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2
SLT Europe 2008 & 2009
`Minerals: Who Needs Them, Who Supplies Them and How
Much is There?'
Dr. David Roberts
Biography
* Dr. Roberts discovered his interest in Geology in school where he had an opportunity to study it from
school certificates and I then he went on to complete his B.Sc and Ph.D at university.
* In September 1991 Dr. Roberts was appointed Head of Geology at Staffordshire University with the
brief to develop Applied Geology courses. During his period at Staffordshire he led the development of
BSc.degree courses in Applied Geology, Environmental Geology, Geology, Earth Sciences, Geology
with Mountain Leadership, Geology with Industrial Practice (this included an additional year spent in
industry or consultancy).
* Dr. Roberts personal achievements include the following:
­ President of the Northwest branch of the Institue of Mining and Metallurgy (subsequently
merged to form the Institue of Materials Minerals and Mining).
­ Chairman of the North Staffordshire Group of the Geologists Association
­ Treasurer and member of the Executive Committee of the Committee of Heads of University
Geoscience Departments (CHUGD).
­ Member of the working group on Accreditation of UK geology degree course by the
Geological Society.
­ Interviewer of applicants for Chartered Geologist (Geological Society) and for Chartered
Engineer and Corporate Membership (IMMM).
­ Invited speaker to conferences of the Earth Science Teachers Association.
­ Member of the Organising committee for the bi-annual Extractive Industries Geology
conference
­ Invited to meetings of the Department of Trade and Industry Foresight Group on Minerals in
the UK
­ Invited member of the Staffordshire County Council Minerals Planning consultative group.
­ Addressed the UK Parliament's All Party Parliamentary Group for Earth Sciences and
regularly invited to attend its meetings.
* Since leaving Staffordshire University, August 2006 Dr. Roberts has been invited to serve on the
Geological Society's Fellowship and Validation Panel. Dr. Roberts retained interest in the Geological
Society and in the IMMM as well as taking up an interest in the Earth Science Education Forum.
* Dr. David Roberts is currently the Lecturer for EAGE's European Student Lecture Tour for 2008 &
2009 and will be covering `Minerals: Who Needs Them, Who Supplies Them and How Much Is
There?'
3
MINERALS: WHO NEEDS THEM?
or
The Demand for Minerals and Metals
The use we make of minerals is as old as the
human race. It is what separates us from the
ants and the apes. Modern society would not
exist without them.
A Few Basic Facts
* If it can't be grown, it has to be mined.
* Mining and Quarrying, along with Agriculture, Forestry and
Fishing, are the PRIMARY wealth generators.
4
ˇ The value of minerals is how their use can improve our lives: this
is true despite the views of those who think they should be left in
the ground for one descendents or to gratify people's intellect.
A Few Basic Facts
* Minerals can only be extracted from those locations where nature
has concentrated them.
* All countries have systems of mineral disposal permitting in
order to control mineral extraction and these are governed by the
Laws of each country.
A Few Basic Facts
5
Less
developed
countries
Newly
developed
countries
Industrialised
countries
Industrial
Minerals
Ore Minerals
Value of
minerals
extracted
Relative importance of industrial and ore mineral
exploitation in evolving economies
* Despite the prophets of gloom (such as the Club of Rome 1972)
we have not run out of any mineral commodity yet. In fact
mineral reserves are higher now than they were when the Club
of Rome made its predictions.
A Few Basic Facts
6
Some Predictions of the Club of Rome
(1972)
* Gold would have been depleted about 1980
* Tin would have been exhausted in 1989
* Lead and Zinc would have been exhausted in the 1990s
* We have just used our last bit of Copper
* We are about to use our last drop of Oil
* Most mineral deposits would have been exhausted by now
* We have not run out of anything yet
* Reserves of Copper, for example, at the end of the twentieth
century are greater than they were at the beginning
FACTS
Conceptual Errors by the Club of Rome
* They regarded mineral reserves as static but projected increase
in consumption commensurate with an exponentially increasing
population.
* They ignored the skills of the geologist to discover and define
more mineral reserves and the ability of engineers to extract and
process leaner deposits and to make use of different materials.
7
Some Major Mines Discovered Between 1975 and 1996
* Olympic Dam, Australia (1975) ­ Uranium,
* Athabasca Province, Canada (1975) ­ Uranium
* Fazenda Braziliera, Brazil (1976) ­ Gold
* Salobo, Brazil (1977) ­ Gold
* Neves-Corvo, Portugal (1977) ­ Lead, Zinc, Copper, Tin
* Rampura Agucha, India (1977) ­ Zinc, Lead, Silver
* Navan, Ireland (Production 1977) ­ Lead and Zinc
* Gold Quarry, Nevada,USA (1979) ­ Gold
* Porega, PNG (1979) ­ Gold
* Red Dog, Alaska (1980)­ Zinc
* La Escondida, Chile (198I) ­ Copper
* Hemlo, Canada (1981) ­ Gold
* Goldstrike, Nevada, USA (1982) ­ Gold
* Lihir (Ladolam), PNG (1983) ­ Gold
* Hilton North, Australia (1985) ­ Zinc, Lead, silver
* Candelaria, Chile (1987) ­ Copper
* Grasberg, Indonesia (1988) ­ Copper, Gold
* Century, N. Queensland, Australia (1990) ­ Zinc
* Radomiro-Tomic, Chile (1990) ­ Copper
* Collahuasi, Chile (1991) ­ Copper
* Mansa, Chile (1991)­ Copper
* Batua Hijau, Indonesia (1991) ­ Copper, Gold
* Voisey's Bay, Labrador, Canada (1993) ­ Nickel
* Spense, Chile (1996) ­ Copper
* Galmoy/ Lisheen, Ireland (Production 1997) ­ Lead and
Zinc
Criteria for Inclusion
ˇMust be a "world class
deposit"
ˇMinimum 3mt contained
metal for copper.
