Economic Feasibility of .... 1.1 Summary In this section, you need to include a summary of the project based on the provided template, projection duration, reserve, etc. You also need to summarize your outcomes and include the values for project NPV, PVR and DCFROR. At the end of the summary the reader should know if the project should move forward. 1.2 Operating Cost and Initial Capital Cost Summarize your costs in a table format. An summary example is below for your reference but yours should include development etc. that is relevant to your project. Include additional tables to get you to the summary, such as your equipment operating expenses. Make sure you label all figures and tables as shown here. Discuss any major expenses you see in Table 1 the plant is clearly the largest cost both for capital and annually, information such as this should be pointed out. Table 1: Cost Summary for Capital and year I operating Costs Equipment Plant Blasting Exploration Auxiliary Mercury Treatment Bonds Total $ $ $ $ $ $ $ S Capital Cost Annual Operating Cost 7,842,400 $ 974,922 211,050,000 $ 29,346,830 $ 882,440 $ 90,000 11,702,045$ 774,729 17,357,463 $ 651,812 1,600,000 $ 237,849,863 S 38,727,517 Include information on any life of mine capital expenditures in table format (table 2). Make sure to always state assumptions you have made in your analysis that may not hold true in a real situation but have to be made for economic decision making. One example is below: The federal government and Generally Accepted Accounting Principles (GAAP) state that mining equipment will serve its useful life after seven years of service. While many operations choose to continue operation of equipment well past this allotted time, this analysis assumes the conservative case of equipment exhaustion after seven years and the purchase of a new fleet during the 8th year. Buildings are assumed to remain useful, insofar as maintenance is kept up to date. Table 2: Additional Equipment Purchases Year Purchased Year 0 Year 8 Amount of Total Capital $ 7,842,400 $ 9,934,518 $ 12,584,750 $ 15,941,985 Year 16 Year 24 1.3 Labor Costs Include a summary of your personnel and include annual costs in a table for year 1. Mention the number of shifts for hourly workers and any other assumption that had to be made. Make sure to separate out administration from mine, plant, consultant workers etc. 1.4 Property Economics and Risk Sensitivities Include a section and table such as the following for your specific risks you were assigned. Based on the assumptions of a minimum rate of return at X%, royalty expenditure at Y%, and a selling price at $Z/metric ton, a tax flow analysis has been created. The entire analysis is included in an associated excel file, but the first five years are included in Figure 1. Year 1 2 3 Raw Production (1000 tons) 1500 1500 1500 1500 Clean Production (1000 tonnes) 1000 1000 1000 1000 Selling Price (S/tonne) $ 108.35 $ 110.12 $ 111.92 $ 113.75 Gross Revenue ($1000) $ 108,350.00 $ 110,119.72 $ 111,918.34 $ 113,746.34 Royalty ($1000) $ 7,584.50 $ 7,708.38 $ 7,834.28 $ 7,962.24 Net Revenue ($1000) $ 100,765.50 $ 102,411.34 $ 104,084.05 $ 105,784.09 Operating Cost ($1000) $ (38,075.70) S (38,697.61) $ (39,329.67) S (39,972.05) Development Cost (70%) ($1000) $ (161,499.58) Depreciation ($1000) $ (1.120.68) $ (1.920.60) S (1,371.64) $ (979.52) Amortization ($1000) $ (13,842.82) $ (13.842.82) $ (13,842.82) S (13,842.82) S (13.842.82) WC Write-off (51000) Before Depletion (S1000) $ (175,342.40) S 47,726.29 $ 47,950.30 $ 49,539.93 $ 50.989.70 50% Limit ($1000) $ 23,863.15 $ 23,975.15 $ 24,769.96 $ 25,494.85 Percent Depletion (S1000) $ 5,038.28 $ 5,120.57 $ 5,204.20 $ 5,289.20 Cost Depletion ($1000) $ 17.88 $ 17.98 S 18.07 $ 18.16 Selected Depletion ($1000) $ (5,038.28) $ (5,120.57) $ (5,204.20) $ (5.289.20) Loss Forward (91000) $ (175,342.40) $ (132,654.38) S (89,824.65) $ (45,488.92) Taxable income ($1000) $ (175,342.40) $ (132,654.38) S (89,824.65) S (45,488.92) $ 211.58 Federal Tax ($1000) $ $ $ S $ (71.94) State Tax Due @4.63% ($1000) $ $ $ S $ (9.80) Net Income ($1000) $ (175,342.40) $ (132,654.38) S (89,824.65) S (45,488.92) $ 129.85 Depreciation (S1000) $ $ 1,120.68 $ 1,920.60 $ 1,371.64 $ 979.52 Selected Depletion ($1000) $ $ 5,038.28 $ 5,120.57 $ 5,204.20$ 5,289.20 Amortization ($1000) $ 13,842.82 $ 13,842.82 $ 13,842.82 $ 13.842.82 $ 13,842.82 Loss Forward ($1000) $ $ 175,342.40 $ 132,654.38 $ 89,824.65 $ 45,488.92 Capital: Equipment ($1000) $ (7.842.40) Capital: 30% Dev. (51000) $ (69,214.11) Working Capital (51000) $ $ $ S $ Mineral Acquisition (51000) ATCF ($1000) $ (238,556.09) $ 62,689.80 $ 63,713.73 $ 64,754.39 $ 65,730.31 NPV ($1000) $96,384 DCFROR 23.3% Figure 1:: Tax Flow Analysis, Years 0-4 From this analysis, the expected discounted cash flow rate of return is over A%, which is well above the B% minimum rate of return and places the project at a net present value of over SC million. Projecting the net present value per year shows the breakeven point occurs during year D. This can be seen in Figure 2. NPV $150,000.00 $100,000.00 $50,000.00 $0.00 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ($50,000.00) ($100,000.00) ($150,000.00) ($200,000.00) ($250,000.00) Figure 2: Net Present Value per year showing Maximum Capital Exposure, Payback and Project NPV. No project is without risk, and scenarios have been drafted. Their results are concluded in Table 3. Table 3: Sensitivity Analysis and Impact on ROR Risk Double Fuel Cost Double Electric Cost Double Equipment Investment Hourly Rates Raised to $20 and $30 All Risks Realized DCFROR Change 17.3% -6.0% 20.1% -3.1% 22.4% -0.8% 22.7% -0.6% 12.9% -10.4% Include a summary paragraph discussing the risk(s) as compared to the original. 1.5 CONCLUSION Clear overall conclusion for the project including risk analysis. In a full feasibility your will have several chapters and will not have the summary section outlined here. This section should include similar information to the summary for this stand alone document but should not be a direct copy by any means. Economic Feasibility of .... 1.1 Summary In this section, you need to include a summary of the project based on the provided template, projection duration, reserve, etc. You also need to summarize your outcomes and include the values for project NPV, PVR and DCFROR. At the end of the summary the reader should know if the project should move forward. 1.2 Operating Cost and Initial Capital Cost Summarize your costs in a table format. An summary example is below for your reference but yours should include development etc. that is relevant to your project. Include additional tables to get you to the summary, such as your equipment operating expenses. Make sure you label all figures and tables as shown here. Discuss any major expenses you see in Table 1 the plant is clearly the largest cost both for capital and annually, information such as this should be pointed out. Table 1: Cost Summary for Capital and year I operating Costs Equipment Plant Blasting Exploration Auxiliary Mercury Treatment Bonds Total $ $ $ $ $ $ $ S Capital Cost Annual Operating Cost 7,842,400 $ 974,922 211,050,000 $ 29,346,830 $ 882,440 $ 90,000 11,702,045$ 774,729 17,357,463 $ 651,812 1,600,000 $ 237,849,863 S 38,727,517 Include information on any life of mine capital expenditures in table format (table 2). Make sure to always state assumptions you have made in your analysis that may not hold true in a real situation but have to be made for economic decision making. One example is below: The federal government and Generally Accepted Accounting Principles (GAAP) state that mining equipment will serve its useful life after seven years of service. While many operations choose to continue operation of equipment well past this allotted time, this analysis assumes the conservative case of equipment exhaustion after seven years and the purchase of a new fleet during the 8th year. Buildings are assumed to remain useful, insofar as maintenance is kept up to date. Table 2: Additional Equipment Purchases Year Purchased Year 0 Year 8 Amount of