Higher Metal Prices – Should Miners Lower the Cut-Off Grade?

Date: February 23, 2016 Author: Ken Kuchling Comments: 7 Replies

When metals prices are high, we are generally told that we should lower the cutoff grade. Our cutoff grade versus metal price formula tells us this is the correct thing do. Our grade-tonnage curve reaffirms this since we will now have more metal in the mineral reserve.

But is lowering the cutoff grade the right thing?

Books have been written on the subject of cutoff grades where readers can get all kinds of detailed logic and calculations using Greek symbols (F = δV* − dV*/dT). Here is one well known book by Ken Lane, available on Amazon HERE.

Recently we have seen a trend of higher cash costs at operating mines when commodity prices are high. Why is this?

It may be due to higher cost operating inputs due to increasing labour rates or supplies. It may also be partly due to the lowering of cutoff grades. This lowers the head grade, which then requires more tonnes to be milled to produce the same quantity of metal.

A mining construction manager once said to me that he never understood us mining guys who lower the cutoff grade when gold prices increase. His concern was that since the plant throughput rate is fixed, when gold prices are high we suddenly decide to lower the head grade and produce fewer and higher cost ounces of gold.

Do the opposite

His point was that we should do the opposite. When prices are high, we should produce more ounces of gold, not fewer. In essence, periods when supply is low (or demand is high) may not be the right time to further cut supply by lowering head grades.

Now this is the point where the grade-tonnage curve comes into play.

Certainly one can lower the cutoff grade, lower the head grade and produce fewer ounces of gold. The upside being an extension in the mine life. A company can report more ounces in reserves and perhaps the overall image of the company looks better (if it is being valued on reserves). To read more about the value of grade-tonnage curves, you check out this blog post “Grade-Tonnage Curves – Worthy of a Good Look“.

What if metal prices drop back?

The problem is that there is no guarantee that metal prices will remain where they are and the new lower cutoff grade will remain where it is. If the metal prices drop back down, the cutoff grade will be increased and the mineral reserve will revert back to where it was. All that was really done was accept a year of lower metal production for no real long term benefit.

This trade-off contrasts a short term vision (i.e. maximizing annual production) against a long term vision (i.e. extending mineral reserves).

Conclusion

The bottom line is that there is no simple answer on what to do with the cutoff grades. Hence there is a need to write books about it.

Different companies have different corporate objectives and each mining project will be unique with regards to the impacts of cutoff grade changes on the orebody.

I would like to caution that one should be mindful when plugging in new metal prices, and then running off to the mine operations department with the new cutoff grade. One should fully understand both the long term and short term impacts of that decision.

In another blog post on the cutoff grade issue, I discuss whether in poly-metallic deposits the cutoff should be based on metal equivalent or block NSR value. Neither approach is perfect, but I prefer the NSR option. You can read that post at “Metal Equivalent Grade versus NSR for Poly-Metallics“.

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Mining Fads and the Herd Mentality

Date: February 16, 2016 Author: Ken Kuchling Comments: 1 Reply

After having worked in the mining industry for over 40 years, it is interesting to experience the herd mentality that exists. Its fascinating to see how easily the industry gets caught chasing the latest fads and loses focus on the long term picture.

All it takes is a short term spike in a certain commodity price, or a big discovery somewhere, and then off goes the herd in that direction. It doesn’t matter the rationale driving the event, companies just know they need to be in there. Investors also know they need to be in there. Its classic FOMO; the fear of missing out.

These fad events, or crazes, can be based on certain commodities, jurisdictions, or technologies. The mining industry is flexible. Here are a few examples that I have seen; you may have others in your own experience.

Commodity Fads

Often as soon as there is a price spike or positive market narrative, commodity specific projects can take on a life of their own. The following are few examples, and when you reflect back on them, how many actually were a success for more than but a few.

Potash: several years ago potash prices spiked and acquiring potash leases was the fad. It didn’t matter where they were located around the globe, be it Canada, Russia, Ethiopia, Thailand, Brazil, etc. BHP even jumped in with both feet. The potash craze has largely fizzled out as prices returned to normal. We may be seeing a resurgence these days but not to the same level as in the past.
Lithium / Graphite: as soon as green battery technology started to be promoted in the news in 2016, miners couldn’t run fast enough to pick up the lithium properties. The same held for battery metals such graphite, vanadium, cobalt, and also rare earth categories. That was 2016. After a lull for a few years, the process restarted itself in 2022, although it seems the graphite – lithium excitement is now calming down in 2026.
Uranium: years ago uranium prices spiked and uranium properties were hot everywhere. Prices have dropped but seem to be ramping up again in late 2018 and the commodity is still somewhat hot in 2026.
Cobalt Excitement Curve

