3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Analysis of capital allocation by mining companies(2019) Van der Bijl, JacobMining operations are by nature capital intensive. Historically mining companies have in general been poor at capital allocation decision making, which translated in poor returns on capital invested and impairments. Better capital allocation strategies are required for mining companies to unlock more value from invested capital. This research focussed on identifying factors to consider during the capital allocation decision-making process that can potentially unlock value in mineral projects. The research included a review of capital allocation decisions and performance of five mining companies from 2001 to 2017. This period covers one full commodity price cycle to determine the impact of the prevailing commodity price on capital allocation decisions. Through analysis of the historical capital allocation of the five mining companies the research aimed to test if it is possible to unlock value by allocating capital in a counter cyclical approach compared to the prevailing commodity prices. From the analysis of the historical capital allocation decisions made by five mining companies a number of common trends were identified. The research found that during a period of higher commodity prices, mining companies focussed primarily on volume growth. This is confirmed by a strong correlation between the value of capital approvals and the average commodity prices of the basket of minerals produced. The higher allocation of capital towards growth initiatives, such as expansionary capital and acquisitions, have in a number of instances resulted in significant capital over-expenditures in projects. The over-expenditures have directly contributed to a number of impairment charges made by the diversified mining companies during a declining commodity price cycle. Conversely, during periods of declining commodity prices mining companies focused on rationalisation of mining projects and operations and disposal of assets that do not meet minimum investment criteria. During these periods capital allocation towards growth projects were reduced, with most capital allocated to reduction of net debt on the balance sheet. The research found a common trend of higher capital allocation towards growth projects during historical high commodity prices, and during subsequent lower commodity prices capital allocation was directed towards reduction of net debt and disposal of loss making assets. Results from the research conducted on the five mining companies indicated that there may be correlation between return on investment and the timing of the capital investment in relation to the position on the commodity price cycle at the time of the investment. However, the results obtained for the five mining companies were influenced by operational returns from existing operations, which makes it difficult to determine returns realised on incremental capital expenditures. From the results obtained from the analysis the following recommendations are made for a capital allocation strategy to increase the probability of unlocking value over the long term. Firstly, a company should have a clear capital allocation framework that is guided by the mining company’s strategic objectives. The framework should clearly indicate the hierarchy of importance when allocating capital to different areas. Secondly the company should clearly identify the minimum investment criteria to be met before capital is allocated to an investment. Lastly the mining company should aim to consistently invest capital throughout the commodity price cycle, and be cautious of over allocating capital towards growth projects during periods of high commodity prices.Item Improving reconciliations through geostatistical resource model updates of Phoenix deposits, Tati Nickel mine(2019-09-27) Ntshole, MothusiPeriodic resource model updates are necessary to bridge the reconciliation variances between the resource model estimates and actual ore mined. As a tool, Mineral Resources reconciliation focuses on identifying, analysing and managing variance between estimated Mineral Resources and actual ore mined. The aim is to minimize the business risk associated with poor resource model estimate performance against actual ore mined at Phoenix Mine. The Phoenix Mine Mineral Resource model update research project incorporates historical and recently acquired drillhole data, other relevant geological information in the form of geological pit floor and face maps to update the Phoenix Mineral Resource model. Employing appropriate geostatistical estimation methods and improved modelling procedures can highlight and overcome some of the causes of observed reconciliation variances. Each of the five domains of the Phoenix resource was estimated through ordinary kriging and indicator kriging as principal methods. Nearest neighbour (NN) and inverse power of distance (IPD) methods were used as a check and where the above geostatistical methods proved inappropriate. The comparison between model estimates from these various estimation techniques and raw drill hole data was undertaken. The results indicate areas of both good and poor correlation across the different methods and sections of the resource. Areas where there is good correlation coincides with good sampling coverage where as poor correlation coincides mostly with portions of the resource where there is paucity of sampling data. Subjecting the individual domains’ resource estimates from the various estimation methods to a validation check against the sampling data assisted in selecting the estimate that honours the sampling data the most. Such Estimate was selected as the most suitable and reported as the Estimated Resources. Indicator Kriging produced better results compared to the rest of the techniques. In domain four geostatistical methods were unsuccessful thus Inverse power of distance method was used.Item Development of a best practice guideline for conducting comparable market valuation by benchmarking from gold deposit case study transactions(2019) Burger, JacobusThe comparable market valuation is an internationally accepted valuation method frequently used to value mineral assets. Valuation methods are generally associated with uncertainty. The uncertainty is associated with values of the input parameters used and assumptions made in the valuation process. Accordingly, national mining valuation codes were designed to provide guidance to the valuation process. These codes are principles-based and not prescriptive, leaving valuators (valuers) with a degree of uncertainty. The purpose of this research study was therefore, to establish a best practice guideline when using the comparable market valuation method to value a mineral project. The guideline is intended to partly reduce variation in approach