Wednesday, November 27, 2013

A Short Course on Hard Rock Gold (Part 8)

There's a very old saying that goes something like this: "It takes a gold mine to make a gold mine." Nowhere is this statement more true than in hard rock gold mining.

Fairly Straightforward

Estimating the overall costs of running a hard rock mining venture is an art form. It doesn't matter how small or how large your hard rock operation is, one thing is for's going to cost you to get that mine developed, get the gold ore mined (and transported if necessary), and get the gold extracted from that ore. It's just the nature of the beast when it comes to hard rock gold.

This said, mine cost estimating is a fairly straightforward matter where logic and practicality are combined with some basic engineering principles and calculations. Your very first step in this regard is probably the easiest and simplest: finding out whether there's enough gold to be had in that hard rock dig of yours to pay the costs of operating it. Those of you out there with real-life estimating experience as contractors or small businessmen or women know exactly what I'm talking about here. If your mining enterprise is a zero-sum game or you're spending more than you're taking in, then you may want to reconsider your options over the long haul.

Cost Parameters

In order to get a good idea of what it's going to take to get your mine up and running you'll need to establish your cost parameters. To make things easier here, I'm going to break those parameters into three main areas:

Labor: These sorts of costs can be very high in a commercial or large-scale hard rock operation, but if your gig involves just you working all by your lonesome on that ledge or blow out, your labor costs are minimal. Let me clarify that a bit...providing your time spent mining doesn't equate to negative cash flow elsewhere (like your regular 8-5 job!). You can look at mine labor costs this way: the more personnel involved, the more you're going to pay out and the less cash you'll pocket over time.

(Just wait till your labor force unionizes!)

Supplies: These include everything from food to fuel and blasting caps to beer, depending on your current level of need. Again, the smaller the operation the smaller the costs in this regard. Or, conversely, the larger they are.

Gear and Equipment: To operate a hard rock mine properly and safely requires a wide range of gear and equipment. The fancier or bigger you get here, the fancier the price tag and the harder it is to extrapolate cost parameters because this very same gear and equipment is bound to break down on you at some point. With that in mind, you might want to consider adding spare parts to your hard rock mining gear and equipment cost projections.

Don't Fall into the Trap

In estimating costs and costs versus returns there are many other variables to consider as well. One of the most important of these is operating time. Will you and your pards or employees being working year round or restricted to a limited and defined mining "season." In a given day, how many hours will you be working to get that ore out? In a given week, how many days? In a given year, how many months? See how quickly things become complicated here?

If we retreat just a bit back to hard rock mining on the smallest of scales this sort of cost estimating doesn't seem as prominent, or even necessary for that matter. Don't fall into this trap, OK? Your time, your travel costs, your fuel, your bacon and beans, and your gear all cost something, even if you're a "weekender" with full time obligations elsewhere. None of you should be laying out good money on a consistent basis for short returns (i.e., bad money).

So if it costs you $100.00 a day to work that little ledge of yours and you're only bringing home $60.00 at the end of that day, time for some cost parameter reassessment my friend. That is unless what you're doing is a true labor of love with the ever-present dream of striking it big one day.

Sometimes it ain't about the money, as we all well know...

(c) Jim Rocha (J.R.) 2013

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