Articles for March 2016

49. Remote Sensing of Ore Grades

The mining industry must continually find ways to improve and modernize. The most likely avenue for improvement will be using new technologies as they become available. One of the new players on the scene is a start-up company called “MineSense Technologies Ltd.”  They are a British Columbia company looking to improve ore extraction and recovery processes based on the sensing and sorting of low-grade ore (pre-concentration in other words). They hope their pre-concentration methods will improve mine economics by reducing the consumption of energy, water, and reagents.

Minesense

 It’s not entirely clear to me how developed their technology is, but MineSense is relying on a combination of ground-penetrating sensors with other sensor technology in order to measure and report the grade of ore in real time. Existing ore sorting technologies seem to focus on distinguishing mineralized material from gangue, but MineSense seems to be targeting using actual ore grades as the defining factor. They hope to be able to eventually integrate their technology into equipment such as shovels, scooptrams, conveyors, feeders, and transfer chutes.
More specifically their proprietary technology is based on High Frequency Electromagnetic Spectrometry and High Speed X-Ray Fluorescence sensors. Reportedly these can deliver better sensitivity and operate at high speeds. They plan to develop two distinct product lines; shovel-based systems; and conveyor belt-based systems.
Their ShovelSense system would be a real-time mineral telemetry and decision system and used for measurement of ore quality while material is being scooped into the dipper, then reporting the ore quality and type to the grade control/ore routing system, and then enabling real-time online ore/waste dispatch decisions. Additional features may include tramp metal and missing tooth detection.
Their belt conveyor systems (SortOre and BeltSense) will use high-speed multi-channel sensing to characterize conveyed ore and waste in real time, allowing grades and tonnages to be reported and allowing ore to be diverted to correct destinations based on the sensor responses. MineSense say that pilot units are operating at 20 tph and systems of up to 2000 tph are in the development stages. Ore sorting has been around for a long time, with companies like Tomra (www.tomra.com), but possibly the MineSense technical approach will be different.
My bottom line is that we should all keep an eye on the continued development of this technology, especially as MineSense completes larger field trials. Hopefully they will readily share the results with us since it will be critical for industry players to see more actual case study performance data on their website. I recognize that developing new technology will have its successes and failures. Setbacks should not necessarily be viewed as fatal flaws since it takes time to work out all the kinks. Hopefully after being able to fine tune their technology they can advance to their next stage which will be to convince the mining industry to adopt it.
P.S. Unfortunately it appears MineSense don’t have a newsletter sign-up form on their website to help us in following their progress.
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48. Online Collaboration and Management Tools (Part 2)

This blog is the Part 2 continuation of the post from last week regarding software tools that the mining people should take a look at. Here are a few more ideas that I would like to share, having found that these are also great to have in your toolbox.
Google Sheets and Google Docs: When undertaking group reviews of spreadsheets or text documents don’t many of us have frustrations? We typically end up with different versions of the same document floating around and nobody knows which one is the most recent version and which one they should be editing. With Google Sheets and Google Docs you can create online spreadsheets and documents and then allow people on your team to review and edit them in real-time online. Writing reports gets simpler since there is only one version of the document with which everyone is working. A “track changes” option is still there (called “Suggesting”) and everyone can see the edits as they are being made. No more asking “who has the most current version?” it’s always there on-line. This type of collaborative editing is also great for certain types of spreadsheets as well as for Design Criteria Documents that are regularly being updated by different team members.
Foxit Reader:  This is an alternative to Adobe Reader and can be used for reviewing PDF documents, whether text documents or drawings. Foxit provides great editing and commenting tools like highlighting text, adding comments, drawing lines and boxes, adding comment balloons, cut & pasting images into the PDF file, and then saving the commented version. For the most part I have stopped using Adobe Reader and have now switched over to Foxit.
Foxit Reader screenshot

Foxit Reader screenshot

UberConference:  This is an online application for team conference calling that allows screen sharing, online conversations, sends out meeting reminders, and it will call participants at the require time. Watch the video on their website to gain a better understanding; it’s entertaining and true to life.
Uber Conference screenshot

Uber Conference screenshot

Those are a few of the software tools that I have found useful and so now you’re probably wondering “what else is out there for me?” The website The Freelance Stack lists many of different tools that exist. Check them out and some of the others may be of value to you. :
One of the key marketing approaches used by most of the tech companies is to provide a fully functional product for free and then charge money to access the enhanced features. The objective is to get future users familiarized and trained on the system, and then they will decide that they wish to upgrade their capability and so pay for the full product suite. I’m not sure if any geology or mining software  is available in a basic functional format enabling optional upgrading. By functional, I don’t mean simply providing a “viewer” to view the work of others or a 30-day trial period, I mean actual software that provides some actual useful capability for free in order to get you hooked.
My bottom line is that there is a lot of good stuff out there, readily available, much of it free, and it can make managing your project teams easier. Just because it’s related to the tech industry, don’t assume it wouldn’t have an application in the mining industry.
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47. Online Collaboration and Management Tools (Part 1)