ˇMinimum 6mt contained
metal for zinc (except Navan
and Lisheen)
ˇMinimum 10 m contained
ounces (311 tonnes) for gold
* Many of the materials we use today were not used to any
significant degree at the start of the 20th Century and some of
these are common elements such as Aluminium and Titanium
not to mention plastics derived from petroleum.
* As an example 40 different elements are used in a standard
telephone hand set.
A Few Basic Facts
8
Elements in the Telephone Handset
* Aluminium Alloy in dial mechanism etc.
* Antimony Alloy in dial mechanism
* Arsenic Alloy in dial mechanism
* Berylium Alloy in dial mechanism
* Bismuth Alloy in dial mechanism
* Boron Touch-tone dial mechanism
* Cadmium Colour in yellow plastic
* Calcium In lubricant for moving parts
* Chlorine Wire insulation
* Chromium Plating; stainless steel; colour
* Cobalt Magnetic material in receiver
* Copper Wire; plating; brass parts
* Fluorine Plastic piece parts
* Germanium Transistors in touch-tone dial
mechanism
* Gold Electrical contacts
* Hydrogen Plastic housing: wire
insulation
* Indium Touch-tone dial mechanism
* Iron Steel; magnetic materials
* Krypton Ringer in Touch-tone set
* Lead Solder in connections
* Lithium In lubricant for moving parts
* Magnesium Die castings in transmitter:
ringer
* Manganese Steel in piece parts
* Molybdenum Magnet in receiver
* Nickel Magnet in receiver; Stainless
steel
* Nitrogen Hardened heat-treated piece
parts
* Oxygen Plastic housing: Wire
insulation
* Palladium Electrical contacts
* Phosphorus Steel in piece parts
* Platinum Electrical contacts
* Silicon Touch-tone dial mechanism
* Silver Plating
* Sodium In lubricant for moving parts
* Sulphur Steel in body parts
* Tantalum Integrated circuits in trim-line
set
* Tin Solder; plating
* Titanium Colour in white plastic
* Tungsten Lights and key sets
* Vanadium Receiver
* Zinc Brass; die casting in
transmitter; ringer
Courtesy of Dr Bob Little
How Much Do We Use?
* UK consumption of minerals is about 626mt.
* About 10 tonnes per resident of the UK made up of;
* Energy Minerals 245 million t
* Industrial Minerals & Metals 110 million t
* Aggregates 271 million t
­ Primary Aggregates 204mt made up of:
* 34% Land won Sand and Gravel
* 6% Marine dredged Sand and Gravel
* 60 % Crushed Rock
­ Supplemented by 64mt of secondary and recycled aggregates
and 3mt imported.)
(Source: British Geological Survey)
http://www.bgs.ac.uk/mineralsuk/statistics/
9
Value of Minerals to the UK
* Minerals as dug contribute about 25 billion (about 3%) of the
UK GDP. (GVA)
* Downstream activities contribute a further 100 billion (11%) of
the UK GDP (GVA).
* The GVA per employee in the non-energy mineral extractive
industry in 2001 was 54,483: manufacturing as a whole was
36,587.
(Source:BGS)
What About Future Need?
A new-born infant will need a life-time supply of:
* 365Kg of Lead
* 345 Kg of Zinc
* 680 Kg of Copper
* 1633 Kg of Aluminium
* 15 tonnes of Iron
* 12 tonnes of Clay
* 13 tonnes of Salt
* 560 tonnes of Stone, Sand, Gravel and Cement
Plus a lot of the high tech elements as he/she grows up
Plus a source of energy: Could it be Nuclear Power?
10
Global Uranium Production 2005
Australia, 23%
Kazakhstan, 10%
Russia, 8%
Niger, 7%
Namibia, 7%
Uzbekistan, 6%
USA, 3%
Canada, 28%
Others, 2%
South Africa, 2%
China, 2%
Ukraine, 2%
What is driving the industry?
The Global Minerals Industry is driven by the demand created by
society: the more we want, the more it has to produce or we will
complain.
What is the European contribution to mineral supply?
