3/9/23, 5:35 PM Module 4: Development

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Module 4: Development
Module 4 Overview
Module 4 Overview

We have a deposit that we believe is economically viable. Through the exploration program, we’ve defined the size and quality of
the deposit. Are we ready to start excavating ore and collecting revenue for our hard work? Not quite! We still have a good
amount of work in front of us before we buy our first shovel.

A significant amount of capital must be available to open a mine. In many cases, this money must be raised from investors;
whereas, in other cases, the company will have its own capital to invest in the project. In either case, additional engineering
studies will be conducted to establish the feasibility of opening a mine. A company with its own capital will have many competing
projects for that money, and they will want to allocate it to the project that bests meets their criteria for a return on their capital.
Investors, on the other hand, will also want to understand the income potential of their investment. And in either scenario, both
will want to understand the risks associated with the project. Consequently, we will have to perform a prefeasibility study to
satisfy either potential investors or the company’s board of directors, that we have a deposit with good potential to provide a
return on the investment of their money.

In this module, we will focus on the decision criteria for determining whether or not we want to go forward and turn this deposit
into a profitable mining operation.

I should mention for completeness, that the development stage also includes the work necessary to access the ore body and
prepare for mining. Clearing the land for a surface mine, sinking a shaft for an underground mine, or building the mineral
processing plant are examples of development activities. We will talk about all of those things, but we will do so in future
modules.

Learning Outcomes
At the successful completion of this module, you should be able to:

demonstrate a basic understanding of the process to move from a measured resource to a proved reserve, i.e., to establish
the extent to which the deposit is economically mineable with today’s technology;
demonstrate an understanding of the broad categories of factors, i.e. locational, natural & geologic, and socio-economic-
political, that will be considered prior to a more detailed feasibility study;
explain the need for legal standards for reporting on mineral projects; and the three overarching goals of these standards;
demonstrate knowledge of NI 43-101 and Form 43-101F1, and a familiarity with a “typical” 43-101 report for coal, metal, or
industrial mineral projects;
demonstrate an introductory knowledge of how mining methods are classified, and describe in a few sentences the
characteristics of each of the methods:
surface
mechanical
open pit
open cast
quarrying
auger
aqueous
hydraulic
dredging
solution
heap leaching
underground
unsupported
room and pillar
shrinkage stoping
open stoping
supported
cut & fill
caving
block caving
sublevel caving
longwall
demonstrate an understanding of the seven groups of factors affecting the choice of a mining method;
identify the specific factors that will have the greatest impact on the selection of a mining method, and explain how each
has this significant impact on the selection.

Lesson 4.1: So, You Think That You Want to Build a Mine?
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Lesson 4.1: So, You Think That You Want to Build a Mine?

The initial stage of development focuses on the merits of the potential mining project. The question of whether or not can we
make a decent return on our investment will be of concern to everyone. And the answer is generally complicated by factors that
we cannot control, as well as factors that may not be easily known at this early stage of the project.

We'll look at the set of factors that will enter into the decision, but before doing so, I'd mention that already some thought has
gone into the merits of the potential project. The investment in prospecting and exploration would not have been made unless
there was a belief that a mine could be a good investment. Thus, we see that the continuum of decision making once again blurs
the crisp lines that we've established with our five stages in the life of a mine. Regardless of the exact point in time that these
factors are considered, they will be addressed early on.

Different authors organize the factors differently, and in more or less detail to suit the purpose of their discussion. Personally, I
like the way Hartman and Mutmansky do it in the textbook for this course, and I'll follow, more or less, their categorization here.
There are three broad categories of factors to consider: locational, natural and geologic, and socioeconomic. We'll discuss each
of these in this lesson.

4.1.1: Locational Factors

4.1.1: Locational Factors
Ore bodies are located where you found them, and often are not ideally located by any definition. They may be inside the Arctic
Circle, high up in the Andes Mountains of Peru, or in the tropics of Indonesia to illustrate just a few out-of-the-way places.
Occasionally, they are near metropolitan areas or small towns. Regardless, you will assess the following:

Transportation Options

You must get your product to market, and you must be able to get supplies to the mine. Transportation options suited to the one
need may be unsuitable for the other, so both must be independently evaluated. Generally, access to rail is necessary. Where is
the nearest railway, and will they be willing to serve a spur to your property? Can you get a right-of-way to build a spur? A
highway suitable for tractor-trailer use may be needed as well, or in lieu of a railhead on your property. Sometimes, it will be
appropriate to move your product on a waterway, e.g., a river or even the ocean. Can you access a load-out facility to get your
product on barges or boats, or do you need to build one? These costs will have to be estimated at this stage, as the costs to get
supplies to the mine can raise your production costs. Similarly, your customers will bear the cost of transporting the product in
most cases. Although you may be able to mine at a competitive cost, your transportation costs could adversely affect your
competitiveness. If you are producing a construction aggregate, your practical limit for transporting the product is on the order of
50 miles. If you are producing iron ore, you may be able to transport it for hundreds or even thousands of miles.

Availability of Labor

The labor requirements will depend on the size and type of mine, but in general, you will require experienced miners who are
familiar with the method, equipment operators, welders, mechanics, electricians, and skilled managers. Electronics and
computer technicians, surveyors, engineers, and accountants are normally part of the human resource requirements, as well.
Some of these services may be provided on a regional basis to multiple mines, especially if your new mine will be part of a large
company with other mines. If you’re evaluating a potential stone quarry in the Atlanta, Georgia area, labor will be readily
available. If the proposed project is an underground gold mine in rural Nevada, you may have to bus the workers for
approximately two hours from the nearest town to the mine site –and you will do this each day. If the proposed mine is located in
the Australian outback, you will probably set up a fly-in fly-out operation, in which you use jet charters to transport your workers.
They will then remain on-site for two or three weeks, working every day, and then return to their home city for a week or so of
leave prior to beginning the cycle all over again. You get the idea! Labor availability can span these extremes, and be anywhere
in between. Regardless, the effort and the cost to staff the proposed operation will be considered early on.