Cobalt: see the price chart on the right to see how cobalt went into a craze and then out of it. Companies jumped into cobalt projects, then jumped out when the price dropped.
Nickel: years ago a spike in nickel prices caused a surge in nickel properties, whether it was sulphide nickel, laterite nickel, or other forms. Lately in 2026 nickel is given some credit as battery metal, but not as hot as it was.
Iron Ore: in conjunction with the Chinese construction boom decades ago, iron ore properties were hot around the globe, whether in high cost or low cost jurisdictions, it didn’t matter where the property was. Iron is still being pursued but its a lot quieter today in 2026.
Diamonds: in conjunction with the first diamond discoveries in Canada in the 1990’s, diamond properties became super hot, whether in the Canada or around the globe. If you couldn’t get a property in Canada’s NWT boom area, places like Alberta, Sask, Ontario or anywhere globally was fine too. The luster of diamonds seems to be gone now.
China in general: decades ago every base metal project was thought of as either a potential supplier to China or a potential acquisition for Chinese companies. As long as it could meet Chinese investor interest the project was good. That is not the norm now, but China is still seen as a potential target for many junior miner liquidity events.
In mid 2026, it seems that everyone is starting to look at tungsten and rare earths. We will see how this enfolds going forward.

Regional Exploration Fads

We have all seen the staking rushes that occur when a world class prospect is discovered. I’m sure we can all recall getting the large claim maps (as shown in Ring of Fire map) with their multicolored graphics showing the patchwork of acquisitions around a discovery. PDAC was great for distributing these. They were well done and always interesting to study.

Picking up properties in hot areas (i.e. near-ology) became the fad and share prices would move upwards regardless of whether there was any favorable geology on the property, as long as it was in the region and made it onto the colorful map. Who recalls the following?

Voisey’s Bay: with a mad staking rush around Newfoundland, with nothing else really paying off in the long run.
Saskatchewan: the potash staking rush where almost every inch of the potash zone was staked with only a couple of companies eventually moving forward and only one or two going into production.
Indonesia: during Bre-X people could not acquire properties in Indonesia fast enough.
NWT: where the diamond property staking rush was crazy in the mid 1990’s.
BC Golden Triangle: where this seems to have been the hot area for the last few years.

Have I missed any areas that you see as hot?

Mining Technology Fads

Even mining or processing technologies could get caught up in somewhat of a wave and move the herd. Sometimes it was driven by suppliers or consultants. For the engineers out there, who can recall…

Paste Tailings: with numerous conferences and consultants promoting thickened or paste tailings technology as the panacea. This lead to numerous studies related to thickening, pumping, and disposal at each mine. The paste fad has now ended as companies moved toward filtered tailings instead.
Block Caving: whereby in order to deliver high tonnages at low cost, bulk underground mining was being promoted. Everyone wanted their underground project to be a low cost caving style operation. This block cave concept is still in play today, but higher metal prices may make conventional open pits a bit more economic.
High Pressure Grinding Rolls (HPGR): where process consultants would highlight HPGR as the new replacement for conventional grinding mills. I’m not sure this technology has taken the industry by storm as they were hoping in the 1990’s.
IPCC: whereby inpit crushing and conveying systems were being promoted in many articles and global conferences as the solution to operating cost issues. I think implementation of IPCC technology isn’t as simple as envisioned and I’m not aware of many cases of its successful implementation.
Dot.com: in the early 2000’s many junior miners left exploration behind and transitioned to the dot.com boom, a fad that essentially went nowhere for most.
Pre-concentration: this seems to be a growing technology that may be gaining momentum. It isn’t new technology and it will definitely have its benefits. However a big stumbling block is how many deposits are actually suitable for its application. I have written more about this technology “Pre-Concentration – Savior or Not?“
Stochastic Modelling: many proponents are pushing towards the use of probabilities in mine planning. Its still the early stage here, so we will see if this gains traction. The herd is not running in this direction .. yet.
AI: The use of AI to summarize reports, compile, and analyze data is now being promoted by several online platforms. As the previous example, we will see if this gains traction since the herd are not chasing this yet.

Have I missed any that you see as growing trends?

Conclusion

The bottom line is that over the years it has been interesting to watch the mining industry react to events. Sometimes it seems like we’re passengers on a ship, almost capsizing due to the industry running from one side to other side and then back again. Unfortunately that doesn’t necessarily make for smooth sailing.

What’s the next fad going to be? I don’t know … but if you can predict it, you can probably make a lot of money.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

For some free mining calculator apps, including project timelines and a simplified cashflow modeller, check out this website https://sites.google.com/view/drillingdown

Global Tax Regimes – How Do They Compare?

Date: February 9, 2016 Author: Ken Kuchling Comments: 3 Replies

Update: This blog was originally written in Feb 2016, but has been updated in Aug 2019.

As a reminder for all QP’s doing economic analysis for PEA’s, don’t forget that one needs to present the economic results on an after-tax basis.

Every once in a while I still see PEA technical reports issued with only pre-tax financials. That report is likely to get red- flagged by the securities regulators. The company will need to amend their press release and technical report to provide the after tax results. No harm done other than some red faces.

Taxes can be complicated

When doing a tax calculation in your model, where can you find international tax information? PWC has a very useful tax-related website. The weblink below was sent to me by one of my industry colleagues and I thought it would be good to share it.

The PWC micro-site provides a host of tax and royalty information for selected countries. The page is located at https://www.ey.com/gl/en/services/tax/global-tax-guide-archive

On the site they have a searchable database for tax information for specific countries.