11
Significant European Mineral Production
7%Talc
20%Mica (Flake)Finland
3%Kaolinite
3%Feldspar
2%DiatomiteCzech Republic
4%MagnesiteAustria
% Global ProductionMineralCountry
Significant European Mineral Production
4%Feldspar
4%Gypsum
3%Mica (Flake)
10%Nickel (New Caledonia)
3.5%Silicon
3%Salt
2.5%Pumice
4%Diatomite
3%Cobalt (New Caledonia)
1.5%ArsenicFrance
% Global ProductionMineralCountry
12
Significant European Mineral Production
1.5%Gypsum
7%Salt
5%Potash
10%Kaolinite
1%Feldspar
2.5%Diatomite
1%BariteGermany
% Global ProductionMineralCountry
Significant European Mineral Production
1%Gypsum
25%Pumice
1%Sulphur
Also the leading producer of polished stone
2%SaltNetherlands
25%Feldspar
1%DiatomiteItaly
1%LeadIreland
3%Magnesite
1%NickelGreece
% Global ProductionMineralCountry
13
Significant European Mineral Production
1%Gypsum
1%Lead
2%Salt
6.5%Silver
2%Sulphur
2%Feldspar
3%CopperPoland
3%Silicon
7%Flake Mica
7%IlmeniteNorway
% Global ProductionMineralCountry
Significant European Mineral Production
6%KaoliniteUK
1.3%IronSweden
3%Salt
2%Gypsum
2%Lead
2%MagnesiteSlovakia
1%SaltRomania
1%TungstenPortugal
% Global ProductionMineralCountry
14
Significant European Mineral Production
3%Magnesite
10%Gypsum
3%Fluorspar
3%Pumice
33%Strontium
1%Silicon
1%Salt
1.5%Potash
3.5%Feldspar
1.5%DiatomiteSpain
% Global ProductionMineralCountry
Significant European Mineral Production
5%Vermiculite7%Magnesite
27%Vanadium9%Lithium
4%Tungsten6%Iron
1.6%Tin1.5%Gypsum
10%Sulphur4%Fluorspar
10%Silicon4%Diatomite
1%Salt34.5%Gem Diamonds
12%Potash20%Industrial Diamonds
7%Phosphate Rock5%Copper
41%Palladium7.5%Cobalt
12%Platinum6%Cadmium
20%Nickel3.5%Bauxite
1%Molybdenum4.5%Asbestos
30%Sheet Mica2.5%Arsenic
30%Flake Mica3%AntimonyRussia
% Global ProductionMineral% Global ProductionMineralCountry
15
65
0
1860 1930 1980 C21
Predominance
of Europe
Predominance
of USA
Predominance
of CIS
Line of Decreasing ConcentrationEurope
USA
CIS China
Aust, Canada
& SA
Brazil, Chile, Peru, Zambia, Zaire
Historic and projected
development of global mining
as perceived in the 1970s
Time of assumptions
%ofglobal
mining
CHINA
* "The demand for metals and minerals from emerging industrial
giants, China and India, continues to drive the world economy."
(Pat Leahy, Director, U.S.G.S. 24th Jan.2006)
* "Strong demand from China continued to drive up the prices for
metals and some industrial minerals and has led to increased
production of some commodities." (U.S.G.S.
Annual Report, Mineral Commodity Summaries 2006)
http://minerals.usgs.gov/minerals/pubs/mcs/
16
ˇ China is the world's leading producer of some 25 different metals
and minerals and closely follows the leading producer for another
6 mineral commodities.
* Most Chinese mineral production is consumed internally and
exports are in the form of manufactured goods.
CHINA
CHINA ­ Aluminium
26%14,000,00032%12,000,000Primary
Aluminium
% of Global
Capacity
Capacity
2007 (t)
% of Global
Production
Production
2007 (t)
Main Bauxite producers were Australia (34%), Brazil (13%),
Jamaica (7%) and Guinea (7%) but in 2007 China produced 32
million tonnes of Bauxite (17% of global total) though its reserve
base is not high as yet.
17
CHINA ­ Iron
38%419,000,000Pig Iron
30%600,000,000Iron Ore
37%482,000,000Raw Steel
% of Global
Production
Production 2007 (t)
Major iron ore producers
* Brazil ­ 360,000,000 (19%)
* Australia ­ 320,000,000 (17%)
* India ­ 160,000,000 (9%)
* Russia-110mt (6%)
19%92,000,00028%2,800,000Zinc
32%12,000,00039%RSA 23,500
36%14,000,00032%China 18,500
Vanadium
70%4,200,00087%77,000Tungsten
Not available50%30,000Arsenic
69%470,00053%3,000Bismuth
56%2,400,00082%110,000Antimony
25%280,000,00017%3,400,000Cadmium
30%3,500,00043%130,000Tin
Virtually unlimited82%550,000Magnesium Metal
Not known73%1100Mercury
21%36,000,00037%1,320,000Lead
44%8,300,00025%46,000Molybdenum
% of Global
Reserves
Chinese Reserves
(tonnes)
% of Global
Production
Production 2007
(tonnes)
CHINA ­ Metals
18
32%190,000Strontium
41%360,000,00055%4,400,000Barite
23%110,000,00052%2,750,000Fluorspar
59%
45%
700,000
455,000
Abrasives
Fused Al Oxide
Silicon Carbide
67%140,000,00070%720,000Graphite
V large globally61%170,000,000Lime (CaO)
24%860,000,00031%1,350,000Magnesite
V Large31%2,500,000Talc
26%13,000,000,00024%35,000,000Phosphates
% of Global
Reserves
Chinese Reserves
(tonnes)
% of Global
Production
Production 2007
(tonnes)
CHINA ­ Industrial Minerals
Leading producer of world production at 80 tonnesGallium
China 27%, second to Canada 29% of 87 tonnes, 2004Germanium
60%10,000t50%250tIndium
59%89,000,00097%120,000tRare Earth Elements
No figures available58%2,900,000Silicon
40%240,00098%8,800tYttrium
% of Global
Reserves
Chinese Reserves
(tonnes)
% of Global
Production
Production 2007
(tonnes)
CHINA ­ High Tech Elements
19
15%3000tMexico
2500t
9%240tUSA
17%3400tPeruSILVER
10%250tChina
20,500t
14%2700tChina
11%280tAustralia
11%270tRSAGOLD
Global Production% ProductionProduction 2007
China ­ Precious Metals
CHINA ­ Cement
* 1.3 Billion tonnes of cement produced in 2007, which is 50% of
global cement production.
