CHAPTER 5.1 Mine Economics, Management, and Law Michael G. NelsonINTRODUCTION ventures that are valued incorrectly or unscrupulously. A goodFinding an ore deposit and putting it into production as a mine historic example is the case of the Emma mine, which wasrequires the execution of many complex tasks, such as explora- located near Salt Lake City, Utah (United States) and whosetion and evaluation, planning, development, production, pro- history is described in detail by Jackson (1955). The origi-cessing, and reclamation. Also required is a team of technical nal Emma claims were staked in 1864 by two prospectors,experts with skills in many areas―drilling, mapping, model- Chisholm and Woodman, who were described as “rough ining, equipment selection, explosives and blasting, ground con- manners and character.”trol, ventilation, power systems, waste disposal, and so forth. As was common in that time and place, the original own-Much of the content of this handbook is devoted to these types ers tried to work the prospect but were compelled to bring inof tasks and skills, almost all of which are specifically techni- partners to finance the venture. The ownership rapidly becamecal, based on various disciplines of science and engineering. unclear, but by 1868, ore was being shipped to Great Britain However, the technical aspects of mine development and for reduction. At this point, two skilled promoters entered theproduction are not sufficient by themselves. Even when all the scene. General George Baxter, former president of the Newscience and engineering are done correctly, there are other key York Central Railroad, and Trenor W. Park, former receivercomponents to a successful project. Capital and start-up funds for the famous Mariposa estate in California, succeeded inare required; the mine must make a profit; day-to-day opera- gaining control of the mine.tions must be efficiently managed; and operations must be in By 1870, London capitalists had overcome the shock ofconformance with all local and national laws, which may in their earlier, disastrous losses in the quartz-gold ventures ofsome cases change unexpectedly. California, and registration of British companies intending to This chapter deals with mine economics, management, invest in American mining ventures boomed. Baxter and Parkand law, and specifically with aspects of those three topics enlisted the assistance of a notable group, including Professorthat directly influence the ability of a company to find a min- Silliman of Yale University, who prepared a favorable report;eral deposit, develop a mine, and operate the mine profitably. William Morris Stewart, U.S. senator from Nevada; and MajorThe disciplines and practices of mine economics, mine man- General Robert C. Schenck, the U.S. minister to the Court ofagement, and mining law are largely devoted to controlling St. James. This group was assisted in its efforts by one Baronrisk and maximizing returns from the exploitation of mineral Grant, a promoter who, in return for providing introductionsdeposits. Those risks and returns accrue to investors, mining to British financiers, would receive 10% nominal capital ofcompany shareholders, governments, and residents of the area any new company. A prospectus for the Emma Silver Miningaround the mine. Company was issued in 1871, offering £1,000,000 in shares Every investment carries risks, and successful inves- at £20 per share. In addition to Schenck, Stewart, Baxter,tors are adept at assessing and accommodating those risks. and Park, the company’s board included three members ofManagement and control of the risks associated with mining Parliament. Professor Silliman’s report was taken at faceinvestments require special methods, because the assets in a value, and no independent evaluation was made. The sharesmining investment are more difficult to quantify than those in were soon selling at £3 to £4 above the offering price.many other investments. Furthermore, some investors have a At first, the mine was highly productive, yielding daily aperception that mining investments can deliver high rates of hundred tons of ore containing 5.7 to 20.10 kg (200 to 700 oz)return. The term gold mine is frequently used in a colloquial of silver per ton, and within a few months $1,500,000 in oresense to describe an unusually good investment. had been mined (Rickard 1932). However, there was consid- Unfortunately, under the right combination of these cir- erable skepticism in the United States. The Engineering andcumstances, large investments can be made and lost in mining Mining Journal commented, “We do not see in the prospectus Michael G. Nelson, Department Chair, Mining Engineering, College of Mines & Earth Sciences, University of Utah, Salt Lake City, Utah, USA 297
298 SME Mining Engineering Handbookof the company any justification for these high figures, except terms of impurities and other properties, and standard expres-a historical one. The mine appears to be valued at five mil- sions for quality are less common.lion dollars because it has produced some two million already, In all cases, the entire makeup of the deposit must be con-and no positive proof is offered as to the amount of ore actu- sidered. The presence of certain impurities may render valuelessally known to be in reserve―at least, none that we have seen” an otherwise attractive deposit. For example, a limestone deposit(Anon. 1871). that contains too much silica may not be suitable for the manu- At the end of 1872, the company director “made the facture of cement. In other cases, the presence of an otherwiseastounding discovery that their stock of available ore was valuable constituent may lead to complications in the ore pro-exhausted, everything in sight worth taking had been extracted cessing. For example, a gold–silver ore that has too high a silverwithout any new ore bodies having been discovered” (Jackson content may require more expensive methods for recovery of the1955). In the annual report issued on March 1, 1873, the direc- precious metals from the leach solution. Thus the characteriza-tors expressed their “regret and disappointment” that the bal- tion of a deposit must be carried out by a diverse team, whoseance sheet was much less favorable than they had until recently members thoroughly understand geology, mining, mineral pro-anticipated. The shareholders were incensed, the mine in Utah cessing, metallurgy, and chemistry.was closed, and most of the work force dismissed. The share Besides characterizing the quality of the deposit, theprice dropped rapidly from ₤23 to one-tenth that amount. evaluation will also include an analysis of the legal status of By this time, Schenck had resigned from the board of the mineral holdings. This will include determination of whodirectors, but as the lawsuits proliferated, back and forth owns the mineral or mining rights, who owns or controls theacross the Atlantic, the U.S. House of Representatives surface rights, who controls access to the property, and whoappointed a special committee to investigate his connection owns the required water rights. The legal definitions of thesewith the Emma mine promotion. Months of testimony resulted rights vary widely among countries and even among states orin 879 pages of proceedings and the finding that Schenck’s provinces within some countries.conduct had been “ill-advised, unfortunate, and incompatible In many cases, the evaluation or characterization of awith the duties of his official position” (Jackson 1955). deposit will include a preliminary assessment of the feasibility Until 1892, exploration continued, companies were of mining that deposit. That assessment will focus particularlyformed and dissolved, and sporadic but generally unprofitable on any characteristics of the deposit (and its locality) that mayproduction at the Emma mine continued. In 1894, the direc- be problematic. Examples include depositstors of the company that held the original Emma claims voted • In particularly remote locations;to devote their remaining small capital to the investigation of • Where permitting may be difficult;West Australian gold properties. • Where local opposition may be extreme; Unfortunately, even today, some of the errors made by • Where water, fuel, or electric power are expensive orinvestors in the Emma mine have not disappeared. Stock is unavailable in sufficient quantities; orissued and investment decisions are made on the basis of a • Where the political climate is unstable.single “expert” report, without seeking independent verifica-tion. Investors are impressed by the political, social, or eco- These preliminary assessments are often called audits—nomic standing of company officers and promoters, and fail environmental, regulatory, social and cultural, and so forth—to determine whether any of those individuals have the train- and are described extensively in the literature.ing and experience needed to operate a mining company. Past Inaccurate or incomplete characterization of a mineralproduction is all too often taken as demonstrable evidence that deposit can have serious consequences. Such inaccuraciesreserves are still in the ground. may or may not be intentional, but once the numbers are in print, the tendency to use them for raising money may be dif-MINE ECONOMICS ficult to resist. Errors in reserve estimation, intentional or not,This section addresses four topics related to the basic premises continue to occur. Though such cases rarely become the sub-of the profitable exploitation of a mineral deposit: ject of congressional hearings, as the Emma mine did, they do have serious consequences. 