Case Study

There are mines that make us happy, There are mines that make us blue, There are mines that steal away the tear-drops As the sunbeams steal away the dew. There are mines that have lost the ore chute faulted, When the ore's forever lost to view, But the mines that fill my heart with sunshine, Are the mines that I sold to you. -Anonymous INTRODUCTION The preceding chapters have discussed, in various degrees of detail, the primary considerations necessary to perform a cash flow analysis of a mining-related investment opportunity. Although the previous discussions regarding the manipulations, calculations, and interrelationships of the various components of the pro forma income statement were illustrated in the text, many individuals are un- familiar with the format and appearance of a final spread sheet for the evaluation of a mining property. As a result, it seems appropriate to conclude this book with an abbreviated case study of an actual mine property (currently in production) showing the cash flow analysis and some back-up data. Obviously all of the supporting data and calculations for the case study presented cannot be provided; however, reference is made to the major assumptions utilized and to the appropriate procedures employed in the calculations, as described elsewhere in the text. The problem associated with using any case study for illustrative purposes is that one tends to be overwhelmed by detail. For instance, specific costs, prices, expenditure timings, and other variable values may be challenged because they either do not conform to one's expectations or are not consistent with specific operating experiences. When this occurs the instructional value of the problem becomes obscured. The purpose of most case studies, and particularly the one presented in this chapter, is to expose the student to the methodology, procedure, and format associated with performing a cash flow analysis of a mining property. It is not to laboriously wade through the specific details associated with operating and capital cost development, mine plans, or equipment schedules. It should be noted, how- ever, that the values represented in this case study result from specific mine plans, operating procedures, equipment spreads, manpower requirements, and other en-