ISSN 0237-6016 Vol 53 1999 227-260 PDF

PubL Univ. of Miskolc, Series A. Mining Vol. 53. (1999) pp.
227-260
Cost Estimation
COST ESTIMATION
Ing. Michal Cehlar. PhD.

Ing. Jan Luczy, PhD.
Technical University of Kosice - Slovak Republic
Summary
The economics evaluation components of the feasibility study,

therefore, must ultimately be based on information, which provides an answer to
the question, "What is going to cost?" Unfortunately engineers preparing
feasibility studies never have all the engineering or economic information they
would like or need. Consequently, the economics portion of the analysis can
only be performed if estimates of the various costs associated with project are
made.
Ing. Michal Cehlar. PhD. Technical University of Kosice

Ing. Jän Luczy, PhD. Slovak Republic
227
Cost Estimation
Introduction
The economic evaluation of a project requires a great deal of diverse

information to be brought together in one place. The greatest concern is that
there will be an error by omission, so it is useful to have a detailed list of what
one needs to know in order to make a thorough evaluation.
There are varying of detail required at the different stages of evaluation
in project, from the "quick and dirty" overview to the pre-feasibility study, to a
full detailed feasibility study, to a due diligence review. Specially operating
costs are too important for valuable judgement not only for future project but
also for already existing project. All this problematic is oriented to the economic
variables in project and can be used for all levels of studies. Its purpose is to
identify a variable or issue and to raise a question, which the review can then
pursue in more detail using increasingly more comprehensive checklist for each
topic. While developed from the point of view of a new project, this list is
equally valid for an ongoing operation.
1. Capital and Operating Cost Estimation
Before useful cost estimating procedures can be applied considerable

data must be collected, compiled, and organised. Preparatory work typically
includes organisation of cost data available for estimating purposes,
development of techniques for updating historical cost, and establishing
methods of forecasting prices and costs over the duration of the project.
Cost estimates for mining and mineral processing projects involve so
many features and variables that it is absolutely essential to have some means by
which the vast amount of detail as possible, all the cost data available (historical
and developed) to the estimator. These costs, after being properly identified in
detail, should be compiled, stored, updated regularly, and made readily available
for use in developing new cost estimates.
Accessing files of current cost information requires a standardised
numerical system of classifying cost data. When uniform definitions and
procedures are used, every project record contributes to the common store of
estimating data.

Ing. J An Luczy, PhD. Slovak Republic
228
Cost Estimation
Such a standardised system is indispensable if accountants, estimators

designers, and managers are to have a common basis of understanding for
allocation of project costs. In summary, good cost estimating is based on:
• Definition of cost elements so that cost records and estimates have a

common basis,
• Collection of cost records based on the foregoing definitions,
• Classification and grouping of cost record,
• Analysis of the relationships among cost data,
• Utilisation of cost estimating procedure based on these relationships.
If organised properly, cost estimating in one activity that gives, as well

as receivingf, information in management information system.
Shopisticated cost estimating procedures have been developed in the
chemical engineering field.This is somewhat understable because process plants
treating homogenous feedstocks generally consist of standard components.
Detailed cost estimating techniques have been developed here based upon
specific quantitative factors, unfortunately mining project mine and process
unique, heterogeneous ores where there is rarely a useful body of historical data,
as a result it is difficult to generalise with respect to cost estimating procedures,
and the process remains more of an art than a science. In short, cost estimating
in the mining portion of the minerals industry is a difficult and time-consuming
process with few, if any, short cuts [2].
1.1. Types of Cost Estimates
Many types and classifications of cost estimates have been proposed by

various organisations and individuals over the years, the American Association
of Cost engineers (AACE) has adopted the following designations for cost
estimates [1]:
1. Order of Magnitude: -30% to +50% accuracy range: use cost capacity

curves and cost capacity ratios .
2. Budget : -15% to + 30% accuracy range: use flowsheets, layouts, and
equipment details: made for budgeting purposes.

229
Cost Estimation
3. Definitive: -5% to +15% accuracy range: use defined engineering data,

specifications, basic drawings, and detailed sketche.
This classification replaced the earlier AACE classification:
Order of magnitude (ratio estimate).

Study (factored estimate).
Preliminary (budget authorisation estimate).
Definitive (project control estimate).
Detailed (firm estimate).
The names of the various types of cost estimates are not nearly as
important as the identification of the estimate with the associated degree of
accuracy of the estimate. There are four basic types of cost estimates used in
evaluating new mining properties. They reflect various stages of progress in the
project. The type and timing of these estimates can best be illustrated with an
example. A typical mining property moves to completion through a series of
stages as follows [1], 1979):
1. Discovery and indication of potential ore through exploration efforts,

2. Order of magnitude cost estimate for preliminary feasibility,
3. Detailed exploration program including metallurgical testing of bulk
samples and an indication of mineral processing requirements,
4. Preliminary cost estimate for feasibility study,
5. Development of data necessary for engineering design of mine and mill
including preliminary equipment selection,
6. Definitive cost estimate for feasibility study,
7. Detailed engineering design of mine and mill including site specifications,
layout drawings, etc,
8. Detailed cost estimate for feasibility study,
9. Plant construction and mine development,
10. Start-up operation,
11. Production.
This example illustrates that there are several key decision points during the
life of a new mining property which require feasibility studies and associated
cost analyses with varying degrees of accuracy. Table 1 illustrates the