Infrastructure

The mining operation will require infrastructure, i.e., electricity, water, roads, buildings, housing, hospitals, schools, and so on. Is
this already there, or will you have to create it? How long will it take, and what will it cost? Mining engineers of the 19th and early
20th century were, by necessity, quite skilled at building towns and the necessary infrastructure, as well as opening and
operating mines. Companies operating internationally in remote or underdeveloped locations still find the need today to develop
the infrastructure. The population in the region of these mining operations often experiences a significant improvement in the
quality of life, e.g., availability of clean water, excellent medical care, good schools, and so on. Again, however, an early decision
includes consideration of the time, effort, and cost to establish such an infrastructure.

Employee Satisfaction

The location and its climate can affect employee satisfaction, which will impact productivity of the workers and your ability to
recruit and retain the workforce. These can be significant risks for the proposed project. If the mine is located near an urban area
with an abundance of cultural and entertainment opportunities, and the climate is pleasant year round, then your employee
satisfaction is likely to be very high. On the other hand, if the mine is inside the Arctic Circle, you may face significant challenges
recruiting and retaining a workforce. Of course, you can “buy” some measure of employee satisfaction with high wages and large
bonuses.

4.1.2: Natural and Geologic Factors

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4.1.2: Natural and Geologic Factors

The technical characteristics of the orebody, the geologic setting in which the orebody is found, and the surface features of the
land over the orebody will influence significantly your choice of a mining method and the way that you will lay out the mine and
supporting infrastructure. The most important natural and geologic factors that will be assessed include:

Topography

The location of your surface facilities, e.g., shops, warehouses, and roads, will be influenced by the topography. Mountainous
terrain creates more challenges than a gently rolling countryside.

Spatial Characteristics of the Orebody

The depth, size, shape, and attitude will have a major impact on the type of mine and mining operation that you can have. A
shallow orebody allows consideration of a surface rather than underground mine. A large orebody allows for larger-scale and
potentially cheaper bulk methods, and a long life means more time to recover certain costs. The orebody may be tabular in
shape, which lends itself to certain types of mining, or it may be a big amorphous blob, or perhaps the ore is contained in
sinuous veins. These shapes, in conjunction with other characteristics, will suggest certain mining methods. And finally, there is
attitude. The attitude of the orebody is important. After all, who wants to develop a mine in an orebody that has a bad attitude!
Just kidding... attitude is a term for the angular orientation of the orebody, and, in particular, we are interested in the vertical
angle of the orebody. If the deposit is flat lying, the vertical angle or dip is zero degrees. As we begin to tilt one end of the
orebody downward, the dip angle is measured with respect to the horizon. Steeply pitching ore bodies with dip angles of 70
degrees or more are not uncommon. As it turns out, some mining methods require steeply pitching deposits, while others work
best with dip angles approaching zero degrees.

Geomechanical Properties of the Orebody and the Surrounding Rock

Undoubtedly, we will want to create openings in the orebody or the surrounding rock as part of the mining process. How difficult
will it be, and how much energy will it take to break the ore and the surrounding rock? Will explosives be required? Once we
remove a section of ore, will the opening be stable, or will the surrounding ore rush in to fill the void? When the ore is removed
will the surrounding rock remain stable, or will it fracture and cave-in? The answers to these questions depend largely on the
mechanical properties of the materials. Compressive strength, modulus of elasticity, hardness, and abrasiveness are some of
the important properties that will determine how challenging it will be to safely and productively operate the mine. We can take
core samples and conduct laboratory tests to quantify the characteristics, and we can avail ourselves of any data that others
have compiled on similar deposits.

Geology
Structures such as cleavage patterns, joint sets, and faults can significantly affect the mineability as well as the stability of the
materials, regardless of certain mechanical properties such as strength. The stratigraphy, or layers of rock formations, is
important in the design of many mine types. The mineralogy of the deposit and the genesis of the orebody will give us an
indication of both mining and subsequent mineral processing challenges. The presence of thermal gradients will likely require
expensive cooling of the ventilating air. Water-bearing strata or aquifers will increase the complexity of the mining as we work to
protect them as well as to deal with groundwater inflows to the mine. There are other examples that will be considered early in
the evaluation process, and this once again illustrates the importance of including geologists on the team.

Ore Beneficiation

The ore has physical and chemical properties that will affect the way in which we extract the valuable components from the
mined ore. Some copper ores are easier to process than others based on the mineralization, orebody genesis, and so on. These
factors will affect the cost of the mineral processing and will be examined before a decision to move forward with the project is
made.

4.1.3: Socioeconomic Factors

4.1.3: Socioeconomic Factors

This category is intended to capture a disparate group of factors that are often beyond the control of the mining company, and
which can occasionally create large problems for the mining company.

Demographics

The population characteristics are especially relevant to the labor force considerations, which we discussed under locational
factors.

Financing and Market Conditions

Generally, mining companies will want to raise capital to finance the proposed mining venture. The prevailing condition of the
financial markets will impact the ease or difficulty of raising capital. Similarly, prevailing regional, national, and global economic
conditions can radically alter the demand for mined products as well as the price paid for those products. Sometimes, these
conditions can change radically from when a project was begun and when it came online. In recent years, the simultaneous
crash of both the commodity and energy markets has had disastrous effects for a number of mining companies.
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Government Actions

Governments at all levels can incentivize mining by giving tax breaks for example, or they can restrict mining by delaying permit
approvals, among other actions. The degree of government regulation is a consideration, and especially the consistency of
interpretation and enforcement of regulations, as these can affect the cost of compliance.

Taxes

Tax policies such as income tax and depletion allowances will affect the profitability and, hence, feasibility of a proposed project.

