MODULE TITLE Production and Cost Estimation CREDIT VALUE 15

MODULE CODE CSMM145 MODULE CONVENER Unknown

DURATION: TERM 1 2 3
DURATION: WEEKS 6

Number of Students Taking Module (anticipated) 13

DESCRIPTION - summary of the module content

Over the last decade, there has been a strong demand for commodities and numerous mining projects and expansions are being developed to meet this demand,
each of which requires a preliminary assessment or feasibility study to demonstrate its economic viability. At the same time, the industry finds itself struggling with
significant cost inflation and other operational pressures that constrain production. This module examines the various components and inputs to development of
production schedules, financial appraisal of mines and projects and the economic analysis of project alternatives.
AIMS - intentions of the module
This module aims to help you understand both the macro-economic and the industry specific economic environment in which mines and projects operate and are
evaluated. You will learn about how technical and operational parameters influence the revenue stream and cost structure at mines.

We will discuss the generation of development and production schedules for both open pit and underground mines, and illustrate this with calculations of
development rates, production cycle times and equipment selection.

Furthermore, we will review cost estimation methods (for both capital expenditure and operating costs), including the use of CostMine software/models.

Finally, we will examine the application of economic analysis techniques (within spreadsheet software), with specific reference to case studies and scenarios
considering engineering alternatives.
INTENDED LEARNING OUTCOMES (ILOs) (see assessment section below for how ILOs will be assessed)
On successful completion of this module, you should be able to:

Module Specific Skills and Knowledge:

1 acquire, analyse and interpret types of economic and cost data covered in the syllabus, recognising the inconsistencies or errors in such data and methods;
2 apply a variety of cost estimation techniques to mining methods. Capital and operating cost estimates can be developed for mine development and
production/stoping activities; following a provisional approach to equipment selection and production scheduling;
3 combine revenue and cost data using discounted cashflow and real options analyses to derive financial valuations of mines and projects and their alternative
scenarios.
Discipline Specific Skills and Knowledge:
4 conduct and present financial appraisals and valuations with awareness of industry standard assumptions and/or exercising personal judgment;
5 show critical awareness of current problems and risks in the financial appraisal of mining projects.
Personal and Key Transferable/ Employment Skills and Knowledge:
6 enhance and refine data-assessment and software based analysis/presentation skills, particularly with the use of Excel spreadsheet and proprietary database;
calculations for cost estimation and financial evaluation exercises;
7 demonstrate technical report writing skills.

SYLLABUS PLAN - summary of the structure and academic content of the module
Introduction:

Review of general mineral economics theory and more detailed review of mining industry specific drivers and business risks. Sources of mine financing;
fundamentals of project finance, project viability and risk assessment.

Development and Production Scheduling:

For both open pit and underground mines; review, discussion and calculation of: equipment selection, matching trucks and shovels, development rates,
production cycle times and replacement/rebuild requirements.

Revenue Forecasts:

Tonnage, grade and recovery calculations and the development of metal production schedules. Net Smelter Revenue calculations and hedging, long-term
contracts and the spot market.

Cost Estimation:

Capital costs - the methods available for estimating both fixed and working capital costs, depending on the type of study being carried out. Cost indices, and a
description of various approaches to cost estimation. Development of pre-production and sustaining/ongoing capital cost requirements. Operating cost
estimations: methods, analysis and key data inputs and cost drivers. Cost trends and pressures in the mining industry; the impact of exchange rates; fuel/power
prices and labour cost inflation. Infrastructure costs. Includes use of CostMine database.

Financial Analysis:

Role of cash flow modelling & detailed financial analysis/valuation of mining projects and operations. Coverage of the main technical and engineering components
of such an analysis. Real options valuation. General coverage of risk/sensitivity analysis, the main factors considered and the techniques used in project
evaluation and feasibility studies. Impact of taxation, capital allowances and royalties.

Project alternatives:

Examination of engineering and financial alternatives using economic analysis techniques. A number of scenarios will be examined from among: contract vs. owner
mining; shaft vs. decline/conveyor haulage, equipment lease vs. buy, optimum fleet sizing, IPCC vs. truck-shovel, production rate optimisation etc.
 LEARNING AND TEACHING
LEARNING ACTIVITIES AND TEACHING METHODS (given in hours of study time)
Scheduled Learning & Teaching Activities 40.00 Guided Independent Study 110.00 Placement / Study Abroad

DETAILS OF LEARNING ACTIVITIES AND TEACHING METHODS

Hours of study
Category Description
time
Lectures 24 Formal lectures delivering main syllabus
Tutorials 6 Tutorial with staff member(s); approximately 1 hr a week throughout module.
Scheduled IT related workshops allowing students to undertake formative and summative exercises introduced and
Workshops/IT tutorial 10
supported by staff
Independent study Independent study; including directed learning on specific topics and completion of assessments.
110
time

ASSESSMENT
FORMATIVE ASSESSMENT - for feedback and development purposes; does not count towards module grade
Size of Assessment (e.g. ILOs
Form of Assessment Feedback Method
duration/length) Assessed
Series of in-class exercises designed to lead up to Self/peer marked with direct feedback by working
Variable 1-7
summative coursework assessment through “model” solutions

SUMMATIVE ASSESSMENT (% of credit)

Coursework 40 Written Exams 60 Practical Exams

DETAILS OF SUMMATIVE ASSESSMENT

Form of Assessment % of Credit Size of Assessment (e.g. duration/length) ILOs Assessed Feedback Method
Examination 60 2 hours 1-5 Through tutor system
Assignment 1 20 2,000 word equivalent 1,2,5-7 Written
Assignment 2 20 2,000 word equivalent 1, 3-7 Written

DETAILS OF RE-ASSESSMENT (where required by referral or deferral)

Original Form of Assessment Form of Re-assessment ILOs Re-assessed Time Scale for Re-assessment
Summative assessment Additional summative assignment Weighting as above August Ref/Def period
Examination Additional examination Weighting as above August Ref/Def period

RE-ASSESSMENT NOTES

RESOURCES
INDICATIVE LEARNING RESOURCES - The following list is offered as an indication of the type & level of
information that you are expected to consult. Further guidance will be provided by the Module Convener
Basic reading: (available as e-books through University of Exeter Library)

Rudenno, V. 2009. Mining Valuation Handbook - Mining and Energy Valuation for Investors and Management (3rd Edition). John Wiley & Sons.

Darling P. (Ed.), 2011. SME Mining Engineering Handbook (3rd edition). Society of Mining Engineers.

ELE: College to provide hyperlink to appropriate pages

Web based and Electronic Resources: As advised.

Reading list for this module:

Type Author Title Edition Publisher Year ISBN Search
Mining Valuation Handbook - Mining and Energy Valuation for
Set Rudenno Victor 3rd John Wiley & Sons 2009 [Library]
Investors and Management
Hartman, Howard Society for Mining, Metallurgy and
Set Mining Engineering Handbook 2nd 1992 [Library]
L. (Eds.) Exploration, Inc. Colorado.

CREDIT VALUE 15 ECTS VALUE 7.5

PRE-REQUISITE MODULES None

CO-REQUISITE MODULES None

NQF LEVEL (FHEQ) 7 AVAILABLE AS DISTANCE LEARNING No

ORIGIN DATE Thursday 06 July 2017 LAST REVISION DATE Thursday 06 July 2017

KEY WORDS SEARCH Development rates; production schedules; equipment selection; cost estimation; financial analysis.