Schedule

Times

Topics 

09.00 – 11.00

1. Introduction. 

Principles of DCF Modelling. Discount rate. Net Present Value. Internal Rate of Return. Payback Period and Choice of Discount Rate. Impact of different discount rates over time. Cash flow for a mineral project. Scenarios illustrating the range of economic performance indicators. Case history of gold operation.  Setting up base case. Nominal versus real.

2.1 Valuation of Companies  

Professional Codes. Relationship between resources and reserves. Alternative valuation methods. Accounting vs Economic model.  Optimisation of capital structure. Treatment of sunk capital. Acquisition cost and valuation of long-life projects.  Share performance metrics: Terminology. Building a DCF model versus alternative approach to determine NPV. Share performance metrics: Interpretation and Implication. Capital Raising – Dilution of existing shareholders. Accretion. Setting share price, share splits and dual-class shares. Share repurchase. Multiple-partner modelling. Accounting impairment..

11.00 – 11.30

Break

11.30 – 13.00

2.2 Case Study – Single Project Copper Company  

Variables and financial performance indicators. Sustaining and sunk capital. Share price movements. Share performance metrics. Quantitative finance. Grade-tonnage relationships and pit optimisation. Role of debt. Multiple separate mining operations.

3. Workshop Session 

DCF exercise based on annuity tables. Review of spreadsheet-based solution.

4. Analysis of Risk and Uncertainty 

Sensitivity analysis. Application to Monte Carlo simulation techniques. Treatment of multivariant systems. Brownian motion and probabilistic modelling. Crystal Ball modelling of gold project. Precision versus accuracy.

13.00 – 14.00    

Break

14.00 – 15.30

5.  Project Finance and the Cost of Equity 

Sources of capital funding. Weighted average cost of capital (WACC). Integrated economic and accounting model for a simple gold project demonstrating the interrelationship between DCFs and the financial accounts. Capital asset pricing model. Optimisation of gearing. Project Finance cover ratios

6. Demonstration of IC-MinEval. 

Treatment in the financial model of profits after tax before interest (ATBI), profit before interest and tax (PBIT),  profit after interest before tax (PAIBT) (and profit after interest and tax (PAIT).

15.30 – 15.45

Break

15.45 – 17.00

7. Value Creation in Mineral Projects 

The cycle of value creation in mineral projects. Exploration Stage. The pyramid reflecting the evolution of a gold mineral exploration and evaluation programme. Drivers – Commodity Prices. Resource Base and Asset Life – Mineral Resources. Synergies and Portfolio Optimisation. Single project mining company stages of development and funding options and sources of capital. Funding Options for Mineral Projects  - Pre-Initial Public Offering, Listing, Joint Venture Agreement and Project Finance. Multiple-partner modelling.

Times

Topics

09.00 – 11.00

8. Resource Evaluation 

Sampling. Diamond drill rig, crowns, core and core storage. Process Mineralogy. Concepts around Geological Continuity. Polygons of Influence and Inverse Distance.

9. Resource Evaluation 

Geostatistical Methods Experimental semi-variogram. Variogram showing the relationship ỵ(h) which relates the semi-variance of sample differences to distance between samples. Resource block model. Grade-tonnage relationships. Reserve and Resource Definitions. Drill spacing. Evaluation versus Production. Break-even and cut-off grade.

11.00 – 11.30

Break

11.30 – 13.00

10. Valuing Mining Assets using Real Options. With Chris Worcester 

Decision tree at pre-feasibility stage after NPV optimisation. Options. Greenfield gold project case study. Building a Financial Model and Calculating the WACC. Inputs for the Monte Carlo Simulations. Real Option Analysis – Theory and Application to Mining Projects. Black-Scholes-Merton Formula – Inputs

13.00 – 14.00    

Break

14.00 – 15.30

11. Metals & Energy Project Appraisal & Finance 

Nomenclature of documentation generated  in mineral project development. IPO Prospectus, SEDAR  and NI 43-101.Preliminary Feasibility Study (PFS) - Elements and Characteristics. Cost Estimation. Relationship Cost to Capacity.  Asset Optimisation. Full Technical Feasibility Study (FTFS)– Elements and Characteristics. Engineering Design Stages . Feasibility Studies  and the Information Memorandum. Construction. Construction Monitoring. Production Monitoring. Project Finance Parameters.

15.30 – 15.45

Break

15.45 – 17.00

12. Nickel Sulphide Open Pit Mine - Project Finance Case History.

IC-MinEval-based workshop session. Open pit nickel mine. Sample of DCF model worksheet. Annual cover ratios. Scenario analysis. Optimisation of gearing. Cost estimates. Debt performance indicators (debt service coverage and ratios such as loan life, project life, reserve tail, interest cover, principal cover and residual cover.).  Different stakeholders. Reserve tail. Convergence of technical and financial risk. Multiparter scenario analysis – determining relative return for different stakeholders as a function of investment contribution. Hedging provision and impact of lost opportunity if metal prices increase. Sensitivity Analysis. 