230
Cost Estimation
relationships among the four basic types of cost estimates and associated
accuracies, time requirements, contingencies, percentages of preproduction
engineering effort, and percentage of preproduction capital expenditures, the
absolute values in the table will vary, of course, depending on the type and
scope of the investment proposal being investigated .Nonetheless, the values do
provide a relative comparison of various cost estimates and accompanying
feasibility studies, it is interesting to notes that a relatively small percentage of
total capital expenditures occur through the definitive cost estimate stage of the
project. At this point, if a decision is made to proceed with the project, serious
preproduction activities begin to occur. Even so, most capital expenditures are
typically made after the detailed cost estimate when equipment orders are
confirmed and construction and development begin.
Before proceeding with a discussion of the various cost estimating
techniques, it is worthwhile to examine in a qualitative sense some of the
features and uses of these four basic types of estimates, the brief notes which
follow are intended to place in perspective the characteristics of the four types
of cost estimates proposed and their relationships to new mining property
evaluation.
1.2. Order of Magnitude Estimates
These cost estimates are generally intended to assist management in

making appropriate decisions regarding potential project feasibility and to
justify a further expenditure, of funds for the next stage of the project. Such
estimates are sometimes suitable to reject a project, but are seldom adequate for
positive project acceptance. The estimates are often based on known costs of
similar projects and typically involve little or no design work for the mine and
mineral processing facility in question. These estimates seldom become the
basis for even conceptual design but may indicate the desirability of expanding
work or efforts further [2].
Accuracy
The order of magnitude cost estimate provides a relatively low level of
accuracy varying by as much as -30% to +50% and sometimes more when
compared to true project cost. The sacrifice in precision, however, is often

231
Cost Estimation
justified by the ability to screen a large number of investment proposals in a

short time span.
Information Available for Estimate

For a new mining property information or indications will typically be
available on project location, gross estimates of potential reserves and grade,
probable mining method (surface or underground), probable processing method,
possible production rates, and probable major mining and processing equipment
required.
Table 1. Comparison of Various Cost Estimates with Pertinent Estimate

Characteristics [I]
Type of cost
estimate and Percentage of
Percentage
associated Noncumulative preproduction
Accuracy Contingency completion of
stage of time required capital expended at
% required , % preproduction
project estimate time of estimate,
effort, % %
developmen
t
Order of -30 to
magnitude +50 1-7 days 20-30 5 <0.5
-15 to 1 week-
Preliminary +30 2months 15-25 15- 25 2-5
-5 to
Definitive +15 3 -12months 5- 15 50-60 10- 20
-2 to
Detailed + 10 2-9 months 4-8 90-100 50- 60
1.3. Preliminary Estimates
The purpose of the preliminary cost estimate is to refine the order of

magnitude estimate when additional data become available. These estimates are
usually suitable to indicate or determine project feasibility and assist
management in estimating a budget for the project. The estimate typically
relates to a conceptual design of a mine or mineral processing facility [2].

232
Cost Estimation
Accuracy
The accuracy of a preliminary cost estimate is variable but will typically
range between -15% and +30%, depending on the scope of the project.

At this stage better information is available from the exploration
program relative to ore reserves and grade. More realistic estimates can be made
about production rates, proposed mining method, and a proposed mine layout,
also, a proposed mineral processing method has typically been indicated along
with preliminary flow charts, plant plans, recovery rates, and possibly plant
layouts with varying degrees of information. Mine and mill equipment lists,
indicating types and sizes, start to be developed. Development requirements can
be estimated. The plant site location is specified, general site conditions are
known, and building space requirements can be estimated [2].
1.4. Definitive Estimates
The purposes of definitive cost estimates are to:
1. provide for appropriation of funds or to establish a contract price,

2. provide the basis for project cost status reports, and/or
3. establish a format for final cost reports to aid accounting and provide
feedback information on actual costs
To use in future estimates and to improve existing estimating methods. An

estimate of this type should enable management to authorise expenditures for
completion of engineering specifications and drawings, design, and site surveys.
Accuracy
The level of accuracy associated with a thorough and well-planned
definitive cost estimate should range between -5% and +15%.

233
Cost Estimation

By this time considerable data are available which describes the planned
mine and mineral processing plant. Specifically, data of the following nature are
available to the estimator:
1. definitive mine plans and layouts for a given mining method,

2. production capacities,
3. ore recovery, average grade, and dilution estimates.
4. definitive milling process with flow charts, plant plans, layouts, utilities,
storage and handling requirements,
5. complete equipment lists with specifications for mine and mill,
6. non equipment items are specified (access roads, paved roads,
infrastructure, piping, etc),
7. preliminary drawings for buildings and site development, and
8. the exact location of mine and plant site.
1.5. Detailed Estimates
The detailed cost estimate culminates the estimating procedure. It is

based on complete engineering drawings, specifications, and site surveys. This
type of estimate is normally suitable for accurate projections and funding for the
project and provides a basis for authorisation to proceed with construction and
development, with particularly attractive projects, some construction may be
authorised prior to completion of the detailed estimate, although this is not a
recommended practice. A detailed cost estimate is seldom undertaken unless
there is reasonable assurance as to project feasibility [2].
Accuracy
Detailed cost estimates should possess the accuracy between -2% and
+ 10% of actual project costs.

