1.

If P6,500 will be needed after 5 years, how much should be invested now if the interest
rate is 7.5% per annum compounded annually?

Solution:
A
Present Value = -----------
(1 + i)n

P6,500
Present Value = --------------
(1 + 0.075)5

Present Value = P4,527.63

2. The projected earnings or net cash flow of a newly developed mine is as follows:
Year 1 - P 3.0 million
Year 2 - P 3.0 million
Year 3 - P 3.5 million
Year 4 - P 3.0 million
Year 5 - P 2.5 million
If the mine is constructed at the cost of P 10 million which will be funded from a loan
borrowed at 12% interest per annum, what is the net present value (NPV) of the
mine?

Solution:

Year Cash Flow PV Factor Present Value

1
Year 1 P 3.0 million ------- = 0.893 P 2.7
(1.12)1
1
Year 2 P 3.0 million ------- = 0.797 P 2.4
(1.12)2
1
Year 3 P 3.5 million ------- = 0.712 P 2.5
(1.12)3
1
Year 4 P 3.0 million ------- = 0.636 P 1.9
(1.12)4
1
Year 5 P 2.5 million ------- = 0.567 P 1.4
(1.12)5
--------------
P 10.9

Net Present Value = Present Value – Capital Investment

Net Present Value = P 10.900 – P 10.000
Net Present Value = P 0.900 million
3. A small scale miner is selling to you a chromite property. You estimated that a capital
investment of P10.6 million is required for year 0. For the next 6 years, the expected
profits are:

Year 1 2 3 4 5 6
Profits in million 7.19 7.22 7.69 8.20 8.73 13.31

What is the present value of the mineral property if the cost of money is 18% compounded
annually? The discount factor at 18% is:

Year 0 1 2 3 4 5 6
Factor 1 0.847 0.718 0.609 0.516 0.473 0.370

Will you buy the property for P20 million?

Solution:

Year Profits in million Factor Present Value

1 7.19 0.847 6.09

2. 7.22 0.718 5.18
3. 7.69 0.609 4.68
4. 8.20 0.516 4.23
5 8.73 0.473 4.13
6 13.31 0.370 4.92
--------
29.23 million

Net Present Value = Present Value – Capital Investment

Net Present Value = P29, 230,000 – P10,600,000

Net Present Value = P18,630,000

Therefore:

Not advisable to buy the property for P20 million since the NPV is only P18.63
million.
4. Consider a mining project which requires an economic evaluation. If the yearly net cash
flow to be generated by the proposed operation over an expected life span of mine of nine
(9) years are as shown in the table, Calculate:
1. DCFROR to be generated by the project using as guides the present value
factors given for 30% and 35%.
2. The net present value to be generated by the project assuming that the cost of
capital is 12% compounded annually.

Year NCF (in millions) PV factor @ 30% PV factor @ 35% PV factor @ 12%
1 (10.1120) 0.7692 0.7407
0.8929
2 5.636 0.5917 0.5487
0.7972
3 3.693 0.4552 0.4064
0.7118
4 3.111 0.3501 0.3011
0.6355
5 3.444 0.2693 0.2230
0.5674
6 3.313 0.2072 0.1652
0.5066
7 3.046 0.1594 0.1224
0.4523
8 (0.121) 0.1226 0.0906
0.4039
9 (0.974) 0.0943 0.0671
0.3006

Solution:

1. DCFROR:
Year NCF PV factor Present PV factor Present
(in millions) @ 30% Value @ 30% @ 35% Value @ 35%

1 (10.1120) 0.7692 -7.778 0.7407 -7.490

2 5.636 0.5917 3.335 0.5487 3.092

3 3.693 0.4552 1.681 0.4064 1.501

4 3.111 0.3501 1.089 0.3011 0.937
5 3.444 0.2693 0.927 0.2230 0.768
6 3.313 0.2072 0.686 0.1652 0.547
7 3.046 0.1594 0.485 0.1224 0.373
8 (0.121) 0.1226 -0.015 0.0906 -0.011
9 (0.974) 0.0943 -0.092 0.0671 -0.065
------------ -------------
NPV @ 30% = +0.319 NPV @ 35% = -0.348
By interpolation:

