Good info from SRV, even though the math ended up being corrected.

However, all the corrections stating that the true premium is 18.75% are also incorrect, and only one other poster (ReadySet) touched on this. Here's why:

The cost basis of production is not zero.

What does this mean? It means that it costs us money to produce the goods that we sell. Let me try to put it into perspective. Very arbitrary numbers, in very simplified layman's terms, but most posters here are quite intelligent and will quickly understand what this really means.

Let's say that we're pulling 1m tons per year from either source, regardless of which one we choose. 32% yields thus result in 320,000 tons of product, whereas 38% yields results in 380,000 tons. True, the latter is an 18.75% higher yield.

However, factor in the costs. All costs. Start with the abstract ones - capitalization of mine costs over the expected lifetime and expected production from the resource. Add extraction costs. Add transportation costs. Add smelting costs. Let's say that based on whatever this total amount per year adds up to, and based on whatever the arbitrary selling cost of the refined product is, the total costs of running the operation are equivalent to about 280,000 tons of finished product per year. I'm trying to keep it abstract. If people are more comfortable with numbers, let's say that we're selling the production at the time for $1200/ton and total production costs for the year were $336,000,000 including direct expenses and accruals and depreciation & amortization, that can be worked backwards to a tonnage cost basis.

So anyway, the end result is that in any year, the first 280,000 tons that we produce and sell are needed to make the mine "break even." After that, everything is "profit."

The 32% mine means that we have a net of 40,000 tons that we can sell at market and which provide our "profit" for the year.

The 38% mine means that we have a net of 100,000 tons that we can sell at market and which provide our "profit" for the year.

In this example, the 38% mine is actually 250% more valuable than the 32% mine.

Now I can't give you firm numbers here, because nobody knows what the cost final cost basis would be for the mine. However, based on industry standards with local predicted conditions worked in, I'm sure there are experts here who could peg a reasonable estimate.

Essentially, the higher the costs of production, and the more difficult it is to break even on a project, the more important it is to squeeze out a higher percentage. The multiplier effect is substantial.

The difference between 32% and 38% doesn't seem that big on paper. But in reality, it can mean everything. If the cost basis "bar" is around 32% to make the mine economic, the 32% resource will probably never be mined and the 38% can be.