You are on page 1of 1

MINE INVESTMENT ANALYSIS

Marble corp, is company that operates several marble mining sites. It has (340.000 + (last 3 digits of
student ID x 10.000)) cubic metric of marble reserves. These reserves are spread over area of 50 hectares
(ha).

Initial stage nessecary before mining operation could be run is land acquisition. that 50ha land is all on
public land, and people in the area are willing to sell their land for price of USD 20/m 2. The company
initially buys USD 850.000 worth of equipments that are considered to have lifetime of 5 years. The
company also spends USD 100.000 for the buildings around the site.

Basic on exploration result, the company calculates overburden to be 30% of reserves, and assumes
mining recovery to be 75%. The stripping cost USD 18.65 per m3 , drilling cost USD 21.25 per m3, blasting
cost is USD 23.40 per m3, loading cost USD 9.85 per m3, and hauling cost is USD 19.25 per m3. The company
has FOB contract with the buyer, and the transportation cost is USD 22.15 per m3.

Companys market strategy classified is market into export market andlocal market. 80% of total
production is sold in export market, and 20% of it is sold in local market. According to companys sales
contract, price of rough block marble is averagely USD 600 per m3, and the local sales price is USD 580 per
m3. Both of are the price are assumed to be escalated by 5% for the fourth and each of the following
years. The marble sales are subject to income tax and export tax.

For its 20 years of mining life, the company decides to hire (last 2 digits student ID + 50) employees. For
the top management, the salary is USD 2.500 monthly, while for the middle management, the salary is
USD 1.300. the low management has salary of USD 600, and operators have salary of USD 350 monthly.
The marketing expense is considered to be 20% of total cost, and general and administrative expense is
15% of total cost. The overhead cost is USD 350 per month.

Capital structure of the company consists of 60% equity and 40% of long-term debt due within 7 years.
The interest is 10% and pola annually.

For the first 5 years. The company uses straight line to calculate the depreciation. Then, by the 6th year,
the company decides to use double declining balances method. Replacing the building and equipments
uses one-year conventionand the buying is on January.

In the 6th year, the company get approved for a new long-term debt of USD 1.500.000. the company also
issues 50.000 shares with price of USD 10 per share. The company uses the funding for renewal of
equipments and buildings, also for investing in other company shares as much as (15% + last digit of
student ID in percentage) from the total funding. The renewal of equipments and buildings is paid in
installmentfor three years. Depletion as tax deduction is applied since the 6thyear.