Marble - Colorado Geological Survey

Textbook, Economic Evaluation and Investment
Decision Methods, Sixth Ed. 1987, by Franklin
J. and John M. Stermole.
A rough rule of thumb used by quarry valuation
experts according to Duncan Ogden is $.10
per cubic foot multiplied times the volume of
recovered, fullsized mill blocks. For this project
that would amount to: $.10 times 20 percent
recovery times 34,820,000 cubic feet equals
$696,400
Discounted Cash Flow
The Discounted Cash Flow (DCF) used in this
evaluation assumes several different manifestations
of production for four, five, and six
months of operation. These include three iterations
of production with tolling of the tiles by
an outside contractor, one six minth production
withthe inclusion of a tile line, and one iteration
of production with the assumption that
whole blocks only would be sold to fabrication
contractors for final disposition. At Conundrum
Creek some have significantly longer periods of
temperatures above freezing allowing longer
operation of water utilizing equipment.
The Discount Factor
The discount factor (DCF) utilized in this study
re-flects the corporate rate of return and the
individual rate of return. The corporate rate of
return used by CGS is that rate which a
conservative corporation must have to offset
cost of money, competing investments, and risk.
The corporate rate is assumed to be 18 percent.
This study is extremely sensitive to the discount
factor, a percentage either way makes a
difference of hundreds of thousands of dollars.
Costs and Revenues
The costs and revenues used by CGS have come
from the experts mentioned above and are subject
to a wide range of interpretation. For this
study CGS assumed that costs would fall under
the following categories: Development, the
building of a staging area, improving roads, and
site preparation. Quarrying, which includes
transportation. Fabrication, the processing of
blocks into finished slabs, of broken blocks to
tile planks, and sawing and guillotining waste
into ashlar veneer strips.
The cost and revenues per product are summarized
below. Quarrying costs are assumed at
$6.00 per cubic foot of usable marble. Any block
that is quarried has this cost which includes direct
labor, haulage to the fabrication facility assuming
that it is reasonably close, and indirect
cost such as overhead. Fabrication costs for
slabs of 5.5 feet by seven feet are approximately
$175 per slab. This figure includes the $6.00 per
cubic foot as well as overhead and direct labor.
Capital costs include quarrying equipment,
fabrication equipment, and a building to house
the fabrication equipment. Land for this building
is assumed to be located near Basalt, Colorado,
where there appears to be opportunity for
an eight acre site of this nature. CGS contacted
the Eagle County Assessor's Office for the cost
of such a site and found it to be $5,000 per acre.
The product line for this operation includes
slabs cut from large quarry blocks. These slabs
are roughly 5.5 feet in width by seven feet to
eight feet in length and could vary in thickness
but are assumed here to be .75 inch. The large
quarry blocks of these dimensions weigh between
18.5 and 20 tons and have a volume of
over 200 cubic feet. The slabs which can be cut
from these blocks are worth between $8.00 and
$15.00 per square foot. CGS assumed $9.00
because the material would be on the low side
of the market. A quote from a buyer yielded a
similar number. CGS also assumed that there
would be loss in slab cutting due to breakage,
imperfections in color or quality, or inclusions
of chert or pyrite. Production from the blocks
would be 56 slabs. This 85 percent recovery is
considered low by industry standards but is
justified by the materials tests which place the
marble in the lower spectrum of allowable
strengths. The set up of the fabricating plant is
directed toward producing these polished slabs
which could in small part be custom fabricated
into sink and counter tops but more likely will
be sold to distributors These distributors expect
a 100 percent markup to the contractor.
The second product expected from this operation
is 12 inches square by .375 inch thick
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