1. © Greenfields Research
Ltd 2013
RESOURCE COST AND CAPITAL
602
“SHIRT-SLEEVE” COST MODELLING
John P. Sykes
Director, Greenfields Research
Provisional PhD Candidate,
Centre for Exploration Targeting & Curtin Graduate School of Business
john.sykes@greenfieldsresearch.com
johnpaul.sykes@postgrad.curtin.edu.au

2. © Greenfields Research
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“Shirt-sleeve” cost modelling: Contents
1 What is a “Shirt-sleeve” approach?
2
Precision and accuracy in mine
costs
3
Case studies in “shirt-sleeve” mine
cost estimating

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602 Resource Cost & Capital: “Shirt-sleeve” costs
What is a “Shirt-sleeve” approach?
Section 1 Section 2 Section 3

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“Shirt-sleeve” approach
shirt-sleeve [shurt-sleev]
• adjective
1. not wearing a jacket; informally
dressed: a shirt-sleeve mob.
2. warm enough to live or work in
without wearing a jacket or coat: shirt-
sleeve weather in November.
3. simple, plain, and informal; direct
and straightforward in approach,
manner, etc.: shirt-sleeve diplomacy.
“Shirt-Sleeve Approach to Long Range Plans” by R.E. Linneman & J.D.
Kennell, Harvard Business Review, March 1977
Image: Shutterstock, Source: dictionary.com

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Garbage In, Garbage Out (GIGO)
• A model is only as good as the data you put in.
• Thus:
• Focus of modelling should be on data and…
• If you only have basic data, you only need a
basic model !

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“Shirt-sleeve” cost modelling
• Simple
• Flexible
• Cost-effective
• Labour-effective
• Not data intensive
Image: Shutterstock
Ideal for:
• Early “idea” testing – principles & paradigms
• Asset comparison & benchmarking
• Macro-economic trend analysis

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Not a “short cut”
• Not about cutting corners
• About not over-resourcing at
early stages
• By understanding the
“principles” of costs
• Taking advantage that most
learning occurs at the
earliest stages
• To extend the metaphor, it is
not about an alternate
shorter route, but moving as
far down the right road as
possible, as efficiently as
possible.

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602 Resource Cost & Capital: “Shirt-sleeve” costs
Precision and accuracy in mine
costs
Section 1 Section 2 Section 3
12th September 2012
Metal Pages Electronic Metals (Guangzhou,
China)
Slide 8 of 36

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Accuracy & Precision
Inaccurate
Imprecise
Accurate
Imprecise
Accurate
Precise
Inaccurate
Precise

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Cost estimates not that precise…
• Mine cost estimates usually aren’t very “precise”:
• Rarely is one project’s cost estimate comparable to
another project’s estimate due to differing underlying
assumptions.
• Rarely can you re-produce the costs yourself given the
underlying data.
Company Project Study Year X Rate Tin Price
Consolidated Tin Mines Mt Garnet Scoping 2010 ? $18,000
Kasbah Resources Achmmach PFS 2012 1.00 $21,961
Stellar Resources Heemskirk Scoping 2011 1.00 $25,000
Venture Minerals Mt. Lindsay PFS 2011 0.90 $25,400
Source:
Company
websites

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…nor that accurate!
• Mine cost estimates usually
aren’t very “accurate” either.
• Nor indeed are the
“accuracies” that “precise”.
• Thus unless you have very
detailed, proprietary data the
level of modelling &
benchmarking you can do is
limited.
• Focusing on the few key
components of costs will tell
you a great deal.
Source: Bullock, Accuracy of
feasibility study evaluations would
improve accountability, Apr 2011,
Mining Engineering, p78-85

12. © Greenfields Research
Ltd 2013
602 Resource Cost & Capital: “Shirt-sleeve” costs
Case studies in “shirt-sleeve” mine
cost estimating
Section 1 Section 2 Section 3
12th September 2012
Metal Pages Electronic Metals (Guangzhou,
China)
Slide 12 of

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Ltd 2013
Case Studies
• Tin mine costs – the case study
– Fairly advanced analysis to understand the future of tin
prices and supply type
– Analysis comparing future sources (including projects)
of tin supply
• Rare earth mine costs – the test!
– More basic analysis to understand the future of rare
earths mining
– How should rare earth mine projects be compared?
• Both case studies work from first principles and
raise fundamental questions about mine costs –
by-products, capital costs etc

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“Shirt-sleeve” cost modelling: Conclusions
1
“Shirt-sleeve” cost modelling is a simple, principal
based way of understanding mine costs
2
It focusing on aligning the level of analysis with the
level of precision and accuracy in mine costs at
early stages of investigation
3
It has uses in comparing operations, understanding
cost trends and at the early stages of more detailed
investigations

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References
• R.E. Linneman & J.D. Kennell, “Shirt-Sleeve Approach to Long Range
Plans”, Harvard Business Review, March 1977
• Consolidated Tin Mines, Scoping Study Confirms Commercial Potential of
Mt Garnet Tin Project, 5 July 2010,
http://www.csdtin.com.au/announcements/asx-releases
• Kasbah Resources, Positive Pre-Feasibility Study for Achmmach, 31 May
2012, http://www.kasbahresources.com/index.php/investor-centre/asx-
releases?view=category&id=4&start=20
• Stellar Resources, Scoping Study Green Light for Heemskirk Tin Project,
http://www.stellarresources.com.au/images/ASX_Announcements/2011/11
0066SRL.pdf
• Venture Minerals, Pre-Feasibility Study Highlights World Class Potential of
Mt Lindsay Tin/Tungsten Project, 1 March 2011,
http://www.asx.com.au/asxpdf/20110301/pdf/41x4mwr6t6160g.pdf
• R. Bullock, Accuracy of feasibility study evaluations would improve
accountability, Mining Engineering, Apr 2011, p78-85

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Contact details
John P. Sykes
MSci (Hons) MSc ARSM MAusIMM FGS
Director, Greenfields Research Ltd (UK)
Provisional PhD Candidate, Centre for Exploration
Targeting & Curtin Graduate School of Business
Australia Mobile: +61 448 658 656
Australia Office: +61 8 9467 1860
Email: john.sykes@greenfieldsresearch.com
Web: www.greenfieldsresearch.com
Linkedin: http://www.linkedin.com/in/johnpsykes