Project Work Mining and Finance

Assignment:
You will receive brief geometric and geologic data for a mineral deposit via email. For this
you need to register your team via email to cwe13@tu-clausthal.de.

In relation to this data you will have to perform a financial analysis of the deposit with a
given mining depth. You will have to assume missing information. The financial analysis
should contain:

- The estimation of Capex

- The estimation of Opex
- The estimated cash flow per year (as the revenue changes over time due to a
changing stripping ratio)
- The period of payback, internal rate of return, NPV, Profitability index
- The NPV sensitivity towards the main factors
- The break-even stripping and cut-off grade ratio for the given deposit with the first
assumptions

After the financial analysis you are requested to suggest a mining depth and perform a
financial analysis for this depth.

Your results should be documented in a short report, which should state your assumptions
and results as concise as possible. You can attach your calculations as pictures or excel file to
the report. The report should contain diagrams for the NPV sensitivity as well as an overview
about the annual cashflow.

The deadline is the 31st of January 23:59h. The report and all relevant attachments need to
be submitted to cwe13@tu-clausthal.de by then. Please address further questions to that
email- address as well. For a personal meeting please propose a date and agenda via email.

For the assignment you should use the following equations:

Equations
The Deposit
ℎ^3
▪ Volume of a pyramide: 𝑉= 3

▪ Life of mine: 𝐿𝑂𝑀 = 0.2 4√𝑇𝑜𝑛𝑛𝑎𝑔𝑒

𝑇𝑜𝑛𝑛𝑎𝑔𝑒
▪ Production (Mt/day): Production T = 𝐿𝑂𝑀 ∗𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑑𝑎𝑦𝑠

T𝑜𝑛𝑛𝑎𝑔𝑒𝑜𝑟𝑒
Production T𝑜𝑟𝑒 = 𝐿𝑂𝑀 ∗𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑑𝑎𝑦𝑠

Capital Expenditure

▪ Drilling equipment cost CD = Nd*3740 d^1.8

▪ Nd: Number of drills

▪ Tons of rock to be blasted per day and drill:

▪ For easily drillable rock: Tp=35.65 d[cm]²

▪ For hard drillable rock: Tp=15.5 d[cm]²

▪ Number of drills: Nd = T / TP

▪ Cost of Shovels and Loading Equipment: CL = NS*588,500 S^0.8

▪ NS: number of shovels NS = 0.011* T^0.8/S

▪ S: Size of shovels [m³] S = 0.081 T^0.4

▪ Haulage Costs: CH = Nt*22,400 t^0.9

▪ Nt: number of trucks Nt = 0.231* T^0.8/t

▪ t: truck size [t] t = 6.69 S^1.1

▪ Clearing Costs for Concentrator, Crushing Plant, and Service Facilities:

CC = 2,000 AB^0.9

▪ AB: Area for buildings [acre] = 0.048 T^0.5

▪ Access roads: CR = 280,000 RL

▪ RL: road length [mile]

▪ Prestripping of soil: CPS = 1,000 ds (AB+AM)^0.8

▪ AM: Area for mining [acre] = 0.016 T^0.9

▪ ds: depth of soil [feet]

▪ Maintenance facilities: CFM= 25,300 A^0.8 t^0.1

▪ Area of pit repair shop A= 33 T^0.4

▪ Communication + electricity: CCE= 267 T^0.7

▪ Fueling system: CFS= 30 T^0.8

▪ Concentrator building: CCB= 28,600 Tore^0.6 + 32,000 Tore^0.5

▪ Tore: tons to be milled per day: Avg. ore per day

▪ Water Supply System: CWS= 14,900 T^0.6

▪ Electrical Substation and Surface Electrical Distribution: CES= 580 kW^0.6

▪ Surface power distribution: CPD= 1150 kW^0.8

▪ Diesel-electric plant: CDP= 6000 kW^0.8

▪ Peak load: kW= 73.56 Tore^0.6

▪ Miscellaneous facilities: CMF= 11,000 T^0.5

▪ Surface warehouse: CSW= 6,000 TOre^0.4

▪ Mine Changehouse: CCH= 125[24(Nop+Nml)]^0.9

▪ Nop: Mine personnel

▪ Nop= 0.028 T^0.8

▪ Nml: Mill (processing) personnel

▪ Precious metals: Nml= 5.37 TOre^0.3

▪ Base metals: Nml=5.02 TOre^0.3

▪ Iron ores: Nml=6.34 TOre^0.3

▪ Maintenance shop: CMS= 102 (85 Nsv)^0.9

▪ Nsv: Service personnel

▪ Nsv=0.254 (Nop+Nml)

