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