Building Economics. In this Example we Start With Western Mine Cost Service Models.

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The Problem of Out of Date Models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