How to Deal With Time Costs in Gemcom Whittle™
It’s possible to deal with time costs in discounted cash flow (DCF) analysis. Costs specified in the Operational Scenario node will be used for DCF analysis of a mining schedule in any of the Analysis, Schedule or Spider Graph nodes.
Correct application of time costs may lead to more accurate Milawa NPV schedules.
One Production Limit
If there is only one production limit being reached in each period, and the amount of time cost factored into your mining, processing or selling cost is correct, then cash flows will include the correct time cost allocation.
More Than One Production Limit
If two limits are applied (e.g. mining and processing), and they control the throughput during different periods, it’s impossible to allow correctly for the required time costs by factoring the amounts implicitly in the mining or processing cost.
In this case you can set up the time costs and/or replacement capital expenditures as explicit amounts per period, but you must also remove the amounts factored into the mining, processing or selling cost for pit optimisation purposes. If you don’t, some costs will be paid for twice in the analysis. Note: if you do this by changing the costs directly, the cut-offs calculated by Whittle will also be changed.
To avoid changing cut-offs, the Operational Scenario node has a Time Costs tab that allows you to enter in the factored (implicit) amounts directly. The schedules and DCF analyses that are subsequently performed in any of the Analysis, Graph or Spider Graph nodes can then use the original costs for calculating the cut-offs and can correct allocation of time costs when calculating the cash flows.
To learn more about Whittle, visit www.gemcomsoftware.com/whittle.