Total Capital $ 7,842,400 $ 9,934,518 $ 12,584,750 $ 15,941,985 Year 16 Year 24 1.3 Labor Costs Include a summary of your personnel and include annual costs in a table for year 1. Mention the number of shifts for hourly workers and any other assumption that had to be made. Make sure to separate out administration from mine, plant, consultant workers etc. 1.4 Property Economics and Risk Sensitivities Include a section and table such as the following for your specific risks you were assigned. Based on the assumptions of a minimum rate of return at X%, royalty expenditure at Y%, and a selling price at $Z/metric ton, a tax flow analysis has been created. The entire analysis is included in an associated excel file, but the first five years are included in Figure 1. Year 1 2 3 Raw Production (1000 tons) 1500 1500 1500 1500 Clean Production (1000 tonnes) 1000 1000 1000 1000 Selling Price (S/tonne) $ 108.35 $ 110.12 $ 111.92 $ 113.75 Gross Revenue ($1000) $ 108,350.00 $ 110,119.72 $ 111,918.34 $ 113,746.34 Royalty ($1000) $ 7,584.50 $ 7,708.38 $ 7,834.28 $ 7,962.24 Net Revenue ($1000) $ 100,765.50 $ 102,411.34 $ 104,084.05 $ 105,784.09 Operating Cost ($1000) $ (38,075.70) S (38,697.61) $ (39,329.67) S (39,972.05) Development Cost (70%) ($1000) $ (161,499.58) Depreciation ($1000) $ (1.120.68) $ (1.920.60) S (1,371.64) $ (979.52) Amortization ($1000) $ (13,842.82) $ (13.842.82) $ (13,842.82) S (13,842.82) S (13.842.82) WC Write-off (51000) Before Depletion (S1000) $ (175,342.40) S 47,726.29 $ 47,950.30 $ 49,539.93 $ 50.989.70 50% Limit ($1000) $ 23,863.15 $ 23,975.15 $ 24,769.96 $ 25,494.85 Percent Depletion (S1000) $ 5,038.28 $ 5,120.57 $ 5,204.20 $ 5,289.20 Cost Depletion ($1000) $ 17.88 $ 17.98 S 18.07 $ 18.16 Selected Depletion ($1000) $ (5,038.28) $ (5,120.57) $ (5,204.20) $ (5.289.20) Loss Forward (91000) $ (175,342.40) $ (132,654.38) S (89,824.65) $ (45,488.92) Taxable income ($1000) $ (175,342.40) $ (132,654.38) S (89,824.65) S (45,488.92) $ 211.58 Federal Tax ($1000) $ $ $ S $ (71.94) State Tax Due @4.63% ($1000) $ $ $ S $ (9.80) Net Income ($1000) $ (175,342.40) $ (132,654.38) S (89,824.65) S (45,488.92) $ 129.85 Depreciation (S1000) $ $ 1,120.68 $ 1,920.60 $ 1,371.64 $ 979.52 Selected Depletion ($1000) $ $ 5,038.28 $ 5,120.57 $ 5,204.20$ 5,289.20 Amortization ($1000) $ 13,842.82 $ 13,842.82 $ 13,842.82 $ 13.842.82 $ 13,842.82 Loss Forward ($1000) $ $ 175,342.40 $ 132,654.38 $ 89,824.65 $ 45,488.92 Capital: Equipment ($1000) $ (7.842.40) Capital: 30% Dev. (51000) $ (69,214.11) Working Capital (51000) $ $ $ S $ Mineral Acquisition (51000) ATCF ($1000) $ (238,556.09) $ 62,689.80 $ 63,713.73 $ 64,754.39 $ 65,730.31 NPV ($1000) $96,384 DCFROR 23.3% Figure 1:: Tax Flow Analysis, Years 0-4 From this analysis, the expected discounted cash flow rate of return is over A%, which is well above the B% minimum rate of return and places the project at a net present value of over SC million. Projecting the net present value per year shows the breakeven point occurs during year D. This can be seen in Figure 2. NPV $150,000.00 $100,000.00 $50,000.00 $0.00 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ($50,000.00) ($100,000.00) ($150,000.00) ($200,000.00) ($250,000.00) Figure 2: Net Present Value per year showing Maximum Capital Exposure, Payback and Project NPV. No project is without risk, and scenarios have been drafted. Their results are concluded in Table 3. Table 3: Sensitivity Analysis and Impact on ROR Risk Double Fuel Cost Double Electric Cost Double Equipment Investment Hourly Rates Raised to $20 and $30 All Risks Realized DCFROR Change 17.3% -6.0% 20.1% -3.1% 22.4% -0.8% 22.7% -0.6% 12.9% -10.4% Include a summary paragraph discussing the risk(s) as compared to the original. 1.5 CONCLUSION Clear overall conclusion for the project including risk analysis. In a full feasibility your will have several chapters and will not have the summary section outlined here. This section should include similar information to the summary for this stand alone document but should not be a direct copy by any means