Assay Rules
Assay rules are used to define how the final analyte values are determined for the contract and how differences between the seller and buyer assay results are settled.
Due to the monetary value's high dependence on the contents of each metal, rules are defined to determine those contents with the least possible ambiguity. A settlement process (assay exchange and umpire) is standard for base metal concentrates, semi-refined metals and iron ore.
For some other materials (for example, coal), assays coming from a survey are often sufficient to determine the quality of the product. A variation, called a 'challenge', is sometimes used for coal assay settlements. For a challenge in the coal industry, an average is done if the results are within splitting limits, otherwise the seller result is the settlement method.
Assay Exchange Process
A settlement process, called an 'assay exchange', must be contractually defined to determine the ruling assays in most cases. The assay exchange is performed to determine the final content of selected analytes for the despatch order. Only after settlement has been reached for every sampling lot, can the settlement assay be determined for the despatch order and analyte.
The word 'final' is used to indicate the definitive determination of the quantity and quality of the material for invoicing purposes. The word 'provisional' is used for any value before the definitive values are known. For example, for assays, production assays might be used as provisional values.
The assay exchange process consists of several steps defined in the contract between the parties. For example, the assay exchange process could consist of the controlled interchange of laboratory analysis results between the seller and buyer. After receiving their respective samples, the seller and buyer proceed to analyse them (or have them sent for analysis at external laboratories). When the results of these analyses are available, each party notifies the other. When both parties have notified the availability of their results, the exchange process can take place. If the difference between them for every sampling lot is below a 'splitting limit', then the final result for the lot is the average of both results. If the difference is over the splitting limit, the parties can agree on using the average as the settlement (split) or call for an external umpire to analyse the lot. The result of the umpire is considered according to a specific set of rules defined in the contract, including the acceptable umpires and the method to be followed.
Analyte Settlement Rules
The contract specifies which analytes are part of the assay exchange process. Normally all payable analytes are exchanged, while other analytes are not (for example, for copper concentrates, only copper, silver and gold are exchanged). However, in some cases, a penalty analyte can be included in the assay exchange process as well (for example, for copper concentrates, arsenic can be exchanged), or a payable analyte can be left out (for example, silver). Therefore, the contract needs to be configurable as to which analytes are included in the exchange process and which are not.
All parameters specifying how the process of assay exchange takes place are defined by analyte:
- Units of measure—The units in which assay results are expressed are contractually specified for each analyte. This unit of measure is valid for the whole shipping and invoicing process, as well as for assay exchange.
- Splitting limits—The splitting limits for assay exchange are contractually specified for each analyte.
- Rounding—The number of decimal places to be used when calculating payable amounts are all contractually specified for each analyte.
Sampling
The determination of the final assays involves a controlled process for obtaining samples of the contracted material. A set of samples is taken at a predefined location in the shipping process (normally at the destination port) with a contractually defined protocol. Usually, a trusted third-party (for example, a surveyor) is responsible for taking and processing the samples.
In some cases, samples for less relevant analytes are combined in a composite sample for analysis (usually this is done to reduce the cost of the analysis). In this case, the analyte takes its value from the composite sample result for the exchange process because it would have no result in any of the lot samples that were taken.
Sample lots are entered into the system with the informed weights for each lot so that the correct number of lot samples to be taken for loading or unloading transactions can be calculated.
Multiple Laboratories
Samples may be analysed by multiple laboratories. The assay rules can specify a default list of laboratories for which composite, lot and DU lot samples can be entered for a despatch. Each analyte settlement rule can limit the applicable laboratories if required.
The multi-lab settlement method determines which result is considered until the assay exchange. At the time of the assay exchange, assays must be retrieved for the assay exchange via the Analyte Values Selection tab. The value that matches the multi-lab settlement method is pre-selected; however, values can also be selected manually.
The selection must be approved before the results are available on the Assay Exchange and Final Analyte Results tabs. A selection that is not approved has no impact on snapshot and invoice calculations.
Settlement Type
The settlement type defined for an analyte determines how samples are considered in the assay exchange and how the final result is calculated:
- By Weighted Average Total
- By Lot (default)
- By Composite Sample
Settlement By Weighted Average Total
The analyte settlement rule must specify a Splitting Limit and a Splitting Limit Total.
