Mineral Economics, Mine Planning, Systems Engineering · Mineral Economics · 2 marks · Numerical answer
A project needs ₹200 crore initially. After gestation, production over three years is 1, 2, 1 million tonnes. Ore sells at ₹2000/tonne; ore mining costs ₹500/tonne; waste mining costs ₹500/m³ at stripping ratio 1.5 m³/tonne. Discount rate is 10%. Ignoring other cash flows, NPV is ₹5.367 crore. Find gestation period in years, to the nearest integer.
Unit net cash is 2000−500−1.5×500=₹750/tonne. Operating-year cash flows are therefore ₹75, 150, 75 crore. Their value immediately before production begins is 75/1.1+150/1.1²+75/1.1³=₹248.49737 crore. With gestation g, −200+248.49737/(1.1)^g=5.367. Thus g=ln(248.49737/205.367)/ln1.1≈2.00014, or 2 years.
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