234
Cost Estimation
Information Available for Estimate.

A detailed cost estimate is predicated on detailed engineering drawings,
a definite project schedule, and actual bids from manufacturers, contractors, and
subcontractors.
1.6. Kinds of Cost Information
Cost information may be classified into three primary categories.
1. historical costs,
2. measured costs, and
3. policy costs.
Historical costs are those collected from the literature, accounting

records, governmental cost information sources, business reports, trade
associations, technical publications, etc. These costs are often obtained
internally within the organisation and may represent data from projects
previously funded by the firm.
Measured costs are defined as time - dollar relationships where direct
observational processes and mathematical rules are followed. Measured costs
are primarily limited to costs of work. Material quantities determined from
drawings and specifications are also a kind of measured data. In general there
are four methods normally employed for the determination of time, which are
fundamental to determining measured costs [2].
2. Time Studies
Time requirements for unit operational components of the entire

production cycle are observed, recorded, and analysed with respect to $ per
hour, $ per ton produced, etc. The following simple example illustrates the
concept of measured costs derived from shift reports [2].

235
Cost Estimation
Example 1:
A small fleet of 100-ton trucks was observed throughout the following
cycle load, flat haul of 3000ft, spotting and dumping, return, waiting, spot and
load. The average production for the truck fleet was 12,00tons per shift
operating costs for the 100-ton truck fleet were as follows.
Tab. 2 Operating costs for the 1001 truck fleet
Operating labor $ 800/shift

Fuel and oil $ 1 000/shift
Repairs $ 600/shift
Tires $ 1 400/shift
Total $ 3 800/shift
Therefore the cost per ton of material moved is:
$ 3 800/12100 tons = $ 0,314/ton.
2.1. Work Sampling
Observations are taken pertaining to specific activities of the person or

machine at random intervals. Such a figure can be used in conjunction with
other work samples to estimate the production capacity of machines in a given
operation. The following example shows how work sampling can be used to
determine production estimates for a given machine.
Example 2:
A work sampling study of an electric shovel in an open pit mine was
performed. Some 400 observations were made of the unit and the shovel was
found to be in a waiting or nonproduction mode during 55 of these observation.
How much of the total time is the shovel expected to be waiting for one reason
or another?

236
Cost Estimation
Solution:
Since work sampling is a statistical technique, the laws of probability
must be followed. When n, the number of observations, is large the binomial
distribution approaches the normal distribution. Therefore, the probability of
even i occurring can be estimated from the number of observations [3].
where p is observed percentage of occurrence of an event,

/ expressed as a decimal,
ni is the number of observations of event i,
n is the total number of observations, in this case, pi =55/400 = 0,14 or 14%.
Using the standard error, of a sample percentage for a binomial

distribution and the concept of confidence intervals, the following formula may
be used:
pi( 1 - pi) /2
1 = 2 (2)
where I is the confidence interval obtained from the study expressed as a

decimal,
a is the factor obtained from tables of probabilities for a normal distribution
The problem can now be expressed as follows for a 90% confidence

interval (a =1.645 ):
0.14(1-0.14) Yl
1 = 2(1.645) = 0.057. (3)
400
Therefore the electric shovel can be expected to be in a waiting mode

14% of the time ± 5.7% /2, or a range of 11.2% to 16.8%.

237
Cost Estimation
2.2. Man - Hour Reports
These reports include tie card reporting of working hours by type of

work, activities, etc, cost distribution for labour can be obtained in this manner.
It is important, however, that provisions be made in the recorded data for delays
(controllable and uncontrollable), weather conditions, equipment malfunctions,
work location, etc, if the information is to be of real value to the estimators.
Predetermined Motion - Time Data:
This system stipulates times for various human motions, usually over
very short intervals. Work performance (quantity) and subsequent cost
distributions can theoretically be determined on this basis. These techniques are
more applicable to assembly-line mass-production situations and are rarely used
in the mining sector.
policy costs are unique in that they have the characteristic of being fixed for
estimating purposes. Although the origins of these costs may be varied, they are
accepted as factual and beyond control by the estimator.
2.3. Sources of Information
Cost estimates for use in feasibility studies may be based on information

obtained from many sources, often the information is obtained internally within
the organisation and represents data collected from technical publications and
other literature sources, historical data on previous company project, or
accumulated data on similar projects funded by other companies, the major
sources for this internal information are:
• Accounting Department,
• Personnel Department,
• Production Department direct costs per unit of production,
maintenance, repair, supplies,
• Purchasing Department,
• Marketing Department,

238
Cost Estimation
• Legal Department,
• Engineering and Geology Department,
• Bureau of labor statistics,
• Department of commerce,
• Bureau of Mine,
• Department of Energy (DOE),
• Environmental Protection Agency (EPA),
Table 3 shows a breakdown of reporting and costing detail which might be

associated with an underground cut - fill mining operation. It illustrates the
detail in which the cost estimator must be prepared to work in the final stages.
Before an estimate can be obtained covering any phase of mining or
beneficiation, the estimator should compile certain basic data in the following
five areas of interest:
1. General
Location
Topography
Climate
Access to facilities and labor market
Prevailing labor costs (including payroll burden)
Daily or annual tonnage
Applicable cost indices
Electric power costs
Transportation availability
2. Surface and Underground Mines