1. Evaluation of mineral properties The requirements for accurate characterization of deposits 2. Mineral property feasibility studies are given in various national standards, as described in detail 3. Cost and cost estimation methods by Bourassa et al. (2003). These standards have been adopted 4. Investment analysis by stock exchanges, government agencies, and professionalFinancing of mining projects is addressed here but is discussed societies to ensure uniformity and accuracy in reports describ-more thoroughly elsewhere in this handbook. ing mineral deposits. In 1988, at the request of members of the Society ofMineral Property Evaluation Mining Engineers (later changed to the Society for Mining,The deposit must be characterized adequately and with the Metallurgy, and Exploration, or SME), the president of SMErequired degree of certainty. The extent of the deposit must formed Working Party No. 79, Ore Reserve Definition. Itsbe defined, usually in terms of the amount of ore present. The mission was to develop guidelines for the public reportingquality or tenor of the deposit must also be defined, usually of exploration information, resources, and reserves. In 1989,expressed for metal deposits as grade: the fraction of metal the Australasian Code for Reporting of Identified Mineralpresent, in milligrams per ton for precious metals, or as a per- Resources and Ore Reserves (the JORC Code) was publishedcentage for base metals. For coal, quality is characterized by and was immediately incorporated into the Australian Stockthe impurities present, specifically sulfur and ash; the heat- Exchange listing rules. In 1991, SME’s guidelines were firsting value; and (for metallurgical coal) the coking qualities. published, and the Institution of Mining and Metallurgy in theFor industrial minerals, user requirements are often specific in United Kingdom revised its standards for reporting of mineral
Mine Economics, Management, and Law 299resources and reserves (SME 2007). The U.S. guide and U.K. In 1990, the owner reported that proven and probable goldrevisions were both based on the 1989 JORC Code. reserves at Cove were cut by 11% to 4.6 million troy oz, and In the collapse of the Bre-X project in Indonesia estimates of other mineralization at depth had dropped from(Danielson and Whyte 1997), private and institutional inves- 4.5 million oz of gold to about 900,000. The error was attrib-tors suffered huge losses when it was revealed that exploration uted to downhole contamination of cuttings in reverse circula-results had been incorrectly reported. After that, international tion drilling (Gooding 1990). In 1993, Amax Gold reported astandards took on increasing importance (Cawood 2004). The US$64.1 million write-down of the carrying value of HaydenSME Guide for Reporting Exploration Information, Mineral Hill (Globe and Mail 1993). In 1996, the owner incurred aResources, and Mineral Reserves was updated in 1999 when $30 million expense to stabilize the pit wall (Globe and Mailthe reporting of mineral resources and reserves was required 1997). By 1998, production had been scaled back (Bagnellto be made by a “competent person,” as defined therein (SME 1998), and by the middle of 2002, no production from Cove-2007). The SME Guide was then recommended for use by McCoy was reported (National Post Canada 2002).SME members. However, the U.S. Securities and Exchange In 1992, the Grouse Creek mine in Idaho (United States)Commission (SEC) did not recognize “resources,” as defined was permitted, with initial annual production expected atin the SME Guide and other documents, in its evaluation of 3.1 t/a of gold and 12.4 t/a of silver, changing later to 2.2 t/a ofproposed mining projects (Kral 2003). When SME became a gold and 77.8 t/a of silver (Anon. 1992). By 1995, the ownerrecognized overseas professional organization, it instituted its announced it was writing down its entire $US95-millionregistered member category in 2006. Those who qualify can investment in the mine because it had encountered significantobtain this membership upgrade through SME. Applicants shortfalls in both grade and tonnage of the ore being minedmust first meet strict educational and professional standards (Globe and Mail 1995).and undergo a vetting process by the Society’s Admissions Completion of permitting for the Hayden Hill project inCommittee (Gleason 2007). California (United States) was announced by Haddon (1992). In an effort to resolve the differences between the SME In 1993, the owner reported a US$64.1-million write-downGuide and the SEC rules and regulations for 2007, a revised of the carrying value of Hayden Hill (Globe and Mail 1993).version of the SME Guide was issued, which included Schwab et al. (1994) assert that some of the tonnage andimproved definition of the term mineral resources and its grade shortfall that was experienced at Hayden Hill may havesubdivisions (measured, indicated, and inferred mineral resulted from an absence of adequate drilling, obscured byresources), and clarification of the technical, economic, legal, variogram analysis that supposedly showed the grade varia-and permitting requirements that must be satisfied before a tions within the range of low variance over distances which,reserve can be declared. A section was added defining the on close inspection of the geology, could not be supported.commodity prices that can be used for reserve estimation and Finally, it is important to remember that reserve risk isreporting, and how price sensitivity should be measured dur- not always a function of resource risk. Modifying factors ining periods of low prices. Documentation requirements were the various standards are meant to account for the conditionsclarified, including the requirement for a Mineral Reserves that should be considered when converting a mineral resourceDeclaration Report. The role of the competent person was to an ore reserve.reemphasized. However, the position of the SEC with respectto public reporting remains that stated in Industry Guide 7 as Mineral Property Feasibility Studiesinterpreted by SEC staff (SEC 2007). Consequently, at any A feasibility study of a mining project is an appraisal of thegiven time, some key aspects of the 2007 SME Guide may be commercial viability of that project, which accounts for engi-inconsistent with SEC requirements. The SME document, The neering, economic, permitting, and environmental variables.Guide for Reporting Exploration Results, Mineral Resources, Like mineral property evaluations, feasibility studies requireand Mineral Reserves (SME 2007) is available at the SME the dedicated participation of a diverse group of skilled pro-Web site. fessionals. In addition to an understanding of geology, mining, When a big financial scandal like that of Bre-X is exposed, mineral processing, metallurgy, and chemistry, the feasibilitythe details of the how the property was incorrectly valued study team must also comprehend cost estimation, construc-are closely scrutinized. In contrast, companies and individu- tion and project management, civil engineering, electricalals are understandably reluctant to publicly discuss projects engineering, permitting and other legal requirements, eco-that were undertaken in good faith but fail nonetheless (SME nomics, and finance.1998). Thus, it is difficult to assess the role of incorrect prop- To control costs and to cater to the progressive increaseerty valuations in those failures. Guarnera (1997) sums up the in geological confidence and understanding of the modifyingeffect of geological risk in recent projects as follows: “No factors, feasibility studies are usually conducted in stages. Ifsingle feature has caused so many mining projects to fail as a study at the first stage produces favorable results, indicatinghave reserves not being what were originally estimated by the property may be exploited profitably, a more detailed (andthe mining company. A few examples of projects which have costly) study will be conducted, resulting in an increased cer-had notable reserve problems are:…Hayden Hill…Cove- tainty of the project economics. Some mining companies haveMcCoy…[and] Grouse Creek.” internal experts who conduct feasibility studies, while others A brief discussion of these projects is instructive. rely on engineering firms or consultants to fulfill this func- The McCoy property in Nevada (United States) was tion. In all cases, feasibility studies are conducted to definedacquired in 1986, and the nearby Cove prospect was discov- standards, stating the requirements for a study at a given levelered in 1987. By 1988, the owner reported proven and prob- of certainty. Although these standards vary somewhat, in allable mineable reserves at Cove of 65.3 t (metric tons) of gold cases the notion is the same: increasing the detail increases theand 3 kt of silver, with drill-indicated possible mineralization certainty but costs more money. For example, Vancas (2003)of 83.9 t of gold and 4.5 kt of silver (Emmons and Coyle 1988).
