The Secret Organization

Valuation of Copper, Gold, Lead, Silver, Tin, and Zinc Lode Mines.

DETERMINATION OF AVERAGE METAL CONTENT; SAMPLING, ASSAY PLANS, CALCULATIONS OF AVERAGES, PERCENTAGE OF ERRORS IN ESTIMATE FROM SAMPLING.

The following discussion is limited to in situ deposits of copper, gold, lead, silver, tin, and zinc. The valuation of alluvial deposits, iron, coal, and other mines is each a special science to itself and cannot be adequately discussed in common with the type of deposits mentioned above.

The value of a metal mine of the order under discussion depends upon:-

The profit that may be won from ore exposed;

The prospective profit to be derived from extension of the ore beyond exposures;

The effect of a higher or lower price of metal (except in gold mines);

The efficiency of the management during realization.

The first may be termed the positive value, and can be approximately determined by sampling or test-treatment runs. The second and the third may be termed the speculative values, and are largely a matter of judgment based on geological evidence and the industrial outlook. The fourth is a question of development, equipment, and engineering method adapted to the prospects of the enterprise, together with capable executive control of these works.

It should be stated at the outset that it is utterly impossible to accurately value any mine, owing to the many speculative factors involved. The best that can be done is to state that the value lies between certain limits, and that various stages above the minimum given represent various degrees of risk. Further, it would be but stating truisms to those engaged in valuing mines to repeat that, because of the limited life of every mine, valuation of such investments cannot be based upon the principle of simple interest; nor that any investment is justified without a consideration of the management to ensue. Yet the ignorance of these essentials is so prevalent among the public that they warrant repetition on every available occasion.

To such an extent is the realization of profits indicated from the other factors dependent upon the subsequent management of the enterprise that the author considers a review of underground engineering and administration from an economic point of view an essential to any essay upon the subject. While the metallurgical treatment of ores is an essential factor in mine economics, it is considered that a detailed discussion of the myriad of processes under hypothetic conditions would lead too far afield. Therefore the discussion is largely limited to underground and administrative matters.

The valuation of mines arises not only from their change of ownership, but from the necessity in sound administration for a knowledge of some of the fundamentals of valuation, such as ore reserves and average values, that managerial and financial policy may be guided aright. Also with the growth of corporate ownership there is a demand from owners and stockholders for periodic information as to the intrinsic condition of their properties.

The growth of a body of speculators and investors in mining stocks and securities who desire professional guidance which cannot be based upon first-hand data is creating further demand on the engineer. Opinions in these cases must be formed on casual visits or second-hand information, and a knowledge of men and things generally. Despite the feeling of some engineers that the latter employment is not properly based professionally, it is an expanding phase of engineers' work, and must be taken seriously. Although it lacks satisfactory foundation for accurate judgment, yet the engineer can, and should, give his experience to it when the call comes, out of interest to the industry as a whole. Not only can he in a measure protect the lamb, by insistence on no investment without the provision of properly organized data and sound administration for his client, but he can do much to direct the industry from gambling into industrial lines.

An examination of the factors which arise on the valuation of mines involves a wide range of subjects. For purposes of this discussion they may be divided into the following heads:-

Determination of Average Metal Contents of the Ore.

Determination of Quantities of Ore.

Prospective Value.

Recoverable Percentage of Gross Value.

Price of Metals.

Cost of Production.

Redemption or Amortization of Capital and Interest.

Valuation of Mines without Ore in Sight.

General Conduct of Examination and Reports.

DETERMINATION OF AVERAGE METAL CONTENTS OF THE ORE.

Three means of determination of the average metal content of standing ore are in use-Previous Yield, Test-treatment Runs, and Sampling.

Previous Yield.-There are certain types of ore where the previous yield from known space becomes the essential basis of determination of quantity and metal contents of ore standing and of the future probabilities. Where metals occur like plums in a pudding, sampling becomes difficult and unreliable, and where experience has proved a sort of regularity of recurrence of these plums, dependence must necessarily be placed on past records, for if their reliability is to be questioned, resort must be had to extensive test-treatment runs. The Lake Superior copper mines and the Missouri lead and zinc mines are of this type of deposit. On the other sorts of deposits the previous yield is often put forward as of important bearing on the value of the ore standing, but such yield, unless it can be authentically connected with blocks of ore remaining, is not necessarily a criterion of their contents. Except in the cases mentioned, and as a check on other methods of determination, it has little place in final conclusions.

Test Parcels.-Treatment on a considerable scale of sufficiently regulated parcels, although theoretically the ideal method, is, however, not often within the realm of things practical. In examination on behalf of intending purchasers, the time, expense, or opportunity to fraud are usually prohibitive, even where the plant and facilities for such work exist. Even in cases where the engineer in management of producing mines is desirous of determining the value of standing ore, with the exception of deposits of the type mentioned above, it is ordinarily done by actual sampling, because separate mining and treatment of test lots is generally inconvenient and expensive. As a result, the determination of the value of standing ore is, in the great majority of cases, done by sampling and assaying.

