Cost Parameters and Definitions

The Cost Data and Advice You Need to Make Informed Mining Decisions

Unit Prices

Listed above the Specifications and Hourly Operating Cost columns on the equipment cost screens are the unit prices upon which the hourly operating costs are based.

Unit Prices

Default values are based on the following parameters:

Repair Labour
The repair labour rate is the average wage, including burden, for mechanics working at Australian mines, including coal, metal, iron ore and industrial mineral mines, as determined by latest Mining Cost Service survey and Hays.
Diesel Fuel / Petrol
The petrol and diesel fuel prices are the average prices for sales to end-users in the Department of Mines and Petroleum (DMP). Motor fuel taxes, which normally apply for on-road use only, are not included in these prices.
Natural Gas and Electric Power
The natural gas rate and electric power rates are average for Australia. The electric power and natural gas rates include appropriate demand and service charges as well as energy charges.
Lube Oil
The lube oil price represents a typical charge for bulk crankcase oil for off-road diesel/petrol equipment.

Units (Equipment)

Listed here are the number of equipment units selected by the user to add to the project inventory.

Unit (Equipment)

Specifications

Specifications

Description
Sufficient capacity and specification information is provided to guide the user in selecting the appropriate equipment items to add to the project inventory.
Weight
If included, the weights listed are provided by the manufacturer. They may represent either a working weight or a shipping weight, but are intended to help provide a rough estimate of the cost of shipping the item to the project site.
Motor type
An entry in the "Motor Type" column indicates that a motor is required for this equipment item. The type of motor or engine is indicated by: d = diesel, e = electric, or g = petrol.
Motor included
A "y" in the "Motor included" column indicates that the cost of purchasing and operating the motor is included in the capital and operating cost amount. An "n" indicates that a motor is required, but has not been included in the capital or operating cost amounts. In this case an appropriate motor should be selected from the Miscellaneous Section of the Calculator and added to the project inventory. Both its capital and operating costs should be included in the estimate.
Motor (hp)
This entry indicates the size (horsepower) of the motor or engine included with the item or required by the item. The listed horsepower value is used in the database equations for computing hourly fuel or electric power costs.

Capital Cost

Capital Cost

The values listed here are list or budget prices for the described equipment item. They are listed for estimating purposes only and should not be considered representative of actual market value. Large disparities can exist between prices listed here and those actually charged to a specific buyer. Disparities can result from differences in specifications, from options added, from the results of price negotiations, and from changing market conditions.

Selling prices are commonly discounted to some degree from list prices. The discount offered by a manufacturer, if any, will depend on such factors as the number of units ordered and how well the model is selling at the moment. A model that is selling poorly may be discounted more than one that is selling well. When market conditions are generally depressed or when large inventories of competing used equipment are available, discounts tend to be higher. In specific instances, a manufacturer may offer a high discount to make the first sale in an area, in a segment of the industry, or at a particular mine.

Discounts for large mobile equipment, such as trucks, shovels, and loaders, typically range from 5% to 40%. Discounts for smaller equipment such as motors or pumps may be higher, often as much as 50% to 55%. Unless otherwise stated, sales taxes, transportation from the distribution center to the minesite, and installation charges are not included, nor are the costs of optional accessory items. Installation or set-up costs vary dramatically. Small mobile units are essentially service-ready upon delivery. Larger mobile units may require some set-up costs. The costs for the labour and materials required for installing stationary equipment generally average between 38% and 145%, but can be as high as 300%, of the purchase price, depending primarily on the degree of foundation, electrical, and piping work required in relation to the purchase price of the equipment.

R2Mining's philosophy in using these prices is to assume the actual cost will be less than the listed price because of discounting, but the discount will be at least partially offset by added options. The listed prices therefore tend to be on the high side, but are sufficiently accurate for a conservative preliminary estimate.

Capital Recovery

Capital Recovery

"Capital recovery", as used here, is similar to "depreciation", except the term "depreciation" has tax implications; "capital recovery" does not. This is the amount that should be charged per hour to provide for purchase or replacement of the equipment. Capital recovery is determined by the following relationship:

Capital Recover = Capital Cost ÷ R
Where: R = estimated replacement life of the equipment item

The anticipated replacement life is, of course, highly variable and is dependent upon operating conditions and company maintenance and replacement policies. Equipment lives used to determine the Capital Recovery values are listed below. No overhauls are included in these estimated lives, and no adjustment has been made for any residual value at the end of the useful life.

Compressors 12,000 hours
Conveyors 10,000 hours
Crushers 26,000 to 52,000 hours
Draglines 45,000 to 65,000 hours
Drills 12,000 to 18,000 hours
Excavators 10,000 to 14,000 hours
Flotation Cells 26,000 to 52,000 hours
Grinding Mills 52,000 to 104,000 hours
Pumps 12,000 hours
Shovels, Mechanical 25,000 hours
Thickeners 26,000 to 52,000 hours
Trucks 37,500 hours

The Capital Recovery costs do not include interest, inflation or escalation.

Overhead

Overhead

The overhead charges listed here are indirect administrative costs associated with ownership, including insurance, license, and record keeping costs. They are determined by the following relationship:

Overhead = CR × F
Where: CR = capital recovery cost (dollars per hour)
F = experience-based factor

Property taxes, sales taxes, profit, and company and project overhead charges are not included.

