Metallurgical accounting relates to mineral processing plants which substitutes metals, concentrates or residues in place of the traditional monetary information. It includes the collection of plant data, technical information, record keeping, report production and a general scope of functions that many plant operators don’t consider.
The overall purpose of metallurgical accounting is to provide management with information that can be used to control costs across mining and metallurgical operations. The decisions that are taken based on the information provided by the metallurgical accounting system should result in improved control and ultimately increased revenue.
METS provides up-to-date information that can be used to control mining and metallurgical operation accuracy. This involves checking of systems and procedures and establishing if they balance. This can be undertaken for all commodities.
In the past the METS team has found that existing metallurgical accounting systems have not been implemented and operated very well in some plants due to, among other factors, a lack of operator experience and training, a lack of understanding of metallurgical accounting principles and missing written procedures. METS has over the years assisted many operations by completing a metallurgical accounting audit and where weaknesses are identified, developed systems and procedures to ensure metallurgical accounting standards are met.
Financial modelling for resource projects and financial analysis are integral components of the project evaluation process.
Expenditures should include the initial capital outlay and sustaining capital, including investments in working capital, fixed assets, operating and maintenance costs, and environmental expenditures. Initial capital should include all expenditure to the point when the capital project is closed out. Contingency with respect to capital expenditures should be reflected as prescribed. Capitalised interest when appropriate should be included as a segregated cost to reflect the financing requirements but should be excluded from the cash flow analysis.
Any demolition (closure costs) for both project and life of facility would normally be included in the discounted cash flow analysis.
Real costs and prices (remove inflation impact) should be projected over the forecast period. Use forecasts that are appropriate to the timing of the revenues and expenditures, with adequate provision for sensitivity analyses in supporting documents, such as reserve block models and cost estimation models.
Cash costs incurred during the production and the realisation of all saleable products from the operation should be included. Where feed streams are processed through existing internal facilities these should be allocated full costs (fixed and variable). When applicable, current projections for treatment and refining charges provided for planning purposes should be used in determining realisation costs.
Any residual values or other recoveries resulting from the project, including the release of working capital should be included, but should not be netted against the value of the capital assets estimated for the project.
Revenue forecasts should be based on the current, commodity price projections provided for planning purposes. Commodity price forecasts invariably reflect inflated-dollar prices; to use these in real dollar cashflow models, the prices will have to be adjusted to remove built in inflation.
Each project must be evaluated on a full cost: stand-alone basis (i.e. should only include cash flows associated with the project). If synergies not specifically related to the project can be realized (e.g. tax shields, incremental cost benefits), they should be quantified separately and their impact on the various screens/measures (e.g. IRR, NPV, etc.) disclosed. Similarly, the project’s impact on the overall performance of the Business Unit should be evaluated and disclosed.
All levels and types of taxes should initially be included and calculated on a stand-alone basis. A sensitivity analysis should be prepared to indicate the impact of any tax synergies due to group benefits through tax consolidation.
Time horizons will vary depending on the project and the nature of the expenditures. As a general rule, cash flows should be calculated for the expected life of the project. Practically, given the diminishing accuracy of forecasts as time horizons lengthen, and the diminishing present value of cash flows many years hence, projections should not be performed beyond 25 years. Instead, a “terminal” or “residual” value should be determined for all cash flows after 25 years.
Process simulation and debottlenecking is a service that METS currently offers where we have a range of software packages available for this. Our team of simulation experts can assist with simulations to reduce risk, estimate mass balances and equipment sizes and determine the optimum arrangement of unit operations.
METS uses different processes and software packages to model and simulate a range of unit and metallurgical processes:
Simulations assist us in reducing risk, estimating mass balances and equipment sizes, and when used in the design stage, determines the optimum arrangement of unit and metallurgical operations, i.e. for plant optimisation, expansions and circuit modifications.
A range of information and outcomes are produced from data analysis, optimisation, design and simulation. This includes the storage and manipulation of models to assist us in testing a variety of plant configurations with no disruption to the plant. As a result the best alternatives are tested when it comes time for a plant trial and the adverse effects on production are minimised.
To learn more about our additional specialised services, including Financial and Process Plant Operations, please click below.
