Placer Examination Techniques
Suction Dredge Economic Evaluation
Suction Dredge Economic Analysis
Analysis Based on Dredging Time
We base the economic analysis on the gold recovered per hour of dredging rather than the gold recovered per cubic yard of gravel dredged for several reasons.
1. Suction dredging is labor intensive and the cost of labor is the overriding cost included in the economic analysis.
2. The time spent dredging and the gold recovered during that time period can be very precisely and accurately calculated. The volume of gravel processed is much less precise due to the difficulty in estimating the volume of the final dredge hole, the volume of material processed through the dredge and the volume of material moved by hand.
3. The production rate of volume of gravel processed usually varies substantially while mining or sampling. Moving overburden may result in a very high production rate due to the unconsolidated nature of the gravel while cleaning up bedrock, dredging around and moving boulders, or dredging in bedrock structures may result in a very low production rate.
Working Time and Dredging Time
The actual work time is greater than the actual dredging time. Based on past experience and observations, and discussions with dredge operators, 1 hour of dredging requires about 1.6 hours of actual work time, or a ratio of dredging time to work time of 1:1.6. A 40 hour work week would include about 25 hours of actual dredging time. This is very important as the revenues generated by a suction dredging operation are based on actual dredging time, as this is the only time that gold is actually being recovered or produced. Costs, including labor are based on the actual time spent working on the project. The additional labor or work time is required for transporting supplies to and from the dredging site, moving equipment from site to site, preparation of the site before dredging, cleanup of the sluice after dredging, panning, sluicing, classifying or processing concentrates, work breaks, plugs, and repair and maintenance of equipment. Observing the dredge operator should increase the mineral examiners knowledge of the claim and dredging conditions, and may result in altering this dredging time to working time ratio.Situations at the site that may affect efficiency or the ratio of working time to dredging time include: presence of boulders that result in additional time spent moving or stabilizing boulders; clay in sediments or clay layers that decrease visibility or require breaking up clay balls at the intake nozzle or in the sluice; deep or fast moving water makes moving more difficult; very cold water requires more rest breaks or dry suits; difficult access; and murky water decreases visibility.Other activities that may result in accounting for significant blocks of time, such as mobilization or demobilization in Wilderness or other areas of difficult access, can be addressed as a one-time cost for the field season.
Number of Workers
We will generally account for 2 people or workers in the economic analysis for a suction dredging operation, unless circumstances dictate more or less people.
Most suction dredge operations will have 1 to 3 people working on the dredge. Although some operators on medium to large dredges will only have 1 person working, based on our experience, 2 people are more efficient and provide for a safer working environment. One person allows for a lower cost for labor but also decreases efficiency due to lesser amount of time spent actually dredging. We estimate that 1 person is only about 60% as efficient as 2 people dredging. This estimate can change based on the conditions at the site. The decreased efficiency is due to one person having to take care of all activities in addition to actually operating the intake nozzle, such as: moving boulders; clearing clogs in the hose, jet or box; dispersing tails; moving and repositioning the dredge; and clearing oversize rocks out of the sluice box. Two people also allows for the dredging operation to continue while 1 person is resting or not working as hard. The second person also provides for safer working conditions. Suction dredging is often conducted in remote areas or areas with limited access. The second person allows for a person to provide first aid and seek medical aid in emergencies. There are hazards associated with suction dredging such as: dredging around and under boulders and unstable gravel highwalls; working in cold and fast moving water; and, walking and carrying heavy or bulky items in and through streams and slippery, rocky areas. In addition, standard safety procedures for diving with supplied air include having a partner in the water, or at least in the immediate vicinity of the diver.
Wage Rates
In suction dredging, labor cost is the major expense item and therefore total operating cost is largely a function of the cost of labor. Suction dredging is strenuous work requiring a certain amount of expertise, which comes from actual dredging experience. Since many of these operations are owner-operator operations, we usually do not charge a cost to employer above the base wage rate. Dredging requires knowledge of gold-bearing stream gravel deposits, knowledge of suction dredging techniques for efficient equipment operation, knowledge of small engine repair and maintenance, and skill at working and diving in somewhat hazardous conditions resulting from cold, swift and often deep water, unstable boulders and gravel banks, and use of weights and supplied air sources. It is not reasonable to work for minimum wage under these conditions.
We have used a wage rate that is less than non-union laborers in surface mines in the western U.S., or heavy equipment operators, and more than minimum wage. Case law supports the use of a wage rate greater than minimum wage but less than a heavy equipment operator. In California, we generally use a wage rate similar to local wage rates for jobs requiring strenuous physical laborin the out of doors.
Gold Prices
The mineral examiner should consider a jewelry value (aka: specimen value, nugget value) for some of the gold if the sample results or the claimants samples contain gold that is coarse and has character. The mineral examiner should survey the gold buyers in the region to determine the size of gold that could provide a jewelry value.
