Popov S.O., professor, eng. doctor, Maximova I.I. post-graduate

Krivoy Rog National University, Ukraine

Methodology of economic efficiency analysis in underground mining conditions

In modern market conditions the research of economic efficiency becomes a topical problem in underground mining conditions. This requirement becomes especially actual in dynamic crisis conditions. In addition to that the mining company management is impossible without performance of the qualitative economic analysis. The lack of management decision tools may be disastrous for both the mining company and its stakeholders.

Various market factors and engineering-economical characteristics of underground mining affect the mining enterprise activity. Such feature requires profound development of advanced methods of economic efficiency analysis.

The modern economic efficiency analysis is carried out in compliance with a combination of economic modeling and mathematical methods [1, 2]. This task can be solved by the implementation of economic-mathematical model of key parameters of ore extraction. It allows to define and to optimize the basic economic indicators, such as profit size, capital and operational expenses, profitability. Besides, the analysis and economic-mathematical modeling of underground mining allows to establish economic and strategic value of an ore deposit.

The following direction as organizational-economic modeling in economy, organization and management is successfully developed by scientists of Economic Cybernetics chair in Krivoy Rog National University.

In the course of research the analysis of existing methods and models of mining optimization has been carried out. It allows to draw the following conclusions.

1. Different criteria of an estimation can be used for the decision of a problem of economic efficiency increase by the economic-mathematical modelling of the basic parameters of ore extraction. The role and value of estimating criteria have changed in connection with the change of economic policy of Ukraine and its transition to the market relations.

2. The main lack of application of the reduced rates as estimated criterion, is regarded as follows: quality and value of received production and also completeness of mineral resource use is not considered. The criterion of specific profit considers the completeness of mineral resource use, however the quantities of produced ore, concentrate, pellets and efficiency of capital investments are not considered in calculation. For the decision of separate issues such as the choice of technological parameters and mechanisation of mining works models can use criteria of labour productivity, the mining and finished production cost price, level of mechanisation, etc. However, this criteria doesn’t completely characterise expenses of living labour.

3. Actually the factor of time and an external environment constantly influences the enterprises. Therefore, it requires the use of dynamic criteria and a flexible mathematical apparatus of a model.

On the basis of fulfilled analysis, authors develop the methodology of economic efficiency determination of underground mining by creation of economic-mathematical model for the optimization of key parameters of technological schemes of underground mining which directly influence production and economic results of the enterprise activity. It is set of the processes necessary for ore mining, transportations to the surface and shipments to the users.

Economic modeling of underground mining has to be carried out by economic criteria, considering set of different factors which can be controllable and uncontrollable. Optimization requires a precise understanding of how changes of these variable factors will impact an economic result [3]. Input factors can be classified in two groups: management levers – parameters that management can influence; environmental variables – external factors that also impact value, but these parameters are uncontrollable (competitor activity, demand, inflation, etc).

Similarly the results of modeling are based on the economic metrics (profitability, costs, revenues, capital, etc) and operational metrics that indicate the performance of an operation (volumes, market share, number of employees, etc).

In modern economic conditions there is an important task of definition of such criterion and restrictions of model which are most fully capable to reflect requirements to ore mining, extraction, production and to improve economic results of activity, considering dynamic economic environment. Generally the choice of parameters of the technological scheme of underground extraction can be carried out on the basis of technical and economic comparison of variants. Generally economic calculations include:

- calculation of the production cost price, profit, level of profitability;

- calculation of operating costs per 1 ton of the extracted ore;

- definition of specific investment expenses per 1 ton of the extracted ore;

- substantiation of technical and economic indicators of activity;

- definition of economic efficiency of application of the certain technological scheme of a shaft;

- definition of investment expenses on building of the enterprise and the size of production assets at the moment of enterprise commission;

- comparison of technical and economic received indicators with actual projects of new enterprises and the best enterprises of a branch.

The decision choice should be executed by economic criteria (a profit level, profitability, expenses), and also by such indicators, as the net present value (NPV) and a profitableness index. Thus, the constructed model should be directed on growth of indicators of economic efficiency of the enterprises of a mining industry in modern market conditions and should be founded on economic criteria of the estimation.

References

1. Arnold V. Economic estimation and resource planning / Arnold V. – Emerald Group Publishing Limited, 2010. – 115 p.

2. Massood S. Project Financial Evaluation and Estimation / Massood S. – USA: Massachusetts Institute of Technology, 2011. – 100 p.

3. Crawford G.D. Mine Optimization and Operations Research / Crawford G.D. // Pincock Perspectives, 2003. – Vol. 41(April). – P. 47-63.