CALLER NO.

D, LITTLETON, COLORADO 80127

OPTIMUM PRODUCTION RATE FOR HIGH-GRADE/LOW-TONNAGE MINES

Ross Glanville Wright Engineers Limited Vancouver, B.C., Canada

For presentation at the SME-AIME Fall Neeting Denver, Colorado - October 24-26, 1984

Permission is hereby given to publish with appropriate acknowledgments, excerpts or summaries not t o exceed one-fourth of the entire text of the paper. Permission to print in more extended form subsequent to publication by the Institute must be obtained from the Executive Director of the Society of Mining Engineers of AIME. If and when this paper is published by the Society of Mining Engineers of AlME, it may embody certain changes made by agreement between the Technical Publications Committee and the author, so that the form in which it appears here is not necessarily that in which it may be published later. These preprints are available for sale. Mail orders to PREPRINTS, Society of Mining Engineers, Caller No. D, Littleton, Colorado 80127. PREPRINT AVAILABILITY LIST IS PUBLISHED PERIODICALLY IN MINING ENGINEERING

Page 1

84-355

Gptinun Production Rate For

?marison Between Different Production Rates For an orebody with definite physical cutoffs*, or boundaries (such as faults or unconfomities), the total ore reserves at different production rates ITBY be identical. Consequent 1 y, for such an orebody, varying production rates result in differing mine lives. Although the mtallurgical recoveries, the mine dilution, and other similar physical paraters m y vary slightly at different production rates, the rrajor differences are the capital COSTS and operating costs per ton. The ramifications of these differences are especially irrportant at low production rates (up to approximately 1000 tons per day), but can also be significant at higher production rates. In addition to the cost differences between various production rates is the fact that the cash inflows (return to invested capital) are realized m c h sooner at higher production rates. The cmbinations of the above factors cause significantly different cash f l m profiles, which, in turn, result in substantial differences in net present values between different production rates. Before presenting and discussing the graphs of net present values versus production rates, the capital and operating costs at several different il production rates for a specific deposit w l be analyzed. Characteristics of the Ore Deposit For purposes of illustration, we have assured an underground gold mine in an accessible area of central British Colmhia with diluted mining reserves of 500,000 tons grading 3.a.S ounces per ton. We also assured good mining conditions, a 500-ft shaft, long hole open stopes, primary crusher underground, average ore hardness, rod and ball grinding, and 996 gold recovery. The remining assurptions are proGided in the detailed cash flow outputs. However, a s m r y of the 400 ton per day case is presented in Table 13. PIlthough this particular exarqle is used for purposes of i 1 lustration, we have analyzed many other high-gradellow-tonnage deposits in different parts of the world, and found that the principles presented in this paper also apply to these other properties. Capital Costs V Based on \ right Engineers' extensive experience and ccmputerized data bases, capital costs were developed for operat ions with production rates of 100, 200, 400, 600, 800 and 1000 tons per day. With mining reserves of 500,000 tons, these daily tonnases translate into mine 1 ives of approximtely 15, 7, 3%, 2%, 2 and 1% years, respectively. The sctual "breakdown" of the various capital cost +Later in this paper, the aspect sf an econcmic cut-off, as opposed to a phyrical cut-off, i introduced. s

