Gold Exploration Economics

INTRODUCTION Pincock, Allen & Bolt, Inc. (PAH) has developed a series of cost models for Western U.S. Gold Mines. The models indicate the economic potential of developing gold properties at various production rates and ore grades. Various combinations of mining and processing methods are also analyzed. The conclusions shown in this paper are taken from PAH's 600 page study titled, "Capital and Operating Cost Models for Western U.S. Gold Mines." PAH decided to develop the cost manual as a result of our perception of the industry's need for such a document. It was our impression that exploration development decisions were being made on the basis of limited economic information. PAH has compiled a substantial database on unit cost information. That database and the engineering capabilities of the firm allowed us to develop a reasonably detailed analysis of capital and operating costs and overall development economics. The study has developed a series of algorithms for underground and open pit mining, processing, G&A, and infrastructure costs. The capital and operating cost data served as a basis for performing after tax discounted cash flow analysis for the various development alternatives. For the base case scenarios, a 15% DCFROR was assumed and the required ore grade was back calculated using the computer. The ore grade versus production rate graphs summarize the economics of developing gold projects in the Western U.S.