300 SME Mining Engineering HandbookTable 5.1-1 Criteria for feasibility studies inferred resource category. Bertisen and Davis (2007) asserted Completion of that the persistence of bias is intentional, driven by a scarcity Engineering Probable of project financing and the need to inflate the project econom-Type of Study Documents*, % Error, % ics in a bid to secure financing.Rough order-of-magnitude 2 ±35–45 Danilkewich et al. (2002) provide guidelines for the proj-Preliminary (conceptual or scoping) 5 ±25–35 ect owner in preparing for a feasibility study. They suggest theBudget appropriation (prefeasibility) 15 ±15–25 owner be responsible for preparing a complete scope of work, a full delineation of assumptions and constraints, a well-Project control (feasibility) 27 ±10–20 defined execution plan, and a comprehensive bid checklist.Definitive 40 ±5–15 Feasibility studies are an indispensable tool in the decision-Source: Adapted from Vancas 2003. making process that leads up to the development of a mineral*Drawings, specifications, procedures, etc. deposit. However, their preparation and interpretation must be carefully managed to ensure satisfactory results. Northcote (2007) provides an excellent discussion of how to minimize func-describes the scheme used by Bateman Engineering for defin- tional risks during a project evaluation and summarizes it thus:ing types of feasibility studies, as shown in Table 5.1-1. Although not specified in the scheme of Table 5.1-1, the To reduce project failures, the foundations need tosteps needed for permitting and reclamation should also be be properly laid. This starts with the stakeholdersconsidered, and are often included, in the various stages of a understanding the project life cycle versus the valuefeasibility study. of the impact of change and having a quality project It is important to remember that any feasibility study is evaluation report.only as good as the information used to prepare it. Although A competent project evaluation manager needsthis may seem obvious, many errors can lead to inaccuracies to be appointed who will select appropriately skilledin a study. Gypton (2002) reviewed 60 projects and found and managed study groups to assist in identifying theonly 15 came in under budget. Of the 45 over budget, 35 were opportunities and the risks. Setting up of the study atmore than 15% over. Of all the projects, 25 were within the the outset so that all participants know the systems,±15% criteria. Similarly, Bertisen and Davis (2007) reviewed schedules and objectives is crucial to a focused and63 mining and smelting projects completed over four decades on timely outcome. Once the project evaluation hasand found that as-built capital costs averaged 25% higher than commenced, retention or access to key people willestimates at the bankable feasibility study stage. About half reduce revisiting concepts and strategies that moreof the projects had as-built capital costs outside the expected than likely have been addressed in the evaluation±15% of the feasibility study capital cost estimate, and cost process. This can reduce cost and schedule impacts.overruns of 100% or more occurred in roughly 1 of 13 projects. Project evaluation management is challenged What could lead to such errors? Vancas (2003) gives a list in keeping study groups focused and addressing theof project pitfalls: risk issues in a timely manner. Regular scheduled meetings, competently chaired, generate synergies • Being forced into unrealistic deadlines that keep the study groups focused. Special review • Not defining the scope of the project clearly at the begin- meetings are to be scheduled throughout the project ning of the project where peer reviewers are invited to test the other’s • Allowing changes of the scope without documenting them findings. or determining their impact to the schedule, resources, Before a commitment can be made by the stake- and project budget holders, in addition to the usual documentation • Getting senior management’s attention too late for them covering the mining, technical, budget estimates, to help construction schedule and market aspects, there • Inability to say “no” (even when obvious that what is needs to be a design criteria and a project execution being requested is impossible) plan. • Not establishing communication channels from the Short cuts during project evaluation will result beginning of the project in a weak foundation and increase the risk of project • Not establishing a control mechanism to track and moni- failure. tor the project • Deserting control mechanisms when the project starts getting into management by crisis Cost Estimation • Continually reorganizing the project team Cost estimation is a part of every feasibility study. A mineral • Committing to arbitrary dates with no real basis for set- deposit should not be considered for development unless the ting those dates estimated annual operating profit after taxes and other costs is • Building up staff too quickly when work is not ready sufficient to recover, with interest, the cost of developing the and/or disbanding support staff too quickly mine and of closing and reclaiming it. Such considerations • Not having a person in charge of the project with respon- should also include sufficient income to provide for mine clo- sibility, accountability, and authority sure and final reclamation costs. This is often neglected, and • Not freezing the specifications and other baseline definitions poor performance at closure can lead to bad public relations,To this list could be added the too-common errors of confus- denial of future permits, and even bankruptcy.ing precision with accuracy and not understanding the inher- As a project progresses through the types of feasibilityent risks associated with mineral resources, particularly at the study previously described, the cost estimates are successively
Mine Economics, Management, and Law 301Table 5.1-2 Specifications for capital cost estimates in feasibility studiesCategory Conceptual or Scoping Study Prefeasibility Study Feasibility StudyBasis, to include the following areas: Order-of-magnitude, based on historic Estimated from historic factors or Detailed from engineering at 15%civil/structural, architectural, piping/ data or factoring percentages and vendor quotes based to 25% complete, estimated materialHVAC, electrical, instrumentation, on material volumes take-off quantities, and multiple vendorconstruction labor, construction quotationslabor productivity, material volumes/amounts, material/equipment, pricing,infrastructureContractors Included in unit cost or as a Percentage of direct cost by area for Written quotes from contractor and percentage of total cost contractors; historic for subcontractors subcontractorsEngineering, procurement, and Percentage of estimated construction Percentage of detailed construction Calculated estimate from EPC(M) firmconstruction (management) (EPC(M)) cost costPricing FOB mine site, including taxes and FOB mine site, including taxes and FOB mine site, including all taxes and duties duties dutiesOwner’s costs Historic estimate Estimate from experience, factored Estimate prepared from detailed zero- from similar project based budgetEnvironmental compliance Factored from historic estimate Estimate from experience, factored Estimate prepared from detailed zero- from similar project based budget for design engineering and specific permit requirementsEscalation Not considered Based on company’s current budget Based by cost area with risk percentageWorking capital Factored from historic estimate Estimate from experience, factored Estimate prepared from detailed zero- from similar project(s) based budgetAccuracy ±50% ±25% ±15%Contingency 25% 15% 10% (actual to be determined based on risk analysis)Courtesy of M.A. Holden.Table 5.1-3 Specifications for operating cost estimates in feasibility studiesCategory Conceptual or Scoping Study Prefeasibility Study Feasibility StudyBasis Order-of-magnitude estimate Quantified estimates with some Describes the basis of the estimate; factoring detailed from zero-based budget; minimal factoringOperating quantities General Estimates with some factoring Detailed estimatesUnit costs Based on historic data or factoring Estimates for labor, power, and Letter quotes from vendors; minimal consumables; some factoring factoringAccuracy ±35% ±25% ±15%Contingency 25% 15% 10% (actual to be determined based on risk analysis)Courtesy of M.A. Holden.refined and made more accurate. At higher levels of certainty, conversely, the rejection of a project that would have resultedmore detailed