* This is almost 1 tonne per person in China
* Globally, only India, with a production of 160 million tonnes, is
within a factor of 10 of Chinese production
20
Production of Cement
1 tonne of Cement requires the input of 1.5 tonnes of
calcium carbonate (CaCO3) plus a pozzalanic material such
as clay or shale.
The production of 1.3 billion tonnes of cement in
China therefore creates from the breakdown of
CaCO3 alone:
1.3  1.5 x 0.44 = 858mt of CO2
During processing:
CaCO3  CaO + CO2
For every tonne of CaCO3, 0.44 tonnes of CO2 is generated.
How does this compare with total CO2 emissions in Europe?
World
Rank
Nation Total k tonnes of CO2
Emissions as % of Chinese CaCO3
breakdown
3 Russia 1,524,993 178
6 Germany 808,767 94
8 United Kingdom 587,261 68
10 Italy 449,948 52
15 France 373,693 44
17 Spain 330,497 39
21 Poland 307,238 36
30 Netherlands 142,061 17
34 Czech Republic 116,991 14
36 Belgium 100,716 12
39 Greece 96,695 11
40 Romania 90,425 11
41 Norway 87,602 10
46 Austria 69,846 8
48 Finland 65,799 8
52 Portugal 58,906 7
53 Hungary 57,183 7
56 Sweden 53,033 6
57 Denmark 52,956 6
60 Bulgaria 42,558 5
61 Ireland 42,353 5
64 Switzerland 40,457 5
67 Slovakia 36,289 4
71 Azerbaijan 31,365 4
21
Total
Lignite
Sub-Bituminous
Bituminous Coal
Anthracite
USA
Total
Lignite
Bituminous Coal
Anthracite
China
76,430,00075,750,00077,620,000
2,380,000,0001,960,000,000999,169,800
200620042000
267,000,000220,000,000175,727,200
2,052,000,0001,690,000,000780,669,000
200620042000
61,000,00050,000,00042,773,600
1,374,0001,540,0004,148,000
512,189,000495,870,000520,974,000
463,669,000435,090,000371,223,000
1,053,662,0001,008,250,000973,965,000
CHINA ­ Coal
Source (BGS)
Global Coal Production 2005
Source (BGS)
China, 38
USA, 18
Other, 14
India, 7
Australia, 6
Russia, 5
South Africa, 4
Germany, 3 Indonesia, 2
Poland, 3
22
CHINA ­ Mineral/Metal Import Dependence
* Bauxite to produce primary Al
* Chromium
* Copper
* Nickel
* Platinum Group Metals
What About Sustainable Mineral
Development?
* "Meeting the needs of the present without compromising the
needs of future generations."
* "Converting natural capital into useable capital to the long term
benefit of the communities where the minerals occur."
* There has to be a balance between:
­ The needs of society and economic development
­ Community benefits
­ Environment protection
­ Government Responsibilities
23
A FEW PERTINANT QUESTIONS
* WHERE ARE WE GOING TO GET OUR FUTURE MINERAL
SUPPLY?
* WHAT WILL BE THE DOMINANT FUEL?
* HOW WELL WILL THE INDUSTRY BE REGULATED IN
OTHER COUNTRIES?
* WHERE IS THE BOUNDARY BETWEEN "DERELICTION"
AND "HERITAGE"?
* WILL THE EU HAVE ADEQUATE HUMAN RESOURCES FOR
THE MINERALS INDUSTRY?
24
MINERALS: WHO SUPPLIES THEM?
or
­ Investment in Mineral Properties:
­ The Risks and Rewards
Answers required from a coal-mining geologist
in regards to a proposed coal mine.
* Is it black?
* Will it burn?
* How much is there?
* Can we dig it? (Are there any
significant geological problems that
will affect extraction?)
* Can we sell it?
* Can we get planning consent?
* Will it make a profit?
Big Pit ­ South Wales
25
Funds for
exploration
Equity
Shares
Objective
Discovery of a mineral
deposit that can be
developed into a profitable
mine
Funding a mineral exploration company
Low Share Price
Equity is the total value of the treasury. All investors
are shareholders who will receive a good return if
successful but could lose everything if it fails.
Junior exploration companies are frequently listed on
Stock Exchanges that have many high-risk companies
listed. Vancouver SEX is well known exchange for
mining juniors. The AIM on the LSE is another place
for such listings.