Political Stability

Undertaking projects in lesser-developed countries(LDC) presents a higher risk for investors, and this may make it difficult to
obtain financing at a reasonable rate, if at all. Governments change and policies can be overturned or reversed in an instant, and
what was a welcoming and investment-friendly government can become quite hostile. Civil wars and terrorism can make it
difficult to operate, not to mention the difficulty in recruiting and retaining a skilled workforce. Sometimes, governments will
expropriate the company’s assets in the country, e.g., the mine, the equipment, and the reserves – this may occur years after the
mine has opened. Despite the risk, companies and investors continue to pursue projects in these areas. Why? The “reward” for
investing in higher-risk projects is a much higher rate of return on the investment. Thus, in the prefeasibility stage, the analysis
would have to support the likelihood of a much higher rate of return. Otherwise, the project will be a nonstarter. It is difficult to
account for these factors, not only because they are largely out of the control of the company, but also because they are difficult
to quantify and predict. One can use the historical record as well as seek advice from outside experts, e.g., economists, political
analysts in the U.S. State Department, and so on. Practically, we can account for some of these risks by performing risk and
sensitivity analyses. For example, if we estimate that the likely selling price is $150/ton, and a worst-case scenario is a selling
price of $100/ton, we would evaluate the desirability of the project over this range, and report our findings to those making the
decision on the project.

4.1.4: Do You Have an Envelope That I Can Use?

4.1.4: Do You Have an Envelope That I Can Use?

Engineers often talk about doing “back of the envelope” calculations. This is an expression for making a first approximation to a
solution or answer. It is a process in which we don’t worry about the details but only the biggest factors that influence the result.
By necessity, it requires experience and judgment. The answer is nothing more than a rough estimate and is likely to result in a
solution that looks like 1, 10, or 100, i.e., an order-of-magnitude estimate, rather than an exact number like 0.67, 13, or 180! Or,
to be more specific here, the team will evaluate the foregoing factors with the goal of concluding one of three outcomes: this
project has little chance of success – we need to cut our losses and move on; this project shows strong potential – we need to
move into the next stage of the project without delay; or, this project has potential, but without doing further analysis, it is difficult
to say that we should move this project to the next stage. Sure, there are shades of gray, but you get the idea of what is
happening at this stage.

Reasonably, you may also wonder just who are the people making this decision. That’s a good question. Although the full team
may include a number of subject experts, e.g., geologists, mining engineers, among others, the decision-makers are likely to be
few in number and are likely to include: a mining engineer with decades of experience in the industry and years of experience in
evaluating and bringing new projects online. This person probably has a title with the words “vice-president” in it. There will be a
financial wizard. Someone with years of experience in the industry, who can probably do complex discounted cash flow analyses
in her head. And there may be a third – perhaps a “rising star” in the organization. Someone with several years of experience,
highly motivated, and with the potential to head up this new mining project if it becomes a reality. The model will vary depending
on the size of the company and the size of the project, but this will give you an idea of the approach.

So, what’s next? Assuming that the conclusion of our “back-of-the-envelope” analysis is that we still want to build a mine, then
we will move to the feasibility-study. This is the subject of Lesson 4.2.

Lesson 4.1 Summary

Lesson 4.1 Summary

The major factors that will affect the desirability and feasibility of a mining project can be divided into three categories. The
consideration of the factors will precede any decision to conduct more detailed studies. It is important to understand the three
categories, the factors within each category, and in what manner they influence the decision.

Lesson 4.2: Feasibility Studies

Lesson 4.2: Feasibility Studies
A company will fund a prospecting and exploration if, and only if, they believe there is or will be a market for the commodity that
they are seeking. As they begin to invest more time and money into the exploration of the deposit, they will concurrently be
evaluating the three categories of factors described in the last lesson. If, at some point, they believe that the project is not worth
pursuing, they will most likely stop all work on the project and turn their attention to something else. If, at the conclusion of the

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exploration program and their “back-of-the-envelope” evaluation, they believe that the project has merit, then they will move to
conduct a feasibility study. This is the subject of this lesson.

4.2.1: The Nature of Feasibility Studies

4.2.1: The Nature of Feasibility Studies

A company will fund a prospecting and exploration if, and only if, they believe there is or will be a market for the commodity that
they are seeking. As they begin to invest more time and money into the exploration of the deposit, they will concurrently be
evaluating the three categories of factors described in the last lesson. If at some point, they believe that the project is not worth
pursuing, they will most likely stop all work on the project and turn their attention to something else. If at the conclusion of the
exploration program, and their “back-of-the-envelope” evaluation, they believe that the project has merit, then they will move to
conduct a feasibility study. This is the subject of this lesson.

Practicing engineers and university professors use a variety of adjectives to describe the studies that are conducted and often do
so without complete agreement. Common terms include conceptual (±40%), prefeasibility (±25%), feasibility (±10-20%), or
definitive (±5% ) studies. The range of terms is meant to convey the cost to perform the study along with the accuracy, (shown
parenthetically) of the study. Thus, a conceptual study may cost little to do, but only yield results that are ±40%, whereas the
definitive or engineering study in which systems are designed and equipment is selected, will yield highly accurate results. Of
course, the latter is laborious and expensive to conduct.

Figure 4.2.1 Cost and Accuracy comparison of different types of feasibility studies
Credit: © Penn State University, is licensed under CC BY-NC-SA 4.0 [1]

The back-of the-envelope considerations described in Lesson 4.1 would qualify as a conceptual or scoping study. I don’t want
you to become overly concerned with the words, and accordingly, I suggest you remember it as follows.

The prefeasibility and feasibility studies have a similar goal, which is to estimate the financial merit of the project. Financial merit
is quantified by metrics such as return on investment and the number of years until the operation becomes profitable, among
other metrics. These studies will be used to make the go/no-go decision on the project. If the money to finance the project is to
be raised publicly on the stock exchanges, then the prefeasibility or feasibility study must be made publicly available. The format
for the published study is prescribed by law. So, what is the difference between the two studies? Some engineers or companies
simply prefer to use one term instead of the other. Perhaps, the meaningful difference between the two terms is the amount of
detail.

A certain amount of detail is prescribed by the legal standards for reporting publicly on projects in which investment is being
solicited, and that constitutes the minimum level of detail. Often companies will want to invest more time and money into
studying the feasibility of the project. The minimum level may be considered a prefeasibility study, and a more detailed
examination of the feasibility may be considered a feasibility study.

