Course and Products for 2002 - SRK Consulting

SRK Australian
Update
February
2002
Edition 1
A step-by-step approach
to Due Diligence
Since 1998, Centaur Nickel Pty Ltd has been exploiting dry
laterite nickel-cobalt deposits at Cawse, located approximately
70 km north-east of Kalgoorlie. Cawse was the first plant to
successfully use a new High Pressure Acid Leach process to
treat the ores in an autoclave. The process has since, with
variations, also been installed at Bulong and Murrin Murrin.
SRK was requested to carry out a Due Diligence on behalf of a
consortium of Australian, European and US organisations. The
project was completed in record time during a period when air
travel in Australia was greatly restricted after the sudden
demise of Ansett. Andrew Vigar from Brisbane was Project
Manager of a small multi-disciplinary team from the Brisbane,
Perth and Sydney offices. Mike Warren from the Sydney office
looked after mining and the financial model, Louis Voortman
from the Perth office assessed the in-situ and upgrade
resource potential. John Reid and Keith Leather, both associate
nickel specialist metallurgists, investigated the metallurgical
plant, the nickel refinery and looked at the scope for further
increasing the plant capacity.
The clients had expressed the wish that the work be carried
out in a step-by-step approach and that after each step a clear
decision point would be reached. This worked out well and
decisions for additional detailed work were taken very cost-
effectively. During the course of the project it became clear
that considerable expenditure had been avoided in this way.
The laterite nickel and cobalt deposits are situated within a
clay profile in a thick weathering profile overlying the ultra-
mafic Walter Williams Formation. Mineralisation is continuous
along strike for a distance of more than 50 km. Cawse Central
contained the rich Bunyip Dam and Pegasus deposits which
now have been virtually mined out. The stratigraphy is
defined by a series of regolith zones that are laterally
consistent and occur draped like an undulating ‘blanket’ over
the underlying formations. The topography varies from
undulating laterite ridges to flat-lying alluvial sediments cut by
local palaeo-channels.
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Long Term partnership
with Cawse Nickel
“… the study significantly increased our understanding of the upgrade
characteristics of dry laterite Ni-Co resources”
The Cawse plant consists of a scrubbing section to produce the
upgraded feedstock for the autoclave unit, a portion of the
plant that produces an intermediary product and an efficient
nickel refinery. Nearby resources are currently being
developed to deliver additional feed to the plant. To assess the
potential for additional in-situ and upgrade resources, SRK
used standard 3-dimensional as well as 2-dimensional
resource models. The latter models automatically take the
undulating behaviour of the ore-bearing regolith zones into
account. In addition to the classic due diligence approach to
arrive at a opinion on the current operation, SRK used a
detailed financial model to generate a series of cash flow
Mapping Faults using the Structural Toolkit.
Detailed regional structural interpretations are commonly used
for identifying possible exploration targets. Globally, SRK is
recognised for their expertise in taking available remotely
sensed data sets and developing structural interpretations that
not only give an overview of the regional basement lithology,
but also the timing of the regional structural events that explain
the deformation history. This is achieved by capturing detailed
information about identified faults, documenting their initiation
age, and reactivation history.
Geographic Information Systems provide the means to query
such a regional data set, querying either the spatial objects,
tabular attributes or even both within the same query. This
identifies a significant difference between a graphical map and
a GIS data set. The power of these queries however, is
dependent on the structure of the attribute tables, and the
consistency of the data that populates them. In a large regional
interpretation there could be 30,000 interpreted faults. Double
handling this amount of data between the interpreting scientist
and a draftsperson is not a suitable solution.
SRK sort to solve this problem, to ensure that the data products
being developed by SRK were accurate and consistent. The
developed solution, in the form of a Mapinfo software
extension, is called the Structural Toolkit. The toolkit is built on
a standardised fault attribute table, with a specified range of
values for each column, but also the flexibility to include a
project-varying list of significant age events. The structure of
this attribute table captures the following details: data source,
fault dip characteristics, basement involvement, initiation age,
and reactivation history.
However, the structure of the attribute table does not explain
how to prevent double handling in the data capture process. To
solve this problem it was necessary to make the GIS simpler for
SRK has also provided a detailed
financial risk assessment
predictions and test the sensitivity of the operation to future
metal price and ore feed grade.
