Well, cost per corruption and incompetence unit is hard to figure. We know of one very good grade mine in old Mexico that had the manager bumped. Mine closed. Many mines close when they bump the executive. Copper rand in Panama was an example. Buchans in Newfoundland was another.
One mine in Mexico bought literally all its silver off the miners. (This was in the 1980's) Each miner would come to the surface and make a little pile. Their pay was so much an ounce. They did not mill so much as smelt directly. 80% of their silver came from highgrade bought off miners. This is a high grade nuggety operation. But in Cobalt Ontario you could buy 50-50 off the miners all athe time, that was a heavy cobalt-silver arsenide mix that you had to smelt for the silver.
Modern efficiencies of large scale mining methods do not count for as much in silver, as stopes are small in length, width and height and take lots of development, i.e. raising, stope access etc... You can make it on 60 to 80 ounce silver per ton in BC. Cobalt made it on 30 to 60 ounces as their mining costs were usually cheap. Throughput costs in mining were from 24 to 60 dollars per ton. (Most cost is in capital cost. Labour costs and land acquisitsion costs, i.e. inflation killed Cobalt, not lack of Silver.)
80 ounces sounds like lots, but the stope scale raises costs that much. Cobalt (Ontario) survived on silver flotation which is cheap. If you cyanide you cannot overgrind. 120 mesh is tops. And you need 60 hours residency not 24 to 36 residency as in gold. (The Pachuca tank, to warm and cyanide mill slurries was developed in Mexico) Personally I would not use cyanide if I could help it. Gravity and flotation is the way to go. Silver recoveries by either method do not exceed 80 to 84%.
Miners/managers can steal up to 30%, unless you install tight security I would say. Bad mining/engineering can be disastrous. Lack of power, air, trained miners could hold things up something fierce. In much of South America, silver mining was with hammer and steel, by single and double jacking until recently.
Corruption will add 75% to your capital cost. Incompetence/primitiveness could add 50% or more to milling and mining costs. Theft could take 30%. So have 1.75 times the payout discounted, and 1.5 times the throughput cost with 1.3 times less ore. So you have 76% of the ore, costing 1.5 times as much. That means costs are doubled per ounce, and have to pay off 1.75 times the Capital cost. (Or the NPV of your cash flows can only be calculated at a very low interest rate, given the high capital cost)
Cut a 60% profit margin back to 30% and the discount rate on funds invested from say 16% to 8% and it looks grim for starting a mine. Starting such a silver mine in Mexico is only making sense when the bank interest rate is very low, or dollars are very weak.
I would say 120 ounces per ton is minimum to make it unless you can minimize the last two factors by good management and engineering.
A silver mine is like a very small scale, poor recovery gold mine, where people steal incessantly and easily.
Go see Traffic. If that is half the truth, I would not rush headlong into the great sandy south of the Rio not-so-Grande.
EC<:-} |
