Mine Economics
Resource
A source or supply from which benefit is produced
Cash flow
Actual amounts which are receipts (inflow) and disbursements (outflow)
Expenses
All corporate costs incurred in transacting business
Debt capital
Also called borrowed capital, obtained from lenders for investment
Future Worth
Amount at some future date considering time value of money
Present worth
Amount of money at the current time
Taxable income
Amount upon which income taxes are based
Depreciation rate
Annual rate for reducing the value of assets using depreciation
Equity capital
Capital that is owned by individuals who have invested their money or property in a business project or venture in the hope of receiving a profit
A=P(i(1+i)^n/((1+i)^n -1))
Capital-recovery
Operating costs
Considered to be all expenses incurred at the plant site
Geometric Gradient
Constant rate of change each time period
Present Worth Revenues - Present Worth Costs
Equation for NPV
Capital recovery
Equivalent annual cost of owning an asset plus the required return on the initial investment
Annual Worth
Equivalent uniform annual amount of all cash inflows and outflows over estimated life
Annual Operating cost
Estimated annual cost to maintain and support an alternative
Replacement value
Existing value of a property or asset as determined on the basis of what it would cost to replace the property of its service with at least equally satisfactory and comparable property and service
Variable cost
Expense that changes with the level of output
Fixed cost
Expense that does not vary with the level of output
Gross income
Income from all sources for corporations or individuals
Cost of capital
Interest paid for the use of capital funds, includes both equity and debt funds
Inflation adjusted interest rate
Interest rate adjusted to take inflation rate into account
Effective interest rate
Interest rate that when Applied once per year to a principal sum will give the same amount of interest equal to a nominal rate of r% per year compounded "m" times per year; E=(1+i)^m -1
Non-mutually Exclusive Alternatives
Investment alternatives from which more than one choice can be selected depending on available capital or budget restrictions
Opportunity cost
Lost revenues from the alternative scenario; By accepting the project, a company forgoes other opportunities for using an asset
Standard deviation
Measure of dispersion or spread about the expected value or average
Percentage depletion
Method of depletion calculated by multiplying the gross income received in the tax year from extracting a resource by an IRS-determined percentage established for each resource
Cost depletion
Method of depletion that looks at the total amount of the resource to be extracted, how much was extracted during the tax year and the amount of money spent to extract it. The proportion of resources extracted divided by the total resources is the percentage used to help determine the deduction in that period.
Minimum Attractive Rate of Return (MARR)
Minimum value of the rate for an alternative to be financially viable
Working capital
Money necessary to operate a business
Compounding frequency
Number of times interest is compounded per period
Economic Service Life
Number of years at which the AW of costs is a minimum
Estimated Life
Number of years or periods over which an alternative or asset will be used
Recovery Period
Number of years to completely depreciate an asset
Payback period
Number of years to recover the initial investment and a stated rate of return
Book value
Original investment in the property or asset as carried on the organization's book less any cumulative allowance for depreciation or amortization entered on the books
Capitalized cost
PW of an alternative that will last for a long time
Debt-equity mix
Percentages of debt and equiyy investment capital used by a corporation to fund projects
Financial Investment
Putting money into something with the expectation of gain, usually over a longer term
Breakeven point
Quantity at which revenues and costs are equal, or two alternatives are equivalent
Inflation rate
Rate that reflects changes in the value of currency over time
Benefit/cost Ratio
Ratio of a project's benefit to costs expressed in Present Worth, Annual Worth, or Future Worth terms
Depreciation
Reduction in the value of assets using specific models and rules
Capital
Refers to wealth in the form of money or property that can be used to produce more wealth
Cost estimating relationships
Relations that use design variables and changing costs over time to estimate current and future costs
Book Value
Remaining capital investment in an asset after depreciation is accounted for
Amortization
Repayment of loan, usually a scheduled scheme for principal and interest payments
Net cash flow
Resulting net amount of cash that flows in or out during a time period
Mutually Exclusive Alternatives
Several alternatives from which only one can be selected
F=P(1+i)^n
Single payment compound-amount
P=F(1+i)^-n
Single payment present worth
A=F(i/(1+i)^n - 1)
Sinking-fund deposit
Study period
Specified number of years over which an evaluation takes place
Marginal cost (revenue)
The change in total cost (revenue)
Compound interest
The interest charge for any interest period is based on the remaining principal amount plus any accumulated interest charges up to the beginning of that period
Nominal interest rate
The interest rate on an investment or loan without adjusting for inflation; Interest rate stated on the loan or investment; Also called annual percentage rate
Sunk cost
The portion of fixed cost that is not recoverable
Simple interest
Total interest earned or charged is linearly proportional to the initial amount of the principal, the interest rate, and the number of interest periods for which the principal is committed
Arithmetic Gradient
Uniform change in cash flow each time period
F=A(((1+i)^n - 1)/i)
Uniform series compound-amount
P=A((1+i)^n -1)/i(1+i)^n - 1 )
Uniform series present worth
Composite rate of return
Unique rate of return when reinvestment rate c is applied to a multiple-rate cash flow series
Salvage value
Value of an asset after its service life
Mine Valuation
assigning of a dollar or other currency value to the worth of a mine or mining project and provides a measure of the desirability of ownership of that property
Feasibility study
engineering/economic appraisal of the commercial viability of a project
Interest rate
may be also called cost of borrowed money, rate of return on invested capital or minimum rate of return
Market value
price established in a public market by exchange between a willing buyer and a willing seller when neither is under duress to complete the transaction
Effective tax rate
single-figure tax rate incorporating several rates and bases
Insured value
value at which the property has been insured against loss or disaster
Assessed value
value entered on the official assessor's records as the value of property applicable in determining the amount of ad valorem taxes to be paid by property owner