The following data relates to a mining project with increasing waste rock to ore ratio as the mine life progresses, givi

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The following data relates to a mining project with increasing
waste rock to ore ratio as the mine life progresses, giving
declining production per year.
Cost dollars and production are in thousands.
Year
0
1
2
3
4
5
Production, (‘000 tonnes)
62
53
35
24
17
Selling Price, ($/tonne)
26.0
26.0
26.0
27.3
28.7
Mine Development Cost (‘000 $)
750
250
Mining Equipment Cost (‘000 $)
670
Mineral Rights Acquisition Cost (‘000 $)
100
Operating Costs (‘000 $)
175
193
212
233
256
Assume:
Royalties are 14% of gross revenue. Liquidation value at Year 5 is
zero.
A) Calculate before tax annual cash flow, ROR, NPV and PVR for a
15% minimum (8 points).
B) Calculate the break-even price per tonne of ore that, if
received uniformly from years 1 through 5, would give the project a
15% IRR (5 points).