26
Normally not much more than
options on exploration targets which
may or may not have undergone
some exploratory drilling. The legal
status of those properties is critical
as is an indication of the value of a
mineable discovery.
What is the collateral?
What is the risk?
Very High
Rarely does 1 target in 1000 (some claim 1 in 5000)
result in a producing mine. Even after it has been
drilled and several million dollars spent on the
work the chances of success are rarely better than 1
in 10.
27
ˇ Not many! Those that do are
risk taking individuals that
like a gamble and should be
able to afford a total loss of
investment. It is not for
widows and orphans!
* Will the Banks invest or
advance a loan?
* NO!! This is far too risky for
an investment bank.
Who will invest?
What should happen to the sums invested?
They should be used exclusively to test
the property for a viable deposit, to
define the resource that could be
developed into a profitable mine. At
the end, all the money has gone and
nothing of value has been discovered
or, as sometimes happens, a good
deposit has been defined.
28
Valuable
Discovery
Asset
High Share
Value of
Company
Very good return on
investment
No remaining
funds
Ideal outcome for a mineral
exploration company
* At this point the junior, which does not have the expertise
or capital to develop the property, seeks a partner in a mid
range or major company to mine the resource or sells the
property at a value much higher than when it was just an
exploration target.
* A value has to be placed on the deposit for acquisition
purposes and this is often carried out by independent
professionals who should undertake the valuation
according to an accepted code of practice. E.g.Valmin. At
this point the investors will see a very good return on their
investment but in this business there will always be more
losers than winners. More investment is required to
develop the mine and this could be raised partly by equity
and partly by loans. If a good and verifiable Feasibility
Study has been undertaken which indicates a good
property the banks may consider a loan.
29
Does this always happen? NO!!!
The property is sometimes used as a Stock Market vehicle
where the directors of the company publish unverifiable
favourable results to attract the greedy and unwary investor
who is looking for a quick return. This results in a rise in the
share price and those that invested low will sell and make a
profit. Mass selling results in a drop in share price and the
original investor can repurchase the same volume of shares
back and have cash to spare. Short trading is where an
individual sells his shares and then makes public unfavourable
remarks about the property to depress the share price at which
point he re-purchases his original share volume at a lower price
and makes money. This is all legal.
Investors beware!
Poseidon Nickel
Western Australia 1969 at the height of the Nickel Exploration
boom.
The price of Nickel was at an all time high
There was a four months miners' strike in the major nickel mining
area of Sudbury, Ontario
Komatiite hosted Nickel deposits had just been identified in the gold
mining area of Kalgoorlie
A prospector, Ken Shirley, who had been looking for gold in the
remote Mt. Windarra area 400 Km north of Kalgoorlie discovered a
nickel rich gossan and he sold options for the claim to Poseidon for
A $500 and became an employee of the company.
Then it all happened..............................................
30
Poseidon Nickel Share Price
24/9/69
2nd hole hits Ni/Cu
Sulphide at shallow
depths
01/10/69
Public announcement
3.65% Nickel
Sept  Dec 1969
4 month strike at
INCO
Ni price $8/lb
13/02/70
Peak share price
AUS$278
Mid 1970
Decision to develop
Mt Windarra
End 1970
Recession in USA and world glut
of Ni - price dropped to
US$1.3/lb. Share price less than
AUS$10
1969 1970
Poseidon Bust ­ Aftermath
Trevor Sykes in The Money Miners says:
"One disturbing feature of the boom-time geological statements is
their misleading air of precision. Poseidon's statement of 3.56
percent nickel looked like a fine calculation to one-hundredth of one
percent. In fact, Poseidon had no basis on which to make such a
calculation at the time and the actual assay of the core turned out
to be substantially lower, although still of ore grade."
31
Poseidon Bust ­ Aftermath
In the early 1970s, the Melbourne Stock Exchange and the
Federal Government (Rae Commission) requested AMIC (now
the Minerals Council of Australia) to develop a code. AMIC
responded and AusIMM joined promptly, resulting in The Joint
Ore Reserves Commission (JORC).
The Code applies to Public Reports or Public Reporting, that is "a
report or reporting on Exploration Results, Mineral Resources or
Ore Reserves, prepared for the purpose of informing investors or
potential investors and their advisers."
So the JORC Code is a Code for Reporting for the benefit of
investors.
JORC
Sets minimum standards for public reporting (in Australia &
New Zealand) of Exploration Results, Mineral Resources and Ore
Reserves
Provides a mandatory system for classification of tonnage/grade
estimates according to geological confidence and
technical/economic considerations
Requires Public Reports to be based on work undertaken by a
Competent Person; describes the qualifications and type of
experience required to be a Competent Person
Provides extensive guidelines on the criteria to be considered
when preparing reports on Exploration Results, Mineral
Resources and Ore Reserves
32
Poseidon Bust ­ Aftermath
Since that date over 30 years work has been undertaken to establish
internationally recognised codes for the reporting of Mineral
Reserves and Resources.
These are not uniform due to differences in financial regulations in
different countries but each one is very clear in terms of its
definitions and requirements.