H gh-GradeILow-Tonnage 'ilines i
Introduction The Optinun Production Rate (m)is one of in the the .mst irrportant paraneters evaluation of a mineral deposit. The G R can also be expressed as the Cptimm Mine Life (N) years since the expected mine life is in determined by dividing the CR? per year into the estimated ore reserves. Unfortunately, very little the and effort has been directed towards the determination of the CRI. Instead, "rules of t h h " are often applied to select a mine life without due consideration of the econanic implications of A "justification" for a such a selection. particular production rate is often based on a pre-conceived arbitrary requirerent for a mine life of 5, 10, or 1 years, for e x q l e . In 5 this paper it is daranstrated that such arbitrary selections for high-grade/lowtonnage mines (such as rrany underground gold/silver deposits) often lead to suboptimal results. In fact, an apparently uneconanic deposit at a arbitrary production n rray be econmic at the CPR. rate Consequently, investment opportunities m y be over looked if one analyzes mine properties based on arbitrary production rates. This paper analyzes the interrelationships of variables such as production rates, capital and operating costs, cut-off grades, discount rates, metal prices, etc. The analysis shows that the (3L for high-gradellow-tonnage deposits is often in the range of two to four years. Although such mine Jives intuitively appear too short to r m y individuals, it should be noted that, in the past, nuch of the mining industry b e c m familiar with the econcmics of large scale mining operat ions. The rules of thurb developed for such large scale operations should not be applied to high-grade/low-tonnage mines such as m y of the underground gold deposits. Cefinition of mtimm Production Rate The C R is selected on the basis of mximizing the net present value of the aftertax cash flows. Hwever, as discussed later in this paper, the production rate selected for a particular mine rray be sawwhat higher or lower than the theoretical OX as a result of other variables such as: 1)the probability or expectation of additional reserves being discovered 2) the likelihood of being able to custmmill nearby deposits w e d by others 3 ) the configuration or attitudv of thk orebody, which m y place upper limits on the production rate 4 ) the residual, or salvage values, of the mine/mill facilities

ccrrponents are presented in Tables I through 6, with the total capital costs versus produc~ion rate i l lustratcd in Figure 1. As can be seen Iron that f lgure, the total capital costs do not increasc very rapidly as the production rate increases (or mine life decreases). This occurs because there is a large ccnponent of fixed costs (such as supply, adninistrative accessroads, powcr buildings, water supply and other infrastructure) in the total capital costs at low product ion capacities. 'inother :MY of expressing the relationship of capital cost to production rate is to s h m the percentage increases in the total capital costs for a doubling of capacity. This relationship is presented in graphical form in Figure 2. m e key aspect of this graph is that the percentages are very lav at low production capacities, but increase relatively rapid. For exsrple, the graph shows the percentage capital cost increase for a doubling of capacity frcm 100 (to 200) tons per day to be only 1 % . However, a doubling of capacity f rcrn 400 (to 800) tons per day requires an increase in capital of aLmst 3m. it significantly higher production levels, a m doubling of capacity requires well over 5 5igher capital costs. In fact, as production rates b e c m very high, the econcrnies of scale diminish quite rapidly and a doubling of capacity requires capital costs almst twice as high. Operating Costs As in the case with the capital costs, operating costs were developed for operations with production rates of 100, 200, 400, 600, SO0 and 1000 tons per day. These operating costs, along with the major cost classifications, are presented in Tables 7 to 12, and show in graphical form in Figure 3. This latter graph shavs the dramtic decrease in operating costs as the production rate increases Iran very Imv levels. This drarratic decrease again results f r m the fact that there is a larger ccnponent of fixed costs in ?5e total operating costs at low production levels. \ the tonnage throughput increases, s these fixed costs are "spread" over a greater nurber of tons, thus lowering the cost per ton dramtical ly. For e x q l e , the operating cost per ton decreases ty almst $20 per r ton when production li increased f r m 200 to 400 tons per day. However, a simi lar 200 tpd increase in production frcm 800 to 1000 tons per day resul:~ in the operating cost per ton decreasing by Less than $4 per :on. Tradeqff Bemeen Capital And aerating Costs As noted above, the operating costs per ton decrease drarratically as production capacities increase f r m l levels. Consequently, the m operating *mrgin (revenue minus operating costs) increases significantly. 'Vevertheless, we m s r recognize that the capital costs 3!s0 increase at higher production rates. The