Dredge Production Rate
The amount of gravel dredged is difficult to calculate. Neither the dredge production rate nor the dredge hole volume are very accurate numbers. The dredge hole is usually very irregular in shape, which makes the hole difficult to measure. Gravel usually sloughs in on the sides thus making the top and bottom dimensions of the whole inaccurate regarding what material was actually dredged. In addition, the hole probably contains tails and oversize rock that were moved during the sampling. The irregularity of the bedrock surface adds another dimension of uncertainty to measuring the volume of the dredge hole.
Dredge throughput would be extremely difficult to measure. The manufacturer’s specifications for production rate or capacity do not reflect the actual throughput of material in dredging conditions and should not be used to calculate production rate or mine life. The manufacturer’s production rates represent the maximum volume of sand or gravel that the dredge can process under ideal or optimum conditions. Ideal conditions would include minimal lift, unconsolidated sand or small gravel with no oversize, uniform size of feed material, and a steady supply of material or continuous operation. These conditions are rarely encountered in streams and rivers. In addition, most gold is recovered in situations where dredging conditions result in rates that are much less than ideal, such as dredging around and under boulders, in crevices and joints, on weathered bedrock, and discontinuous gravel beds. In general we have found dredge production rates to range from about 1.5 to 5 cubic yards per hour for 4 and 5 inch dredges, which is far less than the manufactures’s rated capacity of 5 to 10 cubic yards per hour for 4 and 5-inch dredges.
An estimate of the dredge production rate is calculated using the actual dredging time from sampling and the best estimate of the dredge hole volume from measurements made in the hole after the sampling is completed. The basic calculation is: dredge hole volume (cubic yards) ÷ dredging time (hours) = production rate (cubic yards/hour). Unless site conditions dictate otherwise, the production average production rate for the claim can be calculated using the total volume and dredging time for all of the sample sites on the claim.
Mine Life
The mine life of a claim or claim block can be calculated using the average dredge production rate and the volume of gravel resources calculated from the stream mapping and the sampling. The results of the stream mapping should allow the mineral examiner to calculate the volume of gravel on the claim that could be processed using a suction dredge. There may be portions of the stream or river on the claim that may not be amenable to suction dredging due to stream conditions such as cascades or deep pools, canyons, or topography. Information obtained during the sampling, such as thickness of gravel, depth to bedrock, and bedrock relief, should be used to verify or fine tune the volume calculations made from the stream mapping. The basic calculation for mine life is: volume of gravel resources (cubic yards) ÷ dredge production rate (cubic yards/hour) = mine life (hours). In order to calculate the number of years or seasons in the mine life, the mineral examiner must consider the number of hours of actual work required to accomplish one hour of dredging and the length of the dredging season. Using a ratio of 1.6 hours of work time to 1.0 hours of dredging time means that the operator would accomplish 25 hours of dredging in a 40 hour work week. A dredging season is normally limited to a certain number of weeks per year.
Normally the majority of gold in placer deposits is concentrated over a long period of time (decades to centuries or more) on or near bedrock or other potential gold traps. Therefore, areas on a claim that have been previously dredged do not contain gold-bearing resources. In certain situations, significant amounts of gold in the gravel could be deposited in the gravel over a period of a few years, in which case the mine life could be extended based on ‘regeneration’or ‘recharge’ of the gold values. The latter situation could arise where the primary source of gold is very near or on the claim, and the material is eroding into the creek on a regular and frequent basis. In this case, the mineral examiner may need to adjust the length of the mine life. Evidence for this situation would includesignificant amounts of gold including pieces with character occurring throughout unconsolidated gravel. The gold bearing gravel would appear to be flushed through the claim on an annual basis or during high stream flows.While sampling, the mineral examiner should stop dredging and check the sluice box and remove any coarse pieces of gold after dredging unconsolidated gravel and before cleaning up bedrock.
Sample Analysis
The analysis of each sample should include the following information as shown in the sample table below:
TABLE 1. SAMPLE BW7-1 SUMMARY
Total dredging time / 2.15 hoursActual work time / 2.90 hours
Volume of gravel processed / 4.36 cubic meters (5.7 cy)
Production rate / 2.03 cubic meters/hour
(2.65 cy/hr.)
Gold recovered / 406.6 milligrams
Gold production rate / 189.1 milligrams/hour
Grade / 93.3 mg/cubic meter
(71.3 mg/cy)
The sample data should be combined to show totals and averages of pertinent data so that the individual samples can be compared and the averages for the claim can be displayed as in the sample table below.