The PWC tax and financial information includes topics such as:

Corporate tax rates
Excess profits taxes
Mineral taxes for different commodities
Mineral royalties
Rates of permissible amortization
VAT and other regulated payments
Export taxes
Withholding taxes
Fiscal stability agreements
Social contribution requirements

PWC has a great web site and hopefully they will keep the information up to date since tax changes happen constantly. The website also has a guide related to the rules for the treatment of capital expenditures. Check it out. https://www.ey.com/gl/en/services/tax/global-tax-guide-archive

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Resource Estimates – Are Independent Audits A Good Idea?

Date: February 2, 2016 Author: Ken Kuchling Comments: 2 Replies

(Orig-2016 Updated-2026)

Question: How important is the integrity of the tailings dam to the success of a mine?

Answer: Very important.

Tailings dam safety is so important that in some jurisdictions regulators are requiring that mining companies have independent review boards or third-party audits done on their tailings designs. The logic is that, although a reputable consultant may be doing the dam design, there is still a need for outside oversight. Differences in interpretation and experience, or errors and omission are always a possibility regardless of who does the design. A second set of eyes is beneficial.

Question: How important is the resource estimate to the success of a mine?

Answer: Critically important. The mine life, project economics, and shareholder value all rely on it. The resource estimate IS the project. So why aren’t third-party audits of the estimate that common?

NI43-101 Was The First Step

In the years prior to the NI 43-101 regulations, junior mining companies could develop their own resource estimates and disclose those results publicly. With the advent of NI 43-101, a second set of eyes was introduced, whereby an independent QP would need to review the company’s internal resource or prepare their own independent estimate. The QP ultimately takes legal responsibility for the estimate.

The QP is the sole and final arbiter, or are they?

Many resource estimates are prepared solely by the contracted independent QP. In most cases this estimate gets published without any other oversight. In other words, no second set of eyes has taken a deep dive into it. We recognize the QP is a qualified expert, but is their judgement without question and error free?

The past Parker Challenges have shown that different experts can arrive at different resource estimates using the exact same geological data. In my experience with due diligence, it is not uncommon for our resource expert to find disagreements with the target’s resource model. There likely is no one perfect resource model.

Audits – Good Idea or Not?

Like the tailings design, would it be a good idea for companies to have a second set of eyes take a look at the resource estimates developed by their independent QP’s? Probably yes, with a few caveats. First I would like to clarify that an independent review can consist of three levels of review.

Internal peer review: the idea is to catch errors before public release, working in collaboration with the responsible QP.
Independent technical review: purpose to independently validate methodology, interpretations, and conclusions used by the responsible QP.
Independent resource estimate: whereby the third party actually prepares an entirely new resource estimate. This is sometimes done by due diligence teams.

For a junior miner, I generally think the second option is the preferred approach. The company can have their responsible QP prepare the resource estimate, then have another genuinely independent QP review the database, geological model, estimation methodology, classification and reasonable-prospects assumptions.

What are the Pro’s and Con’s

There are both pro’s and con’s to undertaking such a cold eyes audit. It can create issues that will need to be dealt with, and these can be avoided by not doing the review at all.

Pros

Adds credibility to the resource: an independent review can give investors, analysts, lenders, and potential partners greater confidence in the estimate. This can be important for a company whose technical team or project has limited history.
Catches technical errors: An independent audit may identify problems involving geological interpretation, density assumptions, or grade estimation, classification, etc.
Improves the company’s internal controls: if they only have a few technical employees assisting or checking the work of the responsible QP.
Reduces financing and transaction risk: by having a resource that has been independently audited it may be easier to market to potential investors and financiers.
Provides an early warning before commencing a PEA or feasibility study. If the resource contains weaknesses, it is much cheaper to discover them during an audit than after spending money on the studies and then discovering the flaws.
Maybe identify upside: an experienced reviewer may identify opportunities to improve the model, expand the resource, improve classification, or reduce overly conservative assumptions.
Protects the board and management from a governance perspective: having an independent technical audit can show that management took reasonable steps to verify their most key material technical disclosure.

Cons

It costs money: for a small junior, an independent resource audit can be a significant expense. The cost can be difficult to justify if the deposit is still at an early exploration stage and the resource is going to eventually change substantially with further drilling.
It can delay disclosure: a proper audit requires access to drill data, geological models, databases, QA/QC information, estimation parameters and supporting documentation. This will delay the disclosure of the resource update or technical report.
The auditor may disagree with the company’s QP. Although this can be a positive, it can also be painful. It may create difficult situations where the reviewer suggests shrinking the resource or modifying the geological interpretation.
“Independent” doesn’t necessarily mean completely independent since the reviewer is still being paid by the company, directed by the company, and could try to gain favor for future work. The audit may be closer to a peer review rather than a truly independent audit.
It can create false confidence. An independent audit doesn’t guarantee that the resource is correct. Two competent QPs can still legitimately produce somewhat different estimates. Which one is correct?
Potential liability and disclosure issues: if the audit identifies a material problem, the company may be forced to address it. Once management is aware of a material technical deficiency, simply ignoring it can create a much bigger governance and disclosure problem.