35% = -0.348
DCFROR = 0
30% = +0.319

35 – DCFROR -0.348 – 0
---------------- = --------------
35 – 30 -0.348 – 0.319

DCFROR = 32.4%

2. Net Present Value @ 12%

Year NCF PV factor Present Value

(in millions) @ 12% @ 12%

1 (10.1120 0.8929 -9.029

2 5.636 0.7972 4.493
3 3.693 0.7118 2.628
4 3.111 0.6355 1.977
5 3.444 0.5674 1.854
6 3.313 0.5066 1.678
7 3.046 0.4523 1.378
8 (0.121) 0.4039 -0.049
9 (0.974) 0.3006 -0.351
-----------
NPV @ 12% = 4.680 millions
5. An investor is trying to make-up his mind whether to invest in a project located in
Mindanao or in another project located in Indonesia. Both are gold mines. You were
engaged by the said investor to make a recommendation as to which project will be
profitable for him. The Indonesian government will allow 100% repatriation of profits to
the Philippines. Cost of money here is 26% while in Indonesia it is 20%. The following
data pertains:

Year Expected Profits in million US$ Discount Factor

Project in Indonesia Project in Mindanao @ 26% @ 20%
1 7.20 7.55 0.794 0.833
2 7.40 8.15 0.690 0.694
3 7.30 8.45 0.500 0.579
4 7.80 9.47 0.397 0.482
5 7.80 9.95 0.315 0.402
6 7.30 9.78 0.250 0.335
7 7.20 10.14 0.198 0.279
8 7.00 10.38 0.157 0.233
9 6.80 10.55 0.125 0.194
10 6.50 10.84 0.099 0.162

1. What is the NPV of the project in Mindanao?

2. What is the NPV of the project in Indonesia?

Solution:
1. Project in Mindanao

Year Expected Profits Discount Factor Present Value

In million US$ @ 26% in million US$

1 7.55 0.794 5.9947

2 8.15 0.690 5.1345
3 8.45 0.500 4.2250
4 9.47 0.397 3.7596
5 9.95 0.315 3.1342
6 9.78 0.250 2.4450
7 10.14 0.198 2.0077
8 10.38 0.157 1.6297
9 10.55 0.125 1.3187
10 10.84 0.099 1.0732
------------
30.7223
2. Project in Indonesia
Year Expected Profits Discount Factor Present Value
In million US$ @ 20% in million US$

1 7.20 0.833 5.9976

2 7.40 0.694 5.1316
3 7.30 0.579 4.2267
4 7.80 0.482 3.7596
5 7.80 0.402 3.1356
6 7.30 0.335 2.4455
7 7.20 0.279 2.0088
8 7.00 0.233 1.6310
9 6.80 0.194 1.3192
10 6.50 0.162 1.0530
-----------
30.7126
6. A mining company was able to get the BOI to allow an acceleration of the rate of
depreciation of his fixed assets by 100%. How long will it take the company to fully
depreciate an equipment on a straight line basis if the normal life of the equipment is 10
years?

Solution:

First Cost – Salvage Value

Annual Depreciation Cost = -------------------------------
Life

First Cost – 0
Annual Depreciation Cost = -----------------
10

First Cost
Annual Depreciation Cost = ----------- (Equation 1)
10

By accelerating the rate of depreciation to 100%:

First Cost
Annual Depreciation Cost x 2 = ------------
n

First Cost
Annual depreciation Cost = ------------ (Equation 2)
2n

Equate Equation 1 and 2:

First Cost First Cost

------------ = -----------
10 2n

2n = 10

n = 5 years

What is the book value of a fixed asset originally purchased at 10 million pesos being
depreciated on straight line basis at 20% per annum at the end of the 3 rd year?
a. 2 million b. 4 million c. 6 million d. 8 million

Solution:

Book Value = Acquisition Cost (1-in)

Book Value = P10,000,000 x [(1 – (0.20 x 3)]

Book Value = P10,000,000 x 0.40

Book Value = P4,000,000.00

7. Using the straight line method of depreciation, what will be the residual value of a one
million dollar bulldozer being depreciated at 16% per annum at the end of 5 years?