The buyer results for each lot are combined into a weighted average, and likewise the seller results. If the absolute difference between the two weighted averages is less than or equal to the Splitting Limit Total, then the final result is calculated using the Default Settlement Method.
In the following example, the splitting limit total is 1 and the default settlement method is Average Buyer and Seller. The difference between the buyer and seller results is 0.01, which is less than the splitting limit total. The final result for the analyte is (46.19 + 46.18) / 2 = 46.19 (rounded to two decimal places). The final results of each lot are not used.
| Mass | Seller | Buyer | Final |
|---|---|---|---|
| 4.769875 | 45.94 | 45.78 | 45.86 |
| 4.816333 | 46.53 | 46.68 | 46.61 |
| 3.722167 | 46.08 | 45.90 | 45.99 |
| 4.764625 | 45.93 | 45.85 | 45.89 |
| 4.751312 | 45.93 | 46.09 | 46.01 |
| 4.263500 | 46.74 | 46.76 | 46.75 |
| Total | 46.19 | 46.18 | 46.19 |
If the absolute difference between the buyer and seller weighted averages is greater than the splitting limit total, each lot is considered individually. If the absolute difference between the buyer and seller results is greater than the Splitting Limit, the lot must be split or sent to an umpire.
Settlement By Lot
The analyte settlement rule must specify a Splitting Limit and may specify a Splitting Limit Total.
If a Splitting Limit Total is specified, the buyer results for each lot are combined into a weighted average, and likewise the seller results. If the absolute difference between the two weighted averages is less than or equal to the splitting limit total, then the final result is the weighted average of the final results of each lot.
In the following example, a splitting limit total of 1 is specified and the default settlement method is Average Buyer and Seller. The difference between the buyer and seller results is 0.01, which is less than the splitting limit total. The final result is calculated for each lot. The final result for the analyte is 46.18289, which when rounded to two decimal places is 46.18.
| Mass | Seller | Buyer | Final |
|---|---|---|---|
| 4.769875 | 45.94 | 45.78 | 45.86 |
| 4.816333 | 46.53 | 46.68 | 46.61 |
| 3.722167 | 46.08 | 45.90 | 45.99 |
| 4.764625 | 45.93 | 45.85 | 45.89 |
| 4.751312 | 45.93 | 46.09 | 46.01 |
| 4.263500 | 46.74 | 46.76 | 46.75 |
| Total | 46.19 | 46.18 | 46.18 |
If a Splitting Limit Total is not specified, or if the absolute difference between the buyer and seller weighted averages is greater than the splitting limit total, each lot is considered individually. If the absolute difference between the buyer and seller results is greater than the Splitting Limit, the lot must be split or sent to an umpire.
Settlement By Composite Sample
The analyte settlement rule must specify a Splitting Limit. A Splitting Limit Total is not used.
The lots are combined into a composite sample with the weighted averages of the buyer and seller results. If the absolute difference between the buyer and seller results is less than or equal to the splitting limit, then the final result is calculated using the Default Settlement Method.
If the absolute difference is greater than the splitting limit, the assay must be split or sent to an umpire.
Splitting
The buyer and seller might agree to split the lot despite the difference. The final result is then the average of the buyer and seller results. Splitting saves both parties the cost (in time and money) of going through the whole umpiring process. All lots that are outside of splitting limits for an analyte and have not been split by agreement between buyer and seller are submitted for umpire analysis.
Umpiring
An extra sample for the lot is sent to a nominated umpire for analysis. The umpire result is considered mandatory and determines the final result as per a contractually defined rule.
Umpires are engaged to analyse the extra samples and provide an independent result for comparison. These are either chosen from the umpires according to the contract specification, or if umpires are to be auto-rotated, automatically assigned as the next one in the list of umpires. This process of umpire rotation picks all selected umpires specified in the contract and assigns the relevant lots to them by alternating the selected umpire for consecutive lots. Because the umpire sample must not be tampered with after being taken (samples are sealed and tagged according to standard procedures), if umpire analysis is required for more than one analyte in the same lot, the same umpire must perform the analysis on all required analytes. A different umpire can be used for different lots requiring umpire determination.