Rock type and hardness
Support or ground conditions
Overburden (surface mines)
Extraction and / or mining method
3. Beneficiation
Crushability and/ or grindability
Extraction method (flow chart is useful)

239
Cost Estimation
4. Exploration
Methods to be used
Area (coverage)
5. Capital Cost
Extent and method of preproduction development
Freight rates
Taxes
(I) Capital costs

A. Exploration and access roads
B. Surface and underground mining
Preproduction development
Mine plant and buildings
Townsite
Restoration during construction
Mine equipment
Engineering and construction management fees
Working capital
C. Beneficiation
Crushing
Grinding
Concentrating
Waste and tailings disposal
Site preparation
Utilities and facilities
Townsite
Restoration during construction
Engineering and construction management fee
Working capital

240
Cost Estimation
(II) Operating Costs
A. Surface mining
Production development
Minig of ore
Restoration during production
General operations
B. Underground mining
Production development
Mining of ore (by methods)
Haulage of ore
General opertions
C. Beneficiation
Crushing
Grinding
Concentrating (by methods)
Waste and tailings disposal
Restoration during production
General operations
(III) Administration Costs
A. Surface mining
General expense
B. Underground mining
General expense
C. Benefication
General expense

241
Cost Estimation
3. The Determination of Prescriptive Costs for Drill Carriages

Boomer H 104 in Iron Ore Mine
The calculation of prescriptive costs is carried out in the case of the two
drill carriages of the company Atlas Copco, type Boomer H 104. These are
operating in the Sections I and II of the iron ore mine. Each of them has been
working in one of the above mentioned sections since August 1997.
The first calculation is based on the observation of the working diaries,
which are kept in each section and for each equipment separately. The
individual daily inspections which include the description of the actual state of
the machine with all defects and repairs are recorded there. In addition the time
and performance (drilled meters) values of the machine are recorded there at the
time of inspection. Defects and repairs are also understood as inspections.
Therefore it is possible to determine exactly how much a particular part has
worked, i.e. not only working time but also drilled meters.
The first calculation starts from these data which are based on the
observation of average service life of particular parts during the first four
months of the usage of machines in production.
The data recorded in the working diary of the Section I are listed in
Tables 1-6, they are arranged successively, according months. The tables
contain only data concerning defects and repairs since our aim was to determine
prescriptive costs. The data on unperturbed run were therefore omitted.
The first entry is the datum of an event, then the description of activity
in which the type of defect is included. The activity codes were assigned to the
individual activities in order to have better orientation in the data and to make
easy the subsequent processing. Other entries are: duration which represents the
hours worked of a machine and performance which indicates the total number of
drilled meters of a machine.
The other data concern the oil consumption which is the fuel for driving
aggregate, motor oil and hydraulic oil consumption. They are also included into
the items of prescriptive costs.
The summary calculation for Section I is listed in Table 7 in which the
following items are included: the list of activities with corresponding activity
codes, the number of exchanges of worn out or damaged parts, the unit prices
expressed as the cost needed for the replacement of a part of a machine and the
calculation of specific costs for time and performance unit. Both quantities are

242
Cost Estimation
given since then the work of identical machines in different workplaces can be
compared.
In Table 8 there are data taken from the table of summary data
concerning the consumption of drill material, especially drill rods and adapters.
The data are collected and given in the following order: the date (the time of
exchange of drill tools), the number of drilled drill holes and the total number of
metres drilled. These values are completed with the data on unit price and based
on this the second calculation of prescriptive costs of the Section I was done.
The values in Tables 9-13 are calculated in the same way as the values
in Tables 1-6, the given data concern the same type of the machine as in the
Section I which works in the Section II. Table 14 is the table of summary
calculation for the Section II.
Table 15 as well as Table 8 give the second calculation taken from the
table of summary data on the consumption of drill tools at the Section II.
The calculation of prescriptive costs is carried out on the basis of
information given in Tables 1-6 for the Section I and Tables 6-13 for the Section
II. In each table there is the date of an event which was the origin of costs and
the description of this event; there are also data about the total performance
from the time point of view and the performance, which are related to this event.
This is the total number of drilled metres. The data on the filling of fuel, which
is oil, filling of motor oil and filling of hydraulic oil. The amount is given in
litres.
The calculation, which is concentrated in Table 7 for the Section I and
Table 14 for the Section II, gives the list of activities which were the origin of
costs, denotation of activity codes which are used for clear processing. Unit
price is the price of repair, exchange of a tool and the like. The number of
repairs gives how many times a certain activity has been carried out during the
life time of a machine. The time gives the total number of hours worked of a
machine and the total performance gives the total number of drilled metres
during its running.
The result is the calculation of prescriptive costs I and the calculation of
prescriptive costs II
Unit price x Number of repairs

