Microcomputer Cost Models for Mining and Milling

INTRODUCTION Estimation of capital and operating costs for mines and mills has long been a necessary ingredient of feasibility studies, and though many practitioners have successfully used "rules of thumb" and factor estimating methods for many years, a great deal of work is usually required to prepare an initial estimate and/or to update or revise such an estimate. Development of comprehensive mining and milling cost models during the 1970's by the U.S. Bureau of Mines and by Canadian workers (O'Hara and Mullar) provided the basis for feasibility-level cost estimates, but the numerous equations and the apparent rigor and complexity involved in preparing a project estimate using these models has discouraged many, if not most, potential users. Their acceptance was also hindered by a broad misunderstanding by many engineers in the minerals industries who had little exposure to such procedures, and by a possibly inadequate level of explanation or documentation of the parametric approach to cost estimating. The preliminary nature of most databases, geologic/engineering/ and market, available to the engineer or analyst during the early stages of a mineral project is a universal problem. Basing corporate mega-investment decisions or even individual equipment selection decisions on the usual "SWAG’s has always been a risky practice, but in the current business environment, the "guesstimates" are almost 'verboten', and are certainly becoming antiquated with the advent of both the described models, the ubiquitous microcomputer, and the nearly-ubiquitous hybrid species known as the "computerized engineer". Engineers have almost always sought techniques of cost estimation that can be applied and justified when geologic and engineering information for a mining project is preliminary and incomplete. The answer, in some cases, is the "parametric" approach. Equations, based on actual, past experience are developed to relate capital and operating costs to major physical variables such as the rate of mining or milling, with modifiers for such details as mining method, process characteristics, methods of construction, or types of equipment . Cost Engineering Standards Five major types of fixed capital cost estimates have been defined by the American Association of Cost Engineers : 1. Order-of-Magnitude estimate based on previous cost data and minimal knowledge. usually a "ratio estimate" with no better than +/- 30% accuracy. 2. Factored or ratio estimate based on major equipment costs with probable accuracy in the 25 to 30% range. 3. Budget authorization or Preliminary estimate, based on sufficient project data to