Answer Happy

2) 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 62 53 35 24 17 Production, ('000 tonnes) Selling Price, ($/tonne) 26.0 26.0 26.0 27.3 28.7 750 250 Mine Development Cost (¹000 $) Mining Equipment Cost ('000 $) 670 100 Mineral Rights Acquisition Cost ('000 $) 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).