Engineering Economy Analysis on the Production of Iron Ore in Nigeria

R. A. Adebimpe, J. M. Akande
DOI: 10.4236/gm.2011.11002                

Abstract

In line with the Federal government decision to attract direct foreign investment to the solid mineral sector and to further diversify the Nigerian economy; this study used the discounted cash flow micro-economic as-sessment to evaluate large-scale iron ore production in Nigeria. The iron ore project has an initial investment cost of US$ 73.934 m, annual expenditure and benefit of US$ 48.128 m and US$ 270 m respectively .The net present value (NPV), internal rate of return (IRR) and payback period of financial analysis at 100% ca-pacity utilizations are US$ 833.10 m, 444.36% and 6 years respectively. The economic assessment also shows a positive NPV at both 75% and 60% capacity utilizations. The study further show that the iron ore project has good economic potential and will also guide potential investor(s) in making decision on whether or not to commit resources to the project.

Keywords

Iron Ore, Micro-Economic Assessment, Solid Mineral Sector, Nigeria

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	B. O’Reagan, and R. Moles, “Investment decisions of interna-tional mining firms: Policy approaches,” Simulation. Vol. 78, No. 6, 2002, pp. 362-379.
[2]	S. Iloiu, and M Iloiu, “Ore reserve estimation and project profitability,” Annals of the University of Petrosani, Mechanical Engineering, Vol. 10, 2008, pp. 85-88.
[3]	E. V Domingo, and E. E. P Lopez-Dee, “Valuation methods of mineral resources,” 11th Meeting of the London Group, Pretoria, South Africa, 26-30th March, 2007. pp. 7.
[4]	K. Dagdelen, “Open pit optimisation –Strategies for improving economics of mining projects through mine plan-ning,” .17th International Mining Congress and Exhibition of Turkey- IMCET 2001.Turkey. pp. 117.
[5]	S. Rupprecht, “Establishing the feasibility of your proposed mining venture,” International Platinum Conference ‘Platinum adding value’. The South African Institute of Mining and Metallurgy, South Africa, 2004, pp. 243.
[6]	Mines Department,“Inventory of Nigerian minerals, mines and miners,”Federal Ministry of Pe-troleum and Mineral Resources. Lagos, 1993, pp. 1-10.
[7]	U. Turaki, “Management of the mineral sector in a depressed economy,” NIOMP experience. Nigerian Mining Journal. Vol. 2, No. 1, 1997, pp. 12-19.
[8]	M. Samis, “Valuing a multi-zone as a real asset portfolio-A modern asset pricing(real options) approach,” 5th Annual International Conference on real options-theory meets practice. Los Angeles, California, United States, 13-14th July, 2001. pp. 1.
[9]	D.,Csiminga, and M. Iloiu, “Economic analysis of mining projects,” .Annals of the Oradea University. Fascille of Management and Technological Engineering, Volume VI(XVI), 2007. pp. 2094.
[10]	A. O, Solomon, O. A Adewole, A. U, Garba, A. A Odunaike, S. M, Kollere, and P. O Ajiboye, “Study on magnetic concentration of Nigerian Itakpe sinter concentrate to a Midrex-grade con-centrate,” Maejo International Journal of Science and Tech-nology. Vol. 3 No. 03, 2009, pp. 400-407.
[11]	P. U Umunakwe, “Developing a new mine-The Itakpe case,” Pro-ceedings of the annual conference of Nigeria mining and geo-sciences society, Jos, 1985, pp.
[12]	E. P. DeGarmo, J. R. Canada, and W. G. Sullivan, “Engineering economy,” 6th edi-tion. Macmillan, New York. 1979.
[13]	M. O Ilori, I. A. Irefin, and A. A Adeniyi,. “Engineering economy studies on the pro-duction of non-alcoholic beverages from some tropical crops,” UTechnovation.U Vol. 17, No. 11/12, 1997, pp. 715-721.
[14]	T. “Agboola, Naccima decries high interest rate,”The Na-tion(02/04/2009). Lagos.
[15]	O. Chiama, “Inflation slows further to 13.3%,”The Nation.(20/05/2009) Lagos.
[16]	O Adeoti,., M. O., Ilori, T. O Oyebisi,. and L. O Adekoya, “En-gineering design and economic evaluation of a family-sized biogas project in Nigeria,” UTechnovationU, Vol. 20, 2000, pp.103.
[17]	T. A. O’ Hara, “Quick guide, to the evaluation of ore bodies,” CIM Bulletin (no 814) 73 (2), 1980, pp. 87-89.
[18]	T. A. O’ Hara, and S.C. Suboleski, “Chapter 6:3: costs and cost estimation,” In: H.L Hartman, (Senior Editor): SME mining Engineering Handbook 2nd Edition (Vol. 1 ), SME, 1992, pp. 405-424.
[19]	W. Hustrulid, and M. Kuchta, “Open pit mine planning and design,”2nd Edition. Taylor and Francis London, 2006, pp. 137-152.
[20]	Federal Republic of Nigeria, “Nigerian minerals and mining act,” Federal Republic of Nige-ria., 2007, A479- A538.