Open Pit Mine Planning and Design, Two Volume Set & CD-ROM Pack, Third Edition, 3rd Edition

CHAPTER 8

Responsible mining

8.1 INTRODUCTION

At the beginning of Chapter 1, ‘ore’ was defined as:

Ore: A natural aggregation of one or more solid minerals that can be mined, processed

and sold at a profit.

The meaning of ‘profit’ was defined very simply in Equation (1.1) as

Profits = Revenues − Costs (1.1)

Replacing ‘revenues’ and ‘costs’ by their equivalent expressions in Equation (1.1), one

obtains Equation (1.4).

Profits = Material sold(units) ×(Price/unit − Cost/unit) (1.4)

The profit (or loss) incurred is often referred to as the ‘bottom line’ since it is the final

calculation made in a financial analysis and appears at the bottom of a financial ledger

sheet. In simple terms, it is the amount of money remaining after all of the bills have been

paid. At the conclusion of a presentation on a potential mining project, the first focus is

on the ‘bottom line.’ Other financial indicators such as the NPV, ROR, DCFROR and the

payback period as discussed in Chapter 2 will also be closely examined. For a project to be

considered a ‘Go,’the ROR, for example, must be greater than the ‘hurdle rate’(the minimum

ROR), required by the company. If the projected rate of return is below the ‘hurdle’, then the

project may be re-evaluated using other parameters/assumptions or put aside. The potential

‘ore reserve’ is no more but remains a mineralized occurrence or mineral concentration.

The requirement to make a profit commensurate with the risk being taken is a key aspect

of any business but particularly in mining where the risks can be very high. Because of this,

it is of value to consider the notion of ‘profit’ in today’s world in greater detail.

In this respect, Equation (1.4) can be re-written as

Profit/unit = Price/unit − Cost/unit (8.1)

For metals and many other minerals, the price received per unit is set on the international

market and will be considered fixed for the purposes of this discussion. The Cost/unit is

something that is project dependent. For reasons that will become obvious as the reader

traverses this chapter, it will be expressed as

Cost/unit = Extraction cost/unit +Environmental cost/unit +Social cost/unit (8.2)

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