drawings and more directly quoted prices for in significant profits.major equipment are required. One approach defines threetypes of feasibility study: conceptual or scoping, prefeasibil- Investment Analysisity, and feasibility. Tables 5.1-2 and 5.1-3 show the specifica- An investment analysis may be carried out as part of a feasi-tions for the capital and operating cost estimates, respectively, bility study or as a separate effort. In any case, the purpose ofin each type of study. the analysis is to determine whether or not development of the The correct completion of a cost estimate requires con- project will provide sufficient economic returns to justify thesistency, attention to detail, and good sources of cost infor- required initial and ongoing investment required. The analysismation. Many equipment suppliers have proprietary software must consider the cost of the capital funds employed and thefor estimating capital and operating costs, which may often risk involved in the project.be used at no cost by prospective customers. For example, For any development project, investment of the requiredCaterpillar equipment costs can be determined directly from funds must be justified to the funding source. When a companythe company’s Build and Quote Web site (Caterpillar 2010). considers investing its own funds in a project, that alternativeIn addition, regularly updated cost data are available by sub- will be compared with other available investment opportuni-scription at the CostMine Web site, maintained by InfoMine ties. Those may include other new projects, improvements to(2010). Inaccurate cost estimates will result in cost over- existing facilities or equipment, or additional exploration forruns and may result in the expenditure of large amounts of new prospects. If funding is to be sought from outside inves-capital funds on a project later found to be unprofitable, or tors, those investors will make the same sort of comparisons.
302 SME Mining Engineering Handbook Several criteria may be used for analysis of investments. what to do next.” Nonetheless, the operation of a single mineSome are relatively easy to calculate, such as the accounting or a mining company requires the expert and careful manage-rate of return and the payback or payout period. Other crite- ment of dozens, if not hundreds, of functions and tasks.ria are calculated using discounted cash-flow methods, whichare more complex. These include present value, future value, Historic Approachesannual value, net present value (NPV), benefit–cost ratio, and The scope of topics included under the heading “Mineinternal rate of return (IRR). Management” has grown considerably as the industry has pro- NPV is the most commonly used, single criterion for gressed and adapted to changing conditions. Early handbookscomparing investments, but some analysts also use the IRR. were often directed specifically to the country in which theyThere is some controversy over the use of these two crite- were published and addressed practical matters such as mineria. Torries (1998) states that “both NPV and IRR have valid organization; business and technical management; accountinguses as merit measures for practical application of invest- principles; cost-keeping; mine records; wage schemes; con-ment evaluation methods [and] IRR has no greater number tract work; bonus, cooperative, and leasing systems; methodsof faults than does NPV, even when multiple root problems of paying wages; accident compensation; pensions and ben-are included,” whereas Hajdasinski (2000) believes that “the efit funds; labor relations; arbitration and conciliation boards;IRR is a conceptually flawed and operationally dysfunctional changehouses; mine communities; miners’ dwellings; potableproject evaluation criterion.” water supply systems; sanitation and diseases encountered in Discounted cash-flow (DCF) methods require detailed and mining; and worker health and safety.extensive calculations, and executing them by hand requiresconsiderable skill and patience. The development of personal Contemporary Management Valuescomputers has made DCF analysis much easier. Commonly It is interesting to compare the historic topics with those inavailable programs, such as Microsoft Excel, include built- the public statement of the Rio Tinto Group, a large, multi-in functions for many of the parameters associated with DCF national mining company. Rio Tinto first published The Wayanalysis, and more sophisticated programs are readily avail- We Work—Our Global Code of Business Conduct in 2003; itable. Unfortunately, the relative ease with which DCF analysis was last updated in 2009 and is available in print and on themay now be conducted has not altered the fact that the results Internet (Rio Tinto 2009). Although it is intended to provideof such an analysis are only as good as the input data. In some the company’s employees with guidance on how to conductcases, when a complex analysis is done by computer, it is themselves at work and when representing Rio Tinto, thetempting to simply assume that the results are valid without document by implication describes Rio Tinto’s managementrigorously reviewing the input data and assumptions. approach to corporate responsibility, sustainability, and integ- Other drawbacks to DCF methods are summarized by rity. All employees are strongly encouraged to report anyClevenger (1998) and Lawrence (2000). For example, it is dif- violations of law and are provided with the means to do so.ficult to estimate some of the key parameters, such as future Strong commitment is expressed for important values:cash flows and discount rates, and the practice of subtract- • Incident- and injury-free workplacesing the cash flows of one project from those of another that is • Protection of health and well-beingmutually exclusive (before discounting) can produce incorrect • Excellence in environmental performance and productresults. In addition, DCF measures do not directly recognize the stewardshipvalue of future opportunities, unless the uncertainty regarding • Respect for the rights and dignity of Rio Tinto’s employ-the execution of those opportunities is estimated and included ees and those of its business partnersin the analysis. Finally, small changes in the discount rate used • Respect for human rights consistent with the Universalcan dramatically change the results of the analysis. Regarding Declaration of Human Rightsthis last point, Lawrence notes that “whilst it is preferable for • Strong relationships with communities and indigenousvaluations by DCF/NPV modeling techniques to give as much peoplesdetail as possible in the derivation of the technical basis of the • Avoidance of conflicts of interestinputs used and the Discount Rate selected, it is more impor- • Prohibition of bribes and corruption, in all formstant for it to contain a table or graph showing the impact on • High ethical standards in dealing with governmentsthe valuation of a change of 1% in the Discount Rate, from say • Accurate and consistent communication with the mediazero to 15% per year (in real terms). This allows the reader to and investorstruly test the reasonableness of the valuation by estimating a • Maximum transparency consistent with good governancevalue based on other Discount Rates.” and commercial confidentiality Statistical simulation methods are often used to moreaccurately quantify the range of error associated with cost Clearly, the preceding list does not include all the issuesestimates and investment analyses. These methods are dis- managed by Rio Tinto and its employees. Rather, the com-cussed in subsequent chapters in this handbook. pany must deal with issues covered in the historic handbooks plus those described in The Way We Work. That second setMINE MANAGEMENT of issues may be thought of as higher values, which mustThe topics of leadership, employee relations, and training, now be rationally and consistently managed by all miningdiscussed in subsequent chapters of the handbook, are all companies. Management of higher values is important firstimportant components of mine management, which will be because it is simply the ethically and morally correct thing todiscussed in general here. do. Second, because mining companies continue in business Engineers are often skeptical of management experts. An by public consent, when values like those expressed in Theanonymous cynic defined a manager as “someone who can Way We Work are not upheld, a company loses credibility andalways tell you what you’ve done wrong, but never tell you may eventually lose its license to operate in a given location.
