Question
In: Economics
One method of exploitation of an ore mine that contains 1 million metric tons of ore...
One method of exploitation of an ore mine that contains 1 million metric tons of ore will result in a recovery of 70% of the available ore deposit and will cost $25 per ton of material removed. Another method of exploitation will recover 60% and will cost $20 per metric ton of material removed. Subsequent processing of the removed ore recovers 200 kg of metal from each ton of processed ore and cost $50 per metric ton of ore processed. The recovered metal can be sold for $2.0 per kg. Which method for developing the mine is preferred to maximize total profit from the mine?
Solutions
Expert Solution
| Available Capacity (in mt tonne) | 10,00,000 | |
| Particulars | Option 1 | Option 2 |
| Recovery Rate | 70% | 60% |
| Recovered (in mt Tonnes) A | 7,00,000 | 6,00,000 |
| Tonne per Metric Tonne (B) | 1.10231 | 1.10231 |
| Tonnes (C=A*B) | 7,71,617 | 6,61,386 |
| Cost of removal | 25 | 20 |
| Total Cost of removal | 1,92,90,425 | 1,20,00,000 |
| Processing Cost (50 per mt tonne) (B*50) | 3,50,00,000 | 3,00,00,000 |
| Metal Recovery (In Kgs) (D=C*200) | 15,43,23,400 | 13,22,77,200 |
| Revenue (E=D*2) | 30,86,46,800 | 26,45,54,400 |
| Profits (E-Proc Cost - Cost of removal) | 25,43,56,375 | 22,25,54,400 |
Catch in this question in Cost of removal.
For Option 1 it is 25 per tonne (25*771617)
For Option 2 it is 20 per metric tonne (20*600000).
Recommended to go ahead with Option 1.
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Rahul Sunny answered 2 years agoRelated Solutions
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Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded...
Landmark Coal operates a mine. During July, the company obtained
500 tons of ore, which yielded 250 pounds of gold and 63,400 pounds
of copper. The joint cost related to the operation was $500,000.
Gold sells for $325 per ounce and copper sells for $0.91 per pound.
Allocate the joint costs using the relative sales values. With
these costs, what is the profit or loss associated with Copper?
Round to two decimal places
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded...
Landmark Coal operates a mine. During July, the company obtained
500 tons of ore, which yielded 250 pounds of gold and 62,500 pounds
of copper. The joint cost related to the operation was $500,000.
Gold sells for $325 per ounce and copper sells for $0.85 per pound.
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Round to two decimal places.
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