As part of a new side business venture I have been working alongside a team of website and mobile app developers. It has been a good learning experience for me to see how the tech teams do things versus how the mining consulting industry conducts its business. We know there is a lot of private equity money flowing into tech and not mining, so they must be doing something right.
The tech start-up industry has developed its own set of jargon, like agile management, lean start-ups, disruption, minimum viable products, pings, and sprints. Some of their key methodologies would not make sense for the mining industry where one doesn’t have the luxury of trial-and-error and customer feedback to help complete your project. For software development, the attitude is get it out the door fast and your customers will then tell you what fixes they want to see. In mining you need to get it right the first time (hopefully). Having said that, some mining people will say they have seen 43-101 technical reports that follow the “wait for customer feedback” model.
Now where the tech industry can provide us with some useful advice is in the use of project management and collaboration tools. The software developers often work remotely and so make heavy use of the technology that exists or they develop new technology tools to meet their needs. Mining teams are starting to work from remote offices more often these days.
The following is a partial list (Part 1) of free software tools that I have used recently, mainly because I was forced to by the tech teams. Subsequently I have found the tools easy to use and most definitely some can be applied in our own industry, especially with diverse mining study teams. There are a lot more tech tools out there but my list includes the ones that I have personally come in contact with. Most of these are free to use with limited features and enhanced features are available if you subscribe to the full version at minimal cost. However even the free versions are useful and can be used to train your team. Most of them provide both web based and app based access so even when you’re on the road you can still use them and contribute to the team.
Trello: If you want to create a task list for your team, this is the app to use. Imagine a bunch of yellow post-it notes that you can put under various project categories, assign persons to each note, attached a file if you wish, and then have back and forth discussions within each note. Then once a task is done, just drag the note to another category (e.g. “In Progress”, “Completed”). Anyone or selected people can create a note or provide comment. See the image below for an example Trello screenshot.

 

Trello screenshot

Example Trello Screenshot

Slack: If you want to have a running record of group discussions that all or only selected team members can follow and join in on, then Slack is for you. It can replace the long confusing back-and-forth emails that we commonly see, when people sometimes forget to “reply all” so now you’re out of the loop. See the image below for an example Slack screenshot. It’s great for discussions amongst the team and you can have private one-on-one discussions or wide open team discussions and can attached files too. It provides permanent record of discussions or decisions made.
Slack Screenshot

Example Slack Screenshot

Basecamp: is similar program that incorporates features from both the above and some people swear by this tool. I have not personally used it so cannot vouch for it, but some say it is very good. Watch the video on their website describing what it can do.
My bottom line is that there is a lot of good stuff out there, readily available, much of it free, and can facilitate the management of your project teams. Just because its tech industry related, don’t assume it wouldn’t have an application in the mining world. Next week in Part 2 of this blog, I will describe a few more of the tech tools that I have found useful.
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46. Tailings Disposal Method Risk

After the Mt Polley and Samarco tailings failures, there have been ongoing conversations about the benefits of filtered or dry stack tailings as the only way to eliminate the risk of catastrophic tailings failure. Mining companies would all like to see a similar risk reduction at their own project. However what mining companies don’t like is the capital and operating costs associated with dry stacking. The dry stack tailings processing cost and the transport cost are both costlier than for conventional tailings disposal and therefore would negatively impact on the overall value of the project. Obviously this reduction in value would get offset against an improved environmental risk and a better closure condition. So what’s a company to do?

 

