Mine Economics

Mineral Resources, Reserves and Sampling Resource and Reserve Classification: concepts; IBM and UNFC frameworks; JORC and CRIRSCO codes; measured, indicated and inferred resources; proved, probable and possible reserves. Sampling and Statistical Analysis: grab, channel, chip, bulk and drill-core sampling; sample preparation and reduction; salting and precautions; statistical treatment — mean, variance and standard error of grade. Grade and Reserve Estimation: cut-off grade and break-even grade; reserve estimation by cross-section, polygonal, triangular and inverse-distance methods; introduction to geostatistics and kriging; grade-tonnage curve.

• Mine Valuation Valuation Fundamentals: objectives and scope of mine valuation; factors affecting mine value; valuation for sale, taxation and mortgage; distinction between mine, accounting and market valuation. Methods of Mine Valuation: present-value method; Hoskold's, Morkill's and O'Donahue formulae; replacement-cost and comparative methods; relative merits and limitations. Life and Capacity of a Mine: Taylor's rule for optimum capacity; relationship between reserve, capacity and life; effect of cut-off grade on life and capacity.
• Depreciation and Capital Recovery: straight-line, declining-balance, sum-of-years-digits, sinking-fund and production-unit methods; amortization of intangibles; redemption of capital; depletion allowance.

Discounted Cash Flow Analysis Time Value of Money: compounding and discounting; present value, future value, annuity and perpetuity; effect of compounding frequency. Cash Flow Analysis: project cash flow diagrams; project life cycle — exploration, development, production and closure; treatment of escalation, inflation and working capital; tax-affected cash flow. Investment Appraisal Methods: non-discounted methods — payback period and accounting rate of return; discounted methods — NPV, IRR, discounted payback, profitability index, B/C ratio, modified IRR; conflict between NPV and IRR for ranking. Sensitivity and Risk Analysis: one-way sensitivity (spider and tornado diagrams); scenario analysis; Monte-Carlo simulation (overview); risk-adjusted discount rate. Project Selection: ranking of mutually exclusive projects; capital rationing; replacement decisions; case studies on mining-project appraisal.

Financial Management and Mineral Taxation Business Organization and Financing: forms of business organization; memorandum and articles of association; sources of short-term and long-term capital for mining enterprises. Capital Structure: equity shares, preference shares, debentures, retained earnings and term loans; cost of capital; weighted average cost of capital (WACC); leverage. Break-Even and Inventory: break-even chart, break-even point, margin of safety and contribution margin; ABC analysis, Economic Order Quantity (EOQ), reorder level and safety stock. Mineral Taxation: royalty (tonnage and ad-valorem); dead rent; cess — District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET); income tax on mining; GST impact; MMDR Act 1957 (as amended in 2015 and 2021); Mineral Concession Rules 2016. Mineral Pricing: factors governing mineral prices; primary versus secondary markets; price volatility and cyclical nature of the mineral economy; long-term contracts versus spot markets; commodity exchanges.

Financial Statements and Mineral Economics in Practice Book-Keeping Essentials: double-entry system; journal, ledger and subsidiary books; trial balance; rectification of errors. Financial Statements: preparation of profit-and-loss account and balance sheet; key financial ratios — current ratio, debt-equity, ROCE and earnings per share. Cost of Production: cost classification — fixed, variable, direct, indirect and overhead; cost per tonne; cost centres in a mine. Mineral Economics in Industry: National Mineral Policy 2019; pre-feasibility, feasibility and bankable feasibility studies; sustainable mining and ESG reporting (overview).