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MINE4710 Mine Management > Wk 5 - Fundamentals of Mineral Economics > Flashcards

Wk 5 - Fundamentals of Mineral Economics Flashcards

1
Q

What are the 4 key economic inputs for mining production

A

*land
*labour
*capital
*entrepreneurship

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2
Q

What is an example of lower level entrepreneurship

A

When mining operators make decisions it flows through the whole operation.

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3
Q

What is cost of inputs

A

the associated cost with each of the economic inputs

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4
Q

What are the 3 different categories all cost inputs will have

A

different cost, profiles and time schedules

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5
Q

What are the 3 parts of utility

A

*form
*place
*time

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6
Q

What is the form of a utility

A

This follows the process of converting the ore within the ground to a form that is of benefit to society or has a purpose. With each increase of the process the utility of form will increase.

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7
Q

What are the impacts of place

A

The mined ore in not normally in the location of which it can be converted and utilised in its final form

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8
Q

What are the impacts of time

A

It needs to be produced in a way that meets the market demands. Governments put a tender out and there is a delay between the need (demand) and the supply from the mine to meet it.

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9
Q

What is the relationship between inputs and outputs

A

What goes into the ‘black box’ must also come out

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10
Q

What are the 3 key areas economic output comes from

A

*physical
*revenue
*costs

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11
Q

What is an example of a big time lag or buffer on a mine

A

Stockpiles

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12
Q

When is dry commissioning done

A

It is done on all equipment when the mine and the software are tested with no fluids are running through the plant

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13
Q

When is wet commissioning done

A

when the plant is tested with ore and fluids running through the operation to check it works

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14
Q

What is capital cost

A

cost which gives you the benefit that extends beyond the accounting period

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15
Q

How are operating costs broken down

A

categories are broken down into categories and sub categories

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16
Q

What are the economic inputs

A

land, labour, capital, entrepreneurship

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17
Q

What are the cost of inputs

A

rent, wages, interest/dividends, reward

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18
Q

What are the types of utility

A

form, place, time

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19
Q

What is factors of production

A

the production response to incremental change of input

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20
Q

What is law of diminishing return

A

Very applicable to mining but rarely used in mining operations. It uses the factors of production shown on a graph where output is the vertical axis and quantity of production is the horizontal. This shows that there is a point of optimal output in relation to the amount of employees. As labour increases the exponential curve will flatten out as it becomes saturated.

21
Q

What effects the factors of production and law of diminishing return graph

A

the 4 different economic inputs

22
Q

Why are the physicals focused on

A

*timing of revenue
*timing of costs
*unit operations
*operations and buffers

23
Q

What is stockpile theory

A

*explains the benefit of stockpiles
*cost to the operations
*stockpiles act as an insurance

24
Q

What are types of stockpile practices to benefit an operation

A

*feed blending
*product blending
*low grade stockpiles (commodity price fluctuation, interruption of ore supply to plant)
*low grade stockpiles (end of mine life ore supply)

25
Q

What are the types of physical schedules

A

*impact of stockpile and buffers/lag
*construction schedule
*commissioning schedules
*equipment driven schedules (e.g. availability and utilisation)
*rehabilitation schedules

26
Q

What characterises a revenue schedule

A

*driven by delivery to point of sale and determined by physical schedules and sales term
*must identify cost offset included in calculating net revenue
*incorporate contractual payment delays

27
Q

What are cost schedule considerations

A

*macroeconomic and microeconomic impact of costs considered (including reporting systems)
*capital vs operating costs

28
Q

What are the types of capital cost

A

initial
sustaining
expansionary
rehabilitation/closure

29
Q

What are mine capital costs examples

A

preliminary/establishment
mine
processing plant
on-site infrastructure
off-site infrastructure

30
Q

What is the contingency in capital cost

A

accuracy of estimate

31
Q

What are examples of working capital

A

initial stores
first fill consumables
cash-flow lag (ie work in progress)

32
Q

What is operating cost classified and estimated by

A

*geographical area
*area of responsibility
*unit operation
*activity
*cost type
*cost detail

33
Q

What are the components to cost reporting

A

mining
processing
site administration (G&A)
off-site
royalties
corporate (potential for overlap)

34
Q

What are the types of cost reporting codes

A

*cash operating cost
*C1, C2 and C3
*AISC (All in sustaining cost)

35
Q

What is C1 cost

A

Net direct cast cost
ie cash cost of production steps through the market

36
Q

What is C2 cost

A

Production cost
ie Net direct cash cost plus depreciation, depletion and amortisation (inclusing deferred pit waste)

37
Q

What is C3 cost

A

Fully alocated cost
ie Production cost plus indirect costs and net interest charges

38
Q

What are the categories of AISC

A

*adjusted operating cost
*all in sustaining cost
*all in cost

39
Q

What characterises adjust operating cost

A

costs related to the current operation
e.g. production taxes, community costs, permitting costs

40
Q

What characterises all in sustaining cost

A

sustaining costs
e.g. exploration and studies, capital exploration, capital expenditure

41
Q

What characterises all in cost

A

either not related to the current operation or re non-sustaining
e.g. permitting costs, reclamation/remediation, capital expenditure

42
Q

What are the physical interface of revenue costs

A

*production rate
*cut-off grade
*underground mining blocks and schedules
*open pit schedules
*stockpiles and inventory

43
Q

What physical schedules do we need

A

Everything that drives a material cost or revenue component:
*contract of open pit schedules
*owner-operator schedules
*underground schedules
*processing plant schedules

44
Q

The optimal mine life must achieve a rate of production/throughput which __________

A

*realises economies of scale without creating excessive operating leverage and
*optimises capital recovery under the prevailing tax regime

45
Q

What are the exisiting production constraints on a mine for short and long term

A

*underground and open pit
*processing plant
*product transport
*infrastructure
*social or legislative

46
Q

What are the 4 stages of the interactive process for optimising feasability

A

ore resources/reserves
mine size and method
production cost
cut-off grade

47
Q

What is the start point for mine life iteration

A

Mine life optimisation is a complex iterative
process, but an approximation is provided by
Taylor’s Rule:

48
Q

What are real life methods for estimating cut off grade

A

*mineral resource COG vs ore reserves COG
*Open Pit: Lerchs-Grossman Algorithm
*4-Dimensional Pit Optimisation
*Optimised Pit vs Final Pit
*Underground: Open, Supported and Filled
*Underground: Caving
*Underground Coal: Longwall

MINE4710 Mine Management (11 decks)

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