Mine size optimization using marginal analysis

In this study, a model to estimate the optimum mine size is developed. The model is developed on the basis of marginal analysis. The model solves for the production rate at which the present value of marginal costs equals the present value of marginal revenues—the rate that microeconomic theory shows will maximize the net present value of production from the mine.In addition, the article discusses the effects on the optimum production rate of: the physical characteristics of the deposit, economic factors, and financial factors. It has been found that, not surprisingly, as the reserve tonnage increases, the optimum mine size increases. Also, the optimum production rate increases as the ore grade increases. A direct relationship has been found between the mineral price and the optimum production rate. The optimum mine size is found to be inversely related to the expected growth rate of mineral price, while it is directly related to the expected growth rate of mining costs. A concave relationship has been found between the cost of capital and the optimum mine size.     

A heuristic approach to stochastic cutoff grade optimization for open pit mining complexes with multiple processing streams

Cutoff grade specifies the available supply of metallic ore from an open pit mine to the multiple processing streams of an open pit mining complex. An optimal cutoff grade strategy maximizes the net present value (NPV) of an open pit mining operation subject to the mining, processing, and marketing/refining capacity constraints. Even though, the quantities of material flowing from the mine to the market are influenced by the expected variation in the available metal content or inherent uncertainty in the supply of ore, the majority of cutoff grade optimization models not only disregard this aspect and may lead to unrealistic cash flows, but also they are limited in application to an open pit mining operation with single processing facility. The model proposed herein determines the optimal cutoff grade policy based on a stochastic framework that accounts for uncertainty in supply of ore to the multiple ore processing streams. An application on a large-scale open pit mining operation develops a unique cutoff grade policy along with a portfolio of mining, processing, and marketing/refining rates. Owing to the geological uncertainty, the approach addresses risk by showing a difference of 14% between the minimum and maximum production rates, cash flows and NPV.     

Modelling mining: Open pit copper production in British Columbia

Open pit copper mining in British Columbia is modelled to examine how different price levels affect rates of output and stocks of reserves and to consider the existence and distribution of economic rents. The model depicts the influence of different economic circumstances on production plans, for example, with respect to scale of operations and cutoff grade. To achieve this it represents a balance between the high level of abstraction which has characterized the writing of most economists and the degree of detail and complexity required of models used by operating mines. The model provides a basis for the study of the consequences of alternative forms of taxation, a subject to be pursued in subsequent articles.     

An uncertainty based multi-criteria ranking system for open pit mining cut-off grade strategy selection

Cut-off grade strategy (COGS) is a concept that directly influences the financial, technical, economical, and environmental issues in relation to the exploitation of a mineral resource. Despite the simple definition of cut-off grade, the COGS problem is one of the complex and complicated problems in the mine planning process. From the optimization point of view, the COGS with an objective of maximizing the present value of future cash flows is a non-linear and a non-convex problem that even in its deterministic form can be solved using approximate optimization methods. This optimization problem will also be more complex and complicated under uncertainty conditions. This paper proposes an uncertainty based multi-criteria ranking system to investigate the problem of COGS selection considering metal price and geological uncertainties. The proposed system aims at selection of the best COGS among technically feasible alternative COGSs under uncertainty circumstances. Our developed system is based on integrating metal price and geological uncertainties as well as operating flexibility to close the mine early. We incorporate this operating flexibility into the proposed system using a Monte Carlo based real options (RO) valuation model. For this purpose, in addition to the expected value, other risk criteria are considered to rank the alternatives. These risk criteria include abilities of strategies in producing extra profits, minimizing losses, and achieving the predefined goals of the production. In this study, the technically possible COGSs are generated using the Lane comprehensive algorithm. To demonstrate the effectiveness of the proposed system, we utilize data of an Iranian gold mine. Results show that the proposed system outperforms conventional methods in the sense that it shows significantly lower average mis-ranking than the other methods and also selects a strategy with a higher value. The sensitivity analysis of the proposed system relative to the gold price shows that the system is highly dependent on the parameters of the stochastic process used to model the evolution of the metal price. Therefore, special consideration should be given in estimating stochastic process parameters.     