m s t inportant point, hon.cvcr, Is that up to a particular production rate (the C E t ) the iqact of the decrease in operating costs per ton Is rmch greater than :he increasc in capital costs. This occurs because operating costs per ton decline so rapidly, %hile capital costs increase only slightly, when increasing fran law production rates. At higher production levels, an increase in the production rate results in the operating costs per ton decreasing only very slightly and the capital costs increasing ,mre significantly. Ignoring the t h value of m n e y and risk (both of which nust be incorporated in the discount rate) for the m q t * , s m sirrple calculations w l i l illustrate the trade-off between capital and operating costs for t o w production levels one at 100 tons per day, and one at 400 tons per day. For reserves of 500,000 these throughput capacities translate into mine lives of approxirretely I5 and 3Y1 years, respectively (assuning a 350 day per year operation). The undiscounted costs are present below: 400 tpd $56

Op costs in tl. &p. costs in tl.

$ 52.0 mln. $ 24.4 rnln.

$33.5 -mln. $62.4 mln.

$23.9 mln.

Total Costs $ 76.4 mln.

bother way of vieuring the iqact of producing at 400 tons per day insTead of 100 tons per day is to consider the increnental, or mrginal, costs. In this case the incrmntal capital costs are $ . million 91 - $24.4) while the incrmntal ($33.5 operating cost saving is $23.1 m liion ($52.0 i - $28.9). .A1though the incrmntal capftal cost is expended earlier than the "receiptn of the operating cost savings, at 400 tons per day the operating cost savings are realized over the first 3% years of production (since the mine life is ~ n l y 3% years at 400 tpd). Consequently, it should be inmdiately obvious that the incrmntal investment is very profitable on a present value basis (even ignoring the fact that the revenue is received rmch sooner at '0 tpd than at LOO tpd). This-. 4 1s c o n f i m d by the detailed cash flaw analys~s, as discussed in the next section, I t should be noted here that \be have ignored. any salvage value or disposal value of the mlnefrnill facilities 3t the end of the mine Life.
~

Construction PeriodIStart-lro .Although the capital and operating costs other have been e-rphasized to this point, factors wbich are presented in the next section, r m s ~5e incorporated into the cash flow financial analyses. Che of the mortant factors, is that the construction E i m for larger projects w l be il greater that that for ml!er projects. To +The irrpact of discount rate is discussed larer in this paper.

Page 3

incorporate this consideration, we have assured that the 100 tpd project would take 1 year to construct while the 1000 tpd project would take 2 years to construct. The tims for the other production rates between 100 and 1000 tpd have been interpolated between the 1 and 2 years, respectively. Another factor that i often significant is s the fact that there m y be start-up and shutdown inefficiencies due to a variety of factors, including personnel training, mill enviromntal clean-up, labour tune-up, turnover, etc. No matter h m high the presumd production rate, it cannot be rraintained uniformly, with instantaneous stsrt-up and die-down, and without sequencing problem or the constraints .of continuous crit ical-path elments in the production process. As a result, for purposes of this analysis ; have assured that the production w rates for the first six (6) mnths and last 0/ six (6) mnths of operation w u l d be 3 ? 0 lower, and that the operating costs per ton over these sarre periods would be 2 % higher. As a result, the higher production rates (shorter mine 1 ives) are impacted m r e severly than the lower production rates. Results of Financial .Analysis A graph s m r i z i n g the after tax net present values at production levels of 100, 200, 400, 600 800 and 1000 tons per day is A s m r y ccrrputer presented in Figure 4. printout of one cash f l w financial analysis at a production level of 400 tons per day is presented in Table 13. The detailed cash flog analyses, including all of the i n c m and mining tax infomation, have Seen cmitted to save space. Although the assurptions behind the graph in Figure 4 included a $350 U.S. gold price and a 1233 real after-tax discount rate, large variations in the gold price and discount rate do not significantly affect the optimrn production level.* In our exmple, the optimm production rate is. near 600 tons per day, (a mine 1 ife of appranimtely 2% years) since the present value is the highest at that rate. In fact, the net present value i $6.4 million at 600 s tons per day, whereas it is negative (meaning i t i uneconanic) at 100 tpd. Consequently, s if one arbitrarily picked a mine production rate of 100 tpd (15 years), the project' w u l d appear uneconani c. If one selects a production rate of 200 tpd (7 years), the project would just barely be econunic with a net present value of only $0.5 million. At 400 tpd the net present value increases dramatically to $6.0 million. I t is slightly m r e attractive at 600 tpd ( f years) with a 2i net present value of $6.4 million. The present value then declines to $5.1 million at 800 tons per day and to only $3.3 million at 1009 tpd.