Repeated audits can become expensive and inefficient. Hence one would not want to do them every time a minor change is made to the resource model. But at least one audit may provide learnings that improve subsequent resource updates.

The Bottom Line

For a junior mining company preparing a material resource estimate, I’d strongly recommend an independent audit at some point, albeit under certain conditions. For example:

when the resource is going to be a major valuation driver for the company;
if the company is starting a PEA or feasibility study;
if the company is raising significant capital and needs credibility;
if there has been a major change in the geological interpretation;
if the company is selling the project and independent audits will likely be done by acquirers;
if management has concerns about the robustness of the estimate due to complex geology or metallurgy.

An independent audit is likely not required every time the resource is updated. However resource estimates have been shown to be wrong from time to time by the economic failures of some new mines.

Would an independent audit have prevented these failures – I don’t know. However, one doesn’t want their own company to become one of these case studies, so take all possible steps to avoid it.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

For some free mining calculator apps, including project timelines and a simplified cashflow modeller, check out this website https://sites.google.com/view/drillingdown

Disrupt Mining Challenge – Watch for it at PDAC

Date: January 26, 2016 Author: Ken Kuchling Comments: 2 Replies

Update: This blog was originally written in January 2016, and has been updated for Jan 2018.

In 2016 at PDAC, Integra Gold held the first the Gold Rush Challenge. It was an innovative event for the mining industry. It was following along on the footsteps of the Goldcorp Challenge held way back in 2001.

The Integra Gold Rush Challenge was a contest whereby entrants were given access to a geological database and asked to prepare submissions presenting the best prospects for the next gold discovery on the Lamaque property. Winners would get a share of the C$1 million prize.

Integra Gold hoped that the contest would expand their access to quality people outside their company enabling their own in-house geological team to focus on other exploration projects. In total 1,342 entrants from over 83 countries registered to compete in the challenge. A team from SGS Canada won the prize.

Then Disrupt Mining came along

In 2017, its seem the next step in the innovation process was the creation of Disrupt Mining sponsoerd by Goldcorp. Companies and teams developing new technologies would compete to win a $1 million prize.

In 2017, the co-winning teams were from Cementation Canada (new hoisting technology) and Kore Geosystems (data analystics for decision making).

In 2018, the winning team was from Acoustic Zoom, an new way to undertake seismic surveys.

The 2019 winners will be announced at PDAC. The entry deadline has passed so you’re out of luck for this year.

Conclusion

At PDAC there are always a lot of things to do, from networking, visiting booths, presentations, trade shows, gala dinners, and hospitality suites.

Now Disrupt Mining brings another event for your PDAC agenda.

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Measured vs. Indicated Resources – Do We Treat Them the Same?

Date: January 19, 2016 Author: Ken Kuchling Comments: 6 Replies

(Orig 2016 Updated 2026) One of the first things we normally look at when examining a mineral resource estimate is how much of the resource is classified as Measured and Indicated (“M+I”) and then compare that to the Inferred tonnage. It seems to be important to understand the uncertainty in the resource estimate and how much the Inferred contributes to the overall tonnage. Sometimes we even break the rules and add together the M+I tonnage with the Inferred tonnage.

The mining engineer needs to juggle all three classifications. Having said that, how much emphasis do we put on the split between the Measured and Indicated tonnages? How much emphasis should be put on the Inferred resource by itself?

Inferred Resources Play a Role

We are all aware of the NI 43-101 restrictions imposed on the Inferred resources in mining studies. They are deemed highly speculative, and hence cannot be used in the economic models for pre-feasibility and feasibility studies. However Inferred resource are used for pit design and production planing in a Preliminary Economic Assessment (“PEA”).

Inferred resources are so speculative that a company is not permitted to add them to the Measure and Indicated tonnages in a resource statement (although that is what every investor automatically does). I don’t really understand that concern in a Mineral Resource statement if it clearly includes a line that adds M+I tonnage with Inferred tonnes – as long as everything is transparent. It provides an easy way to see what portion of the total resource is Inferred.

Its a bit contradictory that when a PEA mining schedule is developed, the three resource classifications can be combined into a single tonnage value. However in the Mineral Resource statement itself, the M+I+I cannot be totaled.

I understand that a company must provide information as to how much of the PEA production schedule is based on Inferred Resources, although often they do not provide this breakdown. Next time you are reviewing a 43-101 report for a PEA, take a look if it is provided.

Are Measured Resources Important?

It appears to me that investors are often more interested in what resource tonnage meets the M+I threshold but are less focussed on the tonnage split between Measured and Indicated.

It seems that M+I are largely viewed as being somewhat the same. Since both Measured and Indicated resources can be used in a pre-feasibility economic analysis, does it matter if the tonnage is 100% Measured (Proven) or 100% Indicated (Probable)?

The NI 43-101 and CIM guidelines provide definitions for Measured and Indicated Mineral Resources, but do not specify any different treatment like they do for the Inferred resources. If Measured has more certainty than Indicated, should we be able to apply their tonnages interchangeably?

