19/4/2017 MetalEquivalentGradevsNSR|KJKuchlingConsultingLtd.

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6. Metal Equivalent Grade versus NSR for multi-metals Preference?

Date:May1,2015 Author:KenKuchling

Some of the mining studies that I have worked on were for deposits containing multiple recoverable metals, for example Ag-Pb-Zn mineralization or
Cu-Pb-Zn-Au-Ag mineralization. Management discussions were held regarding whether to use a metal-equivalent grade to simplify the deposit
grade or to use a Net Smelter Return (NSR) value. The NSR would represent a $/tonne recovered value rather than a head grade value.
I have found that the geologists tended to prefer using a metal-equivalent grade approach. This is likely due to the simpler logic and calculation
required for an equivalent formula and its somewhat easier to select the cutoff grade based on similar projects. Generally I have no reservations on
the metal-equivalent approach for a resource estimate. However from an engineering standpoint, I feel an equivalent-grade doesnt provide a
meaningful representation of the ore quality. It is more dicult to relate to the head grades to an operating scenario that may rely on different
mining and processing methods generating different nal products (e.g. dore versus concentrates). The NSR makes it easier for me to relate to the
actual ore quality.
The NSR calculation will require more input data, such as metallurgical recoveries, concentrate characteristics and costs, and smelter payable
parameters. However the end result is an NSR block value that can be related directly to the operating costs. For example if a certain ore type has an
on-site processing cost of $20/tonne and G&A cost of $5/tonne, then in order to breakeven the ore NSR block value must exceed $25/tonne. If one
decides to include mining costs and sustaining capital costs, then the NSR cutoff value would be higher. However in all cases one can directly relate
the ore block value to the operating cost and use that to determine if it is ore or waste. This is more dicult to do with equivalent grades. Using the
NSR, the operating margin per block is evident immediately.
If using pit phases to start mining in high grade areas, one can immediately get a sense for the incremental benet by looking at the prot margin per
pit phase.
A drawback to the NSR block value approach is that its calculation will be based on specic metal prices. If one chooses to change the metal prices
then one must recalculate all the NSR block values. In some studies, I have seen higher metal prices used for resource reporting and then different
metal prices for mine planning or reserves. In such cases, one must generate two different NSR values for each block but one can use the same NSR
cutoff value for reporting tonnages. This two NSR approach is reasonable.
Pit optimizations can be undertaken using the block NSR values rather than calculated block revenue values, so the use of NSRs should not create any
problems for pit optimization.
For projects that involve concentrates the detailed cashow models usually incorporate detailed net smelter return calculations, which include
penalties, deductions, different transport costs, etc. The formulae used for the calculation of NSR block values should be a simpler calculation than
the cashow NSR calculation. For example, one could try to build in penalties for arsenic content thereby lowering the NSR block value; however in
actuality such ore blocks may be blended and the overall arsenic content in the concentrate may be low enough not to trigger the penalty. Since the
NSR block value is mainly being used for the ore/waste cutoff, I dont feel it is critical to get too detailed in its calculation.
My bottom line is that from an engineering standpoint and to improve project clarity, I would recommend the use of NSR values rather than
equivalent grades. Geologists may feel differently.

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Postedin:MineEconomics,MineStudies.
Tagged:43101,MineEngineering.
LastModified:January6,2016

5.PEAsNotAllPEAsAreCreatedEqual 7.MultiCompanyEngineeringStudiesCanWorkWellorNot

2 thoughts on 6. Metal Equivalent Grade versus NSR for multi-metals Preference?

http://kuchling.com/metalequivalentgradeversusnsrformultimetalspreference/ 1/4
19/4/2017 MetalEquivalentGradevsNSR|KJKuchlingConsultingLtd.

CarlosA.Espinoza
Commentedon:May18,2016

Howdoyourelateequivalentgradetocutoffgradewhendecidingtomineablockonadailybasis?.
Itseemsthattheequivalentoregradeissuitableforthepreandfeasibilitystageofaminingproject.

KenKuchlingPostauthor
Commentedon:May18,2016

IgenerallyprefertheuseofNSR$valuesthanequivalentgrade,howeveronecanstilluseequivalentgrade.Theequivalentgradeisbasedonaratioofmetalpricessomaynotchange
muchdaytodaybutcouldchangemonthly.Forexampleifgoldpriceishighandsilverislow,thensilvergrademightnotaddmuchrevenuesominingmayavoidsomematerialwith
moderatesilvercontent.Nowifthesilverpricesincrease,thosemoderatesilvergradesmaynowgeneratemorerevenuesothatsamematerialwouldnowbecomeinteresting.Sowhatyou
decidetosendtothemillwilldependsonwhatthecurrentmetalpricesareandnotjustwhatwasusedinthefeasibilitystudy.

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