Although r m y people would intuitively expect a 7 year mine live (200 tpd) to be more profitable that a 2% year mine live (600 tpd), the results s h w just the opposite. Consequently, a detailed analysis of the ORi rust be carried out. Sbre m n e y can be ml "savedv' or v'rnadel' by spending very . a l dollars to determine the CPR than by spending considerably m r e t i m , effort, and m n e y in less productive areas.
2 4

Sensitivities In order to determine the inpact on the ClvL of changing s m of the key variables, a variety of "sensitivities" were carried out. Sensitivities (tabulated in Table 14) of net present value to changes in the price of gold are presented in Figure 5, while sensitivities to the discount rate are shown in Figure 6. As can be seen fran Figure 5, the O& does not change significantly as a result of m t a l prices ranging f run $300 to $500 per ounce of Hcwever, at higher priced gold, the gold. optimm shifts slightly to an even higher production rate. As can be seen fran Figure 6, the discount rate does not significantly affect the CPR. Howver, at very low discount rates, the "range of reasonable production rates" (where the net present values are not significantly lower than that of the a??) is s & a t greater than the cqarable range at higher production rates. For exarrple at a 0!6 discount rate the range is approximtely fran 250 tpd to 850 tpd, whereas at a 20% discount rate the range is approximtely fran 350 tpd to 750 tpd. This occurs because the interrelationship between the capital and operating costs dwarfs the impact of the discount rate. It should be noted here that the discount rate chosen can be an inportant factor in determining the optimm mine life for larger mining operations. This occurs because the operating costs per ton decrease only slightly and the capital costs increase significanly as one increases fran, say a 40,000 tpd open pit operation, to a 60,000 tpd operation. fnis situation will result in rmch longer optimm mine lives than those for high-gradellmvtonnage properties. Consequently, the impact of the discount rate beccmzs an important determinant of mine life in these situations. .Uthough the has been selected on the basis of mximizing the net present values of the after-tax cash flaws, an CFQ selected on the basis of the after-tax discounted cash f w rate oE return (or internal rate of l return) would be almost identical in m s t situations. This can be seen in Table 14 and Figure 7, where the throughput rate is plotted against the rate of return at gold prices of 1J.S. $300, $400, and $500.

Is the Optiml Mine Life Always Best?

.l 4though the financial the theoretical optimm optimm mine life) should experience suggests that ilowever , be the case. theory tells us that production rate (or be chosen, practical this rray not always one should quantify

------------------*See Figure 5 and Figure 6 for conf i m t i o n of this statenen?

