Estimating Revenues

Question 1

This is calculated by multiplying the number of units produced and sold during the year by the sales price per unit.

Answer 1

Annual mine revenue

Question 2

One of the key variables associated with annual production is

Answer 2

tonnage of ore produced

Question 3

The second key variable associated with determining the annual production of salable units is

Answer 3

grade of the ore mined

Question 4

After arriving at appropriate estimates for annual tonnage and grade of ore produced, the analyst must then calculate the number of

Answer 4

payable units produced annually.

Question 5

basic variable which must be estimated to arrive at a final estimate of the annual production of salable units extracted from the mine

Answer 5

Percentage recovery

Question 6

A component of the mine revenue calculation estimating future mineral prices

Answer 6

Unit Price

Question 7

There is a fundamental uncertainty in demand of minerals surrounding the general level of economic activity that will exist in some future period, with the exception of

Answer 7

fuel

Question 8

Many minerals are traded on world markets; therefore, in weighing supply and demand pressures the analyst must generally consider

Answer 8

production
consumption
trade restrictions

Question 9

The most important exchanges of mineral commodities

Answer 9

London Metal Exchange (LME) and the New York Commodity Exchange (Comex)

Question 10

These are formal free market auctions where buyers and sellers negotiate mutually acceptable sales prices.

Answer 10

Commodity Exchanges

Question 11

Copper is traded today mostly in what form?

Answer 11

cathode

Question 12

These are also traded on both the LME and the Comex that permit
the holder to buy or sell fixed quantities of mineral at a specified price at a particular time in the future.

Answer 12

contracts

Question 13

Most industrial minerals and coal are priced in this manner, commodities are sold at prices determined in _____ negotiated between buyers and sellers.

Answer 13

Purchase Contracts

Question 14

5-, 10-, and 15-year contracts

Answer 14

long-term contracts

Question 15

Mining firms not having captive processing facilities may be able to market their products directly to custom mills or smelters through

Answer 15

Smelter Contracts

Question 16

With a limited number of minerals oligopolies exist where a few producers are responsible for most of the production in the Western world. From time to time, these producers have attempted to be price setters rather than price takers by marketing their production under a Producers Price

Answer 16

Administered Prices

(Administered prices cover a small group of mineral commodities where the producers’ judgment of the appropriate price is substituted for a price derived in the marketplace, either collectively in a commodity exchange or singularly through a negotiation between a buyer and a seller)

Question 17

Current and historical price information for mineral commodities is published in

Answer 17

Metals Week (most authoritative source of price information in the metals industry)

Engineering & Mining Journal
Industrial Minerals
Coal Week
Coal Outlook

Question 18

The best single estimate of tomorrow’s price for any mineral commodity is today’s price

Answer 18

Naive Methods (unsatisfactory for most investment analyses in mining)

Question 19

Quantitative model constructed for various minerals relating price, as the endogenous variable, to a variety of lagged and unlagged exogenous variables.

Answer 19

Econometric Modeling

Question 20

This pricing approach is based upon the assumptions that (1) new productive capacity will be needed on a continuing basis to offset rising demand and/or depletion of present mines, and (2) rational investors will not invest in new mines unless the investment promises to deliver some minimum acceptable return.

Answer 20

Rational Pricing

Question 21

Supply and Demand Shedules

Answer 21

Production Cost Schedules
Short-Run Supply Schedules
Long-Run Supply Curves
Demand Schedules

Question 22

Summation of all producers having
marginal, or variable, costs of production below various price levels

Answer 22

Short-Run Supply Schedules

Question 23

Capital investment and recovery in mining is a long-term process, and
investment analysis must consider the price trends affected by long-run supply

Answer 23

Long-Run Supply Curves

Question 24

Price is determined by the interaction of supply and demand, so price can be estimated by imposing a demand schedule on a supply schedule

Answer 24

Demand Schedules

Question 25

Estimates of revenue is not limited to the application of any one
or two techniques, rather, it is a
painstaking blend of

Answer 25

economic theory, industry analysis, market analysis, and competitor analysis, combined with sound, experienced judgment