How To Make The Most Of A Mining Investment

Mining companies are unique in that they extract mineral resources and must therefore deal with ecological disturbances and other special problems. Like most enterprises, however, their primary motive must be to make money. The problem of mining investment starts with the question of what "make money" means. This article proposes an answer consistent with what economists call the theory of the firm and then applies it to two of the common, and perhaps unrecognized, problems connected with min¬ing investment. In essence, the concepts presented here call for thinking to terms of the income change associated with a given change it outlays or operating procedures To illustrate. ABC Distributing Co. has just discovered the power of advertising. It has raised its annual advertising budget from $25,000 to $50,000, and sales have, zoomed from 250.000 to 350,000 units. The company buy, for 50e per unit and sells at $l. This move has produced $50,000 of operating income for $25.000 in additional advertising expense. This looks great, so the next year the advertising budget goes up to $100,000. Sales go to 440,000 units. With 90,000 more units at 50[c] per unit, ABC sales are up by $45.000. Its advertising costs, however, went up $50,000.