Solution:

Residual (Book) Value = Acquisition Cost x (1 – in)

Residual (Book) Value = $1,000,000 x [(1 – (0.16 x 5)]

Residual (Book) Value = $1,000,000 x 0.02

Residual (Book) Value = $200,000.00

8. What is the net annual foreign exchange savings for the country by using production
from a local coal mine producing 3,000 tons per day, operating 300 days per year,
displacing 10,000 barrels of oil per day, assuming 25 dollars per barrel of imported oil and
the cost of producing the coal is 500 pesos per ton of which 20% is in US dollars to pay
for foreign loans and the exchange rate is 50 pesos to one US dollar?

Solution:
Foreign Expenses (Oil) = 10,000 barrels/day x $25/barrel x 300 days/year
Foreign Expenses (Oil) = $75,000,000 / year

Local Expenses (Coal) = 3,000 tons/day x P500/ton x 300 days/year

Local Expenses (Coal) = P450,000,000 /year

With 20% of the local expenses as foreign loan payment:

Local Expenses (Loan payment in US$) = P450,000,000/year x 0.20 x 1
US$/P50.00
Local Expenses (Loan payment in US$) = $1,800,000/year

Therefore:
Net Annual Foreign Exchange Savings = Foreign Expenses – Local
Expenses
Net Annual Foreign Exchange Savings = $75,000,000 - $1,800,000
Net Annual Foreign Exchange Savings = $73,200,000
9. Assuming you are operating a second hand 10 megawatt power plant at the mine for
300 days a year and are able to save 2 pesos per kilowatt hour by not buying from the
grid, how long will it take you to fully recover your investments if you bought the plant at
288 million pesos?

Solution:

Power Consumption = 10 megawatt x 1,000 kw/mw x 300 days/year x

24 hrs/day
Power Consumption = 72,000,000 kw-hr.

Savings = P2.00/kw-hr x 72,000,000 kw-hr

Savings = P144,000,000/year

Then:

Acquisition Cost
Return on Investment (ROI) = ----------------------
Savings

P288,000,000
ROI = --------------------
P144,000,000/year
ROI = 2 years

10. You manage a small high grade (3%) copper operations at a capacity of 100 short
tons per day at 300 days per year. Your mill recovery is 90% and your selling price is US
$1.00 per pound of copper, net of smelter charges. If your fixed cost total 30 million pesos
per year, what should your average annual variable cost per ton in order to breakeven,
assuming 40 pesos per dollar.
a. P2,160 /ton b. P1,160 /ton c. P2,000 /ton d. P1,000 /ton

Solution:

Production = 100 short tons/day x 300 days/year

Production = 30,000 short tons/year
Production = 30,000 short tons/year x 2,000 lbs/short ton x 0.03 x 0.90
Production = 1,620,000 lbs.

Gross Sales = 1,620,000 lbs x 1 US$/lb x P40.00/US$

Gross Sales = P64,800,000.00

To Breakeven:

Gross Sales = Fixed Cost + Variable Cost

P64,800,000 = P30,000,000 + Variable Cost
Variable Cost = P34,800,000.00

Then:

P34,800,000
Variable Cost/ton = ----------------
30,000 tons

Variable Cost/ton = P1,160/ton

11. Heritage Holding Ltd. Declared stock options for all its Mining Engineers during its
stockholders meeting in 1995 at a price half the par value of P10.00 per share. The Mine
Superintendent purchased 1,000 shares of stock at said price option. Three years later,
he sold all his shares of stock at P15.00 per share. How much profit (before tax) did he
realize?

Solution:

Purchased Amount = 1,000 shares x P5.00/share

Purchased Amount = P5,000.00

Sales Amount = 1,000 shares x P15.00/share

Sales Amount = P15,000.00

Profit = Sales Amount – Purchased Amount

Profit = P15,000.00 – P5,000.00
Profit = P10,000.00

12. The recent chromite export shipment of Heritage Resources to China was surveyed
by SGS. The survey report shows the shipment to contain 12,350 WMT, 8% moisture,
51% Cr2O3, 6% MgO, 18% FeO, 12% Al2O3, 0.25% SiO2, 0.06% P, 0.004% S. The
market contract of Heritage shows the price conditions to be USD 42 per DMT FOB ST
at base grade of 43% Cr2O3 with bonus/penalty of USD 1.50 per unit Cr 2O3 over and
above base grade, fraction pro-rata. What is the total Excise Tax due on the shipment?