Prescripive cost I = Sk/h (5)
Time

243
Cost Estimation
Unit price x Number of repairs

Prescripive cost II = [Sk/m] (6)
Time
The prescriptive cost I is calculated for the unit of one hour worked and
prescriptive cost II is calculated for the unit of one metre drilled. In this way the
disproportion between the two different sections can be revealed and followed.
The sections have different working conditions, however the difference can also
be caused by the time usage of a machine and the final result then depends on
the performance - drilled metres during a certain time unit.
Table 8 for the Section I and Table 15 for the Section II give the
consumption of drill tools and adapter. The data for particular parts which have
been consumed are recorded in time. Each part has a record of its performance
expressed in the metres drilled and unit price. On the basis of this data the costs
for individual parts are calculated and also the average value is given in each
table.
Unit price
Prescripive cost II (7)
Performance
4. The Results
The manner of data processing is chosen taking into account the data
obtained from running records and also taking into account the requirement to
find out prescriptive costs in real conditions. As real conditions can be
understood the operation of two identical machines in different working sections
of the same organisations.
The calculation contains concrete data on activities related to the
formation of costs and concrete data on unit prices related to the above
mentioned activities. The prices are obtained either directly from the machine
operator or from the tables if a certain activity related to the origin of costs have
not been realised yet.

244
Cost Estimation
Sometimes the costs given by operator contain the data related to repairs
or to the solution of a problem and therefore price does not include the wages, it
includes only the price of a spare part. The values given in tables are corrected
and include wage costs which represent approximately 30% of the price of a
spare part.
It results from this calculation that prescriptive costs in the investigated
period were as follows:
Tab. 5 Prescriptive costs in the investigated period

Sk/h Sk/m
Section I 584.34 20.02
Section II 126.06 3.79
As can be seen, the results of the two working sections are different
since the drill machines work in different geological and mining-technical
conditions. It appears that the costs of the Section I are 4.64 or 5.30 times
higher, if the calculations are done for one hour or one metre, respectively.
Further the two items adapter R32 and drill rod were followed. They are
classical consumption material used in drilling process. The first observation
was done directly in the section and the second one is from the mine technical
department.
Tab. 6 Material used in drilling process.

Observations made in the section, and technical department respectively
Sk/m
Section I - drill rod
Section 0.96
Technical department 2.22
Section II - drill rod
Section 0.45
Section I - adapter
Section 12.96
Section II - drill rod
Section 2.64

245
Cost Estimation
The obvious disproportion between the data is probably brought about

by ambiguous recording, e.g. the item drill rod can mean the exchange of a drill
rod but sometimes the rod after a repair can be used again for a certain time.
This, however, is not made more accurate at all recording centres and then it
brings a certain inaccuracy. Only the direct costs, which include direct unit
material, and direct unit wages are considered in the calculations. The costs
caused by the machine transportation, other direct and acquisition (or write-off)
costs have not been considered.
Table 7 Material Consumption

Atlas Copco (August 1997)
Boohmer H 104 Section I
Production No: A VO 97A072
Date Denota- Name Activity Time Performance Oil Oil - Oil -

tion code [h] [m] [1] motor control
PI [1]
20-08-97 Repair of Simbo 1 0 0 0 0 0
21-08-97 Pulling out rods 2 2 9 0 0 0
23-08-97 Exchange of 3 10 65 0 0 0
hammer

246
Cost Estimation

Atlas Copco (September 1997)
Boohmer H104 Section I
Production No: AVO 97A072
Date Deno- Name Activity Time Perfor Oil Oil - Oil -

tation code [h] mance [1] motor control
H [11 rn
6-09-97 Defect 4 12 104 0 0 0
9-09-97 Repair of pipe 5 13 104 0 0 0
9-09-97 Repair of pipe 5 13.5 104 0 0 0
11-09-97 Lubrication of rig 7 28.5 503 0 3 0
11-09-97 Exchange of adapter 8 32.5 581 0 0 0
15-09-97 Maintenance 9 34.5 659 0 0 0
20-09-97 PHM 10 46 1016 20 0 0
20-09-97 Lubrication of rig 7 48 1088 0 1 0
22-09-97 Exchange of adapter 8 54 1169 0 0 0
28-09-97 Exchange of adapter 8 66 1457 0 0 0

247
Cost Estimation

Atlas Copco (October 1997)
Boohmer HI 04 Section I
Deno- Activity Time Perfor- Oil Oil - Oil -

Dde tation Name code [h] mance [1] motor control
fml n m
6-10-97 PHM 10 70 1544 168 0 0
20-10-97 Drill rod 11 84.5 1889 0 0 0
20-10-97 Hydraulics 15 84.5 1889 0 0 25
22-10-97 Drill rod 11 110.5 2534 0 0 0
23-10-97 Drill rod 11 115.5 2675 0 0 0
24-10-97 Exchange of drill point 12 123.5 2906 0 0 0
24-10-97 Repair of drill 13 123.5 2906 0 0 0

mounting
28-10-97 Broken out 14 141.5 3564 14 0 0
30-10-97 - 151.5 3963 0 0 0

248
Cost Estimation

Atlas Copco (November 1997)
Date Deno- Name Activity Time Perfor- Oil Oil - Oil -

tation code [hi mance [11 motor control
[ml [11 [1]
26-11-97 Oil terminal 16 154.5 4035 0 0 0
27-11-97 Changing of rod 17 156 4125 0 0 0
27-11-97 Broken holender 18 159 4245 0 0 0
28-11-97 Drill rod 11 160 4290 0 0 0

