Business, 17.02.2020 22:04 meganwintergirl

Meiger Mining, Inc., has just discovered two new mining sites for iron ore. Geologists and engineers have come up with the estimates below regarding costs and ore yields if the mines are opened:

Site A Site B
Variable extraction costs per ton $3.80 $4.00
Fixed costs over the life of the mine:
Blasting $150,000 $185,000
Construction 225,000 240,000
Maintenance 25,000 20,000
Restoration costs 40,000 35,000
Total fixed costs $440,000 $480,000

Total tons of ore that can be extracted over the life of the
mine: 200,000 160,000

Meiger's owners currently demand a return of 21 percent of the market price of iron ore.

a. If the current market price of iron ore is $8.22 per ton, what is Meiger's target cost per ton?
b. Given the $8.22 market price, compute the cost per ton for Site A and site B?
c. Should either of the mines be opened? compute the cost per ton for Site A and site B?
d. The engineer working on Site B believes that if a custom conveyor system is installed, the variable extraction cost could be reduced to $3 per ton. The purchase price of the system is $25,000, but the costs to restore the site will increase to $45,000 if it is installed. Given the current $8 market price, compute the cost per ton for Site B?
e. Should either of the mines be opened? compute the cost per ton for site B?

Answers: 3

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Meiger Mining, Inc., has just discovered two new mining sites for iron ore. Geologists and engineers...

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