Valuation of Mineral Projects Based on Technical and Financial Modelling

This course aims to enhance an understanding of the business of mining. Actual operating mine valuations are a central focus of the course.

The basics of quantitative finance and the key interface with the accounting cash flow model will be covered as part of the course. No prior knowledge is assumed but the treatment is intensive. What is assumed is that attendees have had some exposure to the technical aspects of minerals and mining.

Workshop sessions are also an integral part of the course delivery and use will be made of the IC-MinEval software which automates the generation of MS Excel-based spreadsheets to produce models for a wide range of mineral projects. These models can be saved as fully linked workbooks and continued use is quite independent of the software. Attendees can generate their own models which can be preserved indefinitely and have normal Excel functionality.

Particular attention is given during the workshops to demonstrating how financial models should be set up with a rate of production appropriate to the size of the resource. Realistic associated capex and opcosts are determined with reference to CostMine. The circumstances in which it is appropriate to set up models based on a straight discount rate basis compared to including debt are outlined. In the latter case the approach to determining the appropriate level of debt will be explained.

Analysis will be undertaken during the workshop sessions on the financial performance indicators generated and there will also be an indication of the valuation that could be placed on the asset. Sensitivity analysis will be undertaken on key variables. Particular attention will be given to why sensitivity on variables such as mining dilution should not be considered. Consideration will also be given to the role of financial models in identify those technical variables that have the greatest impact on financial performance and then back-engineering that to the corresponding technical risk.

Discussion will be aimed at enhancing the level of understanding demonstrated in the analysis of the financial performance indicator generated and the degree to which conclusions can be supported by the assumptions made.

In addition to the presentation slides, attendees will receive a copy of the book Metals and Energy Finance, authored by Prof. Buchanan.

Participants are expected to have their own laptop computers available for this course.