Mining & Mined Caverns - Parsons Brinckerhoff

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Feasibility Studies, Geological Assessments, Resource Estimation APRIL 2012 http://www.pbworld.com/news/publications.aspx 8 Parsons Brinckerhoff Case Study In 2009, Parsons Brinckerhoff was commissioned to undertake both pre-feasibility (+/-25%) and definitive feasibility (+/-10%) studies on a coal resource in the Waterberg area of South Africa, located 5km to the west of the Grootegeluk Colliery and the Medupi Power Station. This was a large project with production rates of up to 15 million tonnes per annum (Mtpa) of run-of-mine (ROM) coal yielding 10Mtpa of saleable thermal coal over a 21 year mine life. The studies included a detailed investigation of the requirements for on-site and off-site infrastructure, mine design and scheduling, engineering, coal handling and preparation, hydrogeology and geotechnical engineering & personnel and equipment. This is an example of a large multi-disciplinary project with several contributors with integration of inputs between the various disciplines key to the success. The client was a joint venture between two companies – one based in South Africa and one in Australia. As the project was being managed out of the UK, effective communication and engaging the various stakeholders was essential. to definitive feasibility study) is not as effective as it should be, which leads to ineffective knowledge transfer. This could result in reduced value in the original study, missing a key conclusion or unnecessary re-work. Innovation within the feasibility study process Innovation within the feasibility study process is interlinked with innovation within the mining industry as a whole. Assuming that a feasibility study has to assess three main criteria - technical, regulatory and economic - possible innovations in these categories, which will change the way projects are assessed or the assessment itself, are shown below: 1. Technical. This category covers a wide range: resource identification and verification, mineral extraction, processing, haulage technology, amongst many others. Once the resource in the ground has been verified, the way it is extracted, processed and delivered to the market determines whether a project is feasible or not. Advances in technology - such as automated mining equipment or x-ray sorting processing methods - can result in a previously un-feasible project becoming viable and keeping on top of new technology is an integral part of the feasibility process. 2. Regulatory. There is a growing movement toward sus- Network tainable development and social responsibility in the industry. Guidelines now require compliance. Expect environmental controls to get tighter in the future and compliance will play a major role in the feasibility study process, even more so than now. Additionally, government intervention, such as high taxes or nationalisation, especially in developing countries, may have a big impact on whether a project could be considered feasible or not. 3. Financial. Because mining is a mature industry, nearly all of the extremely attractive projects - the ‘low lying fruit’ - have been developed, and most mining studies are of a marginal nature when assessed using traditional feasibility techniques. The risk is, of course, that the assessment is too cautious and focused on the downside, which means that good projects are potentially being rejected at the feasibility stage. The traditional valuation technique for a feasibility study is a discounted cash-flow (DCF) model which is well understood and deals with costs and revenue. An alternative method of valuing a mining project that could be adopted is the real options analysis (ROA) method. The ROA method places a value on ‘real options’ when undertaking certain true-to-life business decisions, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. Although there is some similarity between modelling real options and financial options, ROA takes into account uncertainty surrounding the parameters that determine the value of the project and applies a value to the company’s ability to respond to them. On the whole, ROA valuation methods are seen as more ‘optimistic’ than classic DCF methods and could be usefully employed when assessing more marginal studies, although the risk involved will also need to be properly assessed and communicated. Marco Maestri is a principal mining engineer whose expertise lies in feasibility studies, project management, CAD mine design & scheduling and financial analysis. He is currently the project manager for a pre-feasibility project in the Limpopo region of South Africa and has recently managed a successful coal definitive feasibility study in the same region. He also has experience managing and providing technical input to feasibility projects in Europe and Australia. References • The Role of Feasibility Studies in Mining Ventures (Nethery, 2003) • The Use and Abuse of Feasibility Studies (Mackenzie & Cusworth, 2007) • Mine Investment Analysis (Gentry & O’Neil, 1984)
Network Geological Assessment and Resource estimation of Coal Deposits and Their Influence on Mine Design by Aidan Parkes, Manchester, UK, +44 (0)161-200-5178, aidan.parkes@pbworld.com; Samuel Moorhouse, Manchester, UK, +44 (0)1612-200-9847, sam.moorhouse@pbworld.com; and Jonathan O’Dell, Manchester, UK, +44 (0)1612- 200-2216, jonathan.odell@pbworld.com Parsons Brinckerhoff has undertaken a number of feasibility studies for coal deposits in sub-Saharan Africa (see “Mining Feasibility Studies - An Outline of the Technical Input, Requirements and Purpose of Mining Feasibility Studies”, this publication), to determine the economic viability of extracting these potential resources. The feasibility process and reporting of mineral deposits is governed by a number of international codes, and associated guidelines (see “The Relevance of International Reporting Codes and Their Practical Application to Resource Estimation”, this publication). An important aspect of the feasibility study process is the undertaking of a geological assessment and resource estimation, which will quantify the tonnage and quality of the mineral deposit. To do this the Competent Person (CP) must demonstrate an understanding of the geology of the deposit, in particular its extent, quantity and quality, as well as any associated geological structures. The resource can then be classified based on the CP’s confidence of the available data, and quantified according to international resource reporting codes. The geological assessment and resource estimation process is a prerequisite for robust appraisal of mining potential including mine design, planning and scheduling (Figure 1). This article summarises the key stages in the assessment process and highlights some novel approaches employed by Parsons Brinckerhoff geologists during the various feasibility studies. Stage 1: Data selection and audit The goal of the selection and audit process is to produce a robust, finalised database, comprising suitable spatial, geological and quality data (Table 1), upon which a geological model can then be constructed. Data selection involves a detailed assessment of the data made available to Parsons Brinckerhoff by its clients. The CP will identify reliable information, discarding that without a verifiable audit trail. Once the finalised dataset has been selected, a thorough audit process is performed through systematic and comprehensive validation of raw data, to ensure: • Borehole locations and license boundaries use the same co-ordinate system; • Stratigraphical depths are consistent between handwritten, geophysical logs and sample intervals; • Coal analyses match laboratory certificate sheets, and are accurate; and • Statistical analysis of laboratory results is performed to identify any abnormal values. In a recent study, it was found that sampling had been completed on an ad-hoc basis instead of the recommended approach of using depths that relate directly to lithology, as per the geophysical logs. This resulted in the mismatching of drilling, lithology, and sample depths between boreholes, making it necessary to adjust sample depths to ensure compatibility with the geophysical logs. Data quality issues were overcome by using the percentage of core recovered during drilling (“core recovery”) as a direct indicator of data reliability. Because sections of poor core recovery (often relating to minor faulting) lacked adequate sample data and subsequent analysis, they were deleted from the database. Here, where insufficient analytical data was unavailable, resources were downgraded during classification, and greater geological losses were applied (Stage 3 below). This methodology allowed integration of the core recovery, sample, and lithology datasets despite their apparent depth differences. Feasibility Studies, Geological Assessments, Resource Estimation APRIL 2012 http://www.pbworld.com/news/publications.aspx 9
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With reference to Muir Wood (2009)
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