Transcript Building Economics 2

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The Problem of Out of Date Models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 the
Producer Price
Index from the
Bureau of Labor
Statistics
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
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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 numbers
Factor 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
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–
–
–
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
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$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