Valuation of Mineral Projects

1.3 Resource Estimation

Geostatistics. Cut-off grades. Reserve and resource definitions. Interface between envelopes of mineralization, resource blocks and mine design.

1.4 Scale of Mining

Relationship between costs and scale of mining. Valuation of long life projects.

Key differences between the type of project that would be material to Rio Tinto compared to the junior sector.

1.5 Scenario Analysis - Base Metals

Illustration of extractive metallurgy through the hydrometallurgy and pyrometallurgy of copper ores. Oxide versus sulphide ores. Solvent extraction and electro-winning. Net Smelter Returns. Negotiating an off-take agreement for a project that produces a polymetallic concentrate.

1.6 Project Finance

Case history of an open pit copper project. Relationship between cost of debt, taxation, Balance Sheet, profit and Loss account and cash flow. Calculating the cost of debt and equity. Determining the weighted average cost of capital and optimum level of gearing.

1.7 Scenario Analysis - Base Metals

Workshop session - Underground Operation

Engineering concepts behind block caving mining method. Technical risks of the side-wall failure in the open pit on dilution in subsequent block caving operations. Implications for the reserve tail and project finance. Multi-partner scenario analysis - determining relative return for different stakeholders as a function of investment contribution.

2.1 Scenario Analysis - Industrial Minerals

Workshop session - Iron ore.

Chemistry of primary minerals. Price based on dry metric tonne units as a function of iron content. Product specifications and penalties. Beneficiation and yields as a function of iron content. Infrastructure - Power, transport of ore (rail and slurry pumping) and port facilities.

Workshop session - Iron ore.

Optimisation of NPV against yield.

2.2 Scenario Analysis - Industrial Minerals

Workshop session - Mineral Sands.

Mineralogy of mineral sands. Mining methods, environmental impact and optimisation of NPV.

2.3 Scenario Analysis - Industrial Minerals

Workshop session - Diamonds.

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

2.4 Scenario Analysis - Industrial Minerals

Workshop session - Bauxite (and Potash).

Value chain from bauxite through to alumina and then aluminium. Environmental impact of bauxite mining. Entry barriers to the fertiliser industry.

3.1 Scenario Analysis - Energy

Workshop session - Coal.

Geology and classification. Evaluation. Coking Coal. Role of volumetrics in setting up a financial model.

3.2 Workshop session - Coal

Surface coal operations. Justification of an investment in equipment. Set up funding options based on debt and equity. Sensitivity analysis. Underground long wall mining operation. Set up DCF exercise demonstrating relationship between efficiency and profitability.

3.3 Scenario Analysis - Energy

Workshop session - Uranium.

Choice of deposit types and relationship to mining method. Analysis of NPV based on analogue projects. Uranium price drivers.

3.4 Syndicate Exercise

Effect of imposition of a Mineral Resource Rent.

Valuation of an industrial mineral project. Formulation of exercise objectives. Independent preparation by buyer and seller.

3.5 Syndicate Exercise

Presentation of results. Reconciliation of perspectives. Analysis of presentations.