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A comparison of three production rate estimation methods on South African platinum mines

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  • Neingo, P.N.
  • Tholana, T.
  • Nhleko, A.S.

Abstract

Mining is a capital intensive business that requires a large amount of upfront capital to cover development and infrastructure costs. Major infrastructure and development required to access the orebody must last for the life of mine. Net present value is commonly used to determine the economic viability of a project and it is driven by production rate among other parameters. This paper tested variation as well as correlation between production rates estimated (based on rules of thumb) and actual production rates reported by mines. Visual observations and correlation coefficients were used to test the rules of thumb and production rate. Data from the blue chip platinum mining companies was used to determine and test variability of production rates estimated using three rules of thumb. The paper established variations of up to 218% among the three rules of thumb tested on production rate as well as weak correlations (average correlation coefficient of −0.02) between production rates reported by mines and rules of thumb. Therefore, this paper concludes that the size and geometry of a deposit cannot be used independently for all deposits to estimate production rate. Authors recommend research into both size and geometry under changing conditions and formulation of mathematical models to estimate production rates.

Suggested Citation

  • Neingo, P.N. & Tholana, T. & Nhleko, A.S., 2018. "A comparison of three production rate estimation methods on South African platinum mines," Resources Policy, Elsevier, vol. 56(C), pages 118-124.
    • Handle: RePEc:eee:jrpoli:v:56:y:2018:i:c:p:118-124
    DOI: 10.1016/j.resourpol.2017.11.006
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    References listed on IDEAS

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    1. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137-137.
    2. Lewis Cecil Gray, 1914. "Rent under the Assumption of Exhaustibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 28(3), pages 466-489.
    3. Robert Cairns, 2001. "Capacity Choice and the Theory of the Mine," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 129-148, January.
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    Cited by:

    1. Parviz Sohrabi & Hesam Dehghani & Behshad Jodeiri Shokri, 2022. "Determination of optimal production rate under price uncertainty—Sari Gunay gold mine, Iran," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(2), pages 187-201, June.

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