3
items, such as royalties and taxes, may be treated differ-
ently in financial and economic models, however, they are
burdens that should be included in the revenue and COV
calculations.
Calculated Rev-g should be included in the planning
model and used for planning purposes.
COST SIDE OF THE EQUATION
The cost side of the equation is not straightforward. There
are a number of variables that must be considered, some of
which are dependent on owner accounting practices.
Costs considered in determining COV have been tra-
ditionally restricted to operating costs, with capital costs
not being considered.
The boundary between capital and operating costs is
often defined by accounting /financial /taxation consider-
ations that are beyond the scope of this paper. To determine
COV, the distinction between capital and operating costs
should not be considered. What should be considered is
whether those costs are directly related to the production
activity (waste development on level), or are broadly mine-
related (i.e., capital expenditure for a hoisting shaft).
DILUTION /RECOVERY
Dilution and stope recovery must be accounted for in
determining the COV.
• Dilution:
– Internal dilution, also called planned dilution,
is low-grade or waste material that is within the
planned stope or mineable shape and is included
in the stope reserve.
– External dilution is material outside the planned
mineable shape that is not planned but must be
accounted for in the COV calculation.
– Calculation of dilution percentage and grade is
outside the scope of this paper.
• Recovery:
– Recovery number quantifies how much material
(ore +dilution) is recovered from the stope, recog-
nizing that some material is not recovered.
– Recovery percentage varies with mining method
and numerous other factors and is outside the
scope of this paper.
FINANCIAL BURDENS
Several financial burdens are usually not considered “oper-
ating costs” but must be considered in calculating COV.
These items are listed below and often neglected in COG
calculations.
• Royalty payments,
• Taxes,
• Penalties,
• Minimum profit
– Owner /management requirements
– We are opposed to “recreational” or “practice”
mining.
EXAMPLE
For our example, we will assume that the mining method
is transverse sublevel open stoping (SLOS), with backfill.
The details will vary with other mining methods, but the
principals are the same. Figure 1 illustrates the key features
of this method and which portions of mine development
are considered under which cost category.
Example with Manual Calculation
Table 3 shows information on an example stope using
transverse SLOS, with backfill.
Table 2. Revenue at the Gate
Payable:
NSR or other payable from customer
Less:
Penalties
Inland freight
Stevedore or handling costs
Cleaning &disposal costs
Sea freight
Handling &freight at destination
Insurance
Sampling/assay/umpire
Fees/charges
Royalties/severance taxes
Import/export duties
Other charges or burdens
Revenue at Gate (Rev-g)
Table 3. Example Stope
Stope:
(25 × 15 × 20 m)
20,000 tonnes (neat)
Rev-g =$200/tonne
Waste development footwall lateral: 15 m
Stope crosscut: 15 m
Stope recovery 93%
Dilution 10%
Dilution grade Rev-g =$0.00/tonne
Process recovery 90%
Revenue payable 95%
items, such as royalties and taxes, may be treated differ-
ently in financial and economic models, however, they are
burdens that should be included in the revenue and COV
calculations.
Calculated Rev-g should be included in the planning
model and used for planning purposes.
COST SIDE OF THE EQUATION
The cost side of the equation is not straightforward. There
are a number of variables that must be considered, some of
which are dependent on owner accounting practices.
Costs considered in determining COV have been tra-
ditionally restricted to operating costs, with capital costs
not being considered.
The boundary between capital and operating costs is
often defined by accounting /financial /taxation consider-
ations that are beyond the scope of this paper. To determine
COV, the distinction between capital and operating costs
should not be considered. What should be considered is
whether those costs are directly related to the production
activity (waste development on level), or are broadly mine-
related (i.e., capital expenditure for a hoisting shaft).
DILUTION /RECOVERY
Dilution and stope recovery must be accounted for in
determining the COV.
• Dilution:
– Internal dilution, also called planned dilution,
is low-grade or waste material that is within the
planned stope or mineable shape and is included
in the stope reserve.
– External dilution is material outside the planned
mineable shape that is not planned but must be
accounted for in the COV calculation.
– Calculation of dilution percentage and grade is
outside the scope of this paper.
• Recovery:
– Recovery number quantifies how much material
(ore +dilution) is recovered from the stope, recog-
nizing that some material is not recovered.
– Recovery percentage varies with mining method
and numerous other factors and is outside the
scope of this paper.
FINANCIAL BURDENS
Several financial burdens are usually not considered “oper-
ating costs” but must be considered in calculating COV.
These items are listed below and often neglected in COG
calculations.
• Royalty payments,
• Taxes,
• Penalties,
• Minimum profit
– Owner /management requirements
– We are opposed to “recreational” or “practice”
mining.
EXAMPLE
For our example, we will assume that the mining method
is transverse sublevel open stoping (SLOS), with backfill.
The details will vary with other mining methods, but the
principals are the same. Figure 1 illustrates the key features
of this method and which portions of mine development
are considered under which cost category.
Example with Manual Calculation
Table 3 shows information on an example stope using
transverse SLOS, with backfill.
Table 2. Revenue at the Gate
Payable:
NSR or other payable from customer
Less:
Penalties
Inland freight
Stevedore or handling costs
Cleaning &disposal costs
Sea freight
Handling &freight at destination
Insurance
Sampling/assay/umpire
Fees/charges
Royalties/severance taxes
Import/export duties
Other charges or burdens
Revenue at Gate (Rev-g)
Table 3. Example Stope
Stope:
(25 × 15 × 20 m)
20,000 tonnes (neat)
Rev-g =$200/tonne
Waste development footwall lateral: 15 m
Stope crosscut: 15 m
Stope recovery 93%
Dilution 10%
Dilution grade Rev-g =$0.00/tonne
Process recovery 90%
Revenue payable 95%