Times

Topics

09.00 – 11.00

13.  Share Structures 

Deal structure, Share price and stakeholder valuations associated with the progression from a private placement to undertake exploration through to an Initial public offering to fund evaluation drilling. Treatment of options purchased for below an issue price and then distribution of shares held by stakeholders when exercised if this is below an IPO price. Consideration of monies added to the company treasury during corresponding funding stages.

14. Case Studies –

14.1. Nickel Laterite Project at the Development Stage – Rights Issue

Nickel laterite deposits. Reaction of olivine to goethite. Murrin Murrin. Case study. Statement of equity. Share performance metrics. Technical risks. Theoretical Ex-Rights Price (TERP). Dilution of with respect to the original shareholding. Accretion with respect to the value of the holding.

14.2 Capital Raising for a Distressed PGE Mining Operation

Statement of equity as at 1st October 2012.  Rights issue announced on 9th November 2022. Share performance metrics after rights issue. Statement of equity from rights issue to take over

11.00 – 11.30

Break

11.30 – 13.00

15.1  Valuation of a Multiple Project Copper Mining Company 

Multiple Operations Split between Part Ownership. Consolidation in the financial statements. Selling concentrate into the market under an offtake agreement rather than to enter into a hedging programme. Merits of using cash to enhance dividends. Share performance metrics. Valuation metrics linked to NPV based on technical and financial variables.

 15.2 Valuation of a Multiple Operation Gold Mining Company

Takeover strategy. Hydrometallurgical processing of the refractory ore includes precursor pressure oxidation stage prior to conventional CIL extraction of the gold.

13.00 – 14.00    

Break

14.00 – 15.30

16.1 Net Smelter Returns 

Off-take agreements and toll smelting.  Treatment Charge, Refinery Charge (TC/RC) and Price Participation (PP). Case histories. Gold project. Lead, zinc silver project

16.2 Andean Skarn Silver, Lead Zinc Projects 

Valuation of a 22 Mt silver-rich deposit with associated Zn and Pb mineralisation. Determination of the cost of equity as a function of the change in gearing.  Optimisation of NPV. Optimisation of NPV. Debt performance indicators (debt service coverage and ratios such as loan life, project life, reserve tail, interest cover, principal cover and residual cover.)

Case study considering the merits of using debt as an alternative to company cash flow in developing a satellite deposit close to an existing mine. It is specifically designed to  address the modelling prices and repayments to the bank both by using a polymetallic deposit where prices changes are not correlated and may even be self-compensating, but considered within the context of hedging strategies.  These in turn take into account setting limits on the amount hedged to allow the potential upside in metal price to be preserved to the benefit of equity investors. 

15.30 – 15.45

Break

15.45 – 17.00

17. Valuation of a Multiple Operation Polymetallic (Ni-Cu-Precious Metals and Zn) Mining Company

In this case study the company has complete ownership and manages an integrate up-stream mining and mineral processing operations that provides concentrate to their downstream smelting and refining facilities. The company mines a range of different mineral deposit types.

Times

Topics

09.00 – 11.00

17.2 Valuation of a Multiple Operation Polymetallic (Ni-Cu-Precious Metals and Zn) Mining Company. Assignment and Workshop:

Compile response and deliver to group.  Feed-back.

11.00 – 11.30

Break

11.30 – 13.00

 18. Constraints on Mineral Resource Development

ESG – Environmental impact, social license and corporate governance.  Resource nationalism. Assessment. Case studies. Tailings dams.  Occupational Health and Safety. Cost of Environmental Compliance and Closure Provision. Site Visits and Due Diligence. Mining Legislative Framework. Sustainable Development and the Moral Case for Mining. Multiple partner modelling.

19. Case History – Iron Ore 

Iron ore minerals – Hematite and Magnetite. Magnetite and ilmenite. Magnetite, vanadium and ilmenite. Mine blocks. Product specifications. Product specifications. Yield optimisation curve. Infrastructure.

13.00 – 14.00    

Break

14.00 – 15.30

20.  Case History – Diamonds. 

Geological settings and pricing. Alluvial deposit case history.  Evaluation of projects. Instability of DCF models. Primary kimberlitic projects

21.  Metals streaming 

Comparison between Different Sources of Funding for the Development of a Mining Project. Case History -Aljustrel copper-zinc-lead-silver in Portugal. Metals Streaming Companies.

15.30 – 15.45

Break

15.45 – 17.00

22. Introduction to the On-Demand edumine Valuation course.

Review five case studies which are considered, four of which incorporate multiple projects split between part ownership (Antofagasta and Ivanhoe analogues) and complete ownership (Boliden and Agnico-Eagle analogues). This is a much more common structure in the mining industry than the single operation scenarios  modelled in earlier sessions.