CHAPTER 2

PRELIMANARY PHASES
OF INVESTIGATION
PLANNING FIELD WORK---------The field work involved in examining a mine varies
widely, depending to a large extent upon the type of property under inspection, the object
and type of examination, and the familiarity of the engineer with the mine. It is obvious
that examination of an undeveloped prospect or claim involves a difference field
procedure from the evaluation of a fully developed operating mine.
Prospect-------In examining a prospect, the engineer generally conducts his field work
along the following line:
1. Geology
2. Drill records and drilling
3. Sampling outcrops and pits
4. Estimate plant cost and, transportation cost, etc.
5. Market conditions and future possibilities.
The allimportant question to be answered in examining a prospect is What chance has
it to become a mine? Since tangible evidences are usually lacking, the verdict will
depend, necessarily, upon the engineers opinion rather than demonstrable fact. A
majority of prospects have usually been examined several times and as often turned
down. Ordinarily, no brilliant showings will be found. At any time, however, a study of
local geology, access to new facts, or the discovery of other evidence not noticed or not
utilized by preceding engineers may change the aspect of the situation and give the
prospect a different valuating rating.
Ancient Workings----In the examination of ancient workings,1 or antiguas, the first step
is to make a map of the property and pleased the geology on it, because faulting was not
understood in the early days. The workings can then be sampled to determine whether or
not profit can be made by modern methods. The engineer will do well to guard against
certain misconceptions in regard to this type of property.
An ancient working does not necessarily imply rich ore or a valuable property. If slave
labour was used the operators could work even lean ore bodies at a profit. They did not
modern implements, however, and, as a result, could not mine much below water level.
If, in the examination of an ancient mine, the engineer finds that the pay shoots were
short and the stopes were narrow, there is little chance for further exploration except
below water level or through an analysis of fault offsets.
Operating Property----An examination of an operating property should cover the
following points:
1. Estimated of past and present management.
2. Study of office data, such as mine maps, surface and underground geological maps,
drill records, sample maps, cost sheets, productive history, etc.

3. Underground geology inspections.

4. Check sampling at vital points.
5. Study of methods to find weaknesses
6. Survey of plant, equipment, etc.
7. Estimate of future costs, life, and expected profits.
8. Computation of value.
A simple outline form is given here, listing important to be covered in examining a
property. The form, of course, is subject to change to suit the conditions found in the
field, but the main points to be considered will probably be familiar in all cases:

PRELIMANARY PHASES OF INVESTIGATION

Outline for Mine Examination
Property ..
Location .
Date.
Client
Engineer
Purpose and scope of examination. Agreement between engineer and client as to
details: field work, personnel, date of preliminary report, time of completion, fee,
advance payment, etc.
1. Geography.
Map of mine location and nearby territory, showing topography.
Map of country or district, showing towns, roads, rail roads, etc.
Survey of transportation facilities and relation of mine to markets.
Summary of freight rates, power rates, etc.
Climatic conditions: snow, rainfall, etc.
2. History.
(a) Legal
Claim recorded.
Title recorded.
Changes of ownership ---- abstract of title.
Tax history
Leases, water and mill rights, royalties, etc.
Suit in court, claim conflicts, litigations, etc.

(b) Productive
Record of production since beginning
Record of shutdowns and reasons
Production of surrounding district.
(c) Financial
Pre-organization agreements.
Capitalization
Stock issued for cash.
Stock issued for services
Stock issued for property.
Profits, dividends, assessments.
Reorganisations and consolidations.
Comparison of yearly statements.
Present financial structure and standing.
3. Management.
Personal and organisation.
Character, attitude, and capability.
Comparison with operators of other similar mines
Efficiency; past and present.
4. Geology.
Study of district through:
1. U.S.G.S (Direktorat Geologi)
2. State Publications
3. Publication of technical societies.
Study of surface features.
Study of underground structure from:
1. Mine maps and underground examination.
2. Drill hole data and inspection of drill core and samples.
Deductions as to formations, structures, and ore bodies.
5. Sampling.
Study of all records.
Check of previous results.
Sampling of new workings.
Correlation with geology.
6. Estimate of Ore Reserves.
Outlining of assured and probable ore reserves by correlation of geology, sampling,
and mine maps.
Test of tonnage factor.
Estimate of reserves: positive, probable, and possible.
2000
Tf = Cuft/s.Ton
62.5 x Sp. gr

Vol(Cuft)
Vol(Cuft) 62.5 x Sp. gr
Tonnage = , Ton = , s. Tons
Tf
2000 Vol(Cuft)
Example: What is the tonnage of ore if the volume of ore is 3,616,800 Cuft, and the sp.gr
is 3.0? The answere =
3,616,800 Cuft x 62.5 x 3.0
= 339,075 s. Tons
2000 Cuft

2240
Tf = Cuft/l.Ton
62.5 x Sp. gr

Fig. 11.6 Variable Factors in Coal Reserves Assessment. From Ward (1984)
Source:Hand book of Practical Coal Geology