Mine Economics, Management, and Law 303 The International Organization for Standardization (ISO) U.S. coal companies have spent almost $800 million on newhas prepared standards for environmental management, ISO mine safety technology and equipment, much of which was14001, and quality management, ISO 9001 (ISO 2010). Full required for compliance with the MINER Act. Unfortunately,discussion of the management of these values is beyond the although reactive management can control many conditions, itscope of this chapter. However, some brief examples are cannot control them all. In addition, behavior control, whetherinstructive. individual or corporate, is achieved more successfully by pro- active methods.Labor Relations Management Risk management has been applied in many areas ofCompanies that manage higher values have an approach to the mining industry. As early as 1974, Matthews (1974) rec-labor relations that is significantly different from the historic ognized that “most of the contractual problems related tonorm. Zanolli (1972) notes that the United Mine Workers of underground construction are associated with risk and itsAmerica has been “involved in widely publicized and bitter management. Unless all of the ramifications of this subject arebattles with the coal industry employers in collective bar- understood, it will be difficult to employ contracting practicesgaining…[and]…has even battled with the government and best suited to the needs of a particular project. It is hoped thatin 1947 had the experience of collectively bargaining with a detailed study of the nature of risk will assist in this under-the Government when the coal mines were taken over by the standing.” Hebblewhite (2009) describes the use of risk man-Federal Government.” This adversarial relationship of min- agement techniques for the control of geotechnical hazardsers’ unions with employers and governments was common in in Australian mines. Assessment of risks, including politicalmany countries until the 1980s. The author recalls being told risk (Gavelan and Dessureault 2004), is also a standard part ofin 1987, by a West Virginia mine superintendent, “Anything I almost all mineral property evaluations and project feasibilitycan do to get rid of a union miner is good. Every union miner studies.is just a problem.” Contrast this with a statement made by The application of risk management techniques to mineLeigh Clifford, then-CEO of Rio Tinto, in 2007: “Do you safety has been notably successful. The Australian miningremember how anarchic labour relations nearly throttled WA’s industry initially identified the use of risk-based manage-[Western Australia’s] iron ore industry in the 1970s and drove ment techniques during the 1980s. Using research studiesour chief customer to encourage supply from Brazil? Today, performed by the coal sector, which evaluated techniqueswork practices in our mines are more rational and everyone― used in the nuclear industries of various northern hemisphereemployees, customers, companies and governments, is better countries, the industry identified the scope of applying a risk-off as a result” (Clifford 2007). Progressive mine managers based approach to mining. Primarily because mining hasrecognize that their employees constitute a resource equal in many uncertainties and a large number of variables, a clear-value to their ore reserves and treat them accordingly. cut answer cannot always be defined for every situation. The value of risk management became clear in the mid-1990s,Safety Risk Management shortly after the 1994 Moura coal mine explosion in Australia,The concepts of risk management appeared in the 1970s (Field in which 11 miners died (Hopkins 2000). As a result, the min-2003) and were first applied in the petrochemical, nuclear, ing industry began using risk analysis methods to mitigate cer-military, and aerospace industries. This proactive approach tain key hazards.to improving risks, as opposed to a reactive “fix it when it By 1997, regulatory bodies in Australia began to requirebreaks” mentality, was in most cases triggered by a major pub safety management plans for principal hazards. Westernlic disaster such as the Flixborough (England) chemical plant Australia passed the Mines Safety and Inspection Act (Westerndisaster in 1974, the Three Mile Island (Pennsylvania, United Australia 1994), and in New South Wales, the chief inspec-States) nuclear plant event in 1979, the Piper Alpha offshore tor of coal mines published a risk management handbookoil platform disaster in the North Sea in 1988, and others (Joy (NSWDPI 1997). Queensland issued standards the next yearand Griffiths 2007). (QDME 1998; QMC 1999). These regulations require mines The management approach to a given issue can be either to perform major hazard risk assessments on a regular basis toproactive or reactive. Proactive change involves actively address the possibility of unwanted events such as spontane-attempting to make alterations to the work place and its prac- ous combustion, gas outbursts, explosions, air blasts, inunda-tices. Companies that take a proactive approach to change are tions, and roof falls.often trying to avoid a potential future threat or to capital- A comparison of fatality rates (number of fatal injuriesize on a potential future opportunity. Reactive change occurs per million hours worked) for underground mining from 2004when an organization makes changes in its practices after to 2006 indicates that the risk management approach to minea threat or opportunity has already occurred (Reference for safety is having a marked effect (Table 5.1-4).Business 2010). Risk management methods enable the sys- In 2001, the Minerals Council of Australia initiated atematic application of a proactive approach. national project to promulgate a good practice guideline For many years, the management of safety in the min- for risk assessment in the minerals industry. The Mineralsing industry was reactive. Breslin (2010) notes that “most of Industry Safety and Health Centre (MISHC) at the Universitythe Federal safety and health legislation has followed major of Queensland was commissioned to draft guidelines, work-mining disasters that received significant public attention.” ing closely with a representative cross section of the industry,In some cases, a reactive response still occurs. As recently as which included seven large mining companies and nine gov-2006, three mine disasters in the United States (with a total ernment agencies. The resulting document, National Industryof 19 fatalities) resulted in the passage by the U.S. Congress Safety and Health Risk Assessment Guideline, Version No. 7of the Mine Improvement and New Emergency Response (Joy and Griffiths 2007), is an exhaustive discussion of risk(MINER) Act. Popovich (2010) observed that, since 2006, management as applied to mine safety. It includes descriptions
304 SME Mining Engineering HandbookTable 5.1-4 Underground mine fatality rates 2004–2006, United Right to MineStates and Australia Unless the lands containing a mineral deposit are purchased in Average Fatality Rate (fatal fee simple, the right to mine begins with permission from theCountry and Commodity injuries per million hours worked) property owner to enter the property. If this right is granted byU.S. coal 0.25 means of a lease, then the lessor may require evidence that aU.S. metal/nonmetal 0.14 social license to mine can be obtained. In most jurisdictions, the right to mine requires one orAustralia coal 0.04 more permits from government agencies. In some cases, theAustralia metalliferous 0.07 mining permit may be secured with relative ease, but miningSource: Adapted from Iannacchione et al. 2007. cannot begin until several environmental and other permits are also in place. In some jurisdictions, the permitting process may seem opaque and difficult, especially to outsiders.of methods and procedures, examples of forms, worksheets, The right to mine may be forfeited if a company violatesreports, and other valuable resources. MISHC provides an any of the laws to which it is subject. In some cases, this for-on-line resource of information on mining industry risk man- feiture may be a direct result of government actions; in otheragement through its Minerals Industry Risk Management cases, it may be the de facto result of large fines or other pen-Gateway (MIRMgate 2010). alties. In the worst case, a national government may confiscate The use of risk management methods to manage mine or nationalize the property, mining claims, equipment, and