▪ Administrative office: CAO= 1,327 A^0.9

 ▪ Office Area A = 380 Nat^0.3

▪ Nat: Administrative and technical personnel

▪ Nat= 0.11 (Nop+Nml+Nsv)

▪ Primary crushing (gyratory crusher): CPC= 17,000 Tore^0.7

▪ Grinding and fine ore storage

▪ Soft ore: CGS= 13,400 Tore^0.7

▪ Medium hard ore: CGS= 20,000 Tore^0.7

▪ Hard ore: CGS= 24,000 Tore^0.7

▪ Tailing storage: CTS= 21,000 Tore^0.5

▪ High-grade gold ores leached by cyanidation, followed by zinc dust precipitation of

gold by Merrill Crowe process, filtering, drying, and gold refining:

CPS= 63,200 Tore^0.5

▪ Low-grade ores, cyanide leaching, CIP (carbon-in-pulp) or CIL (carbon-in-leach)

adsorption, refining:

CPS= 50,000 Tore^0.5

▪ High-grade gold ores with base metal sulfides; cyanide leaching, secondary flotation,
carbon adsorption by CIP or CIL process, filtering, thickening, drying, and refining:
CPS= 109,000 Tore^0.5

▪ High-grade gold ores leached by cyanidation, followed by zinc dust precipitation of

gold by Merrill Crowe process, filtering, drying, and gold refining:

CPS= 63,200 Tore^0.5

▪ Low-grade ores, cyanide leaching, CIP (carbon-in-pulp) or CIL (carbon-in-leach)

adsorption, refining:

CPS= 50,000 Tore^0.5

▪ High-grade gold ores with base metal sulfides; cyanide leaching, secondary flotation,
carbon adsorption by CIP or CIL process, filtering, thickening, drying, and refining:

CPS= 109,000 Tore^0.5

▪ Simple low-grade base metal ores of copper with minor content of gold, which can be
recovered as smelter credits. Flotation, thickening, filtering, and drying of auriferous
copper concentrates:
CPS= 14,500 Tore^0.5

▪ Pyritic gold/silver ores where the precious metals are locked in the pyritic minerals.
Differential flotation, selective roasting, recovery of deleterious materials,
cyanidation, thickening, precipitation, filtering, and refining:

CPS= 189,000 Tore^0.5

▪ High-grade Cu/Pb ores, Cu/Zn ores, Pb/Zn ores, Cu/Ni ores. Recovery by differential
flotation, thickening, filtering, and drying of separate concentrates:

CPS= 21,600 Tore^0.5

▪ Complex base metal ores containing at least three valuable metals, with recoverable
minor amounts of precious metals; Cu/ Zn/Pb ores, Pb/Zn/Ag ores, Cu/Pb/Ag ores,
Cu/Zn/Au ores. Recovery by differential flotation, separate thickening, filtering, and
drying of several concentrates and/or bulk concentrates:

CPS= 32,000 Tore^0.5

▪ Nonsulfide ores containing specialty metals such as columbium (niobium), tantalum,

tungsten, and tin in minerals that do not respond to flotation, and which are
separated by specialized gravity concentration methods:

CPS= 5,400 Tore^0.5 to CPS= 14,000 Tore^0.5

▪ Uranium ores: acid leaching, countercurrent decantation, clarification, solvent

extraction and yellowcake precipitation:

CPS= 158,000 Tore^0.5 to CPS= 210,000 Tore^0.5

CAPEX Overhead

▪ Engineering costs Oing = 2.30 D^0.8

▪ D: direct costs (CAPEX)

