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Economic modelling and valuation are at the core of mining investment decisions. This course introduces concepts and methods that will allow participants to understand mine economic valuation techniques and conduct basic project evaluations. Topics covered include: time cost of money, discount rates, cash flow statements/diagrams, valuation metrics (NPV, IRR, payback), mine value drivers, capital and operating cost estimation, sensitivity analysis, simulation techniques, and evaluation related risk analysis. Participants will learn how to use and interpret an economic model in MS Excel.
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Upon successful completion of this course, the student will be able to:
Explain the objectives of economic modelling for mining projects.
Differentiate economic concepts and terms such as time-value-of-money, real/nominal dollars, discount rates, discounted cash-flow analysis, etc.
Evaluate mining investments using valuation metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), Free Cash Flow (FCF) and Payback period.
Prepare estimates of capital (construction), operating costs, and revenue for use in an economic model.
Develop simple and flexible economic models in MS Excel using standard valuation metrics.
Perform sensitivity analyses on economic input variables such as capital/operating costs, life-of-mine, metal prices, discount rates, etc.
Select appropriate modelling tools, metrics, and input parameters for mining investments at various stages of development (exploration, project development, operating).
Outline the relationship between project value drivers such as capital cost, operating costs, revenues, and construction/operating schedule.
Assess and analyze key areas of risk for mining investments and perform risk-based scenario analysis on economic valuations.
Effective as of Fall 2014
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