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Figure 4.2.2 We will think of the analysis as a continuum defined by the degree of certainty or accuracy with three defined
regions: conceptual study, feasibility study, and engineering studies. The accuracy of the findings will be on the order of ±40% at
the conceptual stage, ±20% at the feasibility point, and ±5 at the engineering point where equipment is being specified and
systems are being designed.
Credit: © Penn State University, is licensed under CC BY-NC-SA 4.0 [1]

With this understanding behind us, let’s get on with the subject of this lesson – feasibility studies.

The nature of feasibility studies has been prescribed by-laws for projects that will seek investments through public listings, e.g.,
stock exchanges. Most mining projects obtain at least partial funding through public investment, and as such the way we conduct
and report on feasibility in a very similar fashion. Let’s take a look at the requirements, which have only come into being over the
past few decades.

Since the earliest days of mineral prospecting and development, there has been no shortage of hucksters and shysters
attempting to sell worthless mineral deposits. In the old days, the practice of “salting a claim”, i.e., deliberating adding gold or
silver to the sample given to the assay office, separated many a person from their hard-earned money. Over the years, the
methods to defraud investors became more sophisticated, the size of the investments became orders of magnitude higher, and
when fraud occurred, it was likely to affect not just one or two hapless people, but large numbers. In the late 20th century
(1990s), there were a couple of huge scams successfully perpetrated, and these caused great losses around the globe to
institutional as well as individual investors. Further, it shook the public’s confidence in mining and made it very difficult for mining
companies to raise capital.

The major mining countries, including the United States, Canada, and Australia, developed more rigorous standards for public
disclosure of scientific and technical information that will be used to solicit investors. In a nutshell, the standards are attempting
to ensure:

the use of common definitions for words like measured resource;

full disclosure of the people who developed the public report, including names, experience, and potential conflicts of
interest; and
disclosure of information that has a bearing on the worthiness of the project.

There are no significant differences among the standards used by the different countries, although you must ensure that your
report meets the standard of the country in which you are going to list your investment opportunity. For example, if you are going
to list on the New York Stock exchange, you must satisfy the U.S. Securities and Exchange Commission’s (SEC) rules, or to list
on the Toronto Stock Exchange must comply with the Canadian Securities Administrators (CSA) rules.

We are going to use the Canadian standard because it provides a comprehensive approach that can be easily adapted to the
U.S. (SEC), Australian (JORC), or other standards. Even if the intent is not to seek public investment, this standard provides a
fine template for reporting on a feasibility study.

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4.2.2: The National Instrument 43-101

4.2.2: The National Instrument 43-101

The Canadian Securities Administrators (CSA) developed and released this legal standard, which is referred to as NI 43-101, in
2001. This standard was built on various codes and policies that had been around for many years, as were the standards
developed in Australia and the U.S. The standard provides definitions for qualified persons, feasibility studies, and mineral
resource categories. We’ve talked about the last two here in class, but not the first. I’ll leave that reading to you. Please visit this
link to the CIM Definition Standards for Mineral Resources and Mineral Reserves [2].

As you read through it, take special note of what constitutes a qualified person. Also, note the use of the term modifying factors
to describe both the steps to convert a resource to a reserve and the factors that can affect how much of the resource can be
converted to a reserve. Finally, you will no doubt be interested in their definition of a pre-feasibility versus a feasibility study.
Although it is not part of the standard, the Canadian Institute of Mining (CIM) has prepared and made publicly available a series
of best practice documents on the estimation of mineral resources and reserves. Best practice documents are always worth
consulting. You may learn something new that you were unaware of, even as a practicing professional. Further, if you deviate
from practices that are considered industry-standard practices, you expose yourself to sanctions, lawsuits, and so on. Please
visit this Best Practices - Estimation of Mineral Resources and Mineral Reserves [3] document. I suggest that you download it
along with the previous document, and save it for future use. At this time, please quickly scan this document to familiarize
yourself with the kind of information that it contains so that in the future you will be able to refer to it when you need more
detailed guidance.

The “heart and soul” of the standard is known as Form 43-101 F1 [4]. This form essentially specifies the table of contents for the
report, and in so doing, is specifying all of the topics that must be addressed in the report. Detailed instructions are given for
each of the topical areas. As before, I recommend that you read through this document and save it for future use.

4.2.3: Examples of NI 43-101 Compliant Reports

4.2.3: Examples of NI 43-101 Compliant Reports

Let’s close out this lesson by looking at some examples. These reports have to be made publicly available to investors and their
agents, and in many cases, they are available electronically as well as in hard copy. Thus, you can access dozens of these
reports freely on the web by doing a search for “NI 43-101”. The quality of these reports will vary. They must meet the minimum
requirement of the standard, and some do so – just barely, and are of dubious quality! Some contain a lot more detail than
others, i.e., some are definitely preliminary-feasibility studies, whereas others are feasibility studies. There may be times that a
company has done more detailed study than it chooses to disclose in the report. That is fine, as long as the additional detail is
not considered material. Basically, I am giving you notice that you will see a wide range of detail and quality in these reports that
I will give you or that you may find on your own. The list below will give you a nice overview, as it contains different commodities.
You’ll want to download and save these reports. You should flip through the pages to become familiar with the type of content;
and from time-to-time, you should stop and read a particular section that catches your attention.

National (U.S.) Projects

Coal: Coal 43-101 elk creek [5]

Metal: Metal 43-101 gold nugget [6]
Industrial Minerals: IM Potash 43-101 [7]ochoa [7]

International Projects

Metal: Metal NI 43-101 Rio Tinto Copper [8]

Coal: Coal NI 43-101 Pitch Black [9]

4.2.4: What's Next?

4.2.4: What's Next?
Let's imagine that we have completed our feasibility study, and the results indicate that this reserve could be made into a
profitable mining operation. Given this, we’ll prepare the formal NI 43-101 report. The next step will be to seek financing for our
project. If we are going to seek public investment, we’ll list the opportunity on one or more of the stock exchanges. Concurrently,
we may be using the report to gain the interest of private equity groups. Regardless, the next step is to obtain financing.