TABLE 2 - GOLD PRODUCTION RATE AND GRADE OF DEPOSIT
SAMPLE NO. / DREDGING HOURS / VOLUME(cubic yards) / GOLD RECOVERED (mg) / GOLD PRODUCTION RATE (mg/hr) / GRADE (mg/cy)
HD-1 / 2.00 / 2.7 / 15.6 / 7.8 / 5.8
HD-2 / 2.17 / 3.8 / 4,055.2 / 1,868.8 / 1,067.2
HD-3 / 2.17 / 3.8 / 1,078.2 / 496.9 / 283.7
TOTAL or AVERAGE / 6.34 / 10.3 / 5,149.0 / 812.1 / 499.9
After the appropriate gold price is determined, the revenues should be presented to display the value of each sample as well as the average recovery for all of the samples, as shown in the table below:
TABLE 3. SAMPLE RESULTS, PRODUCTION VALUE
Sample Number / Recovery(mg) / Time
(hrs) / Recovery/hour
(mg/hr) / Value/hour
($/hr)
BW7-1 / 406.6 / 2.15 / 189.1 / $1.76
BW7-2 / 78.6 / 2.03 / 38.7 / $0.36
BW7-3 / 474.9 / 1.85 / 256.7 / $2.39
BW7-4 / 73.7 / 2.03 / 36.3 / $0.34
Total/Average / 1,033.8 / 8.06 / 128.3 / $1.19
The mineral examiner should compare the sample values with any dredging information provided by the claimant, operator, other operators in the area, or other suction dredge samples in the area, and discuss these values with the operator. The mineral examiner should examine any records the claimant has regarding time worked, gold recovered, time on the claim, calendars, and areas of the claim that have been dredged.
Mining Scenario
As with any placer mining operation, the mineral examiner must analyze the claimant’s operation or develop a reasonable mining scenario for the suction dredging operation. One method is to evaluate the weekly costs and revenues, extrapolate these costs for the entire season, and include any one time costs, such as move-in and move-out, or mobilization. A reasonable starting point is to assume 25 hours of dredging in a 40 hour work. Conditions at the specific claim may justify adjusting this ratio. The 25 hours of dredging per week would result in revenue based on the hourly recovery for dredging at 25 hours per week. The labor wages would be charged for 40 hours per week per person for the actual work activities. These actualwork activities included in the mining scenario are discussed in the previous sections.
The operating costs should include the hourly cost for fuel and the hourly repair and maintenance costs for the dredge based on dredging time. We have used the Contractors’ Equipment Cost Guide for the hourly costs for parts, supplies and lubrication for a gasoline powered pump of a similar size as that on the dredge.
Capital costs for a dredging operation are generally low relative to the operating costs and includes the expenses incurred by the operator for the dredge, wetsuits, airlines, hoses, regulators, weight belts, ropes, pans, screens, buckets, picks, shovels, pry bars, come-alongs or winches, cables or chains, mechanics tools and other small hand tools. Most of these items can last a relatively long period of time if used conservatively, and not broken or lost. Generally the only items that may wear out over the life of the mine are the pump and engine, and the wetsuits. Pumps and engines depreciate in value based on the hours of use. We have used the Contractors’ Equipment Cost Guide to obtain an hourly cost for ownership for a pump with engine.
We accrue the hourly dredge operating and capital costs based on 25 hours of operation per week.
Claims on which the access is difficult to and from the claim from roads, or difficult access along the river may require additional time for mobilization and demobilization at the beginning and end of each season.
The only reclamation for the actual dredging activity is dispersing dredge tailings and knocking down any boulder piles. These activities can be accomplished by the person tending the dredge or accounted for during the 15 hours per week of non-dredging time for a 2-person operation. Campsites or development or improvement of access could also result in reclamation costs. Most reclamation of the actual dredge site is done naturally.
Using the above method of economic analysis, the mineral examiner must be careful to distinguish between dredging hours and actual work hours, and label them in the report. The remainder of the economic analysis is completed as regular placer examination.
The following spreadsheet is an example of tracking pertinent information for the economic analysis.
ECONOMIC ANALYSISGOLD SPOT PRICE = / $362 / /tr oz = / $0.0116 / /mg
GOLD PRICE (80% spot)= / $290 / /tr oz = / $0.0093 / /mg / FUEL = / $1.25 / /gallon
LABOR RATE = / $20.00 / /hour / FUEL USE= / 1.00 / gallons/hour
PRODUCTION RATE = / 128.3 / mg/hour = / $1.19 / /hour / REPAIR COSTS= / $0.51 / /hour
DREDGING HOURS = / 25 / hours / DREDGE COST = / $2,640
WORKING HOURS = / 40 / hours / DREDGE DEPR. = / $0.25 / /hour
OPERATING SEASON= / 11 / weeks / EQUIP. DEPR. = / $0.25 / /hour
MOBILIZATION TIME= / 16 / hours
OPERATING COSTS PER WEEK
a. Labor-Mining / $800.00
b. Fuel / $31.25
c. Repairs & Maintenance / $12.75
d. Mobilization / $29.09
TOTAL OPERATING COSTS / $873.09 / or / $34.92 / /dredging hour
CAPITAL COSTS PER WEEK
a. Dredge-ownership cost / $6.25
b. Tools & Supplies / $6.25
TOTAL CAPITAL COSTS / $12.50 / or / $0.50 / /dredging hour
TOTAL MINING COSTS / $885.59 / or / $35.42 / /dredging hour
REVENUE / $29.87 / or / $1.19 / /hour
PROFIT OR LOSS / -$855.73 / or / -$34.23 / /dredging hour
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