4. Procedures for the Preliminary Financial Evaluation of Metal Mining Ventures ? Introduction

Careful financial analysis of capital investments has always been a vital task in mining which is one of the most capital intensive sectors of the economy. Furthermore, mining costs have leapt ahead at an astonishing rate in recent years not just due to accelerated inflation, which affects everyone, but also due to the imposition of enormous costs of enviromental regulation and the continuing decline in ore tenor. Not only have unit costs risen, but the amount of effort expended to recover a pound of metal has increased due to the inexorable decrease in ore grades. New low-margin, high-volume mining investments place increasing importance on sound financial planning. Owing to the enormous investments involved, a greater share of individual corporate resources is committed to these projects than is normally the case in other industries. Thus, the consequences of failure are extremely grave, and a close examination of all inputs to the evaluation equation is clearly indicated.