JORC is used in Australia,
the CIM system in Canada,
the SEM and the SEC have produced procedures for the USA
and in Europe the Pan- European Reserves and Resources Reporting
Committee (PERC) was formed in 2006 to take over from the
IMM which had developed its original code in 1991. The release of
the final version is expected to be in December 2008.
Busang
Bre-X Minerals
Gold discoveries and mines
33
0
5
10
15
20
25
30
30
25
20
15
10
5
Jan96
Jan95
Bre-X Share Price 1995 - 1997
C$
10
The Chronology.
1993. Bre-X begins exploring at Busang
1995 (Oct) Bre-x claimed that Busang could
contain more than 30m oz. of gold.
1996 (Feb) Indonesian Ministry says that Bre-X
has found about 40m oz. of gold.
(April) Shares listed in Toronto
(July) Bre-X lifts estimate to 47m oz. gold
(Aug) Shares begin trading on Nasdaq
(Sept) Bre-x announces search for a major
mining partner.
(Oct-Dec) Negotiations between Bre-X,
international mining companies, local partners
and Indonesian Government.
Jan97
$286.5 at peak
0
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10
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20
25
30
30
25
20
15
10
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Jan96
Jan95
Bre-X Share Price 1995 - 1997
C$
10
The Chronology Continued 1997 .
(16th Feb) Deal signed giving Bre-X 45%, Freeport
McMoRan Copper and Gold 15% and various Indonesian
interests 40%.
(17th Feb) Bre-X raises estimate to 71m oz.
(19th Feb) Head of Exploration, John Felderhof says
Busang could contain 200m oz. of gold.
(19th March) Senior Geologist Michael de Guzman falls to
his death from helicopter on his way to a meeting at
Busang with Freeport.
(21st March) Shares plummet after newspaper report that
Freeport's tests did not match Bre-X's findings.
(26th March) Strathcona Services hired for an
independent review of Busang.
(April 23rd) Shares jump after Bre-X says it has further
evidence of gold.
(4th May) Strathcona finds "tampering" with and
"falsification" of samples is "without precedent in the
history of mining".
Jan97
34
Strathcona Comments
* Only trace amounts of gold have been found in the samples
analysed and there were no samples that gave gold values of
economic interest.
* As a consequence, we believe there to be virtually no possibility
of an economic gold deposit in the south-east zone south of the
Busang property.
Ingredients of Mining Frauds
* The property has to be plausible geologically: i.e. associated with
other properties.
* It has to be remote so that inspection of the ground is difficult to
achieve.
* There has to be a fire that destroyed all drilling and other
records.
All three aspects were present at Busang
35
Aftermath of Bre-X
* Bre-X chairman, David Walsh (worth $1.5 billion on paper at the height of the
scam) described as a fast-talking, beer-swilling Calgary wheeler dealer died in
1998 of a brain aneurism.
* John Felderhof went to hide in The Cayman Islands with his millions (claimed by
some to be as much as $250m) acquired through insider trading: he sold a lot of
his shares when the price was high shortly before the crash. He applied for
citizenship. He was eventually extradited to Canada and prosecuted by the
Ontario Superior Court in 1999 but was acquitted in July 2007 because the
prosecution failed to prove that he had done so knowingly and with the intent to
deceive investors. He now lives in Indonesia.
* Freeport McMoRan is still a big mining company after a rather nasty shock with
Bre-X and currently runs the Grassberg Mine in PNG
* The real hero is the quiet Canadian Engineer with Strathcona who spotted the
fraud.
* Investors in Bre-X lost $6 Billion which was the maximum capitalisation of the
company.
The International Stock Exchanges and other investment bodies insisted that the
mining industry states its reserves and resources in a properly defined manner,
compliant with regulations and that reports must be draw up by competent and
qualified people.
RESERVES
RESOUCES
Feasibility of
economic
recovery
Increasing
"accessibility"
Degree of
geological
certainty
Mineral Resources and Reserves
36
ORE RESERVESORE RESERVESMINERAL RESOURCESMINERAL RESOURCES
Probable
Proved
Exploration Results
Inferred
Indicated
Measured
Increasing level of
geological
knowledge and
confidence
Consideration of mining, metallurgical, economic, marketing,
legal, environmental, social and governmental factors
(the "Modifying Factors").
General relationship between Exploration
Results, Mineral Resources & Ore Reserves
Reconnaissance
Prospecting
UN Classification of Resources and Reserves
G
eneralExploration
Detailed
Exploration
Feasibility Study
Pre- Feasibility Study
Geological Study
Intrinsically Economic
Potentially Economic
Economic
37
Income
Total Capital
Value of a
Company
Special
Project
Project Under
Consideration
Average
Project
Future Investment
Possibilities
Equity
Capital
Growth
Objective
Dividends
Bank
Loans
Investments
Costs
Costs
Income
Shares
Movement of Funds In a Major Mining Company
Consider a Mining Major.
* What is the level of Risk? All mining investments are high
risk but the majors are the lowest risk of all mining
ventures.
* What will happen to the investment? It will rise and fall
with the share value of the company: there may be shortterm
losses but in the long run there should be growth.
* What is the collateral? The total portfolio of the company.
38
What is of interest to investors?
