Unlocking Value In Projects Through Mining Economics Principles - 1. Introduction

Mining is a business involving extraction of commodities of value to society from non-renewable resources. Consequently there is only one opportunity to extract ore from the ore body in order to unlock the value potential encompassed in the asset. It is therefore imperative that the maximum value is unlocked during the extraction programme, considering the relative wealth generated for shareholders and society, the sustainability of society, the environment and the operation. The bulk of the value that is unlocked is usually embedded in the initial design process. How do you measure sucess The most common measure of success is the return on investment, which is unlocked during the extraction process. This is usually only determined and locked-in during the study process. Another measure of success is the profitability that is achieved on a monthly basis. A further measure would be the enhancement the asset affords to the share price of the operation. Increasing focus on sustainable development requires that the impact on the society and environment received high priority as well. All these measures are largely encompassed in the cash flow and the discounted cash flows. This paper focuses on the dynamics of the cash flow and the most significant elements influencing return in investment. These include the mine design, production volume, sustainability, risk and valuation techniques. When do you add the most value? There are many different phases and definitions noted by different authors to demonstrate and standardise the study process for new projects. This paper is based on a process with 3 major components namely a conceptual study, a prefeasibility study and a feasibility study.