When the umpire's result is available, it is entered for contract fulfilment. If the umpire's result falls between the buyer and seller's assay, the Between Buyer And Seller rule is applied to determine the final result. If the umpire's result falls within one splitting limit of the closer of the buyer and seller assays, the Within One Splitting Limit rule is applied to determine the final result. If the umpire's result is more than the splitting limit away from the closer of the buyer and seller assays, the Outside Splitting Limit rule is applied to determine the final result. The following rules are available for each scenario:
- Minimum—The minimum assay prevails.
- Maximum—The maximum assay prevails.
- Average Buyer and Seller—The umpire assay is discarded and the average of the buyer and seller assays is the settlement assay.
- Closest to Umpire—The assay closest to the umpire assay prevails. (However, if the umpire assay is exactly the average of the buyer and seller assays, the average of the buyer and seller assays prevails.)
- Umpire—The umpire assay becomes the settlement assay.
- Average Umpire and Closest—The settlement assay is the average between the umpire assay and the buyer or seller assay that is closer to the umpire assay.
- Middle Assay—The middle assay of the buyer, seller and umpire assays prevails.
- Buyer Result—The buyer assay prevails.
- Seller Result—The seller assay prevails.
- Calculated—The result is calculated using a specified expression.
If a provisional invoice is raised after the buyer and seller results are entered, but before the umpire's results are entered, the assay value is determined using the Pre-Settlement Method, and the value is highlighted to show the fact.
Invoicing Umpiring Costs
Use one of the following methods to include umpiring costs in an invoice:
- Set up an umpiring charge. In this method, values entered for the Umpire Fee and Currency in the assay exchange are not applicable. The umpiring charge is based just on the number of won, lost and shared umpire lots. This method is preferable if umpiring charges are fixed or tiered.
- Set up a calculated umpiring charge and enter the Umpire Fee and Currency in the assay exchange. This method is preferable if the fees vary between lots or during the contract term. Configure the umpiring charge as follows:
- Value Type set to Calculated, using either =UmpiringCost() to include the total umpiring cost as a single line item, or =UmpiringCostPerAnalyte("AnalyteName") to include the umpiring cost as a line item for a single specified analyte.
- Value Basis set to Won Umpire Lot or Lost Umpire Lot. (The Umpire Lot option is the same as Won Umpire Lot.)
- Unit should be blank.
- Set up a service contract for the umpire, and then link that service contract to the sales or purchase contract by adding a service charge in the applicable set of contract terms. The charge is applied by sampling lot and by analyte (that is, for every assay result that has to be provided). The charge cost is assumed by the losing party for every lot and analyte. That is, for a sales contract, the seller only pays the cost of the lots and analytes where the umpire result is closer to the buyer's result and for half the cost of the lots and analytes where the umpire result is equally distant from both parties. This method is preferred if service invoices need to be created to pay the umpire. Configure the contract rate with Rate Detail Basis set to Fixed and use a calculation to determine the value.
- Set up a calculated penalty/bonus or premium contract charge and enter the Umpire Fee and Currency in the assay exchange. This method is not recommended for MineMarket 4.8 or later because using a calculated umpiring charge includes more Value Basis options and makes it easier to configure umpiring charges within the chart of accounts. If using this method, configure the contract charge (either penalty/bonus or premium) as follows:
- Value Type set to Calculated, using either =UmpiringCost() to include the total umpiring cost as a single line item, or =UmpiringCostPerAnalyte("AnalyteName") to include the umpiring cost as a line item for a single specified analyte.
- Value Basis set to Invoice Value.
- Value Analyte and Unit should be cleared (blank).
Rounding
Each analyte settlement rule defines the number of decimal places in which results in the assay exchange process are entered and calculated:
- Original Grade—Original grade of the analyte
- Exchange Lot By Lot—Seller, buyer and umpire results for each lot
- Exchange Weighted Average Total—Weighted average of the seller, buyer and umpire results (used for total splitting limits determination and for display in relevant documents)
- Final Lot By Lot—Final result of each lot
- Final Weighted Average Total—Final result for the analyte for the despatch order
