total cost of
working it will be greater by the fixed charges over such an increased
period. Conversely, by equipping on a larger scale, the mine will
be exhausted more quickly, a saving in total cost can be made, and
the ultimate profit can be increased by an amount corresponding
to the time saved from the ravages of fixed charges. In fine, the
working costs may be reduced by larger operations, and therefore
the value of the mine increased.
The problem in practice usually takes the form of the relative
superiority of more or of fewer units of plant, and it can be considered
in more detail if the production be supposed to consist of units
averaging say 100 tons per day each. The advantage of more units
over less will be that the extra ones can be produced free of fixed
charges, for these are an expense already involved in the lesser
units. This extra production will also enjoy the interest which
can be earned over the period of its earlier production. Moreover,
operations on a larger scale result in various minor economies
throughout the whole production, not entirely included in the type
of expenditure mentioned as "fixed charges." We may call these
various advantages the "saving of fixed charges" due to larger-scale
operations. The saving of fixed charges amounts to very considerable
sums. In general the items of working cost alone, mentioned above,
which do not increase proportionately to the tonnage, aggregate
from 10 to 25% of the total costs. Where much pumping is involved,
the percentage will become even greater.
The question of the value of the mine as affected by the volume
of output becomes very prominent in low-grade mines, where, if
equipped for output on too small a scale, no profits at all could
be earned, and a sufficient production is absolutely imperative
for any gain. There are many mines in every country which with
one-third of their present rate of production would lose money.
That is, the fixed charges, if spread over small output, would be
so great per ton that the profit would be extinguished by them.
In the theoretical view, therefore, it would appear clear that
the greatest ultimate profit from a mine can be secured only by
ore extraction under the highest pressure. As a corollary to this
it follows that development must proceed with the maximum speed.
Further, it follows that the present value of a mine is at least
partially a factor of the volume of output contemplated.
FACTORS LIMIT
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