Sometimes the entity that brought the project to this point has no interest in developing and operating a mine. The entity may be
a few individuals backed by a venture capital group or may be a company. Regardless, they are interested in turning their hard
work into a pile of cash! A large company may want to purchase their reserve to add it to their reserve base – something that
they may not mine for several years. Or, a group that does want to work actively to open a new mine may purchase it. For the
purposes of our educational journey, we’ll assume that a mining company conducted, or commissioned, the prospecting and
exploration and put together the 43-101 report. As such, the company will want to develop and operate the mine.

The engineers on the team will be engaged in time-critical activities while the search for financing is underway. Time is of the
essence! A significant amount of money will have been invested to bring the project to this point – perhaps a hundred thousand
dollars for a very small project or millions of dollars for a larger one. What have they earned on this investment so far? Nothing,
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nada, zip! When will they begin to earn something on the investment? Not until they have a mined product to sell. When will that
be? Well, for a stone quarry, it may be in as little as a couple of years. In larger projects, eight-to-ten years is not unusual, and in
very large and complex projects, it may be closer to two decades! Think about this – sinking money into a project for years and
not seeing a penny back!

I have a proposition for you: how about if each of you loans $1000 to me. In return, I will agree to pay you interest on your
money, but I will not begin paying anything to you for 10 years. How many of you are going to jump into this investment
opportunity that I am offering? How much interest would you need to be promised in order to seriously consider this investment?
Oh, and by the way, if things don’t work out quite the way that I plan, I may not be able to pay you back in full, if at all! Welcome
to the world of high risk project financing!

Ok, back to the team of engineers doing time-critical things. What are these things that will be happening while financing is being
sought? Consider that the time required to bring the project online will include the time that it takes to:

acquire access rights, as needed

prepare permit applications
wait for permit approval
conduct the detailed engineering studies
design and bid surface facilities
construct surface facilities
order equipment
provide access to the orebody
construct underground facilities (if an underground mine)
hire the workforce

Permits are required by several state and federal agencies. Not only is it expensive and time-consuming to prepare the
application packages, but also some of the permits may require the completion of work that may take a year or two. For
example, it may be necessary to sample local streams for one year and include the results in the permit application. Once the
permits have been submitted, the review and approval process can be tortuous, as the different agencies review and comment
on a particular permit. If there is public resistance to the project, public hearings may be required as part of the permit review
process. It is important to plan for and sequence the work that you have to do to achieve a timely filing. For example, you don’t
want to add an unnecessary delay because you forgot to hire a consultant to conduct an archeological study that is required in
support of one of your permit applications!

While the permitting process is underway, detailed engineering studies will be required to design the various systems, e.g.,
production, materials handling, power, mineral processing, and so on. These designs will then be used to develop specifications
for major plant items, such as the mineral processing, equipment and so on. Bid packages will be prepared for surface facilities
such as the mineral processing plant, loading facilities, water treatment, warehouses, shops, and so on. If it is an underground
mine, the shaft or other access to the orebody will be bid as well. The construction of these facilities can take a few years. So,
exactly when do you need each to be completed, and knowing that, when do you need to initiate the bidding for their
construction? These are important questions. Given the cost of capital, you don’t want to make the expenditure prematurely; and
at the same time, you are going to look rather foolish if mining is set to commence, but the load-out facilities, which are required
to get your product off the property and on the way to your customers, have yet to be constructed!

Some equipment can be received within weeks of order, whereas others will be fabricated on-demand, and lead times of several
months are common. Choosing the correct point in time to place orders is important.

Accessing the deposit for a surface mine takes less time than for an underground mine, although it can take several weeks to
months and must be planned. Underground access can be far more complex. It may take a year to sink a shaft and to develop
the spaces around the shaft bottom. And then, depending on the deposit and mining method, it can take weeks to a year or more
to develop the workings necessary for mining.

I started this discussion with the question of what are the activities that will be undertaken concurrently with the effort to obtain
financing. Clearly, many of the activities that I’ve just outlined will not be initiated until financing is in-hand. However, these
activities will be in various stages of planning before financing is completed. Early on, it is crucial that an accurate and detailed
project plan be prepared. All of the tasks that need to be performed will be represented on a network diagram known as a PERT
diagram. Detailed timing charts, known as Gantt Charts, will be prepared to document the time relationships of the activities that
must be completed when they need to be completed and started, and their duration. These diagrams will be used to determine
the critical path and when mining can begin, to assess the effect of delays, and ultimately to monitor the progress of the project.
Resource requirements will be documented and integrated into the project plan as well. The size and complexity of these
projects necessitate the use of project management software, such as MS Project.

By the time financing has been secured, a good project plan will have been completed. Further, work will be well underway to
prepare the permit applications; and it is likely that detailed engineering design and analysis will be underway.

The engineering design and analysis of the many systems will be the subject of courses such as MNG 404 Materials handling;
MNG 411 Systems Analysis; MNG 422 Ventilation, MNG 431 Rock Mechanics; MNG 410 Underground Mining; and MNG 441
Surface Mining. You will learn more about project management techniques in the capstone design course, MNG 451, where you
will conduct a 43-101 feasibility study.

Lesson 4.2 Summary

Lesson 4.2 Summary

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The next logical step in our progression through this course is to talk about the unit and auxiliary operations. Most mining
operations use the same small set of operations to execute the entire mining cycle, and as such, it is convenient to examine
them prior to studying each mining method. We will do this in the next Module. Speaking of mining methods, there is one bit of
unfinished business before we move on to the next module.

The selection of a mining method is part of the feasibility study. The choice of the method will affect how much of the resource
can be recovered, and that, of course, affects the reserve that you can report. When you reviewed Form 43-101F, you saw a
section devoted to the mining method, and this is the reason why. Keep in mind that we are not designing the mine at this stage,
merely choosing a method based on the data and information we have available to us. In the next lesson, we will look at the set
of mining methods and the factors that will influence our selection of a method.

Lesson 4.3: Mining Methods

Lesson 4.3: Mining Methods

We are going to identify the various mining methods in this lesson, and then we are going to look at the factors that affect our
selection of a method. Later in the course, we will study the methods in more detail, but at this stage, we want to understand why
a particular method would be identified in the feasibility study.