allsafety has spread rapidly. Safety standards and practices in other assets of a mining company.Great Britain, which apply to all industries and workplaces,are described in A Guide to Health and Safety Regulation in Taxes, Leasing Fees, and RoyaltiesGreat Britain (HSE 2009). They were developed in 1992 and Taxes and fees paid by a mining operation can be complicated.are quite similar to those in Australia. Many large mining com- In many cases, a mining operation may be taxed by several enti-panies, including Alpha Natural Resources, Anglo American, ties. For example, a mine in the United States may include landsBarrick Gold, BHP Billiton, Newmont Mining, Rio Tinto, and where ownership is divided among the federal and state govern-others, have embraced an approach to safety, health, and envi- ments and private holders. That mine could well be required toronmental quality that uses the principles of risk management. pay leasing or claim fees to the federal and state governments, corporate income taxes to the federal and state governments,MINING LAW severance taxes or royalties to the state government, real prop-Mining law traditionally refers to the body of law governing erty taxes to the county government, and royalties to the privateaccess to mineral deposits, the right to mine those deposits, landholder. Some government agencies require the payment ofand the taxes or royalties assessed on the products of mining. lease fees and royalties in advance, and this may significantlyIn the last half century, many other laws that affect mining increase the capital investment required to place a property inoperations have been enacted. Those laws vary considerably operation. During the feasibility analysis, it is important to con-from one country to another, and even within countries, but it sider the likely tax and royalty liabilities for a project.is useful to consider them in six general (if somewhat overlap- When taxes, fees, and royalties are set by governmentping) categories: agencies, they may be subject to change at short notice. In 1. Access to the land some countries, laws may be changed with little or no regard 2. Right to mine for existing contracts and agreements, and these changes can 3. Taxes, leasing fees, and royalties suddenly and drastically alter the economic viability of a proj- 4. Employment, work conditions, and compensation ect. For example, although ex post facto protection is taken for 5. Environmental protection granted in the United States and many other countries, this is 6. Cultural and social issues not the case everywhere, and the local situation should always be carefully investigated.Access to the LandThese laws will govern which lands may be accessed for Employment, Work Conditions, and Compensationexploration and mining. Restrictions may be placed to protect Laws may specify wage rates and required benefits packagesforests, parks, and cultural resources. Regulations may specify in a given location; limit work hours; determine the conditionsaccess or leasing fees for exploration or mining. Companies for operation of labor unions; or specify the makeup of themay be required to attain more than one access right. For work force in terms of ethnic or gender diversity, percentageexample, in some jurisdictions, the surface and mineral estates of local or native residents to be employed, and so forth. Othermay be severed; that is, a company or individual may own laws may include provisions to protect the safety and healthsurface and mineral rights but may be denied vehicular access of workers, including required personal protective equipment,to its property through a national park or other protected area. safe working conditions, safety requirements for equipmentIn other jurisdictions, such as Great Britain and South Africa, and machinery, and compensation for workers injured or madethe state owns all minerals. The concept of state ownership ill by working conditions.of minerals leads to a system of mineral leases, or conces-sions, which requires some effort to understand. The distinc- Environmental Protectiontion between real property and chattel, or personal property, is Detailed discussion of environmental assessments, environ-significant with respect to the distinctions between ownership mental impacts, and other environmental issues may be foundof a mineral reserve in place and the mineral product after it in Part 16 of this handbook. This chapter discusses only gen-has been mined or the wastes that are stored on the mine prop- eral considerations.erty after beneficiation.
Mine Economics, Management, and Law 305 Environmental laws cover many areas. They usually gov- who are well trained and experienced in the laws and practicesern the use and contamination of surface and groundwater, the of each country in which the company operates.discharge and storage of solid waste (including dust, waste Almost all companies now state clearly their intention torock, and tailings) or domestic waste (garbage), the disposal operate in full compliance with all applicable laws and regu-of radioactive and other hazardous materials, and the control lations. In almost all cases, mining companies are also com-of gaseous emissions from equipment and processes. In most mitted to operating in compliance with the highest and bestlocations these laws also cover the protection of endangered environmental standards, often those of the ISO or a similarand/or protected species or ecosystems (including parks, organization, even if the local laws are less stringent.forests, rivers, and lakes) and the protection of viewsheds Mining companies must be fully aware of all laws that(including the night sky). Entities protected under environ- apply to their operations. This will, of course, include localmental laws may be widely distributed in space and time—for laws, but laws of the company’s home country may also apply.example, a caribou herd or a salmon fishery. For example, the U.S. Foreign Corrupt Practices Act of 1977 It is important for mining companies and mining engineers sets forth standards for accounting transparency and prohibitsto be aware of some of the land-use planning concepts under bribery of foreign officials (U.S. Department of Justice 2004).which lands may be designated under a certain usage category It applies to any U.S. or foreign corporation that has a classand thus rendered unsuitable for mining. Unsuitability may be of securities registered or that is required to file reports underafforded to areas with natural hazards, renewable resources, the Securities Exchange Act of 1934; to any individual who isfragile ecosystems, historic sites, and for which reclamation a citizen, national, or resident of the United States; and to anyis technically or fiscally not feasible. This land-use concept is corporation and other business entity organized under the lawsalso called legal sterilization of lands. Mine designers who are of the United States or having its principal place of businessunaware of the designation concept and its application in envi- in the United States.ronmental protection laws may find their pet projects stalledwhen they least expect it. Estimating Legal and Political Risk Environmental laws usually govern the restoration or The preceding discussion of mining law has alluded toreclamation of sites and features disturbed or altered by min- instances when changes in political regime or local laws anding activities. Reclamation requirements may be specific and regulations can seriously affect the viability of a developmentdetailed, and extend far into the future, representing a liability project or mining operation. The assessment and quantifica-that is difficult to quantify. Many government agencies require tion of legal and political risk is one of the biggest challengesthe posting of a bond to guarantee compliance with reclama- for a mining company, which must rely on its experience,tion requirements. In some circumstances (when risk cannot internal expertise, and the advice of qualified consultants.be adequately quantified), bonding companies are unwilling to An annual survey of mineral development potential is con-issue a bond. In such cases, the mining company is required to ducted by the Fraser Institute of Vancouver, British Columbia,post the full amount required. In the worst case (usually for a Canada (McMahon and Cervantes 2009). In 2008, 658 min-smaller company), this will effectively halt the project; in the ing and exploration professionals responded to the survey,best