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Abstract

Because the purpose of any reserve estimate is to permit an economic evaluation of the deposit, a general understanding of basic economic principles is required of the estimator. Whether we like it or not, the “rules of the game” are expressed in economic terms, and the underlying purpose of our endeavors is not to produce tons, pounds, or ounces of some commodity, but rather is to produce dollars of profit.

Cost accounting is not normally of much interest to an exploration geologist charged with delineating a potential mineral resource, and this text does not pretend to cover the subject in any detail. However, virtually all mining operations are preceded by a detailed feasibility study designed to demonstrate that the proposed operation will, in fact, return a profit on the necessary capital investment. Such a study will involve a detailed analysis of both capital and operating costs of the proposed operation, and is typically built up around the anticipated labor and supply costs for each phase of the project—a preliminary cost sheet. Most such studies involve an iterative process, whereby alternative operating scenarios are investigated and initial rough cost estimates are refined. Since these costs ultimately determine the grades at which mineralized material becomes ore, they are fundamental to the final reserve estimate, and all parties involved in the estimating process should have at least a basic understanding of the projected cost structure.

For rough, preliminary resource estimates, overall figures may be satisfactory to determine whether or not a given

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