$25$ Other Relevant Data and Information $25\mathrm{.}1$ Open$-$Pit Mining $25\mathrm{.}1\mathrm{.}1$ Introduction The Mary River Deposit No$.1$ will be mined by conventional open$-$pit mining methods involving excavation of overburden, drilling and blasting of rock, loading with hydraulic shovels and front$-$end loader and haulage utilizing $210-$t capacity trucks. Ancillary equipment includes dozers, graders, front$-$end loaders, service trucks and general equipment for support and maintenance. As mentioned in Section $19\mathrm{.}2,$ the resource model developed by GHW was imported into GEMS using identical dimensions and coordinates. The Interim and Final pit designs were based on the selected pit shells resulting from the Whittle optimization$\mathrm{.}5.[20$ marks$]$ Compute the unlevered project IRR of Baffinland Iron Mine as of June $30,2010.$ Refer to DFS$,$ available on the course website. Assume all cash flows take place mid$-$year on June $30.$ Construct only an annual cash flow model $($i$.$e$.$ no quarterly or monthly details$).$ Although DFS already provides project NPV and IRR, they are based on different assumptions. You will use the following assumptions $($some unchanged and others revised$)$ to re$-$compute the IRR: Use the Life of Mine Production Schedule $($DFS Table $25-1)$ to determine annual production. Ignore the $1\mathrm{.}6$ million tons produced prior to the start of operations $($the PM line$).$ Year $1$ in DFS Table $25-1$ should correspond with $2014.-$ Add a $40\%$ premium to the long$-$term FOB destination price calculated in $4$ above to calculate your sales price. The premium reflects the tightness of the global iron ore market and the effects of the resulting supplier power that the iron ore producers will possess. Assume the price will remain unchanged for the life of the mine. $-$ Use a Nunavut royalty rate of $2\%$ payable on gross sales. $-$ Use the Operating Cost Summary $($DFS Table $25-7)$ for annual operating expenses. Assume the per$-$ton figure remains unchanged for the life of the mine. You will include or exclude ocean shipping depending upon what sales price you are using. Use the Capital Cost Summary $($DFS Table $25-6)$ and Additional Works Budget $($DFS Table $3-3)$ to determine the total capital expenditures $($capex$).$ Exclude, however, the Total Contingency included in DFS Table $25-6.$ Note that you will include only the $2010$ amount from DFS Table $3-3$; this amount will be paid shortly after June $30,2010.-$ Assume the capital costs $($excluding Additional Works$)$ will be incurred in equal payments over the following three years $(2011,2012,$ and $2013).$ That is$,$ the buildout $($incl$.$ commissioning$)$ will take $3$ years. All capital expenditures will be capitalized and amortized over the life of the mine once the production has started. Taxes are impacted by depreciation and amortization as well as interest expense. Use the federal and Nunavut tax rates included in DFS Section $25\mathrm{.}9($that is$,$ the combined federal and Nunavut income tax rate of $27\%).$ The Nunavut Royalties and Mining Tax is the same as the Nunavut royalty rate of $2\%$ used in the case.Table $25-6$ Mary River Iron Ore Project Capital Cost Summary Project Area Description Cost

Direct Costs $($ CAD $000000)$

Processing Plant $609\mathrm{.}8$

Mining $22\mathrm{.}8$

Infrastructure at Mary River Mine $256\mathrm{.}3$

Infrastructure at Steensby Inlet Port $282\mathrm{.}8$

Steensby Port Facilities $148\mathrm{.}4$

Railroad $1,214\mathrm{.}8$

Total Direct Costs $2,534.9$

Indirect Costs

Project Indirect Costs $987\mathrm{.}9$

Owner Costs $85\mathrm{.}7$

Royalties $($Gravel$)28\mathrm{.}7$

Subtotal Direct and Indirect $3,637.2$

Total Contingency $437\mathrm{.}8$

TOTAL PROJECT CAPITAL COST $4,075\mathrm{.}0$

Table $25-7$ Operating Cost Summary CAD$/$dmt Mining $4\mathrm{.}08$ Processing $4\mathrm{.}89$ Railroad $1\mathrm{.}45$ G & A $4\mathrm{.}19$ Subtotal $14\mathrm{.}62$ Ocean Shipping$*30\mathrm{.}25$ TOTAL $44\mathrm{.}87$Table $25-9$ Annual Cash Flow $($CAD x $\text{'}000000)$The following activities are included in the above budget.