* Long term increase in share value. NPV of the mineral
deposit is important
* Short term dividends. ROR on extracting the mineral is
important. Investors should understand the Dividend
Policy of the Company
Who will invest?
ˇFund Managers
ˇIndividuals
ˇCorporations
ˇInvestment Houses
Are there risks?
Yes!
Sometimes even the biggest and best run
companies can make mistakes and a few years
ago Anglo wrote off a $300 million investment in
a copper mine in Zambia when they discovered
that the operating costs would be too
high............But, the copper price was much
lower then.
39
How can this risk be reduced?
1. A full feasibility study must be undertaken
2. This should be followed by a full sensitivity analysis
3. There should also be an independent Due Diligence Study
4. There should also be in place factors of financial risk
management and possibly risk sharing
However, if the basic Geological Investigation has not been undertaken
in a completely thorough and professional manner, all of these studies
are, at the best, meaningless, and at the worst misleading, because they
add an air of security to an insecure situation. Errors in the Geology are
multiplied and their effect magnified through the other investigations
and their effects can be disastrous. In the end it all comes down to an as
accurate as possible estimate of the mineral and rock in the ground. In
this business investors are buying chunks of Geology and if they do not
understand that Geology thoroughly the investment is foolhardy.
40
MINERALS ­ HOW MUCH IS THERE?
An Outline of Mineral Reserve Estimation
or
Map of evaluation drilling on a potential brick clay site
41
Redox boundary
Cross Section of a Uranium Roll Front Deposit
8086081335
176642276
5985621067
255442583
560638884
215569388
442673662
5143351541
U3O8 (lb)U3O8 (%)Tons of Ore
Ratio of geologists estimates
to production results
Geologist
Production
Results
Tons of Ore ­ 9063
U3O8 - 0.26 %
42
Palabora
Mine
Location
Geology of the Palabora Igneous Complex -1
An alkaline intrusive cycle which emplaced in the Archaean
Shield of the Northern Transvaal in successive stages:
* Pyroxenite 6.5km (N-S), 2.5km (E-W), approximately 1655ha.
* Small Syenite Plugs forcibly injected into Archaean Gneiss.
* Extended period of non-violent and partly metasomatic activity
to form irregular, vertical, ultrabasic pegmatoids at 3 centres in
the Pyroxenites.
* The Palabora mine developed in the central body (age 2060ma)
around the Loolekop Hill (80m).
43
Geology of the Palabora Igneous Complex -2
Loolekop Body (1.4km x 0.8km)
The ultrabasic core consists of:
* Phoscorite (Foskorite) ­ an olivine apatite rock with magnetite and
Phlogopite ­ (K,H)3Mg3Al(SiO4)3. In the weathered zone Pholgopite
has altered to Hydrophlogopite and Vermiculite.
* Banded Carbonatite: Magnesium Calcite, Magnetite, and Apatite
* Transgresive Carbonatite forced into the shattered core of the
banded Carbonatite.
* These are the host rocks to the copper sulphides Apatite,
Titaniferous Magnetite plus Uranothorianite [(Th,U)O2], and
Baddeleyite (ZnO2).
Map of Loolekop Body
44
Geology of the Palabora Igneous Complex -3
Loolekop Body (1.4km x 0.8km)
Occurrence of Metals:
* Copper bearing mineralising fluids migrated along fractures within
the Carbonatites and deposited copper sulphides in several cycles.
* First cycle pre-dates the younger Carbonatite and is mainly Bornite.
* Second phase was Chalcopyrite in veinlets up to 1cm wide and less
than one meter in length: these occur in zones up to 10m wide.
* Valleriite [CuFeS2] 1.57-1.70 [Mg,Al,Fe(OH)2] occurs in a broad shear
zone crossing the body. It is a highly variable late stage mineral that
occurs as replacement intergrowths and coatings along grain
boundaries, cracks, and cleavage planes in the other copper sulphides
and in the gangue minerals.
Geology of the Palabora Igneous Complex -4
Loolekop Body (1.4km x 0.8km)
The Valleriite Problem:
* It is a platy mineral of hardness 1 and smears easily, thus causing
problems in processing.
* Recovery of Valleriite is only 20% whereas that of other copper
minerals is 90%.
* Hence, a mineralogical study is vital to determine the proportion of
Valleriite and its distribution: an assay alone will not give this alone
and the Valleriite content will affect the amount of recovered copper
and hence the economics of the mine.
45
Geology of the Palabora Igneous Complex -5
Loolekop Body (1.4km x 0.8km)
* There is a marked lateral zoning within the Loolekop pipe with
copper minerals, Uranothorianite and carbonates increasing towards
the centre and Apatite, Zirconium, Magnetite and Titanium in
Magnetite increasing outwards.
* There is no change in this pattern to depths as much as a 1000m.
Information Required for the Resource
Assessment
The basic estimate was to be made primarily on the copper content since this
was the metal of main interest and the economics of the mine were essentially
dependent on copper.
* Total tonnage of ore and waste with corresponding Cu grade
* How much ore would contain +5% P2O5.
* How much ore would contain +2% TiO2 in Magnetite.
* How much ore would contain 1.0-1.99% TiO2 in Magnetite.
* How much ore would contain 0-0.99% TiO2 in Magnetite.