Atlas Copco (December 1997)
Date Denota- Name Activity Time Performan Oil Oil - Oil -

tion code [h] ce [1] motor control
[ml [11 [11
1-12-97 Broken 18 161.5 4360 0 0 0
holender
1-12-97 PHM 10 161.5 4360 20 0 0
2-12-97 Hydraulics 15 162.5 4402 0 0 15
2-12-97 Repair of 5 168 4633 0 0 0
pipe
5-12-97 Hydraulics 15 182 5411.5 0 0 15
8-12-97 Repair of 5 196 5863 0 0 0
pipe
9-12-97 Broken 18 196 5863 0 0 0
holender
11-12-97 Hydraulics 15 204 6194.5 0 0 0
15-12-97 PHM 10 224 7151.5 10 0 0
17-12-97 Drill rod 11 230 7406.5 0 0 0
19-12-97 PHM 10 234 7577.5 10 0 0
31-12-97 - - 245 7975.5 0 0 0

249
Cost Estimation

Atlas Copco (,January 1998)
Date Activity Time Performance Oil Oil - Oil -

Denota-
tion Name code [h] [m] [1] motor control
[1] rn
20-01-98 Exchange of 8 271 8356.2 0 0 0
adapter
23-01-98 Exchange of 8 284 8597.6 0 0 0
adapter
27-01-98 Exchange of 8 291 8662.5 0 0 0
adapter
27-01-98 Repair of gear 20 294 8675.7 0 0 0
27-01-98 Repair 21 298.5 8744.5 0 0 0
27-01-98 Repair of gear 20 301.5 8775.1 0 0 0

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Cost Estimation
Table 13 Prescriptive costs
Norm
Acti- Unit price Number Time Total Prescripti- Prescripti-

List of activities vity [Sk] of m performan- ve cost I ve cost I
code repair ce [m] [Sk/m] [Sk/m]
Repair of Simbo 1 3000 1 301.5 8775.1 9.95 0.34
Pulling out rods 2 2000 1 301.5 8775.1 6.63 0.23
Exchange of 3 5000 1 301.5 8775.1 16.58 0.57
hammer
Defect 4 3000 1 301.5 8775.1 9.95 0.34
Repair of pipe 5 201.37 4 301.5 8775.1 2.67 0.09
Lubrication of rig 7 42.25 9 301.5 8775.1 1.26 0.04
Exchange of 8 12 369.5 9 301.5 8775.1 369.24 12.69
adapter
Maintenance 9 2000 1 301.5 8775.1 6.63 0.23
PHM 10 19.76 228 301.5 8775.1 14.94 0.51
Drill rod 11 1677 5 301.5 8775.1 27.81 0.96
Exchange of drill 12 5000 1 301.5 8775.1 16.58 0.57
point
Repair of drill 13 3000 1 301.5 8775.1 9.95 0.34
mounting
Broken out 14 3000 1 301.5 8775.1 9.95 0.34
Hydraulics 15 48.1 70 301.5 8775.1 11.17 0.38
Oil terminal 16 409.5 1 301.5 8775.1 1.36 0.05
Changing of rod 17 3000 1 301.5 8775.1 9.95 0.34
Broken holender 18 3000 3 301.5 8775.1 29.85 1.03
Repair of gear 20 3000 2 301.5 8775.1 19.90 0.68
Repair 21 3000 1 301.5 8775.1 9.95 0.34
Total 584.34 20.08

251
Cost Estimation
Table 14 Drill tools
Date Number of drill holes Performance Unit price Prescriptive cost II

M [Ski [Sk/ml
6-10-97 196 588 1677 2.85
20-10-97 251 753 1677 2.23
23-10-97 379 1137 1677 1.47
24-10-97 373 1119 1677 1.50
10-11-97 633 1889 1677 0.89
25-11-97 149 447 1677 3.75
1-12-97 104 312 1677 5.38
1-12-97 504 1200 1677 1.40
8-12-97 551 1654 1677 1.01
18-12-97 323 969 1677 1.73
| Average 2.22
Table 15 Adapter R32
Date Number of drill holes Performance Unit price Prescriptive cost II

[ml [Sk] [Sk/m]
6-10-97 2154 12369.5 5.74
28-10-97 2631 12369.5 4.70
14-11-97 747 12369.5 16.56
25-11-97 795 12369.5 15.56
25-11-97 27774 12369.5 4.46
18-12-97 968 12369.5 12.78
| Average 9.97

252
Cost Estimation

Atlas Copco (September1997)
Boohmer H104 Section II
Production No: AVO 97A074

m [1]
10-09-97 PHM 10 16 463 8 0 0
12-09-97 Drill rod 11 21.5 610 0 0 0
17-09-97 Repair of 5 32 940 0 0 0
pipe
17-09-97 Lubrication 7 34 1003 0 2.5 0
o f rig
23-09-97 Repair of 5 52 1558 0 0 0
pipe
23-09-97 Hydraulics 15 54.5 1684 0 0 20
25-09-97 Hydraulics 15 62.5 1969 0 0 8
26-09-97 Drill rod 11 67.5 2125 0 0 0
29-09-97 Hydraulics 15 67.5 2125 0 0 20