Solution:

Total Shipment in DMT = 12,350 WMT x (100 - % moisture)

Total Shipment in DMT = 12,350 WMT x (100 % - 8 %)

Total Shipment in DMT = 11,362 DMT

Bonus (above base grade) = USD 1.50/unit Cr2O3 x (51%-43%) Cr2O3)

Bonus (above base grade) = USD 12.00 / DMT

Value of Shipment = 11,362 DMT x (USD 42/DMT + Bonus)

Value of Shipment = 11,362 DMT x (USD 42 + USD 12) / DMT
Value of Shipment = USD 613,548

Excise Tax = 2% x Value of Shipment

Excise Tax = 0.02 x USD 613,548

Excise Tax = USD 12,271

13. A small scale gold mine produced 15,000 MT of gold ore in 1993 averaging 6 grams
Au/MT. It was able to sell the entire production at a selling price of P300.00/gram Au. If
operating cost before taxes is P175.00/gram Au and the applicable taxes are: Excise
tax=2% of gross sale; Income tax=35%of the first P100,000.00 and 40% for the balance.
The net income tax posted in 1994 would be:

Solution:
Production = 15,000 Mt x 6 gms/MT
Production = 90,000 grams

Gross Sales = 90,000 grams x P300/gm Au

Gross Sales = P27,000,000.00

Operating Cost = P175/gram x P90,000 grams

Operating Cost = P15,750,000.00

Excise Tax = 2% of Gross Sales

Excise Tax = 0.02 x P27,000,000
Excise Tax = P540,000.00

Total Operating Cost = Operating Cost + Excise Tax

Total Operating Cost = P15,750,000 + P540,000
Total Operating Cost = P16,290,000.00

Gross Income = Gross Sales – Total Operating Cost

Gross Income = P27,000,000 – P16,290,000
Gross Income = P10,710,000.00

Income Tax = (0.35 x P100,000) + [0.40 x (P10,710,000 – P100,000)]

Income Tax = P4,279,000.00

Net Income = Gross Income – Income Tax

Net Income = P10,710,000 – P4,279,000
Net Income = P6,431,000.00
14. A company owns ten blocks (1000 hectares per block) of coal concession underlain
by a 2-meter coal seam with a specific gravity of 1.25 of export quality. The coal deposit
can be mined by room and pillar at 50% extraction but the coal has to be washed. The
buyers want to sign a long term coal supply contract for 5 million tons of washed coal a
year for 20 years. What is the minimum recovery that has to be achieved at the washing
plant?
Solution:

Reserves = 10 blocks x 1,000 hectares/block x 10,000 m2/has x 2m x 1.25

tons/m3
Reserves = 250,000,000 tons

Production = 50% of Reserves

Production = 0.50 x 250,000,000
Production = 125,000.000 tons

Sales = 5,000,000 tons/year x 20 years

Sales = 100,000,000 tons

Total Sales
% Recovery = --------------
Production

100,000,000 tons
% Recovery = --------------------- x 100 % Recovery = 80%
125,000,000 tons

15. The corporate income tax of a gold mine is 35% and the local government unit
receives 40% share and the barangay receives 10% of LGU share. The generated profit
of the mine is P12,387,673.09 and the excise tax is set at P1,079,340.27.
1. How many percent will the Barangay receive from the corporate income tax?
a. 2% b. 1.4% c. 1.25% d. 1.88%
2. Amount the Barangay receives from the corporate income tax?
a. P57,654.00 b. P59,774.89 c. P60,699.60 d. P64,539.11
3. Amount the Government will receive?
a. P5,415,026.13 b. P4,945,600.26 c. P5,335,011.21 d. P4,623,977.00

Solution:
1. % Barangay Share = 10% x 40% x 35%
% Barangay Share = 1.4%

2. Barangay Share Amount = 1.4% of Income Tax

Income Tax = 35% of Profit
Income Tax = 0.35 x P12,387,673.09
Income Tax = P4,335,685.58
Then:
Barangay Share Amount = 0.014 x P4,335,685.58
Barangay Share Amount = P60,699.60

3. Total Amount Government will receive = Income Tax + Excise Tax

Total Amount Government will receive = P4,335,685.58+ 1,079340.27
Total Amount Government will receive = P5,415,025.85
16. You are the owner of a coal mine with a contract to supply 900,000 tons of clean coal
per year to a power plant. How much coal do you have to mine per day if your washing
plant that produces clean coal has a recovery of only 60% and your mine can operate
only 300 days a year?