Relationship between Mineral Reserves and Mineral Resources (CIM Definition Standards).

In my experience with some feasibility studies, a few people did apply a rule-of-thumb that the majority of the tonnage mined during the payback period must consist of higher confidence Measure resource (i.e. Proven reserve).

The idea was to reduce project risk by ensuring the production tonnage during the capital recovery period is mining the resource with the highest certainty in tonnes and grade.

Generally I do not see this requirement used that often anymore, although I am not aware of what everyone is doing in every study. It would be good to see more transparency on this in the studies. Perhaps this may explain why some recent projects put into production had difficulty meeting grade targets and then ran into trouble.

I realize there is a cost, and possibly a significant cost, to infill drill to convert Indicated resource to Measured. Hence there may be some hesitation in this approach. Likely it is simpler for everyone to just view the Measured and Indicated tonnages as one. Note that some algorithyms are now available to help optimize infill drill programs to get the most bang for the buck (see this blog pot Let A.I. Help Target Your Infill Drilling).

Conclusion

NI 43-101 specifies how the Inferred resource can and cannot be used. Given some of the project failures, is it a matter of time before the regulators start specifying how Measured and Indicated resources must be used? There is merit to this idea, however adding more regulation (and cost) to an already burdened industry would not be helpful. Ultimately it is up to the mining companies and financiers as to how far they want to see the re-risking step go.

In lieu of more regulations, perhaps in the interest of transparency, feasibility studies should add two new rows to the bottom of the production schedule. These rows would show how the annual mining and processing tonnages are split between Proven (Measured) and Probable (Indicated) categories. This would enable one to can get a sense of the resource risk in the early years of the project.

Given the capabilities of today’s mining software, it is not difficult to provide this additional detail. Companies with a high proportion of Measured in their Feasibility Study can use this a way to promote their de-risking efforts. Now we just need to ensure that the resource estimation consultants actually classify Measured as very high certainty resources.

I don’t want to give the impression that Inferred resources are unimportant. They do play a role in mine design and permitting, as discussed in this post “The Double Life of Inferred Resources: Now You See It – Now You Don’t“.

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Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

For some free mining calculator apps, including project timelines and a simplified cashflow modeller, check out this website https://sites.google.com/view/drillingdown

Claim Fees Paid for a Royalty Interest – Good Deal or Not?

Date: January 12, 2016 Author: Ken Kuchling Comments: 2 Replies

In 2016 I read several articles about how the junior mining industry must innovate to stay relevant. Innovation and changing with the times are what is needed in this economic climate.

One company that was trying something new is Abitibi Royalties. They were promoting a new way for them to acquire royalty interests in early stage properties. They were offering to fund the claim fees on behalf of the property owner in return for a royalty.

Their corporate website states that they would pay, for a specified period of time, the claim fees/taxes related to existing mineral properties or related to the staking of new mineral properties.

In return, Abitibi Royalties would be granted a net smelter royalty (“NSR”) on the property. It may be a gamble, but it’s not a high stakes gamble given the relatively low investment needed.

Not just anywhere

Abitibi were specifically targeting exploration properties near an operating mine in the Americas. They were keeping jurisdiction risk to a minimum. Abitibi stated that their due diligence and decision-making process was fast, generally within 48 hours. No waiting around here but likely this is possible due to the low investment required and often the lack of geological information to do actually do a due diligence on.

To give some recent examples, in a December 14, 2015 press release, Abitibi state that the intend to acquire a 2% NSR on two claims in Quebec and will pay approximately $11,700 and reimburse the claim owner approximately $13,750 in future exploration expenses. This cash will be used by the owner towards paying claim renewal fees and exploration work commitments due in 2016. Upon completion of the transaction, these will be the ninth and tenth royalties acquired through the Abitibi Royalty Search. For comparison, some of their other royalty acquisitions cost were in the range of $5,000 to $10,000 each (per year I assume). I think that those NSR interests are being acquired quite cheaply.

The benefit to the property owner may be twofold; they may have no other funding options available and they are building a relationship with a group that will have an interest in helping the project move forward. The downside is that they have now encumbered that property with a NSR royalty going forward.

The benefit to Abitibi Royalties is that they have acquired an early stage NSR royalty quite cheaply although there will be significant uncertainty about ever seeing any royalty payments from the project. Abitibi may also have to continue to make ongoing payments to ensure the claims remain in good standing with the owner.

It’s good to see some degree of innovation at work here, although the method of promotion for the concept may be more innovative than the concept itself. Unfortunately these Abitibi cash injections investments are not enough to pay for much actual exploration on the property and this is where the further innovation is required, whether through crowd funding, private equity, or some other means. I’m curious to see if other companies will follow the Abitibi royalty model but extend it to foreign and more risky properties.

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3D Model Printing – Who To Contact?

Date: January 2, 2016 Author: Ken Kuchling Comments: 7 Replies

One of the technologies that is still getting a lot of press is 3D printing. It seems new articles appear daily describing some fresh and novel use. Everything from home construction, food preparation, medical supplies, and industrial applications, 3D printing continues to find new applications in a wide range of disciplines.

