Economic Analysis

Estimated undiscovered mineral resources are based on grade-and-tonnage models made up of deposits of varying economic viability (chapter 6). Many deposits used in grade-and-tonnage models have not been developed because they cannot yet be mined economically. Although technological advances act over time to lower mining costs and environmental impacts, thereby allowing formerly uneconomic deposits to become operating mines, some deposits in these models might “never” be mined for one or more of a variety of reasons, including relatively low tonnages and grades, deep burial, or occurrence in or near environmentally sensitive areas. Few nonacademic problems related to mineral resources are resolved by knowing the amount of metal that exists in some piece of land. Mineral policy issues and problems typically revolve around the effects of minerals that might be economically extracted. This is true if the problem concerns exploring or developing minerals, values of alternative uses of the land, or environmental consequences of minerals development. In resource assessments of undiscovered mineral deposits and in the early stages of exploration, including planning, a need for prefeasibility cost models exists. In exploration, these models separate economic from uneconomic deposits to help focus on targets that can benefit the exploration enterprise. In resource assessment, these cost models can be used to eliminate deposits that would probably be uneconomic even if discovered and allow estimation of the social value of the resources. Data used in grade-and-tonnage models do not necessarily represent economic deposits. Many of the deposits used in the models were found not to be economic and were not mined, whereas other deposits were mined long ago under economic conditions that no longer exist. In this chapter we briefly explore some alternative measures of value used in assessments and then develop the basis for simplified economic filters to separate the clearly economic from the clearly uneconomic deposits. The equations used are not difficult, but they require care in their application because many of the apparently small cost factors can have large effects on the final economic discrimination.