Total development costs for these items would probably be near the $50-100 milUon range, and if 

 included in the return on investment, they would reduce it to a quite unrealistic figure. 



— Profitabihty Analysis (Tables 6 and 7). This illustrates in standard manner the estimation of the aimual 

 return on initial investment (ROII). Analysis is made of two cases with and without manganese included 

 in the sales of product. Returns of 9.8 and 5.2 per cent are indicated. Standard percentage rates are used 

 for administrative and selling expense, royalties, taxes and depletion allowance, and working capital, 

 although it is not clear just how domestic taxation and allowances would apply to a high seas operation 

 of this nature. 



For the amount of capital involved, even the better case is considered marginal. However, considering 

 the conceptual nature of the estimates, the possibihty of improving on the economics of such an 

 operation should not be dismissed. 



Table 7 

 PROFITABILITY ANALYSIS' 



1. Sales 



Ni/Cu/Co content, Mn discarded 



1.5 million tons© $42.07 $63,105,000 



2. Expenses 



Administrative (10 per cent sales) 6,311,000 



Royalties (5 per cent sales) 3,155,000 



Operating costs 41,810,000 



(plus 1/15 development capital) 1,000,000 



Total expenses 52,276,000 



3. Profit before taxes 10,829,000 



4. Depletion allowance (15 per cent of item 3) , . . . 1,625,000 



5. Taxable profits 9,204,000 



6. Taxes (52 per cent taxable profits) 4,790,000 



7. Net profit (item 3 - item 6) 6,039,000 



8. Capital 



Procurement 92,100,000 



Development 15,000,000 



Working (25 per cent operating) 10,452,000 



Total capital $117,552,000 



(item 7) 



9. Annual per cent ROII =#jT——-gT x 100 = 5.2 per cent 



'Rounded to nearest $1,000. 



VIM 86 