Mining can take advantage of 3D printing

In a previous blog “3D Printing – A Simple Idea”, I discussed the helpfulness of printing 3D topographic models for the team members of a mining study. I was recently contacted by a consulting firm in Texas that specializes in printing 3D mining models. Here is their story and a few model images as provided to me by Matt Blattman of Blattman Brothers Consulting. (www.blattbros.com/3dprinting)

Blattman Brothers Consulting

Their 3D printed models are used in the same way geologists and mining engineers have employed models for decades. In the past we saw the physical models made of stacked mylar or plexi-glass maps, wood or foam core. We recognized that there is value in taking two dimensional sections or plan maps and making a 3D representation. This provides more information than those viewed on a computer screen.

Physical models convey scale, interactions and scope in ways that no other method can. Technology like 3D printing improves the model-making process by allowing the addition of high def orthophotos, reducing the model cost, increasing its precision and delivery time.

Currently 3D models can be made in a variety of materials, but the primary three are extruded plastic, gypsum powder, or acrylics.

Plastic models (ABS or PLA) are cheap, fast and can created on relatively inexpensive, hobbyist printers. The downside to these models is that the number of colors available in a single model are limited, typically a single color.

Powder-based printers can typically print in 6.5M colors, allowing for vibrant, photo-realistic colors and infinite choices for title blocks, logos and artistic techniques. However, gypsum models can be as fragile as porcelain and require some care in handling.
Acrylic models allow for translucent printing (“looking into the ground to see the geological structure”) and are more durable than the gypsum. Nevertheless, acrylic models are significantly more expensive than the other two types and the color palettes are limited.

Here are some examples.

Leapfrog Model

Acrylic Model

Powder Based 3D Model

Blattman’s models are created from the same 3D digital data already in use by most companies involved in geological modeling and mine design. Other than the units (meters versus millimeters), the triangulated surfaces created by the software are no different than those created by mechanical or artistic 3D modeling programs.

While many 3D printing services are available on the market, not all of them are able to speak “mining”. They may not be able to walk the skilled geologist or mining engineer through the process of creating the necessary digital formats and that’s where Blattman comes in. With more than 20 years of mining experience and having already gone through the 3D printing learning curve, they can assist any natural resource company through the process, either as a full-service/turn-key project or just to advise the client on how to prepare their own files.

Conclusion

The bottom line is that 3D printing is here to stay and its getting better each year. Go ahead and check out the technology to see if it can advance your path forward .

We would be interested in hearing about any experiences your have had with 3D modelling, pro’s and con’s.

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Fluid Tailings – Time to Kick The Habit?

Date: November 12, 2015 Author: Ken Kuchling Comments: 8 Replies

What is one thing that we constantly hear about negatively yet we continue to do it (although we know it can be bad for us)? Is that thing smoking or is it fluid tailings storage? Can we break either of these habits?

Short term pain for long term gain.

Those of us in the mining industry constantly hear from stakeholders about the negative impacts of fluid tailings storage. By “fluid” I mean conventional tailings that can liquify and flow great distances. We know of numerous mines that have had failures, resulting in fatalities and catastrophic damage. Check out the horrific example video below. It appears some people were walking or driving mid-way up the dam face.

We also know of many mines that have used fluid tailings their entire operating lives without any incidents. Therefore some say it is fine to continue doing that.

The question for me has become whether the mining industry should kick the habit of fluid tailings storage even though not every dam has failed.

Quitting isn’t easy

Quitting smoking takes real effort, some pain, maybe a change in lifestyle, but most importantly an overall commitment to quit. It isn’t easy but pays off in the long run.

The same holds for fluid tailings storage.

Moving away from conventional tailings storage requires real effort, some pain, a change in operating style, and a commitment to quit. It won’t be easy but will pay off in the long run by avoiding major tailings incidents, less negative press, and fewer environmental permitting issues. No longer will consultants and regulators be disputing factors of safety of 1.2 versus 1.5, when they could be discussing factors of safety of 5 versus 10.

Quitting fluid tailings storage may bring relief to stakeholders, shareholders, regulators, and mine management. They’ll all sleep better at night knowing there isn’t a large mass of fluid being restrained simply by a dam at a factor of safety of 1.5. Engineers say they can design dams that will be stable for perpetuity. Even if one agrees with that statement, that is still no guarantee that failures won’t happen somewhere.

Conclusion

The bottom line is that no one wants to sit downwind of a smoker and no one wants to live downstream of a tailings dam. Perhaps it is time for the mining industry to kick the habit of fluid tailings storage, regardless of the cost and discomfort. Short term pain for long term gain.

In another blog post I have discussed how tailings storage always require a tradeoff between cost and risk. Normally lower cost options present high risks, and vice versa. How much risk is acceptable to a company or to the public? You can read that post at this link “Tailings Disposal Method Risk“.

For those wishing to pursue the dry stack approach, a series of laboratory tests are required to characterize the talings, the process, and the placement method. You can see a checklist of the test options at this blog post “Filtered Tailings Testing Checklist“.

