Input-Output Analysis: Its Potential Application To The Mining Industry

Stilwell, L. C.
Organization: The Southern African Institute of Mining and Metallurgy
Pages: 6
Publication Date: Jan 1, 2000
Input-output analysis is a major branch of quantitative economics, and is used to analyse the flow of goods and services between production sectors in a national economy. Its purpose is to determine the relative value-adding capacity of each sector. The model has also, in recent years, found increasing use in assessing the environmental and ecological impact of development projects. It has, however, never been applied to individual production facilities, such as large mines, which themselves have complex economic structures, through which there is a flow of goods and services. Conventional cost and accounting systems, as used on mines, treat production sectors as separate cost centres, and do not determine the inter-relationships between them. This can lead to incorrect conclusions on the relative value of sectors and their impact on the total economic performance of the facility. This paper explains the basic principles of input-output analysis, and presents an example of its application to a simplistic model of a mine, which is used in the absence of any real data. The paper concludes that, by forcing definition of the value adding function of each sector, input output analysis will facilitate control of inputs, or costs. This will result in optimal application of resources and exploitation of ore reserves. The authors realise the model needs to be tested on an operating mine, and hope this paper will result in an opportunity to do so. The authors wish to thank the anonymous referees for their valuable comments.
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