VALUATION OF MINERAL PROJECTS

by Professor Dennis Buchanan et al

Course Presenters Schedule General information

Summary

This course is part of an EduMine blended learning program that integrates online learning with classroom sessions by industry specialists.

Current market turbulence and its impact on the mining sector has increased the need to understand the interrelationship between technical and financial risk.  The key consideration is the intrinsic value of a mineral project. Where current market conditions undervalue the true long-term worth of assets which is then reflected in low share prices, strategic planning can identify opportunities. Ability to secure debt finance for both development and acquisitions has also been reduced and where available, it is expensive.  Understanding how this impact on the valuation of projects also permits an objective approach to determining levels of gearing.

The aim of the course is to develop strategic approaches for evaluating projects at the prefeasibility stage. Delegates will be provided with the training needed to establish an independent valuation of mineral projects. The course also aims to cover the underlying financial and technical principles, which apply to mineral projects, and to demonstrate how these influence the way a financial model is constructed.

Particular attention will be given 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 net present value of a project.

The course is organised by IC-FinEval Ltd. (London, UK), an Imperial College start-up company, and EduMine, the Professional Development Division of InfoMine Inc. (Vancouver BC, Canada).

Background

Current market turbulence has increased the need to understand the interrelationship between technical and financial risk.  The key consideration is the intrinsic value of a  mineral project.  Where current market conditions undervalues the true long-term worth of assets which is then reflected in low share prices, strategic planning can identify opportunities . Ability to secure debt finance for both development and acquisitions has also been reduced and where available, it is expensive.  Understanding how this impacts on the valuation of projects also permits an objective approach to determining levels of gearing. This is relevant to both the investment banking and mining communities  The Valuation of Mineral Projects course is designed to address these issues.

Reliable, but flexible valuation techniques are needed to accurately determine the strategic importance of a property. Where advanced exploration has allowed a deposit to be classified as an indicated resource, the techniques of discount cash flow modelling can be used to value a project.

This course is optionally available as part of a discounted package with the course INTERPRETING THE FINANCIAL STATEMENTS OF A MINING COMPANY. Note that VALUATION OF MINERAL PROJECTS assumes a basic understanding of mining corporate financials and this is a great opportunity to get that understanding.

Pre-Course e-Learning

Prior to the course, registered delegates are provided with an internet url, user name and password. This enables them to access online e-learning material from EduMine (www.edumine.com) consisting of an introductory course titled "An Introduction to Modelling Project Finance ", authored by Dennis Buchanan et al. This course provides delegates with important background material which increases their understanding and appreciation of the classroom course. Review of this material prior to the course, including completion of the interactive reviews, enables delegates to derive maximum benefit from the live sessions.

IC-MinEval

In the workshop sessions use will be made of the IC-MinEval software (www.ic-fineval.com). An IC-MinEval licence will be made available to participants for the course duration and hence they will be expected to have their own laptop computers available.

Participants will be able to retain disc copies of the spreadsheets that they generate during the course. IC-MinEval is an ExcelT-based spreadsheet programme which automates all stages required to produce models of a wide range of mineral projects. It produces a Balance Sheet and Profit and Loss account from the cash flows, with tax provisions linked to the Profit and Loss account.

Output modules include the base case discount cash flows, as well as key financial ratios and performance indicators such as NPV, IRR payback and maximum cash exposure. Sensitivity analysis can be undertaken on key variables.

UBC Certificate in Mining Studies

This course qualifies for the UBC Certificate in Mining Studies, a continuing education initiative by the Norman B. Keevil Institute of Mining at the University of British Columbia. Delegates who (1) register for the Certificate in Mining Studies, (2) complete online certification in the required EduMine e-learning modules, (3) attend this course, and (4) complete a take-away project will receive credit towards a Mining Certificate from UBC Continuing Studies. more details »

Who Should Attend?

The course will be of particular interest to mining analysts, fund and asset managers, bankers, development planning engineers, exploration managers and other specialists in the valuation of mineral projects.

It will be of interest also to industrially based geologists and engineers. Previous courses presented in London, Johannesburg and Stockholm have received wide participation from major finance and mining companies, providing an opportunity to bring together professionals with common concerns in this area. With the emergence of private equity funds aimed at financing junior mining, the course will be relevant to entrepreneurs needing to understand the qualifying framework that such funds use in evaluating projects.