Calculate Value and Profit

Estimate the unit profit in mining and processing a 0.60 % copper ore deposit if the selling price of copper
in the concentrate is 74 cent/lb ($1.63/kg) and overal unit costs are $6.80/ton ($7.50/tonne). Overal
recovery is 92 %.
SOLUTION: Calculate the value of the ore
Value = grade x recovery x price x 2000 lb/ton
= 0.60 % x 92 % x 0.74 x 2000 = $8.17/ton($9.00/tonne)
Profit = Value - Cost
= 8.17/ton - 6.80/ton
= $1.37/ton ($1.51/tonne)
Cost(mining & processing)/ton
Cut off grade =

Price of concentrate ($/lb) x Overall Recovery

$6.80/ton

$0.74/lb x 92 %

= 0.50 %

S(0) = reserves yang ada (tersedia)

Ro(0) = laju ekstraksi sekarang pada insitu resource.
Seandainya laju ektraksi mengalami pertumbuhan dengan laju pertumbuhan konstan
setiap tahun sebesar r (misalnya produksi/ konsumsi tumbuh sebesar 4 persen).
Hubungan antara ekstraksi sekarang dengan perkiraan pertumbuhan
ekstraksi/produksi/konsumsi yang akan datang sebesar r, dapat ditulis seperti persamaan
berikut :
Ro(t) = Ro(0).ert ,.......................,1
Perbandingan antara jumlah reserves dengan jumlah ekstraksi mula-mula/sekarang
(Reserves/use ratio todays) adalah :
S(0)
= Y years,......................., 2
Ro(0)
Apabila ekstraksi Ro dipertahankan pada Ro(0) unit per tahun, maka reserves akan habis
pada waktu tahun Y. Tetapi apabila Ro berubah dengan perubahan tetap setiap tahunnya,
kapan reserves akan habis ? (when will we really run out ?), maka Howe selanjutnya
membuat formulasi cumulative ectraction resource pada waktu tahun T sebagai berikut :
_
Ro (T) =

T
Ro(t) dt =

rt

Ro(0)e dt =

Ro(0)
(erT-1),................,3
r

0
0
_
Sedangkan Ro (T) adalah S(0), sedangkan S(0) = Ro(0).Y, sehingga persamaan diatas
menjadi
Ro(0)
= Ro(0).Y = (erT-1) ,................,4
r
rY =(erT-1), sehingga
ln (rY + 1)
T

r0
for

,................,5
ry + 1 > 0

T = adalah waktu reserves (tahun) akan habis untuk ektraksi reserves dengan perubahan
tetap, sebagai jawaban dari pertanyaan when will we really run out of the reserves?
Y akan mengalami overstates terhadap kehabisan reserves apabila r > 0, dan Y akan
mengalami understates terhadap kehabisan reserves apabila r < 0.
Besarnya perubahan Y menjadi T akibat kenaikan/penurunan ekstraksi dari reserves r
tergantung dari besar/kecilnya angka r itu sendiri. Sebagai contoh apabila harga Y 100

dan r 5 %, maka T adalah 36, dan bila Y 50, r -0.005 maka T = 58, seperti ditunjukkan
oleh tabel 1 berikut :
Date of Exhaustion As a
Function of Y and r
r
Y
T

-0.005
0.00
0.05
0.10
0.15

100
100
100
100
100

139
100
36
24
18

-0.005
50
58
0.00
50
50
0.05
50
25
0.10
50
18
0.15
50
14

7. Methods and Costs.

Mining-----Method in use, estimate of percent of recovery.
Advisable of improvements.
Relation of development work to mining.
Itemization of costs for recent periods.
Estimate of most economical rate of mining and corresponding life of
mine.
Milling----- Flow sheet and details of unusual features, percent of recovery, costs,
suggestions for improvement.
Water supply.
Space available for tailings.
8. Marketing.
Sale of ore or metal.
Smelter contracts.
Open VS special schedules.
By-product possibilities.
9. Plant and Equipment.
Underground-----Condition of shafts, plats, drifts, crosscuts, raises, stopes, etc.
Condition of pumps, motors, and other underground machinery.
Summary of equipment at hand additional pieces needed.
Surface----- Condition of head frame, hoist, power plant, shops, mills, smelters,
houses, hospitals, etc.