Classification of Mining Methods

We will use a traditional taxonomy to classify the mining methods. At the top level, mining methods are either surface or
underground. The difference rests solely with where we access the orebody: are we accessing it from the surface or is it too
deep beneath the surface, such that we can only economically access it from underground?

Figure 4.3.1 Mining Methods - Surface and Underground

Credit: © Penn State University, is licensed under CC BY-NC-SA 4.0 [1]

4.3.1: Surface Mining Methods

4.3.1: Surface Mining Methods

Surface mining methods are traditionally divided into two classes: mechanical and aqueous. Mechanical methods rely on
breaking the ore by mechanical means, and aqueous methods rely on the use of water or another solvent, e.g. an acid, to break
down the ore and facilitate its removal.

Mechanical Methods

Open pit mining

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This type of mining is used for near-surface deposits, primarily metal and nonmetal. The overburden is hauled away to a waste
area and a large pit is excavated into the orebody. The depth of the pit is increased by removing material in successive benches.
A few examples of commodities mined by this method would include iron and diamonds.

Figure 4.3.2 Bingham Canyon Mine, November 2017

Credit: J. Sutterlin, © Penn State University, is licensed under CC BY-NC-SA 4.0 [1]

Open cast mining

Open cast mining is also known as strip mining and is used for bedded deposits, and most commonly for coal. Although it is
similar to open pit mining, the distinguishing characteristic is that the overburden is not hauled away to waste dumps; but rather,
it is immediately cast directly into the adjacent mined-out cut. There are two important sub methods for open cast mining. One is
known as area mining, and is applicable when the terrain is relatively flat; and the other is contour mining, better suited for
mountains regions. A few examples of commodities mined by this method include coal and phosphate.

Quarrying

Quarrying is a method of extracting dimension stone. The term dimension stone encompasses certain stone products used for
architectural purposes such as granite countertops, marble flooring, and monuments, among a few others. The goal in the
mining of these products is to remove large slabs that can be cut and machined to exacting architectural applications. Unlike
open pit mining in which benching is required to prevent failure of the sides or pit slopes, the high strength and competency of
the rock mass in quarries is such that vertical walls of 1000’ or more can be excavated. Now that I’ve given you the classical
mining engineering definition of quarrying, you should be aware that just about everybody uses this word, "quarry" to describe
any open pit operation in stone! Oh well… A few examples of commodities mined by this method include Georgia marble and
Vermont granite.

Auger mining

This is a method to recover additional coal from under the highwall of a contour mine, when the ultimate stripping ratio has been
achieved in open cast operations. It is sometimes referred to as secondary mining because it is done after the open cast mine
has reached an economic limit.

Aqueous Methods

Hydraulic mining

Hydraulic mining is used for a limited class of deposits that are characterized as loosely consolidated, such as placer-type
deposits. A high-pressure water canon is used to dislodge the deposit, and the resulting solution is either pumped to a
processing plant or a gravity separation is performed at the mine site using something like a sluice. A few examples of
commodities mined by this method include gold and kaolin.

Dredging

This method is used for underwater recovery of loosely consolidated materials using a floating mining machine known as a
dredge. In some cases, the deposits are naturally underwater, while in others the area is flooded, creating an artificial lake on
which the dredge operates. A few examples of commodities mined by this method include sand and gravel.

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Solution mining

Solution mining is used to recover deep deposits that would be uneconomical using underground methods, but only if the ore
can be easily dissolved by a solvent. In this method, holes are drilled from the surface into the deposit. A solvent is pumped
down one hole, and the resulting solution with the dissolved mineral is pumped out another hole. This solute or pregnant liquor,
as it is often known, is processed to extract the mineral of interest. In some cases only one hole is used, but the hole has an
inner and outer section to separate the in-going solvent from the out-coming solute. Water, acid, and steam are common
solvents. A few examples of commodities mined by this method include uranium and sulfur.

Heap leaching

Heap leaching was used many years ago as a method to recover very low percentages of metal remaining in the tailings from
mineral processing plants. Large piles, i.e., heaps, of the tailings of low-grade ore were created, a solvent was allowed to drip
and percolate down through the heap, and then the pregnant liquor was recovered and processed. In this fashion, it is a
secondary method. In recent years it has been used with increasing frequency to recover high-value metals such as gold from
very low-grade ores. A few examples of commodities mined by this method include copper and gold.

4.3.2: Underground Mining Methods

4.3.2: Underground Mining Methods
Underground mining methods become necessary when the stripping ratio becomes uneconomical, or occasionally when the
surface use of the land would prohibit surface mining. Underground methods are traditionally broken into three classes:
unsupported, supported, and caving methods. These classes reflect the competency of the orebody and host rock more than
anything else. If you excavate an underground opening in the ore or the rock, is the opening stable -- i.e., will it remain open for
an extended period, or will it begin to fall in? If it is unstable, i.e., the surrounding ore or rock breaks up and falls into the opening,
how much support would be required to keep the opening from caving in? The answers to these questions lead us to choose
mining methods from one of the three classes. Unsupported methods require the addition of minimal artificial supports to secure
a stable opening, whereas the supported methods require the addition of major support to keep the openings from caving in.
Finally the third class is, at first glance, counterintuitive: in general our goal is to create stable openings underground for obvious
reasons, but the methods in this class will only work if the host rock or orebody will cave easily under its own weight -- the caving
methods actually depend on this caving action to function safely and productively!

Unsupported Methods

Room and Pillar mining

This method of mining is used to recover bedded deposits that are horizontal or nearly horizontal when the orebody and the
surrounding rock are reasonably competent. Parallel openings are mined in the ore, i.e., rooms, and blocks of ore, i.e., pillars,
are left in place to support the overlying strata. Other than the pillars, little artificial support is required and often consists of bolts
placed into the overlying strata to pin the layers together, making them behave like a strong laminated beam. A few examples of
commodities mined by this method would include coal, lead, limestone, and salt. Historically, if the pillars were irregular in size
and placement, which is more likely to occur in certain metal and nonmetal deposits, this method was known as stope and pillar,
rather than room and pillar. You will still hear the word stope and pillar being used, but the distinction is now largely irrelevant.
This method accounts for the vast majority of all underground mining in the U.S, and likely the world. Watch this video (2:58)
created by Caterpillar showing the use of their equipment in room and pillar mining.