The SRK team drew up a list of critical issues that included
realistic resource grades, plant upgrade capacity, plant
expansion potential and related capital costs, and provided a
realistic judgment on the sensitivity of the project to future
metal prices. The SRK study showed the sensitivity of the
project to a combination of plant grade and metal price, and
the clients were in a position to make a pragmatic decision on
future potential within a very tight timeframe.
the interpreting geologist, to encourage them to incorporate the
data capture phase as part of his/her process of developing the
interpretation. Certainly this leads to a process of onscreen
interpretation, but with the graphic capability of today’s PC’s,
this is often the preferred method.
Solving the double handling was achieved by designing a
graphical interface within the GIS, that gives the geologist a
series of push button controls that enter relevant values into
the attribute table of the selected fault. If more than one fault
object is selected then each fault entry is updated with the
same value. Entered data values that describe the initiation age
or interpreted reactivation of the fault result in changes to the
graphical fault object, changing the faults colour and line style
based on values defined by the software user. This immediate
graphical representation of the entered attribute data provides
a visual means of verifying the interpretation that also helps the
geologist consider the spatial relationships within their
developing interpretation.
Another key feature of the Structural Toolkit is that fault
symbols, for example the ticks used to represent a thrust or
normal fault, are represented with crisp line styles. This has
two significant benefits for the interpretation. Firstly, the time
saved by not having to generate copious amounts of graphical
objects, which often reside in a separate layer from the faults
themselves. Secondly, the benefit of the long-term life of the
data set, as attribute information is updated using the
Structural Toolkit, graphical changes occur automatically, and
changes to a fault’s shape do not require any additional
changes to a spurious symbols layer.
If you would like more details about the Structural Toolkit for
Mapinfo, please contact Paul Gardner (GIS Consultant) in the
Perth office, email: pgardner@srk.com.au.

Course and Products for 2002
Applied Mining Geostatistics for Geologists
and Mining Engineers
SRK is continuing to run this popular and essential course
during 2002. Planning for courses in Kalgoorlie (May) and Perth
(September) are well underway, and a number of single-client
in-house courses are already planned. The course covers the
basic concepts of the application of best practice estimation to
your resource, and concentrates on ensuring fundamental
mistakes are avoided. The course covers all the principal
modern techniques, including kriging in its various forms, MIK,
Uniform Conditioning and simulations. However the course
focuses on making sure the basics are understood and the right
methods chosen. Software training (integrated with
geostatistics training) and support for the advanced
geostatistical package Isatis are also offered as part of our
training package, and this has now been successfully run for a
number of minesites.
Register your interest with Michael Humphreys at
mhumphreys@srk.com.au.
Structural Geology in Mining and Exploration
This course has been run three times already this year, and
remains the benchmark course for in-house company training
for mining and exploration geology. Ranging from refresher
material from your University days through to advanced
techniques, the course focuses on the mining and exploration
process through working direct hands-on exercises. The course
demonstrates the importance of geological mapping in
Choosing an appropriate estimation block size diminishes resource risk
General
SRK has learned that one of the most important resource risk
factors is estimating blocks, that relative to the drilling grid, are
too small. This is usually the result of trying to directly estimate
blocks that are of a similar volume to the selective mining unit
(SMU). By estimating blocks that are too small, we risk
conditionally biasing the estimates which could lead to the
underestimation of high grades and also result in marginal ore
being classified as waste. In particular, the true variability of
small blocks, which is a key parameter for selectivity, could be
distorted (over-smoothed). In effect, kriging of small blocks from
sparse data will always over-estimate the recoverable tonnage
for a cut-off below the mean and underestimate this tonnage for
a cut-off higher than the mean. The method will also always
under-estimate the recovered mean grade, whatever the cut-off
grade.
A more appropriate method is to estimate blocks of at least half
the drilling grid and to determine the grade-tonnage curves for
the mining units within these panels using the appropriate
geostatistical methods.
SRK’s Approach
Assume that the nominal spacing of the drillhole intercepts
along the orebody is of the order of 40m x 40m. This raises the
issue of how large an estimation block needs to be to achieve
confident estimates from this grid. A general rule of thumb is
that the estimation block needs to be at least half the size of the
drilling grid along the x and y-axes, however this can be
established from the variogram model and the drilling geometry.
