Introduction

Methods of Investigation.

NB. All references to the “Mining Rights Act of 1967” must be ignored because the current
legislation dealing with Mining & Rights is now covered by the “Minerals Act of 1990”.

Read Chapter 2 of “Storrar”

Introduction to Mining Valuation and its broad aspects

Objective:

To acquaint the student with general terms used in Mining Economics and Factors governing the
exploitation of a mineral body.

Mining is the primary (source) industry, which supplies the community with its mineral
requirements for manufacturing of product of commercial value and need satisfaction.

e.g. Iron mineral to make steel that is used in the manufacture of motorcars, washing machines
etc.

The company or person that exploits and sells the mineral does not do so for altruistic reasons,
but for the purpose of financial gain.

The aim of mining operations is to produce actual profits, which can be distributed as dividends
to the shareholders.

Profit is only possible when revenue exceeds expenditure.

Revenue: is the income derived from the sale of the products of the mining operation and can
include income from by-products or other sales.

Expenditure: is the expense incurred in the course of the mining operations. This may be either
classified as “Capital Expenditure” or normal “Working Costs”.

Capital Expenditure: The money for this expenditure comes in the initial stage of developing a
mine or when the mine is expanded (New shafts) from SHARE EQIUTY. During the life of the
mine when new equipment is needed, or to pay for development the money can come from
RETAINED PROFITS.
Working Costs: are the current expenses incurred in the course of production.

Working Profit: is the excess of revenue over working costs.

Working Loss: is the excess of working costs over revenue.

Mining Operations are any method or process by which minerals are extracted from the earth and
are conducted from the purpose of profit.

Mineral, from the mining point of view, can be looked upon as a substance of economic
importance found in the crust of the earth. (see definition in the Minerals Act.)

Mine Valuation deals with the practical side of the economics of mining operations, it depends
largely for its efficiency on good SAMPLING methods, reliable assaying and much common
sense based on experience.

FACTORS WHICH DETERMINE WHETHER AN MINERAL-BODY CAN BE MINED

AT A PROFIT.

a. The value of the deposit.

b. Kind of deposit.
c. Extent of deposit.
d. Depth of deposit
e. Structure of deposit.
f. The actual mode of occurrence of the mineral deposit.
g. The metallurgical process of reduction required to produce the final product.
h. The world demand and market price of the mineral.
i. The location of the deposit in relation to transport and markets.
j. The availability of labour and resources.
k. Climatic conditions in the area.
l. The effect which mining the deposit would have on the health of the workers.

Case Study 1

A mineral body 26 000 000 tons in extent has been found in a remote part of Gondwanaland, it is
600km. from the nearest rail head, water is scarce there is no electric power in the area and it is
populated by nomadic tribes. The beneficiation of the mineral is a simple process and can be
carried out on site. The product has a fairly high value and is in great demand on the world
market. The deposit can be exploited by means of open case mining methods, and because it is in
a semi desert little needs to be done about rehabilitation of the land. The life of the deposit is
estimated at 25 years.

There is extreme hazard to mining the mineral but no health risk outside of the immediate mining
and processing areas.

Will it be viable to exploit the deposit?

Case study 2

An extremely rare and needed mineral is found in a deposit close to an urban area, but it is
2000m below surface.

The life of the deposit is estimated at 10 years. There are no health risks attached to the
exploitation. The mineral is of importance to the world’s medical fraternity.

Can it be exploited profitably?

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