case, it will increase the upfront capital cost of the project. which calculates the policy potential index and the current mineral potential index. The policy potential index measuresCultural and Social Issues the effects on mineral exploration of government policies,Laws relating to cultural and social issues may require pro- including uncertainty over the administration, interpretation,tection of archaeological or historic heritage sites, protection and enforcement of existing regulations; environmental regu-of cultural heritage sites, and control of traffic from material lations; regulatory duplication and inconsistencies; taxation;haulage or employee travel. They may also regulate the con- native land claims and protected areas; infrastructure; socio-struction of employee housing; specify the steps to be taken economic agreements; political stability; labor issues; geolog-when local residents are relocated to accommodate mining ical database; and security.operations; and prescribe compensation for property, water, The current mineral potential index is based on whethersubsidence, and access rights. Some local jurisdictions may or not a jurisdiction’s mineral potential under the current pol-require or request a mining company to make investment in icy environment encourages or discourages exploration. Therelocal infrastructure as part of a mine development program. is considerable overlap with the policy potential index, prob- Cultural and social issues are difficult to quantify, and ably because good policy will encourage exploration, which inlaws regarding them can be subject to widely varying inter- turn will increase the known mineral potential.pretations. Organizations opposed to a mining project often These indices provide a useful assessment of the risksuse these issues as the basis for objecting to the project, even associated with mineral exploration in the areas includedafter the required permits have been issued. in the survey: 7 states in Australia, 12 provinces in Canada, 14 states in the United States, and in 34 other countries. TheMining Law in a Global Business Climate Fraser Institute survey also includes comments made byIt is often said that “gold is where you find it.” Mining compa- respondents, which provide valuable insights based on theirnies have historically operated in diverse global locations, and experiences. Because some of these comments illustrate howthat is still the case. Companies must be prepared to conduct the legal and regulatory climate in a country can affect explo-exploration, development, and production almost anywhere ration projects, they are reproduced here to emphasize thosein the world. Although the technical requirements for these effects. Because this handbook will be a reference for manyactivities will differ in various locations, much greater differ- years, and because political conditions in many locations canences will be found in the legal, political, and cultural require- change unexpectedly, the names of countries and politicalments. Thus, it is important for a company to have employees leaders are not given.
306 SME Mining Engineering Handbook In [location A], title and laws mean nothing. The Clifford, L. 2007. Reflections on the global mining industry. law is what [the government] says it is at any given CCI/CME Corporate Business Lunch, Perth, March 9. time—and [the government] is an amorphous politi- w w w. r i o t i n t o . c o m / d o c u m e n t s / R L C _ P e r t h _ C C I cal party. After spending $10 million on exploration -CME_9Mar07speech__Final.pdf. Accessed January in [location A] we were stonewalled by [the govern- 2010. ment] for four years as a means to deny us the final Danielson, V., and Whyte, J. 1997. Bre-X: Gold Today, Gone production permit. Tomorrow—Anatomy of the Busang Swindle. Toronto, —Exploration company, company president ON: Northern Miner. Danilkewich, H., Mann, T., and Wahl, G. 2002. Preparing a [Location B] is actively seeking independence and feasibility study request for proposal in the 21st century. looking towards minerals and petroleum to fund the SME Preprint No. 02-101. Littleton, CO: SME. country. Emmons, D.L., and Coyle, R.D. 1988. Echo Bay details explo- —Exploration company, manager ration activities at its Cove gold deposit in Nevada. Min. Eng. 40(8):791–794. In [location C], the landowners status is entrenched Field, P. 2003. Modern Risk Management: A History. London: in law; therefore, tenure is secure, with the…gov- Haymarket House. ernment responsible for allocating royalties to their Gavelan, Z., and Dessureault, S. 2004. Probabilistic approach citizens. The government can choose to participate to project-specific political risk analysis for mineral proj- in a mining venture but, they purchase their position ects. SME Preprint No. 04-157. Littleton, CO: SME. at fair market value and, only BEFORE, the project Gleason, W.M. 2007. The 2000s—SME increases Internet becomes revenue producing, operating mine. presence. Min. Eng. 59(2):47–49. —Producer company with less than Globe and Mail. 1993. Canadian corporate reports Amax US$50 million revenue, corporate secretary Gold. October 20. Globe and Mail. 1995. Great Lakes Minerals braces for writeoff In [location D], if you build it, [the president] will $35-million invested in Idaho mine. November 15. steal it. [Location E] is a close second for similar Globe and Mail. 1997. Corporate earnings Echo Bay Mines. reasons along with tribal claims. February 13. p. B21. —Producer company, company vice-president Gooding, K. 1990. Reverse drilling blamed in faulty ore assessment: Unearthing the mystery of the vanishing gold. [Location F] introduces without discussion [and] Financial Times of London. March 5. Section 1, p. 10. unilaterally a royalty on an industry weeks away Guarnera, B.J. 1997. Technical flaws in bankable documents. from opening a diamond mine after capital expendi- In Assaying and Reporting Standards Conference, AIC ture of $1 billion. Conferences, Singapore, November 10–11. www.dolbear —Exploration company, company president .com/Publications/PubBankable.htm. Accessed January 2010.REFERENCES Gypton, C. 2002. How have we done? Feasibility performanceAnon. 1871. Mr. Schenck and the Emma. Eng. Min. J. XII since 1980. Eng. Min. J. 203(1):ww41–ww46. (December 12). Haddon, T.J. 1992. Gold mining from the perspective of aAnon. 1992. Go-ahead for Grouse Creek, Idaho. Min. Mag. chief executive officer. Min. Eng. 44(8):987–990. (November). Hajdasinski, M.M. 2000. Internal rate of return (IRR)—AAusIMM (Australasian Institute of Mining and Metallurgy). flawed and dysfunctional project-evaluation criterion. 1989. Australasian Code for Reporting of Identified Min. Eng. 52(8):49–56. Mineral Resources and Ore Reserves. Parkville, VIC: Hebblewhite, B. 2009. Mine safety–Through appropriate AusIMM. combination of technology and management practice.Bagnell, P. 1998. Repeated writedowns put Echo Bay into the Procedia Earth Planet. Sci. 1:13–19. red. The Financial Post. February 18, Section 1, p. 9. Hopkins, A., 2000. A Culture of denial: Sociological simi-Bertisen, J., and Davis, G. 2007. Bias and error in mine proj- larities between the Moura and Gretley mine disasters. ect capital cost estimation. SME Preprint No. 07-082. J. Occup. Health Saf. Aust. N.Z. 16(1):29–36. Littleton, CO: SME. HSE (Health and Safety Executive). 2009. A Guide to HealthBourassa, M., Champigny, N., Felderhof, S., and Vaughan, S., and Safety Regulation in Great Britain. Caerphilly, Great eds. 2003. Reporting Mineral Resources and Reserves. Britain: HSE Information Services. www.hse.gov.uk/ Littleton, CO: SME. pubns/web42.pdf. Accessed January 2010.Breslin, J.A. 2010. A century of mining safety and health Iannacchione, A.T., Esterhuizen, G.S., and Tadolini, S.C. research. Min. Eng. 62(1):33–39. 2007. Using major hazard risk assessment to appraiseCaterpillar, 2010. BuildandQuote.cat.com. http://buildandquote and manage escapeway instability issues: A case study. .cat.com. Accessed February 2010. In Proceedings of the 26th International ConferenceCawood, F.T. 2004. Towards a mineral property valuation on Ground Control in Mining, July 31–August 2, code: Considerations for South Africa. J. S. Afr. Inst. Min. Morgantown, WV. Edited by S.S. Peng, C. Mark, Metall. 106(1):35–43. G. Finfinger, S. Tadolini, A.S. Khair, K. Heasley, andClevenger, B.W. 1998. Does the capital budgeting pro- Y. Luo. Morgantown, WV: West Virginia University. cess inhibit corporate competitiveness? Min. Eng. pp. 354–360. 50(12):57–64.
