Building Economics

In this Example we Start With Western Mine Cost Service Models

Locking in on 20,000 tpd(My example – your results may differ)

• Mining costs are given in tonnes of ore– Important distinction because MSOPIT wants mining

cost/per tonne• 1:1 $2.45• 2:1 $3.52• 1:1 means 1 tonne waste/tonne ore ie 2 tonnes

– $2.45 / 2 = $1.23/tonne• 2:1 means 2 tonnes waste/tonne ore ie 3

– $3.52 / 3 = $1.17/tonne• I’m thinking around $1.20/tonne as a number

– Remember I’m getting numbers for initial estimates

The Problem of Out of Date Models

I will use theProducer PriceIndex from the Bureau of LaborStatistics

Pick and Click

Using General Mining

Using Price Increase of 2.14 times

• $1.20 / tonne

• $1.20 * 2.14 = $2.57 / tonne mining cost

Now I Need Processing Costs

• Thinking of my primary ore– Have around $24/tonne in free milling gold

• Gravity methods are inexpensive• If I charge the comminution elsewhere about $1/tonne will do

gravity

– Have $23/tonne in copper sulfides• Flotation is normally the process of choice

– Have about $24/tonne gold encapsulated in pyrite• Pyrite is a good flotation mineral do 2nd stage

– I have floatable silver but the value is marginal• Depends on 3rd stage cost

Western Mine Cost Service

Picking 3 Product Float

• $5.08 plus $1.00 for my gravity stage

• $6.08 – need to inflation adjust

• Use my 2.14 factor on the $5.08 (my $1 is pretty good)– $5.08 * 2.14 = $10.87– Plus 1– $11.87 / tonne

Considering the Products

• I will have crude gold nuggets and flakes

• Pyrite concentrate with gold inclusions

• Copper concentrates

• Silver concentrates

My Copper

• Smelter charges $100 per ton (Western Mine Cost Service)– Price escalate $214 per ton

• SWAG at transportation– $40 per ton

• Refining Charges 8 cents/lb– Price adjust 17 cents/lb

I’ll Try for an adjusted price/lb

• Direct cost per lb $0.17 for refining• $244/tonne for concentrates

– Concentrate will be about 28% Cu– 2205 lbs/tonne * 0.28 = 617 lbs– $244 / 617 = 40 cents/lb

• If copper sells for $3.25/lb– I loose 17 cents refining and 40 cents smelt and

transport– Copper in concentrate is worth about $2.68/lb– Recovery about 90% in flotation

Using the Information

Can mostly see where I got numbersFactor converts model units to dollars.

How Did I Get the Copper Factor?

Start with a metric tonne end with dollars

Model contains % copper

%Copper/ 100 * 1 tonne = tonnes of copper

Tonnes to lbs 2204.6 lbs/metric tonne

%Copper/100 * 2204.6 lbs copper * price * recovery = resulting revenue 1 tonne

Factor handles the % conversion X / 100 * 2204.6 = 22.046

My Precious Metals

• My gold nugget– Treatment charges $0.75/oz

• Inflation adjust $1.60/oz

– Pay about 98% of contained metal (they do have losses – and profit)

• 2% of $1200/oz $24/oz

– Cost about $25.60/oz– Value of gravity gold $1,174/oz

My Pyrite Gold

• About 1% iron in pyrite (a median value – your ore may differ)

• 22.05 lbs iron – double for pyrite 44.1 lbs of pyrite– Contains 0.04 oz gold

• Will have to smelt the pyrite– About $214/tonne– Or about $0.10/lb– $4.41 in smelting for 0.04 oz gold– $4.41/0.04 = $110/oz (plus refining charge)

• Pyrite gold is worth about $1,064/oz

My Next Problem

• My block model has gold reported– I know it’s a 50 – 50 split between two types– I’ll handle this with a 50-50 average of my two

gold values• $1174/oz• $1064/oz• Average $1119/oz• About 90% recovery

Getting My Factor

• Start with oz/tonne

• If I multiply by 1 tonne I will have number of oz.

• * price * recovery = revenue

• This factor is easy – its 1.

Put the information in

Note that I put this by silver – don’t you do that.

My Silver

• Since its Silver Sulfides I’ll have to smelt and then refine– I’ll send it with the copper– $214/tonne – 50% silver

• 2205 lbs * 0.5 = 1,100 lbs * 12 troy oz/lb = 13200 oz• About 2 cents/oz

– Refining about 25 cents/oz – inflation adjust 60 cents• About 62 cents off of value• $24.38 /oz for silver• Flotation recovery about 75%

And Finish Up(at least for primary ore)

I have gold and silver reversed in this illustration