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t h i s " p r a c t i c a l experience" and thus b e a b l e t o j u s t i f y a d i f f e r e n t production rate. at the o p t h F i g u r e 5 shows t h a t p r o d u c t i o n l e v e l of 600 t p d , t h e n e t p r e s e n t v a l u e i s $6.4 m i l l i o n . However, t h e n e t p r e s e n t v a l u e s of $6.2 m i l l i o n and $5.1 m i l l i o n at 400 t p d and 800 tpd, r e s p e c t i v e l y , a r e not s i g n i f i c a n t l y lower. I n o t h e r words, over a f a i r l y wide range (400 t o 800 t p d ) of production r a t e s , the net present values change v e r y l i t t l e . In f a c t , t h e differences are relatively insignificant when one recognizes the potential of error of e s t i m a t i n g i n a v a r i e t y of i n p u t p a r m t e r s . W e v e r , at p r o d u c t i o n l e v e l s of l e s s t h a t 400 t p d , t h e n e t p r e s e n t v a l u e f a l l s of r a p i d l y . s If one f e l t t h a t t h e r e i ~ p r a c t i c a l l y no p o s s i b i l i t y of f i n d i n g a d d i t i o n a l o r e , o r f e l t t h a t t h e 500,000 ton e s t i r m t e uas perhaps t o o high, then i t appears t h a t a "practical optimm" l e v e l might b e 400 t p d r a t h e r t h a n 600 tpd. The e x p o s u r e i n t h e form of c a p i t a l e x p e n d i t u r e i s l e s s at 400 t p d , w h i l e t h e n e t p r e s e n t v a l u e i s a h s t as h i g h as i t i s at 600 tpd. C o n v e r s e l y , i f i t was f e l t t h a t t h e r e was a high p r o b a b i l i t y of s u b s t a n t i a l l y increasing the reserves, then the higher production level of 800 t p d would be recmnded. I f t h e r e were o t h e r d e p o s i t s i n t h e a r e a , they might b e custcrn m i l l e d a f t e r your am o r e i s a l l m i l l e d i n l e s s t h a t 2 y e a r s ( a t 800 t p d ) a f t e r s t a r t - u p . In a d d i t i o n , w i t h a lower c u t - o f f g r a d e p o s s i b l e a t a higher production r a t e , there are improved chances that future peripheral d i s c o v e r i e s of lw g r a d e or m a r g i n a l o r e might b e p r o f i t a b l y mined. However, of one could not develop enough vmrking f a c e s i n t h e m 1 1 orebody t o e n a b l e production a t t h e "optirrun l e v e l " , t h e n t h e " o p t i n m " l e v e l should b e reduced because of t h i s p h y s i c a l c o n s t r a i n t . Irrpact o f Cutaf Grade & t e r m i n a t i o n

level. The amount of ''shift" will obviously depend on t h e amount of tonnage (and grade) between t h e economic cutoffs at different production levels. Conclusion As can b e seen from t h e graphs and t h e analysis presented in this paper, considerable attention should b e directed towards determining t h e optimum production rate, since dramatic increases in value c a n result from relatively insignificant expenditures. Once a decision t o design and build at a particular s c a l e is made, i t is often too difficult and costly t o change. Consequently, a detailed analysis should b e carried o u t t o determine some of t h e key variables, at several different production r a t e s (which should "bracket" t h e optimum rate), such as:
.

1) operating costs 2) capital costs 3) tonnage and grade a t different cutoff grades 4) salvage value of t h e mine/mill facilities

Although t h e optimum production level will vary, depending on t h e relationship between t h e k e y variables, in different situations, t h e principles outlined in this paper still apply. In may cases, t h e optimum mine life for high-grade/low-tonnage deposits is between 2 and 4 years. As a result o n e cannot arbitrarily assume a production level; since, in many cases an otherwise economic deposit (at t h e OPR) will often b e seen t o b e uneconomic. Consequently significant investment opportunities may b e overlooked.

