The two key nature-driven factors in the overall economics of a mining project are the ore grade and the ore tonnage.  In simplistic terms, the ore grade will determine how much incremental profit can be generated by each ore tonne processed.   The ore tonnage will determine whether the total profit generated all the ore will be sufficient to pay back the capital investment for the project plus provide some reasonable financial return to the investor.
Focusing on the first factor of ore grade, in order to understand the incremental profit generated by each ore tonne one must first convert the ore grade into a dollar revenue value.   This calculation will obviously depend on metal prices and the amount of metal recovered.  For some deposits with multiple metals, the total revenue per tonne will be based on the summation of value from each metal, some of which may have different process recoveries and different payable factors.
I have created a simplistic interactive spreadsheet at this link (Rock Value Calculator).  A screenshot is shown below.  The user simply enters their data in the yellow shaded cells and the rock value results are calculated. One can zero out values for the metals of no interest.

Rock Value Calculator Pic

Price: represents the metal prices, in US dollars for the metals of interest.
Ore Grade: represents that head grades for the metals of interest in the units as shown (g/t and %).
Process Recovery: represents the average percent recovery for each of the metals of interest.
Payable Factor: represents the net payable percentage after various treatment, smelting, refining, penalty charges.  This is simply a rough estimate depending on the specific products produced at site.  For example, concentrates would have an overall lower payable factor than say gold-silver dore production.
Insitu Rock Value: this is the dollar value of the insitu rock (in US dollars), without any recovery or payable factors being applied.
NSR Rock Value: this represents the net smelter return dollar value after applying the recovery and payable factors.  This represents the actual revenue that could be generated and used to pay back operating costs.
The final profit margin will be determined by subtracting the operating cost from the NSR Rock Value.  These costs would include mining, processing, G&A, and offsite costs.  Typically large capacity open pit operations may have total costs in the range of $10-15/tonne while underground operations could be much higher.
My bottom line is that very early on it is important to understand the net revenue that your project’s head grades may potentially deliver.   This will give sense for whether you are a high margin project from an operating cost perspective or whether the ore grades are marginal and higher metal prices may be required.   The more one understands the potential economics of the different ore types, the better.
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3 thoughts on “11. Rock Value Calculator – What’s My Rock Worth?

  1. hardrockminer

    Well done!

    I am assuming the payable factor shown for gold would be for gold in concentrate. The payable for gold bullion would be 100%, subject only to refining costs.

    Tech reports typically underestimate TC/RC’s, sometimes by as much as 50%. It’s also useful to understand what penalties might apply. This adds to cost through the actual penalty charges, and may also add to costs if they increase the distance to the nearest smelter that can take the concentrate.

  2. Ken Kuchling Post author

    The payable factors are all shown as 90% values in the table but it is up to the user to modify these. For concentrates the gold payable could be 70%-80% while for dore it would be closer to 100% as you identified. Its a variable to adjust.

    I have seen the concentrate transport costs included as a deduction from the NSR and in other studies I have seen the concentrate handling costs as a part of the operating cost estimate. The NSR “factor” in the table could include deductions for penalties, insurance, marketing, transport – all of which go to lower the net revenue.

  3. hardrockminer

    Gold payable varies with grade in the concentrate but is seldom less than 90% for asian smelters. European tend to deduct a gram.

    Whittle calculates off site costs as part of the sales cost so I usually calculate it that way. Everything from transportation onwards becomes a sales cost.

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