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CONSIDERATION, SELEf.TION, AND EXPLANATION OF THE ECONOMIC FEASIRiLITY <br />ANALYSIS <br />The western coal market varies continually and historically has been subject <br />to sudden wide swings in volume and quality requirements. Changes in <br />environmental laws and the availability of alternative sources of fuel both <br />here and abroad impact coal development in the liintah Southwest Rosin, more <br />probably than anywhere else hecause of this coal heiny a significantly <br />yreater distance front market. As conditions change, prudent business <br />requires economic analysis of different cost factors in the production and <br />delivery of the coal. Since a major portion of the total cost and hence <br />competitiveness of North Fork Valley Mines is transportation to market, <br />alternative transportation systems must continually he evaluated and com- <br />pared. <br />CWI's truck haulage system presently in use for moviny coal from the portal <br />to the train loadout must continually be monitored to ensure that the com- <br />pany is employing as cost efficient a method as possible, consistent with <br />preserviny the mine's short and long-term competitiveness. This means <br />identifying the cost per ton for transportation based on different levels of <br />production, which in turn becomes a matter of assessing the volume and <br />security of demand over time. Over estimating the market share for a North <br />Fork Valley mine could lead to capital investment which would exclude that <br />mine from competing in a smaller market due to negative economics of scale. <br />Various alternatives are currently available for comparison to the existing <br />truck haulaye system, These include an overland conveyor, Steven's Gulch <br />truck dump and short conveyor, and a pneumatic capsule pipeline. <br />• A consistent method of economic analysis must he used. Although other <br />methods may be available, CWI uses present worth of total costs for compari- <br />son. <br />Present worth total cost is defined as all capital and annual cost for <br />project life expressed at time zero, for the start of the project. It thus <br />focuses on three critical variables: <br />1) It considers the time value of money. <br />2) It is a function of interest rate used, <br />3) It compares varying project life. <br />After the annual costs (operatiny expenses and maintenance and repair <br />expenses) are totaled, they are discounted back to time zero. This is done <br />utiliziny the uniform series present worth equation where "i" equals the <br />interest rate and "n" equals the nunber of interest periods: <br />(annual cost) X (1+i)n-1 = Present Worth <br />i +i <br />3 <br />