List, and briefly describe the FOUR most commonly used criteria that are used to test and

compare
investment decisions.

NPV – is the sum of cash flows discounted by an accepted to rate to present values compared to the
initial investment in the project. When NPV is positive the project is profitable, the NPV considers the
time value of money (interest)

IRR is the discount rate where the present value of inflows exactly equals the outflows when NPV = 0. It
considers the time value of money, but does not give an indication of how good the project is unless you
compare the IRR with other rates such as inflation, interest rate etc.

PB is the initial investment divided by the annual revenue that gives an indication of how long it will take
to recoup the initial investment spent. It does not consider the time value of money and gives no
indication of subsequent cash flows after payback

ROI is an expression of the annual income as a percentage of the initial investment and gives some
weight to the overall profitability. It does not consider the time value of money

What is meant by the “RISK” associated with an investment alternative, and what FOUR methods are
commonly used to handle this “risk” in investment decision making?

Sensitivity analysis is carried out using a series of NPV cash flows with each case, all factors at possible
levels except one which is varied (by 2 % or 5 % etc) over its likely range. The factors which have the
most positive NPV signify a good project. In mining projects, factors that can be varied are metal price,
metal grade, tonnage mined etc.

Risk analysis randomly chooses a particular set of input data from the various variable input data. A
single set of cash flows are then estimated with the particular set of selected input data. The procedure is
repeated up to 100 times and the NPV results are plotted on a frequency diagram that are normally
distributed. The graphs provide information on project profitability and associated risk. The high risk is
mainly found in the mine construction phase and during production.

List the main geological inputs to the Strategic and Business plans on a mining operation

The company’s strategic planning will involve the following.

1. The company’s mission statement and vision ie. The basic reason why the company exists and its
purpose. The statement should describe what the company does and what needs are met and with what
services.
2. Strategic analysis of the company’s strengths, weaknesses, opportunities and threats
3. Select the goals on what should be accomplished to meet the company purpose
4. Identify specific strategies that must be implemented in a specific time period
5. Identify specific action plans to implement each strategy. The objectives must be clear so that they can
be met or not.
6. Monitor and update the plan where the planners regularly reflect on the extent to which the goals are
being met and whether action plans are on course.

Name five laboratory assay methods used to find sample metal contents of precious metals

Fire assay, AA, AA graphite furnace, ICP (ES), ICP (MS), INAA

Discuss the basic parameters and the associated risks during mineral resource and reserve
estimations.

Location 3D - depth, size, shape of orebody, location of contacts and faults, distance from infrastructure;
RISK - gross or local errors in location may lead to extra cost and or time in development and production
- sterilisation of reserves
Internal variations - grade, density, rock mass characteristics; RISK inaccuracies and or imprecision in
grade and density estimates may cause problems for design and operation of mine and mill, instability of
designed mine openings. Time - evaluation, development and production schedules; mine and mill
production rates; RISK - delays will affect overall costs, failure to complete evaluation programmes may
lead to prediction errors
Energy - selection of mining method and mine design - process selection and plant design; RISK - failure
of selected method or design to meet specifications, failure to produce or forecast capacity
Cost - capital costs, operating costs, mineral product prices; RISK - exchange rate fluctuations, market
fluctuations, changes in tax regime
People - evaluation team; RISK - poor skills, labour force levels, regulations must be followed may close
a mine

Describe the samples taken and the actual sampling procedures carried out at an operation gold mine
in the Witwatersrand basin.

Sampling at a gold mine involves the taking of samples for grade control and ore reserve estimation.
Samples taken are chip samples which are taken from the face or outcrop with a chipping hammer to
verify the mines rock types and also typical background gold content in them. The grab samples are
random samples taken form ore broken in stopes, face or moving dump trucks to determine if the
material is waste or ore.
Channel samples are taken from the face or roof of drives in reef to determine the grade of ore reserves
blocked. The assay values are used in weighted grade calculations.

Describe the parameters that should be considered when calculating the cash flow of a mine.

The parameters that should be considered are divided into two, the revenue and the total expenses to
produce the mineral. The cash flow maybe calculated weekly, monthly and yearly. The revenue is
obtained from the sale of the produced mineral. The total expenses to produce the mineral are the
operating costs which are mainly mining costs, plant recovery costs and labour, salaries and
administration costs.

Discuss the activities that are carried out during the diamond mine feasibility studies.

A diamond mine feasibility study is, a study to determine the economic viability of a project by trying to
quantify the economic returns on an investment project compared to the initial outlay. To simulate cash
flow there must be production of the diamonds on a small or pilot scale. A feasibility study has the
erection of a pilot plant to process the ore and recover the diamonds. A mining engineer, geologist or
metallurgist may be in charge of the feasibility study that can last two years or more. After the feasibility
study, the diamonds content in the orebody is known with tonnage and grade in carats per tonne
distribution documented. The pilot plant stage will demonstrate positive cash flows that can make profits
at full mine scale