This application keeps you mine years ahead by optimizing the life of a mine ⛏️
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Description
💎 The new technique is developed to evaluate the project by combined analysis of total investment, operating cost, cost of production, working profitability, mine life and the net present value (NPV). On comparing two investment proposals, the model analysis would immediately indicate the one which shows better values. This research work is an attempt for assessment of the value of mining investment proposal by comparative analysis of these economical parameters essential for the investment decision at the early exploration stage.
💎 A basic investment decision model developed during this research work has been published under title “Formulation of a Model for Determining the Optimum Investment, Operating Cost and Mine Life to achieve Planned Profitability”, Transactions of the Institution of Mining and Metallurgy, Section-A: Mining Technology, London, Vol. 110, May-Aug., 2001.
💎 The investment decision model can be developed with the help of project profitability and the net present value (NPV) criteria. In the competitive mining industry, the new ventures may only be feasible if its cost of production does not exceed to the difference between revenue and desired profitability. Thus, cost of production is an important ingredient in determining economic feasibility.
💎 In this model, the profitability includes the percentage sum of net profit and interest expenses in relation to revenue. The cost of production refers the operating cost, taxes and depreciation as fixed cost. The operating cost involves the items such as cost of raw material (drill supplies, explosives etc.), direct operating labour and supervision, electricity, air, water, fuel, lubricants, maintenance materials, maintenance labour and supervision, administrative, technical and clerical personnel, sample assaying, office supplies and communications etc. The royalty payment and equipment replacement cost are included in operating cost. Therefore, planner should take into account that some percentage of available operating cost will be invested for equipment replacement as per life suggested by the equipment supplier. The model analysis with the technique of discounted cash flow (DCF) criteria such as Net Present Value (NPV) will help in determining its time value of money and to take up investment decision for the optimum capital investment, operating cost, mine life and the profitability.
💎 The following assumptions have been considered for the formulation of this model.
(i) Costs, prices, production rates and project profitability remain constant over the life of mine. No escalation of either mineral prices or capital or operating costs is considered. This approach is based on the concept that on the average, both will change in an equivalent manner during the project life such that project profitability will be unaffected. (ii) In assessing cost of production, the original investment is written off on a straight-line basis over the economic life of the mine.
💎 For subsequent analysis, the symbols are defined as follows:
I=Original investment to bring the mine into production R=Gross annual revenue accruing from the sale of mineral at estimated average long-run prices C=Annual total operating cost represented in percentage of revenue. It indicates the maximum funds available or allowable towards operating cost, including royalty and equipment replacement cost, and excluding interest expenses and depreciation. V=Present value of an amount of Rs.1 per year for n years and discounted at r% per annum, payment being made at the end of each year n=Estimated economic life of the mine in years m=Mine construction period in years t=Tax rate in percentage