Mine Economics, Management, and Law 307InfoMine. 2010. CostMine Mining Intelligence and Technology. QMC (Queensland Mining Council). 1999. Safety and Health http://costs.infomine.com. Accessed February 2010. Management for Queensland Mines and Quarries:ISO (International Organization for Standardization). 2010. Information Paper. Brisbane, Australia: Queensland Management Standards. www.iso.org/iso/iso_catalogue/ Department of Mines and Energy. management_standards.htm. Accessed February 2010. Reference for Business. 2010. Reactive vs. proactive change.Jackson, W.T. 1955. The infamous Emma mine: A British In Encyclopedia of Business, 2nd ed. www.referencefor interest in the Little Cottonwood District, Utah Territory. business.com/management/Pr-Sa/Reactive-vs-Proactive Ut. Hist. Q. 23(4):339–362. -Change.html#ixzz0emG1J5Qw. Accessed January 2010.Joy, J., and Griffiths, D. 2007. National Minerals Industry Rickard, T.A. 1932. A History of American Mining. New York, Safety and Health Risk Assessment Guideline. Version London: McGraw-Hill. p. 190. No. 7. Queensland, Australia: Minerals Industry Rio Tinto. 2009. The Way We Work—Our Global Code of Safety and Health Centre (MISHC), University of Business Conduct. www.riotinto.com.br/documents/ Queensland. www.mishc.uq.edu.au/Files_for_download/ ReportsPublications/The_way_we_work_2009.pdf. NMISHRAG/NMISHRAG_v6.pdf. Accessed January Accessed January 2010. 2010. Schwab, F., Mehrtens, M.B., and Cook, D.R. 1994. Gold min-Kral, S. 2003. Experts discuss reserves reporting at SME ing due diligence. Min. Mag. February. meeting. Min. Eng. 55(1):23–26. SEC (U.S. Securities and Exchange Commission). 2007.Lawrence, M.J. 2000. DCF/NPV modelling: Valuation prac- Industry Guide 7: Description of Property by Issuers tice or financial engineering? SME Preprint No. 00-58. Engaged or To Be Engaged in Significant Mining Littleton, CO: SME. Operations. Washington, DC: SEC.Matthews, A.A. 1974. The management of risk. In Proceedings, SME (Society for Mining, Metallurgy, and Exploration). 1998. Rapid Excavation and Tunneling Conference, San Open forum―General discussion. In Plant Operators’ Francisco, CA, June 24–27. Edited by H.C. Pattison and Forum 1998. Littleton, CO: SME. pp. 157–158. E. D’Appolonia. New York: SME-AIME. pp. 1167–1176. SME (Society for Mining, Metallurgy, and Exploration).McMahon, F., and Cervantes, M. 2009. Fraser Institute Annual 2007. The SME Guide for Reporting Exploration Survey of Mining Companies 2008/2009. Vancouver, BC: Results, Mineral Resources, and Mineral Reserves. The Fraser Institute. www.fraserinstitute.org/commerce Littleton, CO: SME. www.smenet.org/resourcesAnd .web/product_files/MiningSurvey20082009_Cdn.pdf. Reserves/Sme_Guide_for_Reporting_Exploration Accessed January 2010. _Results_2007.pdf. Accessed February 2010.MIRMgate (Minerals Industry Risk Management Gateway). Torries, T.F. 1998. NPV or IRR? Why not both? Min. Eng. 2010. www.mirmgate.com. Accessed January 2010. 50(10):69–73.National Post Canada. 2002. Echo Bay loss increases, pro- U.S. Department of Justice. 2004. Anti-Bribery and Books duction falls: Shares rise on forecast. July 31. National and Records Provisions of the Foreign Corrupt Practices Edition, p. FP8. Act. www.justice.gov/criminal/fraud/docs/statute.html.Northcote, A.E.A. 2007. Managing the Project Risk. Presented Accessed February 2010. at Project Evaluation Conference, Melbourne, Victoria, Vancas, M.F. 2003. Feasibility studied: Just how good are June 19–20. Carlton South, VIC: Australasian Institute of they? In Hydrometallurgy 2003: Fifth International Mining and Metallurgy. pp. 223–227. Conference in Honor of Professor Ian Ritchie. Volume 2:NSWDPI (New South Wales Department of Primary Electrometallurgy and Environmental Hydrometallurgy. Industries). 1997. Risk Management Handbook for the Edited by C.A. Young, A.M. Alfantazi, C.G. Anderson, Mining Industry: How to Conduct a Risk Assessment of D.B. Dreisinger, B. Harris, and A. James. Warrendale, Mine Operations and Equipment and How to Manage the PA: TMS. pp. 1407–1413. Risk. Hunter, NSW: NSWDPI. Western Australia. 1994. Mines Safety and InspectionPopovich, L. 2010. Mine safety―The best is yet to come. Act 1994. Perth, WA: State Law Publisher. www Coal Age 115(1):10. .slp.wa.gov.au/pco/prod/FileStore.nsf/Documents/QDME (Queensland Department of Mines and Energy). MRDocument:6840P/$FILE/MineSftyAndInspection 1998. Recognised Standard for Mine Safety Management Act1994_00-00-00.pdf?OpenElement. Accessed January Systems. Brisbane, Australia: QDME, Safety and Health 2010. Division, Coal Operations Branch. Zanolli, S.W. 1972. Labor relations―How it works in the bitu- minous coal mining industry. Min. Eng. 24(12):34–39.