Development Of A Simplified Economic Model To Allow More Flexible And Direct DCF Analysis In Mining Feasibility Studies

Feasibility studies for mining projects traditionally involve in their final stages a lengthy process of repetitive trial and error discounting, in calculating the discounted cash flow rate of return resulting from the respective yearly after-tax cash flows. Also, probability analysis and sensitivity analysis (in particular) require extensive additional calculations with each change of any project parameter . These inefficient repetitive procedures have two unacceptable results: 1. they are not flexible enough to allow ready analysis of dependent parameters , and 2. they require resort to high-capacity centralised computing facilities with their inherent impersonality, rather than a convenient and available desk calculator - a factor of particular importance to top mining management. Such problems can be overcome if the mining project can be represented by a reasonable straightforward mathematical economic model. The most flexible and appropriate model has been found to be one in which a maximum and minimum value for each of n parameters are supplied to a program which determines a large number of systematic combinations of parameter events and then statistically analyses them to determine the resulting coefficients of the model. In this paper the authors discuss the selection of the most appropriate type of model and outline the steps followed in its development and application.