Abstract

THOLANA, T.; MUSINGWINI, C.  and  NJOWA, G.. An algorithm to construct industry cost curves used in analysing cash cost performance of operations for selected minerals in South Africa. J. S. Afr. Inst. Min. Metall. [online]. 2013, vol.113, n.6, pp.473-484. ISSN 2411-9717.

South Africa hosts some of the world's largest known resources and reserves of minerals that are strategically important to the global economy. The country's mining industry contributes significantly to the national economy in terms of gross domestic product, export earnings, corporate tax receipts, remuneration earnings, and employment. Platinum, gold, and coal are significant minerals because they make the largest individual contributions to these economic indicators. Several factors impact the cash cost performance of operations that mine these minerals, thus affecting the future sustainability of these operations, which are generally 'price-takers'. It is therefore important that the cash cost performance of operations for these key minerals is analysed. Commercially available industry cost curves can be used for such analysis. However, some companies may not be able to afford to purchase these curves. This paper presents a simple Microsoft Excel^® algorithm for constructing the curves. It also demonstrates how the constructed industry curves were used to analyse the cash cost performance of South African mining operations for the three selected minerals for the period 2007 to 2011, which included the 2008 global financial crisis. The analysis revealed that the operations were affected by several global and local factors during the review period. The work reported in this paper is part of an MSc research study at the University of the Witwatersrand.

Keywords : cost curve algorithm; economies of scale; cash cost performance.

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