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Constraints: Use Them to Your Advantage

Date: August 22, 2015 Author: Ken Kuchling Comments: Leave a reply

I recently read a business book called “A Beautiful Constraint: How to Transform Your Limitations into Advantages, and Why It’s Everyone’s Business” by Adam Morgan and Mark Barden. It describes how to use constraints, like lack of time, or money, or resources and use them to help transform your company for the better.

Here’s an Amazon link to the book.

The book discusses how to shift away from the typical “victim” role by understanding how our routines control things, ask the right questions, and focus on “how” and not “if”.

Focus on HOW and not IF

A good example: one of the recommendations in the book is in your team meetings no one on your team is allowed to utter the words “we can’t because…”. They must replace those words with “we can if…”. This forces the generation of ideas and promotes a positive attitude rather than a victim attitude.

The book describes how many innovative ideas are due to constraints and those innovations would never have come about without those constraints.

To force innovation in your organization you can create artificial constraints for your team. This will foster innovative thinking and push for “outside the box” ideas. The tougher the constraint, the greater the challenge for your team. Possibly the greater the final outcome too.

The term Theory of Constraints may be common to some. However that concept is different than what is being discussed in the book. The TOC essentially relies on managing a constraint or eliminating it, and then addressing the next constraint in sequence.

The book authors instead propose to exploit the constraint or leverage it to create a new possibility. Hence the title “beautiful constraint”.

Mining has no shortage of constraints

We all know the mining industry has more than enough constraints placed upon it today. It may be lack of funding, lack of skilled talent, environmental pressures, supply-demand issues, social issues, or security issues. Each mining project may have additional constraints, so one probably doesn’t need to create artificial constraints for the team.

The mining industry has no option but to try to use these constraints in a constructive manner. Miners must not let them pull the industry down nor simply wait until they go away. When people say “Mining is cyclical and it will all turn around soon.”, that’s an example of waiting for the constraint to go away.

How long do you wait before taking your own action?

The bottom line is that the book is an eye opener and enlightening. It may be telling some of us what we already know deep inside but don’t acknowledge openly. Don’t wait any longer, start innovating, and don’t be afraid of grand innovations.

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When metals prices are high, we are generally told that we should lower the cutoff grade. Our cutoff grade versus metal price formula tells us this is the correct thing do. Our grade-tonnage curve reaffirms this since we will now have more metal in the mineral reserve.

But is lowering the cutoff grade the right thing?

Books have been written on the subject of cutoff grades where readers can get all kinds of detailed logic and calculations using Greek symbols (F = δV* − dV*/dT). Here is one well known book by Ken Lane, available on Amazon HERE.

Recently we have seen a trend of higher cash costs at operating mines when commodity prices are high. Why is this?

It may be due to higher cost operating inputs due to increasing labour rates or supplies. It may also be partly due to the lowering of cutoff grades. This lowers the head grade, which then requires more tonnes to be milled to produce the same quantity of metal.

Do the opposite

His point was that we should do the opposite. When prices are high, we should produce more ounces of gold, not fewer. In essence, periods when supply is low (or demand is high) may not be the right time to further cut supply by lowering head grades.

Now this is the point where the grade-tonnage curve comes into play.

What if metal prices drop back?

This trade-off contrasts a short term vision (i.e. maximizing annual production) against a long term vision (i.e. extending mineral reserves).

Conclusion

The bottom line is that there is no simple answer on what to do with the cutoff grades. Hence there is a need to write books about it.

Different companies have different corporate objectives and each mining project will be unique with regards to the impacts of cutoff grade changes on the orebody.

I would like to caution that one should be mindful when plugging in new metal prices, and then running off to the mine operations department with the new cutoff grade. One should fully understand both the long term and short term impacts of that decision.

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After having worked in the mining industry for over 40 years, it is interesting to experience the herd mentality that exists. Its fascinating to see how easily the industry gets caught chasing the latest fads and loses focus on the long term picture.

These fad events, or crazes, can be based on certain commodities, jurisdictions, or technologies. The mining industry is flexible. Here are a few examples that I have seen; you may have others in your own experience.

Commodity Fads

Often as soon as there is a price spike or positive market narrative, commodity specific projects can take on a life of their own. The following are few examples, and when you reflect back on them, how many actually were a success for more than but a few.

Uranium: years ago uranium prices spiked and uranium properties were hot everywhere. Prices have dropped but seem to be ramping up again in late 2018 and the commodity is still somewhat hot in 2026.

Cobalt: see the price chart on the right to see how cobalt went into a craze and then out of it. Companies jumped into cobalt projects, then jumped out when the price dropped.

Nickel: years ago a spike in nickel prices caused a surge in nickel properties, whether it was sulphide nickel, laterite nickel, or other forms. Lately in 2026 nickel is given some credit as battery metal, but not as hot as it was.

Iron Ore: in conjunction with the Chinese construction boom decades ago, iron ore properties were hot around the globe, whether in high cost or low cost jurisdictions, it didn’t matter where the property was. Iron is still being pursued but its a lot quieter today in 2026.

