Mine Economics, Health, and Safety
Project economics
Value is created through discounted cash flow. NPV = Σ CFt/(1+r)^t; IRR is the discount rate at which NPV = 0; payback ignores time value and is a screening tool only. Build models from reserves (Proved and Probable, after applying modifying factors), not resources (Measured, Indicated, Inferred). Separate capital from operating cost, and apply royalties, taxes and depreciation per the host jurisdiction. A competent report presents sensitivity analysis, not a single number.
Cut-off grade
COG = (mining + processing + G&A cost per tonne of ore) ÷ (metal price × recovery × payable factor). Recalculate whenever price, recovery or cost changes materially.
Health and safety
Apply the hierarchy of controls: eliminate, substitute, engineer, administrate, then PPE last. Risk assessment uses likelihood × consequence matrices, and critical risks are managed with verifiable controls. Performance is reported as frequency rates; LTIFR = lost-time injuries × 1,000,000 ÷ hours worked, though many operations use a 200,000-hour basis - always state which. Investigate incidents for systemic causes rather than blame. Occupational hygiene covers dust, noise, diesel emissions, heat and fatigue; emergency response, refuge chambers and mine rescue capability are required underground.
Traps
- Mixing nominal and real cash flows, or discounting at the wrong basis.
- Alternating cash flows can produce multiple IRRs.
- Quoting a reserve without stating the modifying factors applied.
- Mixing the 200,000-hour and 1,000,000-hour frequency bases.
Worked example
3 lost-time injuries in 480,000 hours: LTIFR = 3 × 1,000,000 ÷ 480,000 = 6.25 per million hours, which equals 1.25 on the 200,000-hour basis.