Filtered tailings stack

Example of a Dry Stack Tailings

In my experience when designing a new mining project, all mining companies at one point in time complete a trade-off study for different tailings disposal methods and disposal sites. Contrary to some environmental narratives, companies really do wish to know how the different tailings options compare because they would adopt the dry stack approach if it was the most advantageous method. The mining companies are fully aware of the benefits but the dilemma the company runs into is the cost and being able to somehow justify the technology. Complicating their final decision, companies also have options for reducing their tailings risk even if using another tailings disposal method and so the final decision can get very complex.
Often proponents of the risk analysis approach will use a risk-weighting approach to assign an expected economic cost to their tailings plans. For example, if the cost of a failure is $200 million and the risk is 0.1%, then the Expected Value is $200,000. The problem is that this is a theoretical calculation on an assumed likelihood of failure but in reality either the dam will fail or it won’t. So failure remediation money will be spent or it won’t be spent, it won’t be partially spent.
The degree of acceptable tailings risk therefore becomes a subjective factor. While implementing a dry stack may reduce the risk of catastrophic failure to zero, implementing a $100,000 per year monitoring program on a conventional tailings pond will reduce its risk. Implementing a $500,000 per year monitoring program would reduce that risk even further. Installing in a water treatment plant to enable periodic water releases may further lower the tailings risk. The company can look at different mitigations to keep lowering their risk, although recognizing that none of the mitigations would necessarily bring the risk down to zero. Finally the companies could compare the various risk mitigation costs against the incremental dry stack costs in order to arrive at an optimal path forward.
So the question becomes how low does one need to reduce the tailings storage risk before it is acceptable to shareholders, regulators, and the public. I don’t think the answer is that one must lower the risk down to zero. There are not many things in today’s world that have zero risk. Driving a car, flying in a plane, shipping crude oil by ocean tanker, having a natural gas furnace in your house..none of these have zero risk yet we accept them as part of living in modern society.
Environmental groups are always discussing ways of forcing regulators and mining companies to take action against the risk of tailings failure. This is commendable, however they generally fail to provide any guidance on what level of risk would be acceptable to them or to the public. It seems to be impossible for these groups to define what an acceptable risk is or provide any ideas other than the standard “shut down all mining” solution.
We know that in the long run mining is here to stay so we all should work together towards solutions. The solutions need to be realistic in order to be taken seriously and for them to play a role in redefining tailings disposal in modern mining. Dry stack may not be the only solution and we should be open to ways of improving the other tailings disposal methods so that companies have more low risk options available to  them.
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45. Do Any Junior Producers Model a Gold ETF?

I have often wondered if any of the junior gold producers has ever tried to model itself after a gold Exchange Traded Fund (“ETF”). This hybrid-model may be a way for companies to provide shareholders a way to partly leverage themselves to physical gold rather than leveraging solely to the performance of a mine. Let me explain further.
Consider two identical junior mining companies starting up a new mine. Each of their two projects is identical; 2 million gold ounces in the reserves with annual production of 200,000 ounces resulting in a 10 year mine life. On an annual basis, let’s assume their annual operating costs and debt repayments can be paid for by the revenue from selling 180,000 ounces of production. This would leave 20,000 gold ounces as “profit”. The question is what to do with those 20,000 ounces?

Gold Dore

Company A sells their entire gold production each year. At $1200/oz, the 20,000 oz gold “profit” would yield $24 million. Income taxes would be paid on this and the remaining cash can be spent or saved. Companies may decide to spend more on head offices costs by adding more people, or they may spend some on exploration, or they could spend on an acquisition to grow the company. There are plenty of ways to use this extra money but returning it to shareholders as a dividend isn’t typically one of them. Now let’s jump forward several years; 8 years for example. Company A may have been successful on grassroots exploration and added to reserves but historically exploration odds are working against them. If they actually saved a portion of the annual profit in the bank, say $10M of the $24M, after 8 years they may have $80M in cash reserves.
Company B only sells 180,000 ounces of gold each year and puts the remaining 20,000 ounces into inventory in a vault. Their annual profit-loss statement shows breakeven status since their gold sales only cover their financial commitments and nothing more. In this scenario, after 8 years Company B would have 160,000 gold ounces in their vault, valued at $192 million at $1200 gold price.
If you’re an investor looking at both these companies in the latter stages of their mine life, which one would you rather invest in? Company A has 400,000 ounces remaining in mineral reserves and say $80M cash in the bank. Company B also has 400,000 ounces of mineral reserves and $192 million worth of gold in the vault. If I’m a gold bull investor and foresee a $1700/oz gold price, then to me Company B might theoretically have $272M in the vault. If I’m a super gold bug, then their inventory could be worth a lot more..theoretically.
I assume that the enterprise value of Company A would be based on its remaining reserves at some $/oz factor plus its cash in the bank. Company B could be valued the same way plus its gold inventory. So for me Company B may be a much better investment than Company A in the latter stages of its mine life. In fact Company B could still persist as an entity after the mine has shutdown simply as a “fund” that holds physical gold. If I am a gold investor, then Company B as an investment asset might be of more interest to me.
My bottom line is that it appears that most of the time companies sell their entire annual gold production to try to show profit on the annual income statement. Possibly this is to put some cash in the bank and to show “earning per share” to the analysts. My question is why not inventory the extra gold and wait for prices to rise if the company doesn’t really need the money or doesn’t want to gamble it on exploration or acquisitions? This concept wouldn’t be a model for all junior miners but might be suitable for a few companies to target certain gold investors.  They could provide an alternative junior mining investment especially interesting in the final years of a mine life. Who wants to buy shares in a company who’s mine is nearly depleted?  I might if they hold a lot of gold.
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