CONSERVATIONAL WATER PRICING FOR INCREASED WATER SUPPLY BENEFITS1

ABSTRACT: A study was undertaken to see if benefits from water supply could be increased by utilizing price-usage information in reservoir design studies. Three pricing policies were examined. The first policy assumed no price-use relationship, and quantity demanded was based on existing community usage with a low water rate. The price of water was set to recover system costs. A price-use relationship was assumed in the second policy and the water rate was constant. The price of water was determined from the associated system which provided maximum expected net benefits. The third policy assumed the price-use relationship and the price charged for water during each billing period was a non-linear function of storage which increased as the amount of water in storage at the beginning of the period decreased. It was found that the use of the conservation pricing policies substantially reduced storage requirements while providing demonstrable net benefits to the community and a large average supply. The conservation pricing policies substantially lowered the average price paid for water. The effect of uncertainty in consumer response to changes in price was studied by using a probabilistic price-use relationship. This uncertainty did not significantly reduce the effectiveness of the conservation policy. It was concluded that demand management by the use of a proper pricing policy could significantly increase net water supply benefits to a community.     

Optimal production scale of open pit mining operations with uncertain metal supply and long-term stockpiles

An open pit mining operation consists of various stages, and the calculation of the production capacities of these stages depends upon the available supply of ore (mineralized material of economic value) and waste material. Cutoff grade is the criterion that specifies the amount of ore and waste. The material with grade equal to or higher than the cutoff grade is classified as ore. The material with grade less than the cutoff grade is considered waste. While this explains the link between cutoff grade theory and the calculation of production capacities, the majority of optimization models for finding production capacities not only disregards this relationship but also ignores expected variations and uncertainty in metal content or the available supply of ore and waste material.     

Long-term adequacy of metal resources

Although the earth's crust contains vast quantities of metals, extraction technologies and associated costs are inextricably bound to three fundamental geological factors — the amount of metal available in the earth's crust in each range of grades, the mineralogical form and chemical state of the metal, and the spatial distribution of the metal. The energy required to recover a given amount of metal increases substantially as grade declines. Most metal is produced from sulphide or oxide minerals, whereas most metal in the crust may be locked in the structures of the more refractory silicates. Recovery from silicate minerals could require orders of magnitude more energy than that used at present as also could exploitation of small, widely scattered or thin, deeply buried deposits. Although specific information on the fundamental factors is not available, each factor must in turn tend to further restrict exploitation. Independence of average grade and tonnage for many deposit types further reduces the availability of rock as a source of metal. In the long term, effects of these factors will be large increases in price for many metals.     

The interest of OECD countries in ICAs and the Common Fund

This article explains that the nature of commodity price determination and the characteristics of the link between commodity prices and prices of manufactured goods are such that they have an inflationary and recessionary impact on the world economy. Subsequently, it argues that International Commodity Price Agreements (ICAs) and the Common Fund are not only in the interest of developing countries but are also in the vital interest of developed countries. They assist in stabilizing economic activities and sustaining recovery at a higher rate of growth of output and employment in these countries. Nevertheless, to be effective for these purposes, ICAs should cover a wide range of commodities and adequate financial resources should be available to the First Account of the Common Fund.     

Net value royalties : Practical tool or economist's illusion?

The petroleum industry has traditionally generated substantial revenues for governments. Where governmental power is divided, as in federations like Canada and Australia, a junior level of government normally collects royalties while the senior level levies a variety of imposts (income tax, export duties, excises on production). The combination of recent sharp reductions in prices, more price volatility and an era of freer markets has subjected existing tax and royalty systems to severe strain and has shifted attention to the design of fiscal systems that are more profit- sensitive. For the royalty element, interest focuses on net value royalties (NVRs). This paper deals with the nature and problems of NVRs. It proceeds by looking first at the application of resource rent royalties in Australia. It then focuses on recent megaproject royalty arrangements in Alberta and evaluates the degree to which Alberta's current royalty system is profit- sensitive. Problems associated with NVRs are discussed in the fourth section; concluding remarks are made in the last section.     

不确定条件下矿产资源的最优开采

通过一个连续时间的随机动态规划模型,探讨了市场需求、资源存量的不确定性以及勘探活动对矿产资源价格和开采速度的影响,并给出了随机条件下Hotelling法则的表达形式.模型结果显示:不确定性对资源价格变化速度的影响主要取决于开采成本,如果相对于资源存量来说开采成本是不变的或者开采的规模成本是不变的,则不确定性对资源价格的变化速度没有影响.反之,如果开采的规模成本是递增的,则不确定性会加速资源价格的变化.此外,不确定性的存在将加快资源的开采速度.至于勘探活动,它一方面降低了地质条件的不确定性,另一方面增加了资源的存量,所以勘探活动降低了资源价格和开采速度的变化率,减少了不确定性对资源开采的影响.     

