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Revisiting operating cost in resource extraction industries

Author

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  • Rademeyer, Maryke C.
  • Minnitt, Richard C.A.
  • Falcon, Rosemary M.S.

Abstract

A modified version of the Cobb-Douglas production function is proposed for simulating production costs in resource extraction models. The resulting average cost function is U-shaped with a wide bottom, and as such should be more representative of the economies of scale associated with bulk operations. It also possesses a minimum which is obtainable from the characteristics of the operations. The viability of the proposed cost function is demonstrated in a profit maximisation exercise constructed as a problem in optimal control, rendering results consistent with what could be seen in a real-world resource extraction operation with similar constraints.

Suggested Citation

  • Rademeyer, Maryke C. & Minnitt, Richard C.A. & Falcon, Rosemary M.S., 2018. "Revisiting operating cost in resource extraction industries," Resources Policy, Elsevier, vol. 58(C), pages 159-164.
    • Handle: RePEc:eee:jrpoli:v:58:y:2018:i:c:p:159-164
    DOI: 10.1016/j.resourpol.2018.04.013
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    References listed on IDEAS

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    Cited by:

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    3. Ganhane, José Jeremias & Stage, Jesper, 2024. "Estimating resource rents for Mozambique," Resources Policy, Elsevier, vol. 94(C).

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