Page 277 - Introduction to Mineral Exploration

260 B. SCOTT & M.K.G. WHATELEY

closure. They encompass both human and bio- Of course not all these factors are under the
physical considerations and they must be fully direct control of a mining company wishing
integrated with engineering, financial and other to develop mineralisation into ore reserves.
aspects of a project. These reports also have to Changes in the way in which global business
consider the closure costs. Closure planning is operates, and the impact of ever more sophist-
now considered early in a mine life and is one icated and immediate means of communica-
of the factors that has a bearing on the value tions, have brought large mining companies
of the mineralisation. Decommissioning, reha- under increasing scrutiny by, and pressure
bilitation and sustainable development all from, a wide range of interests. The demand is
contribute to closure costs. for these companies to demonstrate, through
action, that they understand their responsibil-
ity towards the communities in which their
11.2.8 Government controls
businesses are or will be located. As a result,
Any potential mine will have to operate within issues that integrate economic activity with
a national mining law and a fiscal policy environmental integrity and social concerns
enforced by an inspectorate. Fiscal policy is have become central to the planning and man-
usually of prime importance for it decides agement of sustainable development good
items such as taxation of profits, import duties practice (MMSD 2002).
on equipment, and transfer of dividends and
capital abroad if foreign loans and investors are
involved. If this transfer cannot be guaranteed 11.3 CASH FLOW
then the value of the proposed mine, and the
mineralisation, will be considerably less (see The factors in section 11.2 can be expressed in
also section 1.5.3). terms of revenue and cost (income and expend-
iture) of a proposed mining operation. All rel-
11.2.9 Trade union policy evant items are brought together in an annual
summary which is referred to as a cash flow. In
It is a foolish investor who does not consult the any particular mineral project:
local trade unions before starting a new mining
project. Union disputes can stop a mine as
effectively as machinery breakdowns and con- Cash flow
tinual strikes and disputes over working prac- = cash into the project (revenue) minus cash
tices can make a mine unprofitable. In other leaving the project (cost)
words industrial disputes can change ore to
mineralized rock of no value. In some countries = (revenue) − (mining cost + ore beneficiation
trade unions are, in effect, a branch of the gov- costs + transport cost + sales cost + capital
ernment and if a contract is agreed between costs + interest payments + taxes)
host and developer this will include a trade
union agreement. Cash flow (Fig. 11.6 & Box 11.1) is calculated
on a yearly basis over either a 10-year period or
the expected life of the mine, whichever is the
11.2.10 Value of mineralisation – a summary
shorter. It is a financial model of all relevant
Mineralisation has value if a saleable product factors considered in section 11.2. It is the pro-
can be produced from it. “Value” is a financial cess by which the value of a tonne of mineral-
concept and is related to the several factors ized rock is calculated to determine whether
discussed above rather than to just grade and this tonnage is ore. Such mineralisation only
tonnage. The main factors which enhance the has value by virtue of its ability to produce a
value of mineralisation are an increase in series of annual positive cash flows (revenue
tonnage, grade, mineral recovery, product sales exceeding expenditure) over a term of years.
price, and political stability, together with Another way of expressing this is to say that
decreases in costs of mining, ore beneficiation, the value of a tonnage of mineralized rock is
transport to market, capital, and taxes. the value in today’s terms of all future annual