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VIII-2
Case 2: Mining height 6 feet; mine recovery 80%
Case 3: Mining height 4.5 fee nine recovery 90%
All sylvite financial analyses were done in the context of case 3.
In addition to the mimng scenarios described above, several development scenarios
were evaluated. In the first case, which is indicated in this report and accompanying data
presented in the appendix as Scenario I, no additional development costs are incurred and
mining begins on I January 1996. Development Scenario 2 is associated with new shaft
capital costs of S5 million and ,nining beginning 1 January 1997. Development Scenario 3
is modeled as construction of a new $150 million plant, with 46.7% of development costs
allocated to langbeinite and 53.3 % allocated to sylvite. If the new plant is built, costs are
evenly allocated over the two '~ars of construction (1996 and 1997) and operations are
assumed to begin on I Janual") : 999. Only the combined area was evaluated in the
context of build ::1g the new plant.
Expected present values and net present values are affected by the mining scenario
considered. Since cash flows are delayed during minin; development scenarios 2 and 3,
present values for all analyzed variables will be impacted. The tabular data presented in
the attached appendix illustrates this point.
A discount rate of 15 % was used as the base case for evaluation of potash
resources. For the combined area, the expected present value E(PV) of the market
revenue from sylvite is estimated as $230 million if mining begins on I January 1996,
$190 million if mining begins on 1 January 1997, and $140 million if mining begins on 1
January 1999 see Table 6. The expected market value for langbeinite in the combined
area is estimated as $180 mUlion if mining begins on 1 January 1996, $160 million if
mining begins on 1 January 1997, and $120 million if mining begins 1 January 1999.
These data are summarized in Tables '-9.
In the WIPP area, the expected present value E(PV) of the revenue from sylvite is
estimated as $190 million if mining begins on 1 Jam: -y 1996 and $17') million if mining
begins on 1 January 1997. The expected present marliet value for langoeinite in the WIPP
area is about $140 million for mining cases 1 and 2 and is $170 million for mining case 3
if no new development costs are incurred. Similarly, mining cases 1 and 2 are associated
with a revenue E(PV) of S120 million if $5 million in new development occurs, and $150
million if nuning case 3 obtains in this scenario. The :'fferences in expected present
market values between scenarios is attributable to the L:t that five more years of
langbeinite mining activity within the WIPP site are available under mining case 3 (4.5 ft
minmg height and 90% mine recovery).
Finally, if a new plant is built, the expected present market value of combined
area langbeinite is $120 million if a 15 % discount rate is used. These data are
summarized in Tables 7-9.
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