The Principles of Room & Pillar Mining

Principles of Room and Pillar Mining

source: Caterpillar Global Mining [10]

Shrinkage stoping

Shrinkage stoping is used to recover steeply dipping orebodies when the ore and host rock are reasonably competent. A stope,
i.e., a large section of the mine where active production is occurring, is mined, but the broken ore is not removed, but rather is
left in place to support the walls of the stope until the time when all of the broken ore will be removed. Since rock swells,
i.e., increases in volume when it is broken, it is necessary to draw off some of the broken ore as the stope is progressively
mined. The name of this method derives from this drawing off or shrinkage of the stope. A modern and important variant of this
method is known as vertical crater retreat (VCR) mining. A few examples of commodities mined by this method include iron and
palladium. Watch this video (3:01) created by Atlas Copco demonstrating sublevel stoping mining method.

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Sublevel Stoping Mining Method

Sublevel Stoping Mining Method

source: Atlas Copco / Black Diamond Drilling Services [11]

Open stoping

This type of mining is used to recover steeply dipping orebodies in competent rock. The ore is removed from the stope as soon
as it is mined. Sublevel stoping and big-hole stoping are the important variants in use today. A few examples of commodities
mined by this method include iron and lead/zinc.

Supported Methods

Supported methods historically included cut and fill stoping, stull stoping, and square set stoping. However, the last two are no
longer used due to their extreme cost. We’ll confine our discussion to cut and fill stoping.

Cut and fill

Cut and fill is used to recover ore from weaker strength materials, in which the openings will not remain stable after the ore is
removed, and the overlying strata cannot be allowed to cave. A slice of the orebody is mined and immediately after the ore is
removed, backfill is placed into the opening to support the ore above. The next slice is removed, the cut is then backfilled, and
the process repeats. As you might imagine, this is a very expensive method to use, and consequently, it would be used only for
the recovery of high value ores. An example of a commodity mined by this method is gold. Watch this video (2:58) created by
Altas Copco on Cut and Fill mining method.

Atlas Copco - Cut And Fill Mining Meth…

Meth…

Cut and Fill Mining Method

source: Atlas Copco / Black Diamond Drilling Services [11]

Caving methods

Caving methods include block caving, sublevel caving, and longwall mining. For emphasis, allow me to repeat what I said earlier:
caving methods are used in settings where the ore or the host rock is so weak that it cannot support its own weight for any
period of time; the methods only work if the rock or the ore will readily cave under its own weight.

Block caving

This method is used in weak and massive orebodies, in which the ore is undercut, and then as the broken ore is removed the
remainder of the orebody collapses into this void, and as more ore is withdrawn, the caving continues. Typically the host rock is
fairly strong, although ultimately it tends to cave into the void created from removing the ore. The fracturing and caving often
break through to the surface. Watch this video (3:16) created by Atlas Copco on Block Caving Mining Method

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Atlas Copco- Block Caving Mining Met…

Met…

Block Caving Mining Method

source: Atlas Copco / Black Diamond Drilling Services [11]

Sublevel caving

This type of caving is used in strong and massive orebodies in which the host rock is very weak and quickly caves into the void
created by removing the core. As in block caving, the cave will ultimately reach the surface. Watch this video (3:05) created by
Atlas Copco on sublevel caving mining methods.

Atlas Copco - Sublevel Caving Mining …

Sublevel Caving Mining Method

source: Atlas Copco / Black Diamond Drilling Services [11]

Longwall mining

Longwall mining is a type of caving, applied to a horizontal tabular deposit such as coal. While block and sublevel caving are
essentially vertically advancing metal mining methods, longwall mining is applied to relatively thin and flat-lying deposits – most
often coal, but occasionally an industrial mineral such as trona. The coal seam is extracted completely between the access
roads, and then as mining retreats, the overlying strata caves into the void left by removing the coal. Watch this video (5:31)
created by Clearcut Mining Solutions showing logwall mining method.

Longwall Mining

Longwall Mining
Aram Drake [12]

Our goal in attempting to classify mining methods is to make it easier to learn the methods, because methods in a given class
tend to work best in similar circumstances. Similarly, there tend to be just a few factors that differentiate the methods. By
examining the classification scheme, we make it easier to remember the methods and the characteristics under which they can
or cannot be used. It’s also useful to note that there is nothing sacred about the choice of a method. If five years down the road
the characteristics of the deposit are changing, then another method will be employed. There are examples of mines utilizing
three different mining methods over a 15-year period, as they adapt the mining method to the evolving geological conditions.
Sometimes, one method is employed as the primary mining method, but another is used on retreat to recover pillars, for
example. We’ll look at some of those cases later as well.

4.3.3: Why Do We Choose One Method over Another?

4.3.3: Why Do We Choose One Method over Another?
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There are many factors that can affect the choice of a mining method. However, a relatively small number of them will dictate the
choice. The others may affect the layout of that method, or other details, but rarely do they eliminate a method from
consideration or drive the selection of a method. Let’s take a look at a comprehensive set of factors and understand what they
mean. Then, we’ll step back, take a deep breath, and see how uncomplicated it can really be! Here is a comprehensive list with
a few annotations to indicate the significance of the factor.

Spatial characteristics of the deposit

These factors play a dominant role in the choice of a mining method because they largely decide the choice between surface
and underground mining, affect the production rate, and determine the method of materials handling and the layout of the mine
in the ore body.

1. size (especially height, thickness, and overall dimensions)

2. shape (tabular, lenticular, massive, or irregular)
3. attitude (inclination or dip)
4. depth (mean and extreme values, stripping ratio)
5. regularity of the ore boundaries
6. existence of previous mining

Geologic and hydrologic conditions

Geologic characteristics of the ore and surrounding country rock influence method selection, especially choices between
selective and nonselective methods, and ground support requirements for underground mines. Hydrology affects drainage and
pumping requirements, both surface and underground. Mineralogy governs solution mining, mineral processing, and smelting
requirements.

