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Mine operating cost estimates and comparative rankings are now widely used by investors and lenders to assess the financial performance of mining companies. Mining companies themselves need mine cost models to benchmark their own performance against competitors and to better understand the economics of the industry. Resources industry investment analysts need mine cost models to forecast earnings. Bankers need mine cost models to assess project finance options and project creditworthiness.
Mine cost data is also used to draw embedded cost curves showing industry competitive rankings in snapshot form. Cost curves are a favorite tool of investors and lenders to the mining industry. Mine cost information is expensive! Top of the range mine cost data is sold by organizations such as CRU International, Brook-Hunt Associates and some mining engineering consultants. Mine cost information from these organizations is typically of high quality, but so is the price. High prices are charged because the information has limited circulation among the big mining companies and banks who are prepared to pay for the best available cost data. Banks often need a "name" to cite when putting deals together, and when the customer is paying, why not go for the best names around? Certainly CRU and Brook Hunt are very professional organizations that do an excellent job. If you need the best, then go ahead and buy it. But if you are spending that kind of money, you should really check some of their cost estimates against ours. Think of it as insurance. After all, if a cost estimate turns out to be wrong, who gets the blame? Our mine operating cost estimates are based on a serious attempt to model the flowsheet for the operation. Our focus is on-site cash operating costs rather than guesses about off-site costs such as treatment, shipment, marketing expenses and overheads, much less depreciation, amortization and interest charges. While our models include offsite shipment, treatment and refining charges in order to estimate the cost of production to refined metal, we use published custom treatment charges based on standard treatment and refining contract terms, where relevant, for all mines, unless disclosed by the mine operator. This has the virtue of allowing mines to be compared on the basis of their own performance rather than on the efficiency or otherwise of the downstream smelter! We would far prefer to spend time on getting the mines right than theorizing about offsite costs. Our models go into much more detail than you will see from the research organizations. The detail is there because we model every step in the flowsheet, and because we aim to provide maximum transparency to model users. The more detail we put in, the harder it is to fudge the numbers. Cost estimates with minimal detail are much easier to fudge. And many of them are fudged. That's why we put in the detail. That's why we have models with formulas. And that's why we disclose all our data sources. Best of all, you can really satisfy yourself that our claims are reasonable by downloading the Users Guide to minecost.com models which annotates each line item and explains the formulas and equation used for each flowsheet process. Our estimates are open to scrutiny by any mining analyst who logs into this site and registers. If we get it wrong, we cheerfully credit you for the cost of the mine download. See more on how we construct our mine cost models. Have a look at an image of the Operating Cost module or even download the free sample mine model to get the flavor of our approach. See our list of Frequently Asked Questions.
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