Solution:

Clean coal produced

Recovery = -------------------------
Mine production

Clean coal produced

Mine Production = ---------------------------
Recovery

900,000 tons/year
Mine Production = -------------------
0.60

Mine Production = 1,500,000 tons/year x 1 year/300 days

Mine Production = 5,000 tons/day

17. How many days per year will a local coal mine producing 10,000 tons per day have
to operate to supply a power plant requiring 1 million tons a year of which 70% is
imported?

Solution:

Total requirement = 1,000,000 tons/year

Imported (70%) = 700,000 tons/year

Local (30%) = 300,000 tons/year

Let N = no. of days to operate per year

Local requirement/year
N = ----------------------------
Production/day

300,000 tons/year
N = ------------------------
10,000 tons/day

N = 30 days
18. An open pit coal mine has an overall stripping ratio of 10 cubic meters to 1 ton of coal.
If the owner decides to contract out both the waste stripping and coal mining at a price
per cubic meter of material, what should be the minimum contract price for the mine to
breakeven assuming a selling price of coal of 1,000 pesos per ton ex-mine and a coal
specific gravity of 1.25.
Solution:

Assume:

Coal Production = 1 ton

Then:
Waste Produced = 10 cu.m.

Therefore:
Gross Sales = 1 ton x P1,000/ton
Gross Sales = P1,000.00

Let: a = cost/cu.m. of mining coal and waste

Cost of mining coal = (1 ton x 1 cu.m./1.25 tons) x a

Cost of Mining Coal = 0.80 cu.m. x a (P/cu.m.)

Cost of Mining Coal = 0.80a

And:
Cost of Mining Waste = 10 cu.m x a (P/cu.m.)

Cost of Mining Waste = 10 a

Then:
Total Operating Cost = Cost of Mining Coal + Cost of Mining
Waste

Total Operating Cost = 0.80a + 10a

Total Operating Cost = 10.80a

To Breakeven:

Total Operating Cost = Gross Sales

10.80a = 1,000

a= P92.59/cu.m.
19. Semirara Coal Corporation supplies coal to NPC plants on the basis of import parity
(delivered price + tariff ) on an equivalent BTU basis. If NPC can buy imported coal of
10,000 BTU per pound at 20 USD per ton delivered and pays a tariff of 10% on the FOB
price of 15 USD per ton, how much will SCC have to produce and deliver its 8,000 BTU
per pound coal to breakeven, assuming an exchange rate of 40 pesos to one USD?
a. P688 / ton b. P704 / ton c. P640 / ton d. P800 / ton

Solution:

Cost of imported coal = [20 USD/ton + (0.10 x 15 USD/ton)] x P40.00/1

USD
Cost of imported coal = P860/ton

To Breakeven:

P860/ton Cost of local coal

-------------- = --------------------
10,000 BTU 8,000 BTU

Cost of local coal = P688/ton

20. A coal basin underlain by a one-meter thick continuous horizontal coal seam is open
for concession applications. What is the minimum number of coal blocks one has to apply
for to supply the 25-year requirement of a 300 megawatt power plant which requires one
million tons of run-of-mine coal a year assuming a specific gravity of 1.25 for the coal as
mined. One block consisting of 1000 hectares and a mining recovery of 100%.
a. 2 blocks b. 20 blocks c. 200 blocks d. 30 blocks

Solution:

Total requirement = 1,000,000 tons/year x 25 years

Total requirement = 25,000,000 tons

Tonnage/block = 1000 hectares/block x 10,000 sq.m./has. X 1m

Tonnage/block = 10,000,000 cu.m./block x 1.25 tons/cu.m.
Tonnage/block = 12,500,000 tons/block