Hourly Operating Costs

Hourly Operating Costs

Hourly operating costs are considered variable and are directly related to daily use. The operating costs assume the equipment is working a full operating hour under average operating conditions. Procedures for adjusting these costs for other conditions or for other economic situations are explained in How to Use the Cost Calculator. The cost of operator time is not included. It must be added separately.

Overhaul Parts

Overhaul parts costs for mobile equipment are those associated with scheduled reconstruction and/or replacement of major components such as engines and transmissions. For stationary processing equipment, the costs are for scheduled refurbishing or replacement of major wear components such as drives, support frames, and vessels. The value is based on the following relationship:

Hourly Overhaul Parts Cost = ((Capital Cost × F) ÷ H)*C
Where: F = experienced-based factor
H = typical annual operating hours
C = scale coefficient

Overhaul Labour

Overhaul labour costs for mobile equipment are those associated with scheduled reconstruction and/or replacement of major components such as engines and transmissions. For stationary processing equipment, the costs are for scheduled refurbishing or replacement of major wear components such as drives, support frames, and vessels. The value is based upon the following relationship:

Hourly Overhaul Labour Cost = Overhaul Parts Cost × F × L
Where: F = experienced-based factor
L = overhaul labour hourly wage plus benefits
(dollars per hour)

Maintenance Parts

This item represents those costs associated with both unscheduled repairs and scheduled servicing of both minor and major components, excluding overhaul activities. These include all aspects of machine maintenance exclusive of fueling, lubrication, tire replacement, and maintenance and replacement of those parts directly to impart energy (see wear parts). The value is based upon the following relationship:

Hourly Maintenance Parts Cost = ((Capital Cost × F) ÷ H)*C
Where: F = experience-based factor
H = typical annual operating hours
C = scale coefficient

Maintenance Labour

This item represents a typical charge per hour of operation to cover mechanics' time to perform maintenance and repair functions, exclusive of overhaul work. The value is estimated by the following relationship:

Hourly Maintenance Labour Cost = Maintenance Parts Cost × F × L
Where: F = experience-based factor
L = repair labour hourly wage plus benefits (dollars per hour)

Fuel/Power

This item lists the cost per hour for diesel fuel, petrol, electric power, or natural gas as appropriate. Care should be taken to note whether an "n" or "y" is listed in the "Motor Included" column. If an "n" is listed, a motor is required, but the costs to operate are not included here. In this case an appropriate motor should be selected from the Miscellaneous Equipment list, and both its capital and operating costs added to the estimate. Costs for each fuel type are determined by the following relationships:

Diesel Fuel

The cost per hour for diesel fuel required to operate the equipment under average conditions is estimated by the following relationship:

Diesel Fuel Cost per Hour = Engine Horsepower × F × D
Where: F = experience-based factor
D = diesel fuel price (dollars per litre)

Petrol

The cost per hour for petrol required to operate the equipment under average conditions is estimated by the following relationship:

Petrol Cost per Hour = Engine Horsepower × F × G
Where: F = experience-based factor
G = petrol price (dollars per litre)

Electric Power

The cost per hour for electric power required to operate the equipment under average conditions is estimated by the following relationship:

Electric Power Cost per Hour = Motor Horsepower × F × 0.746 KW per horsepower × E
Where: F = average electric power draw (factor)
E = electric power price (dollars per KWH)

The electric power price (E) includes demand and service charges as well as energy charges.

Natural Gas

The cost per hour for natural gas required to operate the equipment is determined by the following relationship:

Natural Gas Cost per Hour = (E ÷ 1,040,000 btu's/MCF) × N
Where: E = Energy requirement (btu's per hour)
N = Natural gas price (dollars per MCF)

Lube

The hourly cost of crankcase oil and other lubricants required to operate the equipment is estimated by the following relationship:

Lube Cost per Hour = (Capital Cost ÷ FL) + (((Engine HP ÷ FC) × L) ÷ I)
Where: FL = experience-based equipment lube factor
FC = experience-based crankcase oil factor
L = lube price (dollars per litre)
I = lube change interval (hours)

Tires

Tire costs assume that each tire will be retreaded two times before being replaced with a new tire. The cost of a retread is assumed to be 75% the cost of a new tire, and the life expectancy about nine percent less. The hourly cost for tires is calculated by the following relationship:

Tire Cost per Hour = ((N tires × T) + (2 retreads × (0.75 × T × N tires))) ÷ (L hours + ((2 retreads × L hours) ÷ 1.1))
Where: N = number of tires required by vehicle
T = tire price
L = expected tire life

Wear Parts

Costs in this column typically refer to the costs of parts that directly engage rock and impart some form of energy intended to change the character of the rock. These include items such as drill bits, dozer blades, excavator teeth, crusher and impactor liners, and grinding media. Hourly wear rates are highly variable (depending on the nature of the rock) and should be adjusted accordingly. Wear rates assumed here are considered average for hard-rock mining and mineral processing operations. The relationships used to provide the Wear Parts costs are specific to the machine and take the form:

Wear Parts Cost = Pc × Hc
Where: Pc = cost of the parts (drill bits, grinding balls, bucket teeth)
Hc = parts consumed per hour

Total

The total operating cost comprises the sum of the eight operating cost items listed. It does not include depreciation, overhead, insurance, or cost of facilities capital. Nor does it include the cost of equipment operators.