Metallurgists needed to know the expected production of high and low
phosphate ore and waste and annual high and low Titanium Magnetite from
the copper ore in order to design the processing plants.
46
Information Required for the Resource
Assessment
A full assessment would also have information on the following:
* The distribution, grade variation and average grade of
Uranothorianite
* The distribution, grade variation and average grade of Baddeleyite
* The distribution and quality of the Vermiculite and Phlogopite
* The amount of Phoscorite that would be recovered as part of the
mining operation because a neighbouring Phoscorite processing plant
would except the material. This ceased to be waste rock but part of
the mineral inventory of the mine.
Assessment Investigations -1
* An enormous exploration developed in the 1950s following the
discovery Uranothorianite. This initially involved the geological
mapping, trenching, and some surface drilling to gain an overall
appraisal of the geology of the deposit.
* Between June 1957 and Feb 1962 111 holes were drilled, totalling
over 41,000m and sampled at 1.5m lengths giving over 27,000
samples for analysis. Surface holes were drilled at 75m intervals and
inclined at 45°.
* A exploratory shaft was sunk, tunnels driven into the body and
mapped and in addition 7,000m of horizontal drilling took place of
which some 1,500m of material was sampled.
* Bulk sampling from the 400 level was also undertaken.
47
Assessment Investigations -2
* Geologists produced manually 13 sections and projected the data
onto bench plans for the proposed mine.
* The volume of data became far too great to handle in this manner
and pioneering computer programmes were written to produce the
estimates and plans for the proposed mine.
* On the basis of all this data an open pit mine was proposed with
surface dimensions of 1500m x 900m and to an initial depth of 360m
though eventually the pit extended to a depth of 822m.
* An initial estimate gave 315Mt of ore averaging 0.69% Cu with a
cut-off at 0.3% Cu.
* These design parameters were based on the geology, geotechnics,
mining methods, mineral processing and economics.
ˇIt took a team of Geologists and Engineers over 5 years to carry out
this work
Ore Reserve Blocks on Section 750 East
48
Geology of the 400 ft. Level
Ore Reserve Blocks on 400ft Level
49
Environmental: the degree of significance is dependent on locality
1. Competition for land use: e.g.Farming
2. Conservation
3. Pollution
4. Environmental Impact of the operation.
Economic: In addition to all costs associated with exploitation
1. Government Regulations:- Taxes and/or subsidies
2. Location and availability of transport infrastructure
3. Land costs
4. Availability of water, power,skilled labour etc.
5. Economic forecasts for the mineral/metal
6. Price (Stability) and Market (no market = no ore body)
Non technical factors to be evaluated before a mineral
resource can be considered as a mineral reserve.
Aerial View ­ Palabora Mine
50
Aerial View ­ Palabora Mine November 2004
The Current Approach to a Similar Estimate
* The basic geological investigations would still be required but the
data achieved would be handled completely in a highly sophisticated
computer model, such as Data Mine, Surpac, Gemcom or Techbase.
* These programmes require all data to be given x,y,z co-ordinates at
the outset in order for continuous 3D modelling to take place.
* Throughout sophisticated statistical analysis of the grade
distributions would be undertaken in order to help determine basic
statistical parameters for each element and these would be
superimposed on the geological model.
* The ore blocks would be assigned a mean grade achieved by a
geostatistical evaluation of the data and this in itself requires highly
sophisticated software.
51
Later Developments at Palabora
* The open pit ended in 2002 with exhaustion of reserves.
* Leading up to this inevitable scenario a strategy to extend the life of
the mine through the development of an underground mine had been
implemented. The sunk costs of this mine were $465M and a
projected life of 20 years.
* A reserve estimation (2004) indicated:
* Proven reserves ­ 225Mt at 0.7% Cu
* Probable reserves ­ 16Mt at 0.49% Cu
* A reserve estimation (2005) indicated:
* Proven and probable reserves ­ 112Mt at 0.56% Cu
* Rio Tinto recorded a $161M asset write down in its 2005 accounts to
reflect this.
3D Diagram of Block Caving
52
Some Concluding Points
* All calculations and subsequent evaluation is based on the
understanding of the geology. If the geological model is wrong all that
follows will be flawed. The basis of the geological model is good
mapping, thorough and accurate core logging, accurate and careful
sampling and an intelligent interpretation of the data.
* The mining engineer and the mineral processors require accurate
information from the geologists in order to undertake their work
accurately. In turn, all feasibility studies and economic assessment of
the project will rely on the combined information produced by this
multi-disciplinary professional team. It is on the basis of their results
that hundreds of millions of dollars are invested.
* All codes for the reporting of reserves and resources require the
people undertaking those estimates to be fully qualified and
competent persons.
Some Concluding Points
* All investment in mining is in fact investing in chunks of geology. If
the investor is not certain that the rock has been properly assessed by
competent people, then the investment is a foolhardy one. It is for
this reason that banks and other major investors require many checks
through due diligence studies before considering any investment in a
mineral deposit.
* Beware! There are many optimists and clever talkers with
exploration prospects and it is prudent to treat all promotional
literature on mineral projects with caution until a full feasibility
study and risk assessment have been undertaken.
* "A gold mine is a hole in the ground with a liar on the top"
(Mark Twain)
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