25,000,000 tons
No. of blocks = --------------------
12,500,000 tons/block

No. of blocks = 2 blocks

21. A copper deposit has been extensively explored by driving tunnels at levels 1300,
1200, 1100 and 1000, the level nomenclature representing the elevation of the tunnel in
meters above sea level. At each level, the mineralized area and average copper grade
has been delineated and established as follows: L1300=200,000 sq.m., 1% ; L1200 =
100,000 sq.m., 0.70% ; L1100 = 100,000 sq.m., 0.70% ; L1000 = 50,000 sq.m., 0.60%.
The outcrop is at elev. 1400 and you decide to exclude the oxidized portion of the deposit
which extends down to 25 meters from the outcrop. What is the average grade of the
unoxidized copper orebody?

Solution:

Delineated Area Area Area

Level Area, sq.m. Grade Oxidized Unoxidized Grade x Grade

L1300 200,000 1% 50,000 150,000 1% 150,000

L1200 100,000 0.70% - 100,000 0.70% 70,000

L1100 100,000 0.70% - 100,000 0.70% 70,000

L1000 50,000 0.60% - 50,000 0.60% 30,000

----------- --------- ---------
400,000 320,000

Area x Grade
Average Grade = ----------------
Area unoxidized

320,000
Average Grade = ------------
400,000

Average Grade = 0.80%

22. A mine produced 30,000 tons in one month consisting of 25 working days. During that
period, there were 800 underground workers, 400 of whom averaged 2 hours of overtime
each working day. In addition, there were 100 service support personnel who had average
4 hours each working day and 50 supervisors, none of whom worked overtime. Assuming
there were no absences, what was the mine’s overall productivity in tons per manshift (a
shift consisting of 8 hours).

Solution:

No. of Working Regular OT Overtime Total

Persons Days Manshift Hrs Manshift Manshift

Under
Ground
Workers 400 25 10,000 0 0 10,000
400 25 10,000 2 hrs 2,500 12,500
Support
Personnel 100 25 2,500 4 hrs 1,250 3,750
Supervisors 50 25 1,250 0 0 1,250
---------
Total Manshift 27,500

Production
Overall Productivity = --------------
Manshift

30,000 tons
Overall Productivity = --------------------
27,500 manshift

Overall Productivity = 1.09

23. An underground mine has developed an incentive bonus scheme which provides for
a 50% bonus for development advance beyond the standard of 3 meters per day per
crew. If the crew achieves said standard, they get 300 pesos per day. What is the total
compensation due a crew that made an advance of 105 meters during a 25 working day
month, assuming there were no holidays and no night work?

Solution:

Standard Advance/month = 3 meters/day x 25 days/month

Standard Advance/month = 75 meters/month

Advance Beyond Standard = Total Advance – Standard Advance

Advance Beyond Standard = 105 meters – 75 meters
Advance Beyond Standard = 30 meters

Total Compensation:

1. Regular = P300/day x 25 days = P 7,500

2. Bonus = P150/day-meter x 30 meters = P 4,500
----------
Total Compensation = P12,000
24. A gold mine extracts ore from several small pits to feed its mill. An orebody was
determined to have a tonnage of 14,000 tons and a grade of 3.5 gms Au/ton. Cost of
mining is detailed as follows:
Dozing = P460.00/hr
Dozing capacity = 166.4 bcm/hr
Loading = P5.85/lcm (swell factor of
1.64)
Hauling = P13.60/lcm/km
Other services (ore only) = P60.00/ton
The pit is 0.90 km away from the mill and 0.80 km away from the waste dump. The mill
head is 85% of the mine cut sample. The mill recovery is 80%. Milling cost is P168.00/ton
milled. Other relevant costs are: Mine General overhead, depreciation, depletion,
amortization, interest and other charges, and administration totaling P300.00/ton milled.
Metal prices are as follows: $470/oz for gold and $8.00/oz for silver with an exchange rate
of P20.50 per US $1.00. Assume that gross metal value equals revenue from sale of
metal. Further assume that ore and waste rock specific gravity is 2.2. Determine the
breakeven stripping ratio of said orebody. (Ans=14.2)

Solution:

At Breakeven:
Operating Costs = Revenue from sale of metal

Operating Cost = Mining Cost + Milling Cost + Other relevant cost

A. Mining Cost = Cost of Mining Ore + Cost of Mining Waste

a. Cost of Mining Ore:

Dozing cost = Dozing rate x Dozing ore period

Total ore tonnage

Dozing ore period = ----------------------
Dozing capacity

14,000 tons
Dozing ore period = -----------------------------------
166.4 bcm/hr x 2.2 tons/bcm

Dozing ore period = 38.243 hrs.