At this stage the third dimension of the estimation block, which
should be a function of the mining selectivity (and equipment
selection), has not yet been considered. Whether it is decided to
mine, for instance, a 4m or 6m bench will have a significant
effect on selectivity decisions and should be tested. This can be
achieved by generating change-of-support models for different
bench heights. Having assessed which bench height lends itself
to the best selectivity, we can then carry out tests to establish
the dimensions of a “well estimated” block for optimal
estimation and exploitation of the resource.
decision-making, and links the course material to
the day-to-day operations of the site. The course
is highly relevant, “concepts easily transportable
to mine and regional scale work - hope I can
remember it all though” commented one course
participant. Designed to be run at your site, the
course includes a review of your data and
development of field exercises at the your site, be
that mine-based or an exploration-based program.
For further information contact
Cam McCuaig at cmccuaig@srk.com.au.
Products
The Eastern Goldfields maps now covers 30 map sheets between Laverton in the
north and Erayinia in the east, and between Norseman and Menzies in the west.
These maps are available as ArcView and MapInfo files in digital format, and all
include details of the structural evolution not found on any other series of
Yilgarn maps.
Archaean Provinces provide a huge proportion of the gold produced in the world.
SRK has a consistent database of geological map information, linked to a variety
of textual databases, of all the major Archaean Provinces worldwide. Know as
the Global Archaean Synthesis, this product is available for purchase in a
number of country or region modules, or a complete global product. The
databases provide essential base-layers in GIS format as a starting point for any
serious evaluation or exploration of Archaean terranes.
For information on prices and geographic coverage, contact
Deborah Lord at dlord@srk.com.au.
If it is established that a 20m x 20m x 6m panel can be well
estimated from the given grid, we still need to provide
estimates for selective mining unit (SMU) sized blocks since
this is the volume on which decisions of whether the material is
to be processed as ore or waste will be made.
To achieve this it is recommended that a non-linear estimator
be used. It is common knowledge that all linear estimators such
as inverse distance weighting, ordinary kriging etc. introduce
smoothing to a model, which is fine for global estimation but
unwanted for local estimation. Basically, with a non-linear
estimator such as Uniform Conditioning, ordinary kriging is
used to estimate the parent panel, which in our example is the
20m x 20mx 6m block. There are several non-linear estimators
which should first be tested for suitability to a given
mineralisation style.
The methodology described above has been successfully
employed by SRK at a number of sites and mineralisation styles
and results in better exploitation of the resource as
misclassification of ore as waste, and vice versa, is largely avoided.
Diagram showing the relationship between the drill spacing, small
blocks and estimation panels. In this case, the small blocks are
5m x 5m on a drill spacing of 100m - the panels are 50m x 50m.
Cam McCuaig
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Spotlight on
Mike Warren
Mike Warren heads up the due diligence practise within SRK Australasia, which
services mining companies and the major banks to the mining industry. Mike is
well qualified to handle this type of work as he recently worked for several
banks for nearly five years, providing very similar advice from within the Global
Project Finance teams of BZW Australia (Barclays Bank) and WestLB (a German
bank fairly new to Australia).
Mike is a mining engineer who has worked in underground and open cut mines
and has over 20 years of industry experience. He has been involved in many
aspects of mining, including technical, supervisory, financial and head office
roles. Beginning with 8 years at Broken Hill with CRA, Mike went into the coal
mining industry where the “toys were bigger”. Mike worked for Goonyella Coal
Mine in the Bowen Basin of Queensland for 5 years, initially for Utah
Development Company who were later taken over by BHP.
Looking
forward in 2002
SRK Consulting’s strategic focus for 2002 will continue to be on
providing highly professional advice and products to mining operations,
mineral and oil exploration companies both in Australia and overseas.
Our strengths in the specialised large scale mining methods of the
future, and the complex geotechnical and engineering challenges that
these present, are continuing to grow, and will lead the growth that we
are predicting into 2002. SRK provides critical input into almost all
underground mining projects in Australia, and these are maintaining a
strong focus on mining development projects in 2002.
As the mining industry consolidates, the size, production rate, and
efficiency of most operations will be put under further scrutiny. SRK is
well placed to provide both resource geology and engineering expertise
into those operations, to help companies make the best planning
decisions possible based on the best technical and economic outcomes.
Along with the mining and engineering aspects, SRK’s resources and
geology groups are working with a number of companies to optimise
resource development projects. This includes applying best-practice
structural geology to advanced resource estimation procedures. This
approach delivers much improved domain definition, based on practical
mining considerations such as the mining method, controlling
structures, and alteration pattern.