by different valuators and so reduce the uncertainty in the valuation process. According to the APB (2013), when a transaction on a property is a ‘competitive substitute’ it is acceptable to be classified as comparable. Most transactions used in mineral property valuations will not be classified as being competitive substitutes, further substantiating the importance of determining a best practice guideline for the market comparable valuation method. Five steps were introduced, after investigating similarities between valuations of real estate and mineral properties, that form the best practice guideline for conducting the comparable market valuation. These five steps are: • Step 1: Construct a database to be used in valuation; • Step 2: Adjust values to real terms; • Step 3: Distribute unit values per Mineral Resource category; • Step 4: Perform sanity checks; and • Step 5: Identify and apply sensible adjustments. By building an extensive valuation transactions database, based on gold deposit case study transactions over a period of 12 years (2006 to 2017 inclusive), and following each proposed step, the industry average unit values per resource category were determined to be: • Inferred: 2.3 USD/oz; • Indicated: 13.3 USD/oz; and • Measured: 21.7 USD/oz. The best practice guideline developed in this research study was applied to a listed gold mining company case study. The non-diversified, South African listed gold mining company used for the case study was Pan African Resources (PAR), which has several operating gold mines as well as potential projects with compliant Mineral Resource statements containing 33.3 Moz of gold. The industry average unit values per resource category were applied to the gold case study after making project-specific adjustments to determine the project resource value of USD269.4 million. This equates to a project average unit value of 8.1 USD/oz, which is the probable value that a willing buyer would potentially expect to pay for the purchase of the Mineral Resource. The estimated market value of an asset determines the validity of any valuation. To justify the estimated value based on the comparable market valuation method, the estimated resource value was compared to the enterprise value of the listed gold mining company of USD242.7 million at the time of the valuation. This resulted in a variance of 11%. Given the fact that the share price fluctuated by approximately 15% to 17% higher or lower, preceding and succeeding the date of the valuation, an 11% variance can be deemed as acceptable. The value based on the comparable market valuation method following the proposed guideline using gold deposit case study transactions can, thus, be deemed as reliable and justifiable. It is recommended that mineral property valuators make use of the guideline when conducting the comparable market valuation. It is also recommended that the national mining valuation codes, which are accepted globally, can consider presenting valuators with a similar guideline to ensure transparency among valuators.Item Economic evaluation of bamboo cultivation and potential yield on rehabilitated mine sites(2017) Mothapo, Makgamatho GodfreyAbandoned mines in South Africa have created a series of environmental legacies around the mining community in the form of health hazard (air pollution), land degradation and illegal mining activities. The biggest mine environmental legacy that is being addressed today in South Africa is that of abandoned mines, particularly asbestos and the process of cleaning up asbestos mining dumps in South Africa as implemented by Mintek (state owned mineral processing and metallaurgical research instistute)on behalf of Department of Mineral Resources (DMR) and this form the main basis of this research study. The history of abandoned mines, particularly asbestos mining, is that the mining peaked and took place during the time when there were no environmental regulations forcing mining companies to take control of their waste. The only legislation was the Atmospheric Pollution Prevention Act (Act No.45 of 1965). The Mineral Act, which regulated most of the mining activity in South Africa was promulgated in 1991 and was enacted as Act No.50 in 1991. Apart from the environmental challenges, these mines are located in rural areas with high unemployment levels and poor infrastructure, and therefore all solutions would require these matter to be addressed as well. This study was based on a literature review involving bamboo as a potential vegetation cover to be grown on abandoned mineland both for rehabilitation and with intention to harvest it for energy use. This would hope to address some of the socioeconomic issues within the communities surrounding such abandoned asbestos mines. Penge area in the Limpopo Province is proposed as the site for a pilot study for such bamboo cultivation. Bamboos are a large group of rapidly growing woody grasses, mainly found in the IndoChina regions of the world that can be sustainably managed in short-cycle harvesting schemes. They offer many benefits like erosion control, architectural properties for rural construction activities and can be used as biomass feedstock for the bioenergy economy. The results of this study indicate that it is possible to grow bamboo in the Penge based on its physio-climatic conditions. The literature review proposes , Bambusa balcooa, Dendrocalamus asper, Dendrocalamus strictus and Phyllostachys edulis as suitable bamboo species for the region. Based on rudimetary simple evaluation model the area will produce 14 tonnes/ha/year of biomass in the 5th year of harvesting, increasing to and stabilizing to 47 tonnes /ha/year in the 7th year and it has proven economically feasible to proudce energy from the amount of feedstock generated.Item The application of macro co-kriging and compound lognormal theory to long range grade forecasts for the carbon leader reef(1997) Chamberlain, Vaughan AndrewDue to the extreme costs of establishing new shaft systems in Witwatersrand gold mines it is essential that the resource estimation is optimised, The result of poor Of sub-optimal estimation could be catastrophic even.to the largest of mining companies. This project examines the application of Compound Lognormal Distribution theory and shows the advantages of this distribution model over more traditional models, for the Carbon Leader Reef. The incorporation of information from mined out areas of a deposit in resource estimation is demonstrated. The critical role played by accurate geological modelling is highlighted. The process of Macro Co-Kriging in conjunction with Compound Lognormal Theory is discussed in detail and is shown to be a more accurate estimation technique than traditional techniques using Lognormal theory. Finally the use of the Macro Co-kriged limits are shown to be useful in the classification of Mineral Resources.