Economic Evaluation and Optimization of Mineral Projects

Economic Evaluation and Optimization of Mineral Projects

Areas of Study: Management

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Qualifies for Certification

This course is designed for an audience of mining professionals and managers who require a practical understanding of economic evaluation and financial analysis methods and their application to mineral projects. The discounted cash flow (DCF) method is the method of choice for economic evaluations of mineral projects from pre-feasibility study stage to operating mine. The method is accepted by industry, the financial community and regulatory bodies.

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  • Audience Level:
  • Professional
  • Enrollment:
  • Required
  • Duration:
  • 8 hours

Course Summary

Introduction

The predominant economic evaluation technique for a mineral project, from pre-feasibility study stage to operating mine, is the discounted cash flow (DCF) method. A DCF evaluation will include a detailed year-by-year cash flow projection spanning the life of the mineral reserves plus the DCF metrics of net present value (NPV) and internal rate of return (IRR). DCF methodology is accepted by industry, the financial community and regulatory bodies.

This course examines the requirements, practice, and application of DCF methodology, as well as insights into the potential pitfalls to be found in such evaluations. Principal course topics include:

  • Discounted Cash Flow
  • Net Present Value (NPV) and Internal Rate of Return (IRR)
  • Determination of Discount Rate
  • Metal Price, Inflation, Debt and Taxes
  • Targeting, Scoping and Ranking
  • Optimizing Production Rate and Project Size
  • Project Expansion Analysis
  • Trade-Off Analysis
  • Equivalent Annual Cost Analysis
The course includes practical applications of DCF methodology, with examples, to project evaluation, mineral process selection, process optimization, project expansion, selection of equipment and comparison of alternatives.

This course is designed for an audience of mining professionals and managers who require a practical understanding of economic evaluation and financial analysis methods and their application to mineral projects.

Course Content

Economic Evaluation and Optimization consists of 10 viewing sessions of 30 - 60 minutes each with supporting figures, tables, examples, appendices and interactive course reviews. Course duration is equivalent to approximately 8 hours of viewing content.

The content of this course is taken from a paper published in Mineral Processing Plant Design, Practice, and Control published by the Society for Mining, Metallurgy, and Exploration, Inc. (SME) (http://www.smenet.org).

Learning Outcomes

  • Discuss the discounted cash flow (DCF) method, net present value (NPV), internal rate of return (IRR) and their application to mineral projects.
  • Discuss the application of DCF methodology to optimization of mineral projects.
  • Discuss the application of DCF methodology to selection of mineral project alternatives.
  • Apply the knowledge gained to practical economic evaluation and financial analysis of mineral projects.

Recommended Background

  • A basic understanding of mineral project economics and mining operations from a financial perspective.
  • A degree in mining engineering or its equivalent (recommended).

Lawrence Devon Smith

Larry Smith is a mining engineer with over 40 years experience in economic evaluations and project engineering for mining, metallurgical, and industrial projects. He holds a B.A.Sc. from the University of Toronto and an M.Eng. Mining from McGill University.

Larry is the principal consultant at LDSA. He has worked as Director Project Evaluations at Barrick Gold and has held similar positions with BHP-Billiton Base Metals, Rio Algom, SNC-Lavalin, Kilborn, Inco, and Vale.

His evaluation experience includes economic evaluations, targeting and ranking studies, scoping studies, optimization studies, pre-feasibility and feasibility studies, risk assessment, and due diligence work for banks and mining companies. Larry has published a number of papers on mineral project evaluation, discount rates, and risk assessment, and is considered an expert in these fields.

Larry teaches mineral project evaluation and mineral economics at the University of Toronto/Canada, Schulich School of Business at York University/Canada, as well as in-house courses and seminars. He also presents "Introduction to Mining" workshops for investors, management, finance personnel, lawyers, and indigenous peoples.

Larry has been on the executives of the Canadian Institute of Mining (CIM) Toronto and the CIM Mineral Economics Society (MES). He is the recipient of the CIM Robert Elver award for Mineral Economics, a Fellow of CIM, and a CIM Distinguished Lecturer.