1. Building Economics

2. In this Example we Start With Western Mine Cost Service Models

3. Locking in on 20,000 tpd (My example – your results may differ) Mining costs are given in tonnes of ore –Important distinction because MSOPIT wants mining cost/per tonne 1:1 $2.45 2:1 $3.52 1:1 means 1 tonne waste/tonne ore ie 2 tonnes –$2.45 / 2 = $1.23/tonne 2:1 means 2 tonnes waste/tonne ore ie 3 –$3.52 / 3 = $1.17/tonne I’m thinking around $1.20/tonne as a number –Remember I’m getting numbers for initial estimates

4. The Problem of Out of Date Models I will use the Producer Price Index from the Bureau of Labor Statistics

5. Pick and Click

6. Using General Mining

7. Using Price Increase of 2.14 times $1.20 / tonne $1.20 * 2.14 = $2.57 / tonne mining cost

8. Now I Need Processing Costs Thinking of my primary ore –Have around $24/tonne in free milling gold Gravity methods are inexpensive If I charge the comminution elsewhere about $1/tonne will do gravity –Have $23/tonne in copper sulfides Flotation is normally the process of choice –Have about $24/tonne gold encapsulated in pyrite Pyrite is a good flotation mineral do 2 nd stage –I have floatable silver but the value is marginal Depends on 3 rd stage cost

9. Western Mine Cost Service

10. Picking 3 Product Float $5.08 plus $1.00 for my gravity stage $6.08 – need to inflation adjust Use my 2.14 factor on the $5.08 (my $1 is pretty good) –$5.08 * 2.14 = $10.87 –Plus 1 –$11.87 / tonne

11. Considering the Products I will have crude gold nuggets and flakes Pyrite concentrate with gold inclusions Copper concentrates Silver concentrates

12. My Copper Smelter charges $100 per ton (Western Mine Cost Service) –Price escalate $214 per ton SWAG at transportation –$40 per ton Refining Charges 8 cents/lb –Price adjust 17 cents/lb

13. I’ll Try for an adjusted price/lb Direct cost per lb $0.17 for refining $244/tonne for concentrates –Concentrate will be about 28% Cu –2205 lbs/tonne * 0.28 = 617 lbs –$244 / 617 = 40 cents/lb If copper sells for $3.25/lb –I loose 17 cents refining and 40 cents smelt and transport –Copper in concentrate is worth about $2.68/lb –Recovery about 90% in flotation

14. Using the Information Can mostly see where I got numbers Factor converts model units to dollars.

15. How Did I Get the Copper Factor? Start with a metric tonne end with dollars Model contains % copper %Copper/ 100 * 1 tonne = tonnes of copper Tonnes to lbs 2204.6 lbs/metric tonne %Copper/100 * 2204.6 lbs copper * price * recovery = resulting revenue 1 tonne Factor handles the % conversion X / 100 * 2204.6 = 22.046

16. My Precious Metals My gold nugget –Treatment charges $0.75/oz Inflation adjust $1.60/oz –Pay about 98% of contained metal (they do have losses – and profit) 2% of $1200/oz $24/oz –Cost about $25.60/oz –Value of gravity gold $1,174/oz

17. My Pyrite Gold About 1% iron in pyrite (a median value – your ore may differ) 22.05 lbs iron – double for pyrite 44.1 lbs of pyrite –Contains 0.04 oz gold Will have to smelt the pyrite –About $214/tonne –Or about $0.10/lb –$4.41 in smelting for 0.04 oz gold –$4.41/0.04 = $110/oz (plus refining charge) Pyrite gold is worth about $1,064/oz

18. My Next Problem My block model has gold reported –I know it’s a 50 – 50 split between two types –I’ll handle this with a 50-50 average of my two gold values $1174/oz $1064/oz Average $1119/oz About 90% recovery

19. Getting My Factor Start with oz/tonne If I multiply by 1 tonne I will have number of oz. * price * recovery = revenue This factor is easy – its 1.

20. Put the information in Note that I put this by silver – don’t you do that.

21. My Silver Since its Silver Sulfides I’ll have to smelt and then refine –I’ll send it with the copper –$214/tonne – 50% silver 2205 lbs * 0.5 = 1,100 lbs * 12 troy oz/lb = 13200 oz About 2 cents/oz –Refining about 25 cents/oz – inflation adjust 60 cents About 62 cents off of value $24.38 /oz for silver Flotation recovery about 75%

22. And Finish Up (at least for primary ore) I have gold and silver reversed in this illustration