Dozing Cost = P460/hr x 38.243 hrs = P 17,592

Loading Cost = P5.85/lcm x 14,000 tons x 1.64 lcm/bcm

------------------------------------------------------
2.2 tons/bcm

= P61,053

Hauling Cost = P13.60/lcm-km x 14,000 tons x 1.64 lcm/bcm x 0.9 km

-------------------------------------------------------------------------
2.2 tons/bcm
= P127,741

Other Services = P60.00/ton x 14,000 tonnes = P840,000

Total Cost of Mining Ore = P1,046,386
b. Cost of Mining Waste:
Dozing Cost = Dozing rate x Dozing waste period

Total waste tonnage

Dozing waste period = -------------------------
Dozing capacity

W tons
Dozing waste period = ----------------------------------------
166.4 bcm/hr x 2.2 tons/bcm

W
Dozing waste period = ------ hr
366

Dozing cost = P460/hr x W

------ hr = P1.257W
366

Loading Cost = P5.85/lcm x W tons x 1.64 lcm/bcm = P4.361W

-----------------
2.2 tons/bcm

Hauling Cost = P23.60/lcm-km x W tons x 1.64 lcm/bcm x 0.8 km = P8.111W

-------------
2.2 tons/bcm

Total Cost of Mining Waste = 13.729W

Then:
Mining Cost = Total cost of mining ore + Total cost of mining waste
Mining Cost = P1,046,386 + P13.729W ---------------------- Equation 1

A.
Milling Cost = P168/ton x 14,000 tons = P2,352,000.00
B.
Other Costs = P300/ton x 14,000 tons = P4,200,000.00
C.
Total Operating Cost = Mining Cost + Milling Cost + Other Cost
Total Operating Cost = (P1,046,386.00 + P13.729W) + P2,352,000.00 + P4,200,000.00
Total Operating Cost = P7,598,386 + 13.729W

Solving for the Revenue from Sale of Metal:

Revenue = Weight of metal x Price of metal

Wt. of metal in Concentrate (Cc)

Recovery = ----------------------------------------
Wt. of metal in ore (Ff)

Wt. of metal in concentrate = Wt. of metal in ore x Recovery

Wt. of metal in ore = Wt. of ore x Mill Head
Mill Head = 0.85 x Mine cut sample
Mill Head = 0.85 x 3.5 gm Au/MT
Mill Head = 2.975 gm Au/MT

Wt. of metal in ore = 14,000 MT x 2.975 gm Au/MT

Wt. of metal in ore = 41,650 gms Au
Wt. of metal in concentrate = 41,650 gms Au x 0.80
Wt. of metal in concentrate = 33,320 gms Au x 1oz./31.1035 gms
Wt. of metal in concentrate = 1,071.262 oz. Au

Then;
Revenue = 1,071.262 oz x $470/oz x P20.50/$
Revenue = P10,321,610.00

But:
Operating Cost = Revenue
P7,598,386 + P13.729W = P10,321,610
P13.729W = P2,723,224
W = 198,356 tons
Therefore:

Wt. of waste
Breakeven Stripping Ratio = ---------------------
Wt. of ore

198,356 tons
Breakeven Stripping Ratio = ------------------
14,000 tons

Breakeven Stripping Ratio = 14.2

25. You are the manager of the company contracted to do pre-stripping of a large copper
deposit minable by open pit with total minable reserves of 15 million tons and an overall
stripping ratio of 2 to 1 which the mine owner wants to reduce to 1 to 1 during operations.
At what average daily rate will you have to pre-strip the mine if you are given only 6
months and you have 25 working days per month.

Solution:

Since stripping ratio was reduced to 1:1 during operations, then,

Total Waste = 15,000,000 MT

Then:

15,000,000 MT
Stripping rate= --------------------------------
6 months x 25 days/month

Stripping rate= 100,000 TPD