1. Given the following information for the David open-pit gold mine, prepare annual cash flows for the expected life of the project. 

Grade of ore: 0..164 (troy) ounce/ ton.

Recovery: 93%.

Ore reserves: 18,225,000 tons.

Price of gold: $1200 /(troy) ounce.

Production rate: 10,500 tons per day.

Working days/year: 350 days.

Capital expenditure: $365,000,000 evenly spent over 2 years.

Operating costs: $76.00 /ton (subject to inflation starting at year 1).

Tax rate: 39 %.

Depletion: 4 % of revenues.

Depreciation method: Declining balance and a rate of 35%.

Inflation rate of operating costs: 2.5 % for years 1 and 2, and 3 % thereafter. (To be applied at the end of a year).

Production commences at beginning of year 3.

Answer rating: 100% (QA)

Year 0 Capital expenditure 365000000 Year 1 Capital expenditure 182500000 Operating costs 7600 per t... View the full answer