Planeamiento de mina

S2 Mining revenues and costs

ECONOMIC CONCEPTS

ESTIMATING REVENUES
The units in which the prices axe expressed also vary. Some examples in this regard are presented below.
1. For many minerals, the 'ton' is unit of sale. There are three different 'tons' which might be used. They
are:

If 1 long ton (2240 lbs) of iron ore contained 1% iron (22.40 lbs), then it would contain 1 long ton unit (1
ltu) of iron. If the long ton assayed at 65% iron then it would contain 65 ltu. If the quoted price for pellets
is 70 //ltu, then the price of 1 long ton of pellets running 65% iron would be:

ESTIMATING REVENUES
Metric ton units (mtu) and short ton units (stu) are dealt with in the same way. The
reason for using the 'unit' approach is to take into account varying qualities.
2. For most metals, the unit of weight is the pound (lb) or kilogram (kg).
3. Gold, silver, platinum, palladium, and rhodium are sold by the troy ounce. The
relationship between the troy ounce and some other units of weight are given below.

Historical price data

Mineral prices as monitored over a time span of many years exhibit a general upward
trend. However, this is not a steady increase with time but rather is characterized by cyclic
fluctuations.
A mining venture may span a few years or several decades. In some cases mines have
produced over several centuries. Normally a considerable capital investment is required to
bring a mine into production. This investment is recovered from the revenues generated over
the life of the mine. The revenues obviously are strongly dependent upon mineral price. If
the actual price over the mine life period is less than that projected, serious revenue shortfalls
would be experienced. Capital recovery would be jeopardized to say nothing of profits.

ESTIMATING COSTS
Types of costs
There are a number of different types of costs which are incurred in a mining operation (Pfleider
& Weaton, 1968). There are also many ways in which they can be reported. Three cost categories
might be:
- Capital cost;
- Operating cost;
- General and administrative cost (G&A).
The capital cost in this case might refer to the investment required for the mine and mill plant.
The operating costs would reflect drilling, blasting, etc. costs incurred on a per ton basis. The
general and administrative cost might be a yearly charge. The G&A cost could include one or
more of the following

ESTIMATING COSTS
The capital and G&A costs could be translated into a cost per ton basis just as the operating costs.
The cost categories might then become:
- Ownership cost;
- Production cost;
- General and administrative costs.
The operating cost can be reported by the different unit operations:
- Drilling;
- Blasting;
- Loading;
- Hauling;
- Other.

ESTIMATING COSTS

ESTIMATING COSTS

ESTIMATING COSTS

ESTIMATING COSTS-Step of Step

Step I. Given the annual production requirements for ore and waste plus the operating schedule, determine the daily
production rate.
Step 2. Select a basic equipment fleet
Step 3. Calculate the expected production rate for each type of equipment. Calculate the number of machines
required. Determine the amount of support equipment needed.
Step 4. Determine the number of production employees required. Determine the number of support employees.
Step 5. Calculate the owning and operating costs for the equipment.
Step 6. Calculate the other costs.
Step 7. Calculate the overall cost per ton.
This procedure will be demonstrated using an example presented by Cherrier (1968). Although the costs are old,
the process remains the same. The cross-sections through the molybdenum orebody used in this example. The
initial mine design has indicated a pit for which
- Rock type is granite porphyry,
- 32,300,000 tons of waste,
- 53,000,000 tons of ore,
- Stripping ratio SR equals 0.6:1, and
- Average ore grade is 0.28% MoS?.
The waste will be hauled by trucks to a dump area. The ore will be hauled by trucks to one of two ore passes. The
ore is crushed and then transported by underground conveyor to the mill.
The step-by-step process will be developed.

ESTIMATING COSTS
Step 1: Daily production rate determination. It has been decided that the annual production rate will be
- 3,000,000 tons ore and
- 2,000,000 tons waste.
The mine will operate 2 shifts/day, 5 days/week, 52 weeks per year, with 10 holidays. The ore and waste production per shift becomes:
- Ore: 6000 tons/shift,
- Waste: 4000 tons/shift.
Step 2: Selection of a consistent set of pit equipment. The major types of production equipment to be selected are:
- Drills,
- Shovels,
- Trucks.
The bench height has been chosen to be 30 ft. The basic equipment fleet selected consists of:
- 6 yd3 electric shovels,
- 35 ton capacity rear dump trucks,
- Rotary drills capable of drilling 9 7/s" diameter hole.

Step 3: Production capacity/Number of machines. Based upon a detailed examination of each unit operation, the following production rates were
determined:
- Drills: 35 ft of hole per hour,
- Shovels (waste): 630 tons/hour,
- Shovels (ore): 750 tons/hour,
- Trucks (waste): 175 tons/hour,
- Trucks (ore): 280 tons/hour.

ESTIMATING COSTS
From this, of the number production units and required scheduling were determined for ore and waste:
- Ore
1 drill (1 shift/day),
1 shovel (2 shifts/day),
3 trucks (2 shifts/day).
- Waste
1 drill (1 shift/day),
1 shovel (2 shifts/day),
4 trucks (2 shifts/day).
The support equipment includes:
- 4 dozers (2 shifts/day),
- 2-5 yd3 rubber tired front end loaders (2 shifts/day),
- 2 road graders (2 shifts/day),
- 1 water truck (2 shifts/day),
- 1 explosives truck (1 shift/day).
The reserve production equipment to be purchased is:
- 2-35 ton trucks,
- 1-5 yd3 front end loader.
In case of shovel breakdown, a front end loader will substitute.