▪ Project supervision costs Osv = 1.80 D ^0.8

▪ Administration costs Oad = 1.50 D^0.8

▪ These overhead costs may be estimated as a function of the total direct costs D in
dollars. Engineering: This includes the costs of feasibility studies, environmental
impact studies, design engineering, equipment specifications and procurement, and
specialized consulting services:

▪ Project Supervision: This includes project supervision, scheduling and budgeting, and
construction management:
 ▪ Administration: This includes local office administration by corporate owner’s
representatives, accounting and payment of general contractor, legal costs, plus
preproduction employment of key operating staff

Operational Expenditure

▪ Drilling cost per day: CDd =2.03 T^0.7

▪ Blasting cost per day: CBd =3.39 T^0.7

▪ Loading cost per day: CLd =2.86 T^0.7

▪ Haulage cost per day: CHd = 2.86 T^0.6

▪ General services cost per day: CSd =7.12 T^0.7

▪ Primary crushing: CPCd= 8.37 Tore^0.6

▪ Grinding section costs: CGSd= 5.19 Tore^0.6

▪ Tailings costs: CTSd= 0.99 Tore^0.8

▪ Assaying costs: CASd= 1.37 Tore^0.8

▪ Supervision and maintenance: CSMd= 43Tore^0.8

▪ Electrical power costs: CEPd= 173,2 Tore^0.56

▪ Gold / Silver ores: CPSd= 69 Tore^0.6

▪ Simple base metals: CPSd= 57.2 Tore^0.6

▪ Complex base metals: CPSd= 36 to 44 Tore^0.6

▪ Uranium ores: CPSd= 69.61 Tore^0.6

▪ Nonsulfide ores: CPSd= 48 Tore^0.6

▪ Workers: Mining, Processing and Service:

▪ 8h per day á 16.2$ per h with a factor of 2.5 for holidays, sickness, insurance

▪ Administration:

▪ 4,500$ per month with 21.5 working days and a factor of 1.8 for holidays,
sickness, insurance

▪ Site Managers:

▪ 2.5% of personnel costs

Financial Consideration
𝐶𝑜𝑠𝑡𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦
▪ Opex per ton = 𝑇𝑜𝑛𝑛𝑎𝑔𝑒 𝑝𝑒𝑟 𝑑𝑎𝑦

𝐶𝐴𝑃𝐸𝑋
▪ Capex per ton = 𝑡𝑜𝑡𝑎𝑙 𝑡𝑜𝑛𝑛𝑎𝑔𝑒

𝐶𝐹𝑡
▪ Net present value: 𝑁𝑃𝑉 = ∑ (1+𝑘)𝑡

▪ k: discount rate

▪ t: number of years

▪ Net CF: cashflow

▪ Net Cash flow:

𝐶𝐹 = 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 − taxes + depreciation − interest

𝑁𝑃𝑉
▪ Profitability Index: 𝑃𝐼 = 𝐶𝐴𝑃𝐸𝑋

▪ Internal rate of return r:

𝐶𝐹𝑡
𝑁𝑃𝑉 = ∑ =0
(1 + 𝑟)𝑡

▪ Period of payback t when:

∑ 𝐶𝐹𝑡 ≥ 0

▪ Volume ore:

▪ Strip area: Astrip= H´*l/(2*cos 𝜑)

▪ For l=w this accounts for all strips

▪ Ore volume: Vore = Astrip *4/3*w

▪ Volume pit:
1
Vpit =3 (𝑙𝑖∗𝑤𝑖∗ℎ𝑖−𝑙𝑖−1∗𝑤𝑖−1∗ℎ𝑖−1)

▪ li ; wi = l𝑖−1+2H´/tan 𝜑 ; 𝑤𝑖−1+2H´/tan 𝜑

▪ hi = ℎ𝑖−1 + H´

▪ Volume waste: Vwaste =Vpit -Vore

 ▪ Tonnage

T = Vore *ρore + Vwaste *ρwaste

▪ Determine h´ so that T = annual production

▪ Use or tonnage for revenue