In our exploration division, our focus for 2002 will be on advanced
modelling of ore bodies, based on ensuring 3D data are captured and
displayed in the most appropriate format to the problem at hand. New
methods of treating data are being developed, to add to the range of
possibilities already provided by the major software packages. The core
SRK strengths in structural geology, geological interpretation and ore
body geometry are still being applied to generate regional and local
geological models for exploration. Increasingly, the new methodologies
of risk management and exploration accountability are being worked
into these products, to ensure exploration initiatives meet the increased
accountability demanded by senior managers.
SRK’s major initiative into oil and gas exploration will become an even
larger part of the SRK business focus in 2002, with the division
generating major projects and successes in 2001, and with strong
demand for these products looking set to continue into 2002. The
initiatives of the SEEBASE technology developed for oil basins can also
be applied to projects in mineral sands, water and particularly red-bed
copper and SEDEX mineral environments.
SRK is also developing a new set of advanced courses for 2002. These
include new ways of interpreting aeromagnetic data (with ENCOM
Technologies), an updated and revised structural geology course, and a
new course in Geostatistics.
Peter Williams
Managing Director
Children’s education needs took Mike and family to Sydney in 1987,
where he worked in head office roles of mining companies including
Elders Resources and Exxon Coal and Minerals, and these roles
included components of due diligence on acquisition targets. Mike
completed a part time MBA at Macquarie University during this time,
which assisted in his move into investment banking. While working
for investment banks, Mike was involved in due diligence for world
class mines including Lihir, Argyle, Bengalla and Alumbrera, as well as
mines and projects in gold, nickel, copper and coal, including the
financing of the Nimary gold mine in WA
for Eagle Mining and the Coppabella PCI
coal mine in Queensland.
Mike assisted SRK in 2000 by leading a
team on a coal mine due diligence in
China and subsequently joined SRK to
head up the due diligence business
sector in Australia. In the last two years
or so Mike has consulted on or lead
teams in due diligence for;
• Yanzhou Coal, Jining III Coal Mine, China
for Rothschild.
• Mt Cuthbert Copper SXEW mine in Queensland for Summo Minerals Inc.
• Stawell Gold Mine in Victoria for Mining Project Investors.
• Ernest Henry Copper/Gold mine in Queensland for Aquila Resources
and ABN AMRO.
• The independent report on 18 bauxite mines in China for the listing of
Aluminium Corporation of China Limited (Chalco) on the New York and
Hong Kong stock exchanges.
• A review and valuation (with Ernst & Young ) of the My Leyshon assets
for Normandy.
• Consulted on WMC Gold reserves for Gold Fields.
• A review of the Cawse nickel mine for Rothschild and potential
purchasers.
Contact Mike at Level 9, 1 York Street, Sydney NSW 2000.
Ph: +612 9250 0130 Fax: +612 9250 0131 e-mail: mwarren@srk.com
New contracts
Expanded Environmental Services
Working towards providing our clients with a wider spectrum of
services, SRK has formed an alliance with Martinick McNulty
based in Perth. Martinick McNulty, established in 1979 has been
active in providing baseline studies, environmental monitoring
and EIS/EIA studies. This will supplement the geochemistry and
mine closure services already provided by our GeoEnvironmental
engineering group in Brisbane. The alliance with Martinique
McNulty will also increase the scope of SRK’s environmental
services on the western seaboard.
Another Successful Mine Closure
John Chapman of our Brisbane office recently completed a review
of the 2001 monitoring data for the closed Flambeau Mine located
in Wisconsin (USA), a Kennecott operation. At the Flambeau Mine
SRK assisted the operator in the development of a limestone
amendment control program to neutralise acidic waste rock prior
to backfilling the waste rock open pit. The monitoring results
have shown that complete neutralisation of the backfill pore
water has been achieved and dissolved metal concentrations are
within the limits estimated for the equilibrated groundwater.
Stop Press
To keep our clients informed of recent activities in China, the next
SRK Sundowner will focus on mining in the People's Republic of
China. Several high-level guest speakers have been contacted,
among them the Consul-General in Perth. The event will take place
at the end of March & invitations will be sent out shortly.
25 Richardson Street, West Perth, WA, 6005
Ph: +61 8 9322 2993 Fax: +61 8 9322 2994
Mike Warren