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    2 days - £1500
    3 days - £2025
    5 days - £3375
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21 November 2017

There are some notable similarities between mineral and petroleum projects. Both are based on depleting resources and therefore companies are under constant pressure to replace reserves.

The products are commoditised and globally traded on both spot and futures markets as well as being based on long-term contracts (iron ore, coal and gas supplies). These are products that have low demand elasticity, are capital intensive, require long development lead times and are associated with high technical and commercial risk.

There are also environmental compliance and regulatory burdens associated with the development of all natural resource projects.

More information

Background

Management and Business (Cash Flow Modelling) 

This session considers the links between the “accounting model” (potentially net profit, earnings per share, price to earnings ratio, even return on investment %) and the “economic model” (present value of the project’s expected future cash flow). It outlines the way in which cash flow information is constructed from basic project details and then to represent that information as a set of accounts, as this is widely used for presentation and reporting of financial information. It could be argued, however, that cash flow information is much more useful.

For mineral projects particular attention has to be paid to the treatment of the key independent variables such as grade, and dependent variables, such as grade-tonnage relationships, and the way these influence the rate of mining, associated costs and optimisation of the value of a project. Petroleum projects are based on initial volumetrics, segment production and annual production profiles, revenue, operating costs and capital costs. The distinction between technical appraisal and financial factors will also be addressed and the reason why discounted cash flow (DCF) models need to be integrated correctly into financial accounts explained. This will be linked to concepts of shareholder value and the role of gearing to maintain an efficient balance sheet.

Schedule

Management and Business: Cash Flow Modelling

Cash Flow Modelling and Financial Accounting
Principles. Valuation of Mineral of Mineral Projects. Analysis of Risk and Uncertainty.
Time
Session 
Contributors
 
09:00-10.00
 
 
 
 
 
 

Cash Flow Modelling and Financial Accounting

Accounting versus Economic model. Principles.  Performance indicators. Nominal versus real. Gold project case history.

D Buchanan

10.00-11:00

Cash Flow Modelling and Financial Accounting.

Valuation of Mineral of Mineral Projects. Terminology and share performance metrics. Methods. Analysis of Risk and Uncertainty. Sensitivity analysis. Monte Carlo simulation.

D Buchanan
11:00-11:30
Break
 
11:30-13:00
 
 
 
 
 
 
 

Cash Flow Modelling and Financial Accounting
Project Finance and the Cost of Equity. Weighted average cost of capital and capital asset pricing model. Integrated economic and accounting model. Optimisation of gearing.

D Buchanan
13:00-14:00
Lunch
 
14:00-15:30

Cash Flow Modelling and Financial Accounting
Petroleum Fiscal Regimes. 

Colin Howard
15:30-15:45
Break
 
15:45-17:00

Cash Flow Modelling and Financial Accounting
Generation of Financial Models.

Colin Howard

Presenters

Professor Dennis Buchanan (Course Director)

Emeritus Professor of Mining Geology & Senior Research Fellow, Imperial College London 

Professor Buchanan works jointly between the Department of Earth Science and Engineering and the Business School at Imperial College London and will act as the Course Director.   

Professor Buchanan's current research interest lies in addressing the underlying technical principles applying to mineral projects and demonstrating how these influence financial modelling. He has 36 years’ experience teaching mining geology, mineral exploration and mineral project appraisal and is responsible for the MSc in Metals and Energy Finance.  This is a joint degree between the Department of Earth Science and Engineering and the Business School at Imperial College. Professor Buchanan has worked as a Mining Geologist in both gold and platinum mines in South Africa and had wide experience as a consultant to industry, as an expert witness and in designing and delivering short courses for industry

Colin Howard
Director, CTH Resource Economist Ltd

Colin Howard is a consultant petroleum economist, specialising in the evaluation, fiscal modelling and risk analysis of hydrocarbon projects. Prior to establishing his own consulting business, he worked with Schlumberger Plc, providing software support to international oil and gas companies. He holds MSc degrees in structural geology from the University of Pennsylvania and in Mineral Project Appraisal from Imperial College London. He has extensive experience in modelling a wide variety of hydrocarbon tax regimes and production sharing contracts throughout the world, as well as presenting professional training courses. Clients include Royal Dutch Shell, BP, BG Group, Hess Corporation, and Sonatrach, Algeria.