MINICASE Maxine Peru, the CEO of Peru Resources, hardly noticed the plate current price for high-quality hydrated zircon gemstones was of savory quenelles de brochet and the glass of Corton Char- $3.300 per pound. lemagne "94 on the table before her. She was absorbed by the engi- Peru Resources was a family-owned neering report handed to her just as she entered the executive of $45 million, including cash reserves of $4 million. The outlay dining room. required for the new mine would be a major commitment. Fortu The report described a proposed new mine on the North Ridge nately. Peru Resources was conservatively financed, and Ms. Per of Mt. Zircon. A vein of transcendental zirconium ore had been believed that the company could borrow up to $9 million at an discovered there on land owned by Ms. Peru's company. Test bor- interest rate of about 8%. ings indicated sufficient reserves to produce 340 tons per year of The mine's operating costs were projected at $900,000 per year transcendental zirconium over a 7-year period. including $400,000 of fixed costs and $500,000 of variable costs The vein probably also contained hydrated zircon gemstones. Ms. Peru thought these forecasts were accurate. The big question The amount and quality of these zircons were hard to predict marks seemed to be the initial cost of the mine and the selling because they tended to occur in "pockets." The new mine might price of transcendental zirconium. come across one, two, or dozens of pockets. The mining engi- Opening the mine, and providing the necessary machinery and neer guessed that 150 pounds per year might be found. The ore-crunching facilities, was supposed to cost S10 million, but cout