In m y cases where reserves are a p p r o x i n a t e l y 500,000 t o n s , f o r e x a r p l e , t h e production l e v e l i s a r b i t r a r i l y s e t a t , s a y , If this 200 t o n s per day (7 year mine l i f e ) . were done i n t h i s c a s e , t h e c u t o f f g r a d e would have been based on t h e o p e r a t i n g c o s r s f o r a 200 tpd o p e r a t i o n . Since the operating c o s t s a t 200 t p d ($76 per t o n ) a r e m c h higher t h a t t h o s e of 600 tpd ($48) t h e c u t - o f f g r a d e a t 290 t p d uould b e nuch t o o high f o r t h e 0ptirnn-1 production l e v e l of 600 t?d. If v e a s s i m d an e c o n a n i c c u t o f f ( t h a t i s , a r e g r a d u a l l y d e c r e a s i n g i n g r a d e ) a s opposed t o a physical cutoff (such a s a f a u l t or unconformity) which we have a s s 4 up t o now, t h e c u t o f f s a t 200 tpd and 600 t p d u o u l d b e about 0.20 ounces and 0.13 ounces r e s p e c t i v e l y a t $350 U.S. gold. S i n c e t h e r e -night b e a c o n s i d e r a b l e amount of tonnage between g r a d e s of 7.13 and 0.29, t h e o p t i m m p r o d u c t i o n r a t e would permit t h i s t o be mined a t a p r o f i t . Thus, t h e net p r e s e n t v a l u e a t t h e ZFR would e b e higher than what w have a s s m d i n t h e exsrple t o dare. F i g u r e S shows t h a t t h e e f f e c t of o p t i m i z i n g t h e c u t o f f w i l l b e t o s h i f t t h e o p r i m m p o i n t t o a higher p r o d u c t ~ a n

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Table 1 Capital Cost Estimate Hypothetical Gold Mine 100 stpd 1984 Cdn.$ (millions) Mine development Site development Crushing Processing Water supply Tailings disposal and water reclamation Power supply and distribution (hydro) Anciliar y buildings and fuel storage Access road, surface v e l ~ i d e s Engineering and field supervision Administration costs T o t a l Capital C o s t

Table 2 Capital Cost Estimate Hypothetical Gold Mine 200 stpd 1984 Cdn.$ (millions) Mine development Site development Crushing Processing Water silpply Tailings disposal and water reclamation Power supply and distribution (hydro) Ancillary buildings .Access road, surface vehicles and fuel storage Engineering and field supervision Administration costs Total Capita1 C o s t 5.96 0.59 1.14 5.47 0.4 1 0.75 1.84 3.13 1.66 2.25 1.88

28.38 -

Table 3 Capital Cost Estimate Hypothetical Gold Mine

400 stpd 1984 Cdn.$ (millions)

Mine development Site development Crushing Processing Water supply Tailings disposal and water r e d a m a t i o n Power supply and distribution (hydro) 4ncillar y buildings Access road, surface vehicles and fuel storage Engineering and field supervision Administration costs Total Capital Cost

12.38 0.64 1-22 6.48 9.44 0.83 1.84 3.28 1.67 2.74 1.99

33.50 -

Table 4 Capital Cost Estimate Hypothetical Gold Mine

600 ssod 1984 Cdn.$ (millions)

Mine development Site development Crushing Processing V a t e r supply Tailings disposal and water reclamation Power supply and distribution (hydro) Plncillary buildings 4ccess road, surface vehicles and fuel storage Engineering and field supervision .Administration costs Total Capital C o s t

15.35 9.69 1.30 7.44 9.47 0.9 1 1.84 3.42 1.68 3.11 2.10 38.30

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Table 5 Capital Cost Estimate H y ~ o t h e t i c a Gold Mine l

800 stod 1984 Cdn.$ (millions) 18.20 0.73 1.38 8.34 9.50 0.99 1.34 3.56 1.69 3.58 2.20

Mine development Site development Crushing Processing Water supply Tailings disposal and water reclamation Power supply and distribution (hydro) Ancillary buildings Access road, surface vehicles and fuel storage Engineering and field supervision Administration costs Total Capital Cost

43.00 -

Table 6 Capital Cost Estimate Hypothetical Gold Mine 1000 stpd 1984 Cdn.$ (millions) ~Mine deve!opment Site development Crushing Processing Water supply Tailings disposal and water reclamation Power supply and distribution (hydro) Ancillary buildings Access road, surface vehicles and fuel storage Engineering and field supervision 9dministration costs Total Capital Cost 21.01 0.75 1.45 9.29 3.54 1.36 1.54 3.70 1.70 3.58 2.3 1

k7.47 -

Page 8

Table 7 Operating Cost Estimate Hypothetical Gold Mine 100 stpd 1984 Cdn.$ per ton Milled A. Mining Cost 8. Milling Cost C. General Overheads Total Cost

