ore 330 14-economics - soest | school of ocean and ... 1 of 2 cash buyer cash seller &...

Economics

Mineral EconomicsKey Metals In Order of Economic Importance:

Mn Nodules – Ni, Cu, Co, MnMn Crusts – Co, Mn, Ni, Pt

Profit = Sales – CostNormally this profit is calculated as a percentage of the

investment and is referred to as internal rate of return (IRR)

For high risk ventures such as mining this needs to be on the order of 20-30%

CostsPrimary costs are in two categories:

Capital costs: buildings, ships, machinery, etc.Operating costs: supplies, labor, energy, etc.

SalesMajor metals are sold on metals exchanges – key

examples:The London Metal Exchange and the New York Commercial Exchange (COMEX)Manganese and cobalt are sold on the internet and by direct contract with minesSpecifications for metals sold include: delivery date, location, lot size, grade, packaging, and technique of processing

Price ProtectionPrice volatility is one of the major metal market issuesMetals prices are hedged by futures and optionsFutures contracts allow sales of metals now with payment

and delivery up to 27 months in the futureOptions contracts are a price insurance policy in part

guaranteeing a minimum sales price

Project Economics Depend On:1) Quality and size of resource2) Technologies3) Markets4) Capital & operating costs5) Tax regimes & subsidies6) Risks