ESTIMATING COSTS
Step 4: Determine the number of production employees. A manpower scheduling chart is prepared such as is shown in Table
2.36. The overall numbers are summarized below.
- 1 assistant superintendent,
- 4 shift foreman,
- 4 shovel operators,
- 4 oilers,
- 14 truck drivers,
- 2 drillers,
- 2 driller helpers,
- 1 blaster,
- 1 blaster helper,
- 8 dozer operators,
- 4 loader operators,
- 4 grader operators,
- 2 water truck drivers,
- 4 truck spotters,
- 4 crusher operators,
- 4 conveyor operators,
- 10 laborers.
As can be seen, there are 73 production employees. The crusher/conveyor part of the production system operates 7
days/week and 3 shifts per day. There is one crusher operator and one conveyor operator per shift. The ore passes contain
enough storage capacity so that the mill can run 7 days/week even though the mine runs 5.

ESTIMATING COSTS
Step 5: Determine the number of other employees. There are four basic departments at the mine:
- Administration,
- Engineering,
- Mine,
- Maintenance.

ESTIMATING COSTS
Step 6: Determine the payroll cost. Table 2.38 summarizes tie basic annual wage figures for the various job
classifications. Fringe benefits amounting to 25% are not included in this table.
Step 7: Determine the operating costs for the equipment. The total operating costs for the various unit
operations include materials, supplies, power and labor. These are summarized in Table 2.39. The labor
cost includes the 25% fringe benefits.
Note that there are three different units which have been used to express the costs ($/ft, $/hr and $/ton).
Some conversion factors are required to obtain the desired common values of $/ton. These are:
- Drilling: 27.2 tons/ft,
- Loading (ore): 750 tons/hr,
- Loading (waste): 630 tons/hr,
- Hauling (ore): 750 tons/hr (3 trucks),
- Hauling (waste): 630 tons/hr (4 trucks).

To simplify the presentation, only two cost categories will be carried further. These are operating labor
and MEP (material, expenses and power) which includes all of the rest. The ore-waste separation will be
made. The results are summarized in Tables 2.40 and 2.41. It is noted that the labor cost is strictly for
operating labor and does not include repair labor nor does it include supervision.

ESTIMATING COSTS
Step 8: Determine the capital cost and the ownership cost for the equipment. The capital cost for the pit
equipment is given in Table 2.42.
During the life of the mine, some of the equipment will have to be replaced. This is indicated in Table 2.43.
As can be seen, the original equipment falls into three lifetime groups (5, 10 and 20 years). These are
summarized below:
Life (yrs)
Total original cost ($)
5
861,000
10
396,000
20
1,401,000
The equipment ownership cost consists of two parts:
(1) Depreciation,
(2) Average annual investment cost.
Straight line depreciation with zero salvage value is assumed. Thus the average equipment depreciation
per year is $281,850. The average annual investment (AAI) is calculated using the following formula.
where n is the life (yrs) and CC is the capital cost ($).

The total AAI = $1,469,930

To obtain the average annual investment cost AAIC a percent P
(expressed as a ratio) is applied. Included in P are interest, taxes
and insurance.
AAIC = P x AAI
In this case 10 percent will be used. Hence AAIC = 0.10 x
$1,469,930 = $146,993; The average annual equipment ownership
cost becomes

ESTIMATING COSTS
Step 9: Calculation of other capital expenditures (mine). The other capital expenditures at the
mine include those for the required mine buildings and the costs associated with the mine
development period. The following list includes all required mine buildings, and their required
capital outlays.

ESTIMATING COSTS
This will be depreciated over the 20 year mine life. The development expenses are as follows:

ESTIMATING COSTS
Step 10: Calculation of milling costs. In this case the open pit ore tonnage (averaged over 7
days) of 8,600 tpd will go to a mill having a capacity of 34,400 tpd. The additional 25,800 tpd
will be supplied by an underground mine. Since the total mill investment is $48,000,000 the

share for the open pit operation is $12,000,000. This will be depreciated over the 20 year
mine life. The ownership cost (depreciation plus average annual investment) per year is

The primary crushing will be done at the mine, therefore the first step in milling will be the
secondary crushing. Operating costs for milling are estimated to be the following (includes

administration and overhead):

ESTIMATING COSTS
Step 11: Expression of the mining costs. There are a variety of ways by which the mining costs can be expressed. A series of cases
will be presented to illustrate this.
Case 1. Direct operating costs. The simplest way is to examine the direct operating mining costs for ore and waste. These are:

Step 11: Productivity calculations. The productivity in terms of tons per manshift can now be calculated. It will be assumed that
each employee works 250 shifts per year in producing the 5,000,000 tons of total material. The productivity will change
depending on the number of departments included:

ESTIMATING COSTS
Step 12: Mine ownership costs/ton. As indicated earlier, in addition to the operating costs, there are a number of capital
costs to be charged against the material moved. These are:
- Equipment ownership costs;
- Development costs;
- Mine buildings.
The development and mine buildings will be amortized over the total amount of material moved. In this case

The equipment ownership cost is

Hence the ownership cost/ton is

Step 13: Total mining cost. The total mining cost is equal to the total operating cost plus the ownership cost. In this case it is

Note that the ownership cost here is about 27% of the operating cost and 21% of the total mining cost.

ESTIMATING COSTS
Step 14: Milling cost. As was indicated earlier, the mills operating costs per ton is

Step 15: Profitability estimate. The revenues are attributable to the ore and all the costs must now be charged against the ore as
well.

Current equipment