Time Value of Money and Optimal Location of Mining Facilities

This paper examines the impact of the time value of money on the location of mining facilities, as examplified by a central processing plant serving several mines. Three approaches, the Euclidean-Distance Approach, the Gravity Centre Approach, and the Rectilinear-Distance Approach, commonly applied to a single facility location problem were employed in the study. The objective function in all three models was the updated value of the following three costs influenced by the processing plant location and defined within the framework of the continuous model of value representation and the continuous interest rate convention: I. the costs of transporting the useful mineral from the mines to the plant, 2. the costs of constructing the transportation links between the mines and the plant, and 3. the costs of maintaining these links over time. Results of the study show a substantial impact of the time value of money on both the processing plant optimal location and the opportunity cost of neglecting the time value of money in the locational considerations.