1. mineralogy and petrography (e.g., sulfides vs. oxides in copper)

2. chemical composition (primary and secondary minerals)
3. deposit structure (folds, faults, discontinuities, intrusions)
4. planes of weakness (joints, fractures, shear zones, cleavage in minerals, cleat in coal)
5. uniformity of grade
6. alteration and weathered zones
7. existence of strata gases

Geotechnical (soil and rock mechanics) properties

The mechanical properties of ore and waste are key factors in selecting the equipment in a surface mine and selecting the class
of methods (unsupported, supported, and caving) if underground.

1. elastic properties (strength, modulus of elasticity, Poisson's ratio, etc.)

2. plastic or viscoelastic behavior (flow, creep)
3. state of stress (pre-mining, post-mining)
4. rock mass rating (overall ability of openings to stand unsupported or with support)
5. other physical properties affecting competence (specific gravity, voids, porosity, permeability, moisture content, etc.)

Economic considerations

Ultimately, economics determines whether a mining method should be chosen, because economic factors affect output,
investment, cash flow, payback period, and profit.

1. reserves (tonnage and grade)

2. production rate (output per unit time)
3. mine life (total operating period for development and exploitation)
4. productivity (tons /employee hour)
5. comparative mining costs of suitable methods
6. comparative capital costs of suitable methods

Technological factors

The best match between the natural conditions and the mining method is sought. Specific methods may be excluded because of
their adverse effects on subsequent operations (e.g., processing, smelting, environmental problems, etc.).

1. recovery (proportion of the ore that is extracted)

2. dilution (amount of waste that must be produced with the ore)
3. flexibility of the method to changing conditions
4. selectivity of the method (ability to extract ore and leave waste)
5. concentration or dispersion of workings
6. ability to mechanize and automate
7. capital and labor intensities

Safety, Health, Environmental concerns

The physical, social, political, and economic climate must be considered and will, on occasion, require that a mining method be
rejected because of these concerns. The impact of one mining method over another method on the environment must be

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considered. Similarly the ability to provide the highest level of safety and health with one method as compared to a competing
method must be considered.

1. ground control to maintain integrity of openings

2. subsidence, or caving effects at the surface; or affect on ground water system
3. atmospheric control (ventilation, air quality control, heat and humidity control)
4. availability of suitable waste disposal areas
5. workforce (availability, training, living, community conditions)
6. comparative safety conditions of the suitable mining methods

4.3.4: Putting it into Perspective

4.3.4: Putting it into Perspective

So there you have it – the 37 factors that will influence your choice of a mining method… but how and when? Fortunately, this all
reduces to a few major drivers.

First is depth...

If I know the depth of the deposit and the thickness of the overburden, I can do a few calculations and decide whether it is most
likely going to be a surface or an underground mine. With this one factor, I’ve excluded or included half of the mining methods.
Here, our decision tree has to split based on surface or underground. Let’s go down the surface path first.

If it’s a near-surface deposit, then tell me if is metal, nonmetal, or coal deposit. If it’s a noncoal deposit, then open pit is likely. If
it’s coal, then open cast is likely.

If it’s coal, then tell me about the topography. If it is flat lying, area mining is likely. If it is mountainous, then contour mining is the
better choice.

On the other hand, if it is a low-grade and deep deposit, then solution mining will be considered if the mineral is one that is
known to be recoverable with solution mining methods.

If the deposit is dimension stone, then I know it is going to be a quarry operation.

Ok, so what if an underground method is indicated?

The process is not quite as simple as for narrowing the field of surface methods, but almost so. Let’s go down that path and see.

First, I’d like to know about the attitude. Is the deposit horizontal or nearly so? If so, I’ve excluded several of the underground
methods, e.g., shrinkage stoping and open stoping. On the other hand, if it is steeply pitching, I can eliminate room and pillar.

Next, I’d like to know about the competency of the host rock and the deposit. That will further narrow the field of potential
methods.

Figure 4.3.3 Sample Decision Tree for determining the Mining Method after depth of deposit and thickness of overburden is
calucluated
Credit: © Penn State University, is licensed under CC BY-NC-SA 4.0 [1]

This will all become clearer...

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After we’ve studied the methods in more detail, this will become clearer. At this time, I am simply trying to make the process of
selecting a method seem less intimidating. Sure, all of the 37 factors that I listed earlier are relevant, and that will become
apparent by the end of the course. The ones with the greatest effect, in general, are:

depth;
surface features (especially for, but not limited to surface methods);
attitude, shape, and size (extent);
geotechnical characteristics of the orebody and the host rock;
grade and uniformity;
production requirements.

If these are the factors that essentially drive the selection process, then why do we bother listing the others? You will be in a
stronger position to answer this at the end of the semester, but let me make a few remarks now, to give you a better feel for the
relevance of the other factors, and why you should learn them!

Safety considerations, as well as productivity, are responsible for the preference of vertical crater retreat mining rather than
shrinkage stoping.
Selectivity will be important for high grade ores in which the precious metal is concentrated in narrow veins or bands.
Presence of discontinuities could nix the use of one caving method but be largely irrelevant for a different caving method.

Lesson 4.3 Summary

Lesson 4.3 Summary

In this lesson, we’ve introduced the different mining methods used to exploit mineral deposits. We’ve characterized them into
broad categories of underground and surface. Within each category, we established classes of methods, and then we identified
the individual mining methods belonging to each class. We saw that a class represented a few specific characteristics of the
deposit, and as such the methods in that class are well suited for deposits with those characteristics.

The choice of a specific mining method may require consideration of several factors, and we looked at six groups of factors
totaling 37 in all. Although any of these factors can affect the selection of a mining method, a small set of the 37 have a
disproportionate effect on the choice, and we identified those.

You will develop a better understanding of the details of the mining methods and the many factors that affect the choice of the
method as we work through this course. Despite the lack of detail at this stage, you will find the material covered in this lesson to
be quite useful as we continue into the remaining modules.

Regardless of which method we use, it is likely that the similar unit and auxiliary operations will be used during exploitation. The
equipment itself may be very different, but the operations are similar from an engineering perspective. We’ll take a look at this in
the next module.

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