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geowizard
17:44:58 Sun
Apr 25 2010

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"Economy of Scale"

All endeavors in life i.e gold mining or starting up an Airline involve economics.

I would like to throw out a few of the economic constraints that affect what is known as economy of scale.

I have a new 3" Proline combo. What are the economics in a given gold producing area? Should I highbank or dredge? Will I get rich?

The 3" Proline combo comes with HP300 pump and is advertised to run 8 cubic yards per hour. A 300 gallon per minute pump running 10 percent solids in a slurry will pump 18000 gallons per hour or 9 cubic yards per hour in "dredge configuration".

Given .01 ounce per cubic yard gold, that's $90.00 an hour at $1000 an ounce gold. If the gold is .900 fine and the refiner keeps 10 percent and the property owner keeps 10 percent, then you make around $63.00 an hour operating a 3" dredge. If you burn a gallon of gas @ $5.00 a gallon, the "net profit" is about $58.00. per hour.

Operating in Highbanker configuration, 9 cubic yards represents 40 x 9 = 360 five gallon buckets an hour for the same through-put. Yes, it's six buckets a minute!

A highbanker will require more manpower and an equal division of the net revenue.

A six inch dredge has a much greater throughput. At 900 gallons per minute using two 9 HP Honda driven P359 pumps @ 48,000 gallons per hour, and 10 percent slurry = 27 cubic yards per hour. This amounts to 0.27 ounces per hour in the same ground.

The six will net $189. an hour = $1890. per 10 hour day with the numbers given (fuel not included).

A 200 yard per hour washplant/sluice configuration is much more profitable and shows a greater economy of scale.

So, in summary economy of scale is a consideration if you plan to mine for recreation or profit.

Yes, these numbers represent the theoretical high side. Your results may vary and will in all cases be less than the high side values given!

It would be interesting to see opinions on the subject.:welcome:


[3 edits; Last edit by geowizard at 18:10:19 Sun Apr 25 2010]

  
peluk
19:17:47 Sun
Apr 25 2010

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Re: "Economy of Scale"

Let me throw a wrench in the works,Geo.I have seen in my own mining,different prevalent specimen shapes requiring different
methods of recovery.None of the material I am dealing with has a heavy limestone content for example.That would create a slurry that is denser than that found on the coastal plane.

I don't like working in material that obscures visibility in the sluice.At the same time,there may not be flat specimens or even very fine gold in another deposit,rich in limestone, so a miner can run faster with less risk of loss even though settling/recovery action is not as easy to see.

My guess is that you have to work a given quantity with the tools you've chosen first.Then you can see if the feed speed you planned on is acceptable to achieve the optimal recovery in that particular material.

Some miners apparently get in a rut.If they recovered gold someplace operating in such and such a manner,they can't adjust to the thought that it won't work ideally elsewhere.

This winter I cleaned some material for a man who got it from a dredge offshore.He said he watched the outflow and sampled it while on the dredge.He told the owner that he was finding gold stuck to rocks but there was no clay binding it.It was merely adhering by friction or compression....and it was flattened.
It's just one more example of how recovery can not be projected based on methods used elsewhere.

Even that Proline 3"combo may require some changes in the mats or riffles where it would be acceptable in another setting.

  
jminter20
21:48:18 Sun
Apr 25 2010

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Re: "Economy of Scale"

Geo:

Can you give me a rating on your 3" Proline highbanker/dredge. I'm probably going to buy one and wondered how you liked it, ie the good, bad and ugly.

Jim

  
jminter20
04:12:39 Mon
Apr 26 2010

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Re: "Economy of Scale"

Geo:

Maybe we can compare notes next year on the 3". I should have some experience using one by then. Based on Proline information, it appears to be a machine that one guy can work the shallows. Maybe not as portable as a true dredge, but workable.

Wish I could come up and work that ground with you. Can't do it this year, maybe next. I'd like to see that size equipment working and I 've always wanted to see that country.

Thanks,

Jim

  
aumbre
05:16:16 Mon
Apr 26 2010

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Re: "Economy of Scale"

How large is the deposit? A person would not want to start up a large, efficient operation and mine the deposit out in two months.
Many of the start-up costs (permitting, ore testing, and treatment plans) would be equivalent for large or small mines.
How much money do you have? Or how much would it cost to borrow enough to start an efficient operation?

  
leonard
12:11:49 Mon
Apr 26 2010

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Re: "Economy of Scale"

Quote: geowizard at 00:48:15 Mon Apr 26 2010


I had the combo shipped to Nome the summer before last. Got it all set up on East Beach. It was the calm before the storm! Storm blew in. Peluk helped save me from the storm. Stored the combo at peluk's place til last year. Peluk helped re-pallet the combo.


So I wasn't the only one that got "stormed" out. I kept getting the "real prospectors don"t let a little weather bother them" speech. Funny thing though, I didn't see many "real prospectors" out there either. :smile: :smile: :smile:
Leonard

  
aumbre
17:47:01 Fri
Apr 30 2010

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Re: "Economy of Scale"

When investigating the economy of scale variables should be considered because of the risk on the investment if things donít work out as planned.
Geowizard, it appears you are creating a type of economic model for the operation of a small suction dredge. It seems to me that your production figures are unrealistically high.
Scale of operations gets interesting / critical when contemplating starting a hardrock mine.

  
peluk
21:31:12 Fri
Apr 30 2010

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Re: "Economy of Scale"

Under economy in the dictionary I see 1)thrifty management of money and materials.The term"economy of scale"I would prefer to read,"economy per scale"....or economy according to scale".

How can a miner think in terms of economy when dealing with unknowns.He is actually thinking in terms of risk and that would be like trying to teach a hyperactive child using methods meant for a more manageable one.The whole project can come unglued and it is derailed at least for a time.Steady progress is lost.

If a miner goes into a project with a history of profit on a smaller scale in the same material,he can then decide if it is feasible to scale up.Of course that miner has got to know the ground ahead has similar potential.The miner also has to know whether . that potential and the potential return will continue after the upgrades have been paid for..That would insure that the project paid for its tools and brought a profit as well.Anything less would just be something other than a thrifty business undertaking or an expensive hobby.

Here's an example using Leonard's observation of the beach mining.The reason no activity was taking place was that the surf was rough.To put a stinger (intake pipe) out in such conditions,is not practical.You'd be sucking air or plugging the intake or pumping sand through the pump etc. One guy tried because he was new to it.He ruined a pump.He pumped out of a distant pond and ran dry without shutting down.He let his pump flip over in the surf as well.That''s not thrifty.He's down3-5 hundred dollars and his highbanker wasn't even set up properly in the first place.He figured,as many do,"run more materia".That doesn't work.If you can't catch it on a smaller scale,why magnify losses on a larger scale.

In that case,during that unusually stormy summer,it was just a matter of waiting until conditions improved.If you were visiting,that became difficult since food costs to fuel idle miners would have to have been factored in.

This winter,I talked to a family member of a group mining a deep deposit.It is beneath 60' of overburden.When they got closer to pay,they found the ground had tunnels going here and there.The pay was good but the costs were prohibitive.It would seem that could have been figured out ahead of time.


  

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