253
Cost Estimation

Atlas Copco (October 1997)

[1] [11
7-10-97 PHM 10 80 2584 8 0 0
8-10-97 Repair of 5 84 2677 0 0 0
pipe
20-10-97 Hydraulics 15 112. 3438 0 0 20
5
22-10-97 Repair of 5 128 3907 0 0 0
pipe
23-10-97 PHM 10 137. 4219 10 0 0
5
24-10-97 Drill rod 11 155 4564 0 0 0
28-10-97 Hydraulics 15 171 5048 0 0 4
28-10-97 Exchange 8 171 5120 0 0 0
of adapter
30-10-97 Repair of 5 185 5633 0 0 0
pipe

254
Cost Estimation

Atlas Copco (November 1997)
Boohmer HI 04 Section II
Date Deno- Name Activity Time Perfor- Oil Oil - Oil -

tation code [h] mance [1] motor control
[ml m [11
3-11-97 PHM 10 195.5 6005 5 0 0
3-11-97 Repair of 5 200.5 6172 0 0 0
pipe
5-11-97 Drill rod 11 217 6828 0 0 0
5-11-97 Hydraulics 15 218 6860 0 0 12
6-11-97 Repair of 5 221 6956 0 0 0
pipe
12-11-97 PHM 10 235 7448 25 0 0
12-11-97 Lubrication 7 235 7897 0 4 0
o f rig
13-11-97 Exchange 8 247 8152 0 0 0
of adapter
14-11-97 Exchange 5 254 8722 0 0 0
of adapter
17-11-97 Hydraulics 15 272 8854 0 0 10
18-11-97 Repair of 19 274 8809 0 0 0
socket
19-11-97 Drill rod 11 285 9207 0 0 0
24-11-97 Exchange 8 310 10372 0 0 0
of adapter
25-11-97 Repair of 5 311.5 10447 0 0 0
pipe

255
Cost Estimation

Atlas Copco (December 1997)
Activity Time Perfor- Oil Oil - Oil -

Date Deno- Name code M mance [1] motor control
tation [ml f'l [1]
1-12-97 Hydraulics 15 337 11431 0 0 8
1-12-97 Lubrication 7 337 12600 0 2 0
o f rig
4-12-97 Repair of 5 371.5 12840 0 0 0
pipe
5-12-97 Repair of 5 378.5 13080 0 0 0
pipe
8-12-97 PHM 10 385.5 13309 25 0 0
8-12-97 Hydraulics 15 385.5 13309 0 0 8
22-12-97 Lubrication 7 459 15525 0 3 0
o f rig
22-12-97 Hydraulics 15 459 15525 0 0 8

Atlas Copco (January 1998)
Activity Time Performance Oil Oil - Oil -

Date Denota- Name code M [m] [1] motor control
tion [11 [1]
16-01-98 Lubrication 7 501 17018 0 3 0
of rig
19-01-98 PHM 10 506 17148 15 0 0
26-01-98 Lubrication 7 563 18711 0 7 0
of rig

256
Cost Estimation
Table 21 Prescriptive costs

Norm
List of Activity Unit price Number Time Total Prescriptive Prescriptive

activities code [Sk] of repairs [h] performance cost I [Sk/m] cost II [Sk/m]
fml
Repair of 1 3000 0 563 18711 0.00 0.00
Simbo
Pulling out 2 2000 0 563 18711 0.00 0.00
rods
Exchange 3 5000 0 563 18711 0.00 0.00
of hammer
Defect 4 3000 0 563 18711 0.00 0.0
Repair of 5 201.37 10 563 18711 3.58 0.11
pipe
Lubrication 7 42.25 21.5 563 18711 1.61 0.05
of rig
Exchange 8 12369.5 4 563 18711 87.88 2.64
of adapter
Main ten anc 9 2000 0 563 18711 0.00 0.00
e
PHM 10 19.76 96 563 18711 3.37 0.10
Drill rod 11 1677 5 563 18711 14.89 0.45
Exchange 12 5000 0 563 18711 0.00 0.0
of drill point
Repair of 13 3000 0 563 18711 0.00 0.00
drill
mounting
Broken out 14 3000 0 563 18711 0.00 0.00
Hydraulics 15 48.1 110 563 18711 9.40 0.28
Oil terminal 16 409.5 0 563 18711 0.00 0.00
Changing of 17 3000 0 563 18711 0.00 0.00
rod
Broken 18 3000 0 563 18711 0.00 0.00
holender
Repair of 19 3000 1 563 18711 5.33 0.16
socket
Repair of 20 3000 0 563 18711 0.00 0.00
gear
Repair 21 3000 0 563 18711 0.00 0.00
I Total | 126.06 | 3.79

257
Cost Estimation
Table 22 Drill tools
Date Number of drill Performance Unit price Prescriptive cost II

holes [m] [Sk] [Sk/m]
20-09-97 245 724 1677 2.32

11-09-97 505 1515 1677 1.11
3-10-97 752 2256 1677 0.74
27-10-97 675 2226 1677 0.83
6-11-97 824 2472 1677 0.68
19-11-97 395 1185 1677 1.42
25-11-97 399 1197 1677 1.40
2-12-97 732 2196 1677 0.76
12-12-97 841 2523 1677 0.66
6-1-98 137 411 1677 4.08
| Average 1.40
Table 23 Adapter R32
Date Number of drill Performance Unit price Prescriptive cost II

holes [m] [Sk] [Sk/m]
2-09-97 5162 12369.5 2.40

29-10-97 3116 12369.5 3.97
13-11-97 2801 12369.5 4.42
25-11-97 3507 12369.5 3.53
12-12-97 2846 12369.5 4.35
| Average 3.73

