Blue Mountain Mining Ltd is evaluating its proposed iron ore mine for the Pilbara region of West Australia. The mines primary operations are the extraction of iron ore and its transportation to the port. Given that the mine is 240 kilometres to the nearest port, ore will be transported using three (3) heavy haul trains where each train comprises two (2) locomotives and 208 ore carriages. It is anticipated that it will take one day for each train to complete the return trip from the mine to the port, including loading and unloading

The management of Blue Mountain Mining Ltd have requested that you provide a detailed financial analysis of each train option and prepare a report that recommends a preferred option. Using the information below create a Discounted Cash Flow Analysis and calculate the NPV over 30 years:

The following information has been provided:

General Information
Iron ore reserve (tonnes)	900,000,000
Annual production (tonnes)	30,000,000
Life of mine (years)	30
Distance from mine to port (kilometres)	240	Round trip is 480 kilometres
Trains in operation	3	Each train comprises locomotives and carriages
Locomotives per train	2
Carriages per train	208
Fuel usage per train (litres per kilometre)	8	Averaged over round trip
Fuel cost ($ per litre)	1.4
Effective operating days per year	360	Used to adjust for maintenance and breakdowns
Tax rate	30%
Discount rate After Tax	10%
Information on Locomotives (per locomotive)
Initial outlay ($)	2,500,000
Life of locomotive (years)	15
Working capital ($)	500,000	Fuel, spare parts and related materials
Maintenance costs per year ($)	200,000
Depreciation method	Straight Line	Rate = 1/Locomotive Life
Salvage value at end of year 15 ($)	0
Information on Drivers
Drivers required (per train, per day)	4	Two drivers operate each train.
Work hours (per driver, per day)	12
Driver's weekly working hours (average)	42
Driver' yearly working weeks	48
Driver's unavailability due to illness (weeks per year)	2
Total drivers required	27
Driver's average annual salary ($)	220,000
Information on Automation
Additional capital outlay to rail line ($)	35,000,000	Sensors and related materials, depreciated straight line over life of mine
Salvage of additional capital outlay to rail line ($)	0
Additional capital outlay to locomotive ($, per locomotive)	250,000	Sensors and related materials required for all new locomotives, depreciated straight line over life of locomotive
Salvage of additional capital outlay to locomotives ($, per locomotive)	0
Additional working capital ($)	1,000,000	Total across rail line and all trains
Fuel efficiency usage adjustment	93%	Automation reduces fuel usage as locomotives operate more efficiently, e.g. reduces cost by 7%
Maintenance cost adjustment	95%	Automation reduces maintenance costs through less wear and tear, and breakdowns of locomotives, e.g. reduces cost by 5%
Drivers required	0
Total automation technicians required	6
Automation technician's average annual salary ($)	150,000