Table 8 Operating Cost Estimate Hypothetical Gold Mine

200 stpd

1984 Cdn.$ per ton Milled

A. Mining Cost

B. Milling Cost C. General Overheads

Total Cost

Table 9 Operating Cost Estimate Hypothetical Gold Mine 400 stpd 1984 Cdn.$ per ton Milled
A. Mining Cost 0. Milling Cost

C. General Overheads
Total Cost

Page 9

Table 10 Operating Cost Estimate Hypothetical Gold Mine

600 stpd
1984 Cdn.$ per ton ,Milled
A. Mining Cost 3. Milling Cost C. General Overheads

Total Cost

Table I I Operating Cost Estimate Hvpothetical Gold Mine

800 stpd 1984 Cdn.$ per ton Milled

A. Mining Cost 6. Milling Cost C. General Overheads

Total Cost

Table 12 Operating Cost Estimate Hvpothetical Gold Mine

1000 stpd

1984 Cdn.$ per ton !dilled A. Mining Cost B. Milling Cost C. General Overheads Total Cost

Pngc 10
C;SHnO!u' SU!!.LW.'I

.*.11111 01*1 LO11 DmlUDoYI .O~T!O1lL LOIN ~*1WDOU* -SC*CDULID LOIR mrr&rntnt -0*lfOn1L LO11 lCP11itIM1 -111111ST C I * C * l I

. .....................................
811 tPulT1 cA11 I V I I L I I L C I C C U ~ U L I l I V t TOTAL 1Cf l*COUIltD a1sCOUwlrD DXSCOUNttD DISCOUMTCD DISCOUMTID D1SCOumTCD DlSCOURTfD DlSCOUklID

I 0.0 P C 1 3 Nt? 1 1 0 . 0 ? C T >

kc1 *CC MC? 1C1 RC* 112.0 111.0 116.0 115.0 120.0

PC11 *CT> *CT) PCT) PCTI

Table 14

NET PRESENT V.4LUES

Discount Rate
0 8 -

4 -

12 -

16 -

20 -

Page 11

Table 15 DISCOUNTED CASHFLOW RETURN ON INVESTMENT

Gold Price Production Rate (tons per day)

100 200 400 500 800 1000

Figure 1

THROUGHPUT (TONS

PER DAY)

CAPITAL COSTS vs PRODUCTION RATE

Figure 2
45

40
35

wr

..
"

,-

30
25

..
.. .
c
:

20
15

10 5

I
1

.I

100

200

300

400

500

600

700

800

900

1000

T;+.SOUGHPUT

(TONS PER DAY)

FOR A DOUBLING OF CAPACITY

Page 13

Figure 3

110 10090-

I-

ti a
YC

80
'O-

60: 50 40
30

0 '
U

w. n
O-

20100 , 100
I

q.r \
I
I

200

300

400

500

600

700

800

900

I 1000

d.

. . *.

THROUGHPUT (TONS PER DAY)

OPERATING COSTS vs PRODUCTION RATE

.
*-

Figure

THROUGHPUT (TONS PER DAY)

PRESENT VALUE vs PRODUCTION RATE

AT $350 US GOLD

Page 14

84-355

THROUGHPUT (TONS PER DAY)

PRESENT VALUE vs PRODUCTION RATE US GOLD

AT $300. $400 & $5QO
Figure 6

=O

THROUGHPUT (TONS PER DAY)

PRESENT VALUE vs PRODUCTION RATE

AT $400 US GOLD

Figure 7

100
Id

200

300

400

500

600

700

800

900

1000

THROUGHPUT (TONS PER DAY)

RATE OF RETURN vs THROUGHPUT

AT

THREE

GOLD

PRICES

'..'

THROUGHPUT (TONS PER DAY)

ECONOMIC CUTOFF vs PHYSICAL CUTOFF

AT $350 US GOLD