Condition of machinery.
Estimate of new equipment needed.
10. Miscellaneous.
Timber, land, power sites, water, etc.
Labour, unions, wages, disputes, welfare, safety practices, etc.
Attitude of local government.
Surface rights-----liability for damage due to subsidence above mining operations.
11. Economics Situation.
Average profits for recent periods.
Average market in same periods.
Future prospects.
Estimate of feature earning power.
12. Valuation.
Determination of values for years life, profit factor, interest rate, etc.
Application of formulas and calculation of present worth.
CF
PV = ------(1+i)n
GEOGRAPHICAL LOCATION----- The question of geographical location is of greater
moment in connection with the examination of a prospect or undeveloped mine than in
the case of fully developed property. For the former, railway facilities, roads, power lines,
town sites, etc., must be figured on; whereas the latter probably has these facilities at
hand. Nearness to markets and reduction plants and the possibility of a shift in markets,
however, are points which must be considered with either type of property; in fact, when
translated into freight costs, these often become deciding factors in the consummating of
a transaction. Freight charges are always an important item in the cost sheet of a mining
enterprise and consequently affect the valuation of the property.
LEGAL HISTORY ------TITLE RECORD-----An inspection of the legal history of the
property should cover all land and mineral titles and deeds, all transfers of title, and all
recorded documents, to show just what acreage
And rights are included in the property and to disclose any errors in title, conflicts,
damage suits, delinquent taxes, etc., which might affect the validity of the title to any of
the property in question. Rentals, leases, royalty and sale contracts, and especially any
long-time agreements, should all be gone over carefully in order that the engineer may
know the exact standing of the company with respect to those whom it is dealing.
Unless he is well acquainted with legal procedure, court records, contracts, etc., the
examiner should delegate this part of the investigation to an attorney or other reputable
consultant in the field of legal transactions and documents. Because of the specialized
nature of this work, many mining companies have found it wise to establish departments
within their organizations to deal entirely with land, royalties, property and water rights,
taxes, and other items related to ownership.

PRODUCTIVE RECORD ------The productive history of the mine give the engineer a
record of past achievements upon which to base his estimates of feature capabilities. A
careful inspection of these records
may reveal certain facts in regard to the past which will enable him to gauge the
efficiencies of plant and operations. Particular attention should be paid to determining the
causes and effects of any shutdowns.
Before accepting the cost figures on the past production of any property, the engineer
should satisfy himself as to the correctness of accounting practice, particularly with
reference to the proper distinction between capital and operating accounts. When expense
items are improperly charged to capital accounts or when proper depreciation of capital
accounts is not provided for, an actual loss in operation may be turned into a profit on the
books.
FINANCIAL STRUCTURE ------An itemization of the financial structure of the
concern, in conjunction with cost summaries for past years, helps to confirm the
engineers judgment in regard to the efficiency of past work and also gives him a general
picture of the financial standing of the business and the attitude of the shareholders or
owners. Special attention should be paid to the causes and result of pre organization
agreements and to any assessments which may have been called. A summary of yearly
profits furnishes rough gauge of the past success of the property. This estimate must,
however, be qualified by further opinions as to efficiency and economic factors.
MANAGEMENT------Management is undoubtedly a most important factor in the
success of a business; in fact, managerial ability is considered so vital that some
authorities attribute as much as 90 % of the success of an enterprise to this one item.
Management is likewise vital in the operation of the mineral property but the general
statement must be qualified because one mine may be endowed naturally with a better
grade of raw material and less difficult physical conditions than another, though each
produces the same product. Given two mineral properties similar in all respects, the true
measure of management then becomes as evident as with two grocery stores.
Management is the influence that coordinates land, capital, and labour. Efficient
operation can be achieved only by a proper harmony of these three. A few mines are rich
enough to carry the management, and some mines are too deficient in resources for any
management to show a profit, but in the great majority of intermediate cases, the
management make the mine. A careful examiner, like a careful investor, will not
overlook the management of a mine when he scrutinizes its mineral resources and
productive record.
Costs obtained at a mine are largely dependent on management. In the determination
of proper cost figure to use, the engineer must ask himself whether the same quality of
management will be maintained in the future. If the property has no operating record,
what can be expected in the way of the management when the mine is opened up?
Naturally, it is more difficult to this abstract valuation of a property than it is to predict its
feature under known management conditions. That good management will lose only a
small amount of money on a poor property, will make a small profit on a fair property,
and will make a bonanza out of a good one has proved itself time and again. Frequently
an engineer examines and values a mine for an operating group whose abilities are well

known to him. If he feels sure that his group can effect economies in operation, it is
province to consider this in his valuation.
The management of a property expresses itself in many ways, and each engineer
builds up from his experience certain criteria upon which he bases his opinion. Good
housekeeping at a mine may sometimes indicate efficient direction, but this is not
always a good guide. Safety conditions at the mine are often used as a barometer. One
engineer always pays particular attention to the loading and condition of the cars used for
hauling rock and ore. He has found that partially loaded cars being hauled to the shaft and
rolling stock that is not kept up show indifferent and expensive operation. These are only
a few of the many telltale observations that can be revealing. No matter what the
yardstick, the engineer making the evaluation must be sure of the quality of the
management before he makes any radical changes in cost figures.
Engineering and planning, of course, come under the heading of management. In fact,
it is usually at this point that the examining engineer makes his first contact with the
property. It is sufficient here to emphasize the importance of two questions: (1) are the
records, maps and estimates in such shape that a clear presentation is made of the whole
situation? (2) In the case of an operating property, does the engineer plan the work or
merely measure it up after it is done? The complete answer to these questions usually
furnishes a good insight into the operating efficiency.
The indirect charge for management is the item just discussed. The direct charge is
represented by the salaries and wages paid to those who guide the operation. In a
consideration of these items, the ratio between amounts paid and results obtained is
worthy of notice.