Why are Californians interested in hybrid cars?

This paper explores quantitatively Californians' interest in hybrid electric vehicles (HEV) based on a statewide phone survey conducted in July 2004 by the Public Policy Institute of California. The paper develops ordered choice models and factors that summarise beliefs about energy and the environment using principal component analysis. As expected, Californians concerned about the environment, energy efficiency, global warming and recent increases in the price of gasoline state a higher interest in hybrids; an even more important reason for considering hybrid electric vehicles, however, is the possibility of using high occupancy vehicle (HOV) lanes while driving alone, especially for people with potentially long commutes to work. The findings also suggest that beliefs about energy and the environment should be included in vehicle type choice models.     

POTENTIAL ECONOMIC IMPACTS OF CHANGES IN WATER AVAILABILITY ON AGRICULTURE IN THE TRUCKEE AND CARSON RIVER BASINS,NEVADA, USA1

ABSTRACT: Effects of climate change are likely to be detected in nearly all sectors and regions of the economy, with both winners and losers. One of the consequences of climatic changes could be altered regional water supplies. This paper presents an investigation of regional agricultural implications of changes in water availability. Specifically, using a profit maximization approach, the economic consequences of altered water availability in the Great Basin of Nevada are analyzed in terms of the effects on net returns of agricultural producers. Under the scenarios analyzed in this paper, it is found that with adequate water systems, increase in streamflow and consequent increase in water availability could significantly benefit agricultural producers of this region. Net returns to irrigators could increase by 8 to 13 percent, not taking into account the possibility of changes in crop yields and prices. It is also shown that the benefits from increased water availability are sensitive to likely crop yield and price changes. The potential for adverse effects of climatic changes on water supply is also considered by analyzing the effects of decreased water availability. Under decreased water availability scenarios, farmer net returns decrease substantially.     

Bilateral Monopoly: A Market for Intercountry River Water Allocation

/ Collaboration of countries with an aim to share fresh surface water resources promises to generate potential joint benefits. Unfortunately, existing agreements lack the perspective and capacity to produce any real action in efficient cross-border water allocation. When that problem is encountered by any two adjacent countries claiming riparian rights to the same watercourse, this paper suggests that apossible solution to be examined is a water market. This market requires the relevant countries to engage in a bargaining process as described in the theory of bilateral monopoly. The bargaining process should determine both the water quantity to be transferred and the price to be paid. However, there has to be a fair allocation of the joint benefits resulting from the transfer for a sustainable price solution. As an empirical illustration, the paper examines the case of river Nestos shared by Bulgaria and Greece in the southern Balkans. A net revenue function quadratic in water is specified and estimated using scarce data on three agricultural crops in Greece. Sensitivity analysis on the size and distribution of the net benefits is also performed.KEY WORDS: Bilateral agreements; Water markets; Efficient allocation     

耕地不同产量水平的面积与分布监测法

查清中低产田的面积、分布与开发条件是制定农业综台开发规划的重要依据。采用按公里网布设的农业资源动态监测系统,开展对耕地不同产量水平的面积与分布的动态监测,其方法具有准确、简便和实用的特点。     

Avoided deforestation as a greenhouse gas mitigation tool: economic issues

Tropical deforestation is a significant contributor to accumulation of greenhouse gases (GHGs) in the atmosphere. GHG emissions from deforestation in the tropics were in the range of 1 to 2 Pg C yr(-1) for the 1990s, which is equivalent to as much as 25% of global anthropogenic GHG emissions. While there is growing interest in providing incentives to avoid deforestation and consequently reduce net carbon emissions, there is limited information available on the potential costs of these activities. This paper uses a global forestry and land use model to analyze the potential marginal costs of reducing net carbon emissions by avoiding deforestation in tropical countries. Our estimates suggest that about 0.1 Pg C yr(-1) of emissions reductions could be obtained over the next 30 to 50 yr for $5 per Mg C, and about 1.6 Pg C yr(-1) could be obtained over the same time frame for $100 per Mg C. In addition, the effects of carbon incentives on land use could be substantial. Relative to projected baseline conditions, we find that there would be around 3 million additional hectares (ha) of forestland in 2055 at $5 per Mg C and 422 million ha at $100 per Mg C. Estimates of reductions in area deforested, GHG mitigation potential, and annual land rental payments required are presented, all of which vary by region, carbon price paid, and time frame of mitigation.     