Sampling.-The whole theory of sampling is based on the distribution of metals through the ore-body with more or less regularity, so that if small portions, that is samples, be taken from a sufficient number of points, their average will represent fairly closely the unit value of the ore. If the ore is of the extreme type of irregular metal distribution mentioned under "previous yield," then sampling has no place.

How frequently samples must be taken, the manner of taking them, and the quantity that constitutes a fair sample, are matters that vary with each mine. So much depends upon the proper performance of this task that it is in fact the most critical feature of mine examination. Ten samples properly taken are more valuable than five hundred slovenly ones, like grab samples, for such a number of bad ones would of a surety lead to wholly wrong conclusions. Given a good sampling and a proper assay plan, the valuation of a mine is two-thirds accomplished. It should be an inflexible principle in examinations for purchase that every sample must be taken under the personal supervision of the examining engineer or his trusted assistants. Aside from throwing open the doors to fraud, the average workman will not carry out the work in a proper manner, unless under constant supervision, because of his lack of appreciation of the issues involved. Sampling is hard, uncongenial, manual labor. It requires a deal of conscientiousness to take enough samples and to take them thoroughly. The engineer does not exist who, upon completion of this task, considers that he has got too many, and most wish that they had taken more.

The accuracy of sampling as a method of determining the value of standing ore is a factor of the number of samples taken. The average, for example, of separate samples from each square inch would be more accurate than those from each alternate square inch. However, the accumulated knowledge and experience as to the distribution of metals through ore has determined approximately the manner of taking such samples, and the least number which will still by the law of averages secure a degree of accuracy commensurate with the other factors of estimation.

As metals are distributed through ore-bodies of fissure origin with most regularity on lines parallel to the strike and dip, an equal portion of ore from every point along cross-sections at right angles to the strike will represent fairly well the average values for a certain distance along the strike either side of these cross-sections. In massive deposits, sample sections are taken in all directions. The intervals at which sample sections must be cut is obviously dependent upon the general character of the deposit. If the values are well distributed, a longer interval may be employed than in one subject to marked fluctuations. As a general rule, five feet is the distance most accepted. This, in cases of regular distribution of values, may be stretched to ten feet, or in reverse may be diminished to two or three feet.

The width of ore which may be included for one sample is dependent not only upon the width of the deposit, but also upon its character. Where the ore is wider than the necessary stoping width, the sample should be regulated so as to show the possible locus of values. The metal contents may be, and often are, particularly in deposits of the impregnation or replacement type, greater along some streak in the ore-body, and this difference may be such as to make it desirable to stope only a portion of the total thickness. For deposits narrower than the necessary stoping width the full breadth of ore should be included in one sample, because usually the whole of the deposit will require to be broken.

In order that a payable section may not possibly be diluted with material unnecessary to mine, if the deposit is over four feet and under eight feet, the distance across the vein or lode is usually divided into two samples. If still wider, each is confined to a span of about four feet, not only for the reason given above, but because the more numerous the samples, the greater the accuracy. Thus, in a deposit twenty feet wide it may be taken as a good guide that a test section across the ore-body should be divided into five parts.

As to the physical details of sample taking, every engineer has his own methods and safeguards against fraud and error. In a large organization of which the writer had for some years the direction, and where sampling of mines was constantly in progress on an extensive scale, not only in contemplation of purchase, but where it was also systematically conducted in operating mines for working data, he adopted the above general lines and required the following details.

A fresh face of ore is first broken and then a trench cut about five inches wide and two inches deep. This trench is cut with a hammer and moil, or, where compressed air is available and the rock hard, a small air-drill of the hammer type is used. The spoil from the trench forms the sample, and it is broken down upon a large canvas cloth. Afterwards it is crushed so that all pieces will pass a half-inch screen, mixed and quartered, thus reducing the weight to half. Whether it is again crushed and quartered depends upon what the conditions are as to assaying. If convenient to assay office, as on a going mine, the whole of the crushing and quartering work can be done at that office, where there are usually suitable mechanical appliances. If the samples must be taken a long distance, the bulk for transport can be reduced by finer breaking and repeated quartering, until there remain only a few ounces.

Precautions against Fraud.-Much has been written about the precautions to be taken against fraud in cases of valuations for purchase. The best safeguards are an alert eye and a strong right arm. However, certain small details help. A large leather bag, arranged to lock after the order of a mail sack, into which samples can be put underground and which is never unfastened except by responsible men, not only aids security but relieves the mind. A few samples of country rock form a good check, and notes as to the probable value of the ore, from inspection when sampling, are useful. A great help in examination is to have the assays or analyses done coincidentally with the sampling. A doubt can then always be settled by resampling at once, and much knowledge can be gained which may relieve so exhaustive a program as might be necessary were results not known until after leaving the mine.