174
Mining Royalties
Table 4.13. NPV vs. Cumulative Royalties on Copper and Government Takea
NSR royalty rate (%) 0.000 1.000 2.000 3.000 4.000 5.000 5.445 6.000
NPV at 18% (US$)
Cumulative royalty (US$)
Cumulative government take (US$)
140,265,487 55,068,448 42,725,646 30,376,178 18,013,580 5,557,749 0 (6,933,718)
0 65,648,085 131,296,170 196,944,255 262,592,340 328,240,425 357,448,811 393,888,510
343,869,421 258,461,918 302,224,251 346,032,585 389,987,012 433,955,824 453,584,932 478,073,748
Source: Authors John Stermole and Frank Stermole. a. Calculations are based on $1.05/lb copper, assuming production continues over the entire 22-year life of the mine.
Table 4.14. Economic Data for Different NSR Percentages and Estimated Economic Reserve Dataa
NSR (%) 0.000 1.000 2.000 3.000 4.000 5.000 6.000 5.455
IRR (%)
NPV at 18% (US$)
20.03 18.90 18.70 18.51 18.30 18.10 17.88 18.00
140,265,487 55,068,448 42,725,646 30,376,178 18,013,580 5,557,749 (6,933,718) 0
ETR (%)
Estimated economic life (years)
Tonnage produced
Tonnage lost
42.05 56.78 66.40 76.02 85.68 95.34 105.03 99.65
22 17 16 16 15 14 14 14
364,705,882 266,234,882 247,999,882 247,999,882 229,761,882 211,529,882 211,529,882 211,529,882
0 98,471,000 116,706,000 116,706,000 134,944,000 153,176,000 153,176,000 153,176,000
Source: Authors John Stermole and Frank Stermole. a. Calculations are based on a uniform copper price of $1.05/lb.
Figure 4.1 shows that the large negative cash flow in year 11 is the result of anticipated replacement costs for mine and processing equipment. As shown by the marginal magnitude of cash flow occurring after this expenditure, a point-forward analysis of the negative cash flows and costs in years 8–11 might lead to termination of the project as early as year 8, which would further increase the production tonnage lost but maximize NPV at the end of the eighth year. Under a year eight closure, the project NPV is maximized at $67 million. The eight-year life and 3 percent NSR would represent an excess of 244 million tonnes of potential ore left in the ground. Looking at Table 4.15, the royalty take would be dimin-