Study Case 4.7. Low or High Capacity

High or Low Capacity?

You are working for a big mining company with several mining sites around the world. Within your business unit you
have been promoted. Now you are mine manager of “Adinal” mine. Your first big project is to start mining a new area.
As experienced mining engineer you want to utilize an optimum mining capacity of 10 Mt per year. The new CFO of the
mining company (which has absolutely no mining background) asks you to cut costs and suggests that you decrease the
planned mining capacity for this new part to 7.5 Mt per year, also lowering investment costs.

Use dynamic calculation methods (NPV, EAC p.a. and p.t., IRR, and ROI) to prove, if the request of the CFO is
expedient.

Approach:

• 1) NPV
• 2) EAC a) per year and b) per ton
• 3) IRR
• 4) ROI