258
Cost Estimation
4. Conclusion
The article has been oriented to describe estimation of the costs and
specially describing the operating costs of two drilling machines in the iron ore
mine. These two machines are new in the process of the extracting of iron ore.
For this reason it was necessary to find out all possible costs in order to know
influence of using drilling machines to all economy of the mining divisions.
Drilling machines are working in two divisions with not same
conditions. So all data were judged from this point of view.
Management of iron ore mine and especially management of mining
division now can effectively manage all operations and in same time can have
review about discipline of attendance of drilling machines. Like results is
decreasing of operating costs of drilling machines and can forecast possible
costs in new conditions or in different style of using.

259
Cost Estimation
Bibliography
[1] Gentry, D., W.: Mine Valuation: Technical Overview, Computer Methods
for the 80's In the Mineral Industry, Alfred Weiss, ed., AIME, New York,
pp. 520-535.
[2] Gentry, D., W. and O'Neil, T., J.: Mine Investment Analysys, by Society
of Mining Engineers of American Institute of Mining, Metalurgical, and
Petroleum Engineers, Inc, New York. 1984, pp. 103-151.
[3] Oswald, P., F.: Patterns of Cost Information, "Cost Estimating for
Engineering and Management, Chap. 3, W. J. Fabrycky and J. H. Mize,
eds., Prentice - Hall, Inc. Englewood Cloffs, NJ, pp.45-51.
[4] Stackhouse, E., E.: Cost Estimating, "Project and Cost Engineers'
Handbook, F. C. Jelen, ed., American Association of Cost Engineers,
Morgantown, WV, 1979, pp.2-l=2=19.

260

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PubL Univ. of Miskolc, Series A. Mining Vol. 53. (1999) pp.

Ing. Michal Cehlar. PhD.

The economics evaluation components of the feasibility study,

Ing. Michal Cehlar. PhD. Technical University of Kosice

The economic evaluation of a project requires a great deal of diverse

1. Capital and Operating Cost Estimation

Before useful cost estimating procedures can be applied considerable

Ing. Michal Cehlar. PhD. Technical University of Kosice

Such a standardised system is indispensable if accountants, estimators

• Definition of cost elements so that cost records and estimates have a

If organised properly, cost estimating in one activity that gives, as well

1.1. Types of Cost Estimates

Many types and classifications of cost estimates have been proposed by

1. Order of Magnitude: -30% to +50% accuracy range: use cost capacity

Ing. Michal Cehlar. PhD. Technical University of Kosice

3. Definitive: -5% to +15% accuracy range: use defined engineering data,

Order of magnitude (ratio estimate).

1. Discovery and indication of potential ore through exploration efforts,

Ing. Michal Cehlar. PhD. Technical University of Kosice

1.2. Order of Magnitude Estimates

These cost estimates are generally intended to assist management in

Ing. Michal Cehlar. PhD. Technical University of Kosice

justified by the ability to screen a large number of investment proposals in a

Information Available for Estimate

Table 1. Comparison of Various Cost Estimates with Pertinent Estimate

1.3. Preliminary Estimates

The purpose of the preliminary cost estimate is to refine the order of

Ing. Michal Cehlar. PhD. Technical University of Kosice

Information Available for Estimate

1.4. Definitive Estimates

The purposes of definitive cost estimates are to:

1. provide for appropriation of funds or to establish a contract price,

To use in future estimates and to improve existing estimating methods. An

Ing. Michal Cehlar. PhD. Technical University of Kosice

Information Available for Estimate

1. definitive mine plans and layouts for a given mining method,

1.5. Detailed Estimates

The detailed cost estimate culminates the estimating procedure. It is

Ing. Michal Cehlar. PhD. Technical University of Kosice

Information Available for Estimate.

1.6. Kinds of Cost Information

Cost information may be classified into three primary categories.

Historical costs are those collected from the literature, accounting

Time requirements for unit operational components of the entire

Ing. Michal Cehlar. PhD. Technical University of Kosice

Tab. 2 Operating costs for the 1001 truck fleet

Operating labor $ 800/shift

Therefore the cost per ton of material moved is:

$ 3 800/12100 tons = $ 0,314/ton.

2.1. Work Sampling

Observations are taken pertaining to specific activities of the person or

Ing. Michal Cehlar. PhD. Technical University of Kosice

where p is observed percentage of occurrence of an event,

Using the standard error, of a sample percentage for a binomial

where I is the confidence interval obtained from the study expressed as a

The problem can now be expressed as follows for a 90% confidence

Therefore the electric shovel can be expected to be in a waiting mode

Ing. Michal Cehlar. PhD. Technical University of Kosice

2.2. Man - Hour Reports

These reports include tie card reporting of working hours by type of

Predetermined Motion - Time Data:

2.3. Sources of Information

Cost estimates for use in feasibility studies may be based on information