ma'es a specialty of some class of engineering as structural or as

sanitary" he underta'es to use the a$erage s'ill of others who ma'e a similar specialty such class of engineering He does not in either case insure absolute accuracy" unless" by custom" chec's are possible and in regular use which will allow absolute accuracy to be secured What service is guaranteed. The engineer does guarantee4 1 Reasonable learning" s'ill" and experience The use of the proper care and diligence 6 The application of his best judgement 7 Absolute honesty The burden of proof is on him who disputes the engineer/s s'ill and other (ualifications The engineer is" of course" liable if negligence on his part can be pro$ed What an engineer may attempt. %f an engineer of good training and experience is call upon" as often happens" to carry out wor' not altogether within the line of pre$ious experience" and he enters upon his duties modestly and with earnest purpose to succeed" it is probable that strong e$idence would be necessary to hold him liable for faults in his wor' if there seemed reasonable probability of success when he attempted the wor' An engineer who ne$er attempts wor' which he has not already demonstrated his ability to carry out" is of little use in the world 0here the result of failure is li'ely to pro$e serious and the probability of success definitely doubtful" the engineer should decline the ser$ice" unless the necessary seems imperati$e whit no better alternati$e apparently a$ailable