How do you value a mining project?

How Do You Value a Mining Asset?

1. Here is an overview of the main valuation methods used in the industry:
2. P/NAV = Market Capitalization / [NPV of all Mining Assets – Net Debt]
3. TAC = [Cost to Acquire + Cost to Build + Cost to Operate] / Total Ounces.

How do you build a project financial model?

How do you build a financial model? (10 Step Guide)

1. Historical results and assumptions.
2. Start the income statement.
3. Start the balance sheet.
4. Build the supporting schedules.
5. Complete the income statement and balance sheet.
6. Build the cash flow statement.
7. Perform the DCF analysis.
8. Add sensitivity analysis and scenarios.

How do you value a mining company?

The only reasonable way to evaluate a mining company is to look at the net present value of the potential future cash flow, discounted at an appropriate discount rate.

How do you calculate the net asset value of a mining company?

Asset NAV is the value of the company’s assets, which in mining is its mines. This is calculated by projecting each mine’s after-tax cash flows, discounting it by an appropriate discount rate (5-10\% for precious metals), then summing its cash flows to arrive at a present value (AKA NPV or NAV).

What is a good debt to equity ratio for mining?

The optimal debt-to-equity ratio will tend to vary widely by industry, but the general consensus is that it should not be above a level of 2.0. While some very large companies in fixed asset-heavy industries (such as mining or manufacturing) may have ratios higher than 2, these are the exception rather than the rule.

What are the different types of valuation methods?

7 Business Valuation Methods

• Market Value Valuation Method.
• Asset-Based Valuation Method.
• ROI-Based Valuation Method.
• Discounted Cash Flow (DCF) Valuation Method.
• Capitalization of Earnings Valuation Method.
• Multiples of Earnings Valuation Method.
• Book Value Valuation Method.

What is financial model in project finance?

Project finance modeling is an excel based analytical tool used to assess the risk-reward of lending to or investing in a long-term infrastructure project based upon a complex financial structure. A project finance model is built to be: Easily used.

What is a net asset value model?

Net asset value is the value of a fund’s assets minus any liabilities and expenses. The NAV (on a per-share basis) represents the price at which investors can buy or sell units of the fund. When the value of the securities in the fund increases, the NAV increases.

What is the formula for NAV?

NAV is calculated by dividing the total value of all the cash and securities in a fund’s portfolio, minus any liabilities, by the number of outstanding shares.

How profitable is the mining industry?

The revenue of the top 40 global mining companies, which represent a vast majority of the whole industry, amounted to some 656 billion U.S. dollars in 2020. The net profit margin of the mining industry decreased from 25 percent in 2010 to 11 percent in 2020.

Why do mining companies have low debt?

Debt reduction is now largely complete, which should allow for higher dividends, exploration, and may also encourage M&A activity in the sector, Metals Focus says. Lower debt means more free cash to increase dividends and explore for the mines of the future, Metals Focus says.

What is financial modeling for mining projects?

What is Financial Modeling For Mining Projects? What is Financial Modeling Financial modeling is performed in Excel to forecast a company’s financial performance. Overview of what is financial modeling, how & why to build a model.

How do I calculate the value of mining assets?

CEO and Instructor at Corporate Finance Institute® Input all assumptions into a robust and dynamic financial model Calculate the value of a mining asset Run sensitivity analysis on the value of that asset Read a technical report / feasibility study and gather the important economic information corporatefinanceinstitute.com

How do you build a mining and milling model?

To build such a model, an analyst needs to gain access to a technical report (such as an NI 43-101, feasibility study, or preliminary economic assessment), and model out the mining and milling schedules based on those reports. The more “early-stage” a project is, the harder it is to build a model

What is the financial model of a project?

The financial model of a project is one of the most important documents a mining company will submit as part of a package of documents to get a mining license in most mineral-rich countries.