In mid 2026, it seems that everyone is starting to look at tungsten and rare earths. We will see how this enfolds going forward.

Regional Exploration Fads

Picking up properties in hot areas (i.e. near-ology) became the fad and share prices would move upwards regardless of whether there was any favorable geology on the property, as long as it was in the region and made it onto the colorful map. Who recalls the following?

Voisey’s Bay: with a mad staking rush around Newfoundland, with nothing else really paying off in the long run.

Saskatchewan: the potash staking rush where almost every inch of the potash zone was staked with only a couple of companies eventually moving forward and only one or two going into production.

Indonesia: during Bre-X people could not acquire properties in Indonesia fast enough.

NWT: where the diamond property staking rush was crazy in the mid 1990’s.

BC Golden Triangle: where this seems to have been the hot area for the last few years.

Have I missed any areas that you see as hot?

Mining Technology Fads

Even mining or processing technologies could get caught up in somewhat of a wave and move the herd. Sometimes it was driven by suppliers or consultants. For the engineers out there, who can recall…

Paste Tailings: with numerous conferences and consultants promoting thickened or paste tailings technology as the panacea. This lead to numerous studies related to thickening, pumping, and disposal at each mine. The paste fad has now ended as companies moved toward filtered tailings instead.

High Pressure Grinding Rolls (HPGR): where process consultants would highlight HPGR as the new replacement for conventional grinding mills. I’m not sure this technology has taken the industry by storm as they were hoping in the 1990’s.

IPCC: whereby inpit crushing and conveying systems were being promoted in many articles and global conferences as the solution to operating cost issues. I think implementation of IPCC technology isn’t as simple as envisioned and I’m not aware of many cases of its successful implementation.

Dot.com: in the early 2000’s many junior miners left exploration behind and transitioned to the dot.com boom, a fad that essentially went nowhere for most.

Stochastic Modelling: many proponents are pushing towards the use of probabilities in mine planning. Its still the early stage here, so we will see if this gains traction. The herd is not running in this direction .. yet.

AI: The use of AI to summarize reports, compile, and analyze data is now being promoted by several online platforms. As the previous example, we will see if this gains traction since the herd are not chasing this yet.

Have I missed any that you see as growing trends?

Conclusion

What’s the next fad going to be? I don’t know … but if you can predict it, you can probably make a lot of money.

Note: You can sign up for the KJK mailing list to get notified when new blogs are posted. Follow me on Twitter at @KJKLtd for updates and other mining posts. The entire blog post library can be found at https://kuchling.com/library/

For some free mining calculator apps, including project timelines and a simplified cashflow modeller, check out this website https://sites.google.com/view/drillingdown

Update: This blog was originally written in Feb 2016, but has been updated in Aug 2019.

As a reminder for all QP’s doing economic analysis for PEA’s, don’t forget that one needs to present the economic results on an after-tax basis.

Taxes can be complicated

When doing a tax calculation in your model, where can you find international tax information? PWC has a very useful tax-related website. The weblink below was sent to me by one of my industry colleagues and I thought it would be good to share it.

The PWC micro-site provides a host of tax and royalty information for selected countries. The page is located at https://www.ey.com/gl/en/services/tax/global-tax-guide-archive

On the site they have a searchable database for tax information for specific countries.

The PWC tax and financial information includes topics such as:

Corporate tax rates

Excess profits taxes

Mineral taxes for different commodities

Mineral royalties

Rates of permissible amortization

VAT and other regulated payments

Export taxes

Withholding taxes

Fiscal stability agreements

Social contribution requirements

PWC has a great web site and hopefully they will keep the information up to date since tax changes happen constantly. The website also has a guide related to the rules for the treatment of capital expenditures. Check it out. https://www.ey.com/gl/en/services/tax/global-tax-guide-archive

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(Orig-2016 Updated-2026)

Question: How important is the integrity of the tailings dam to the success of a mine?

Answer: Very important.

Question: How important is the resource estimate to the success of a mine?

Answer: Critically important. The mine life, project economics, and shareholder value all rely on it. The resource estimate IS the project. So why aren’t third-party audits of the estimate that common?

NI43-101 Was The First Step

The QP is the sole and final arbiter, or are they?

Audits – Good Idea or Not?

Like the tailings design, would it be a good idea for companies to have a second set of eyes take a look at the resource estimates developed by their independent QP’s? Probably yes, with a few caveats. First I would like to clarify that an independent review can consist of three levels of review.

Internal peer review: the idea is to catch errors before public release, working in collaboration with the responsible QP.

Independent technical review: purpose to independently validate methodology, interpretations, and conclusions used by the responsible QP.

Independent resource estimate: whereby the third party actually prepares an entirely new resource estimate. This is sometimes done by due diligence teams.

What are the Pro’s and Con’s

There are both pro’s and con’s to undertaking such a cold eyes audit. It can create issues that will need to be dealt with, and these can be avoided by not doing the review at all.

Pros

Adds credibility to the resource: an independent review can give investors, analysts, lenders, and potential partners greater confidence in the estimate. This can be important for a company whose technical team or project has limited history.