Metalliferous sediments in the Atlantis II Deep—Assessing the geological and economic resource potential and legal constraints

Projected increases in demand and thus increasing metal prices have brought the exploration and exploitation of marine mineral resources back into focus. The Atlantis II Deep, located in the central Red Sea between Saudi Arabia and Sudan, is one of the largest marine sulfide deposits known, with high concentrations of metals such as zinc, copper, silver and gold. However, little is known about the economic potential of marine minerals as well as the legal constraints. Our geological assessment shows that the deep is similar in grades and scale to large land-based deposits. Its economic potential is far from negligible. The total present value of possible gross revenues for the four metals zinc, copper, silver and gold ranges from 3.03 to 5.29 billion US$, depending on the assumptions made concerning future price development, mass calculation and discount rate. From a legal perspective, a general duty to cooperate in the exploration and exploitation of non-living resources located in disputed maritime areas is identified in both customary international law and in UNCLOS. It is submitted that a joint development agreement is one means of ensuring compliance with this duty in general and in the case of the Atlantis II Deep in particular.     

自然资源特许经营权流转的法理基础与制度构建

自然资源特许经营权的流转有助于发挥市场在资源配置中的基础作用,通过价格杠杆和竞争引导自然资源的开发利用.基于自然资源特许经营权的用益物权属性,特许经营者享有流转决定自由、选择流转相对人自由及定价自由,国家可基于自然资源所有者和社会管理者的双重身份对特许经营权流转予以限制.我国矿业权、海域使用权、取水权、渔业权等自然资源特许经营权流转立法还存在较多法律障碍.直接转让、作价出资、证券化、出租、抵押等是特许经营权流转的基本形式,并且受到流转主体的资质、流转客体的适格和流转形式的要式等限制.     

Mountain substitutability and peak load pricing of high alpine peaks as a management tool to reduce environmental damage: A contingent valuation study

High alpine peaks throughout the world are under increasing environmental pressure from hikers, trekkers, and climbers. Colorado's “Fourteeners”, peaks with summits above 14,000 feet are no exception. Most of these peaks have no entrance fees, and reach ecological and social carrying capacity on weekends. This paper illustrates how a series of dichotomous choice contingent valuation questions can be used to evaluate substitutability between different alpine peaks and quantify the price responsiveness to an entrance fee. Using this approach, we find that peak load pricing would decrease use of popular Fourteeners in Colorado by 22%. This reduction is due almost entirely to substitution, rather than income effects. There is also price inelastic demand, as 60% of the hikers find no substitution for their specific Fourteener at the varying cost increases posed in the survey. The no substitute group has a mean net benefit of $294 per hiker, per trip, considerably higher than visitor net benefits in most recreational use studies.     

Incorporating environmental issues into optimum cut-off grades modeling at porphyry copper deposits

Cut-off grade is defined as the grade which discriminates between ore and waste within a given orebody. Determination of a complete optimum cut-off grade policy is a very important function during mine life. Using the modified optimum cut-off grade model presented in this paper not only the net present value of a porphyry copper mining project is maximized, but also the adverse environmental impacts of the project are minimized simultaneously. This methodology is more effective in long-range planning. For showing the effectiveness of the model, two scenarios are considered in a hypothetical deposit and the results show that incorporating the modified optimum cut-off grade policy, the net present value will be increased by 3.6% in comparison with the Base Case.     

Wildlife conservation through people-centred approaches to natural resource management programmes and the control of wildlife exploitation

While the Convention on Biological Diversity (1992) introduced a new and progressive outlook on conservation, the South African government has failed to produce a comprehensive legal body of legislation to give effect to its varied obligations. Inconsistency and incompleteness of regulations governing wildlife conservation in conjunction with the failure to implement objectives to conserve wildlife through restricted exploitation with the political, social and economic motives of community conservation must be seen as major contributions to failed conservation goals. This paper analyses post-apartheid conservation laws and policies and argues that current plans for people-centred approaches to natural resource management programmes have been unsuccessful in operationalizing policy goals of biodiversity conservation and sustainable development into transparent plans for implementation. In fact, legal instruments and implementation plans seem to focus on the benefit-sharing components of community participation and therefore fail to address important issues of resource exploitation. It is suggested that where communities are expected to take part in the management of wildlife resources, the responsibility for sustainable wildlife management must be linked to the benefit-sharing instruments of the programmes. However, these would not deal with 'outsiders' like poachers and poaching driven by commercial interests. The paper proposes a model that allows communities to take control over wildlife resources.