The Valuing of Mining Projects

This paper is a literature review and a research proposal to study the way mining projects currently are valued and to demonstrate the need for changing this method.

This paper explains that capital allocation is extremely important to mining, and the efficiency and effectiveness with which this capital is allocated will be greatly affected by the valuation of a project. The author points out that determining the best method is not the purpose of this paper; rather, using a primary and secondary approach, the study will examine current practices, review the various financial principles and methods that are currently available, and derive ideas for solutions that are somewhat more in favorable. The paper demonstrates that both the commercial and the technical aspects that have to do with mining investments have always been very high risk; however, in recent years, new elements of political risk are being created by the United States, which is considering changes in some of the mining laws that will be more stringent, making mining even more economically risky. Tables and graphs.

Table of Contents
Statement of the Problem
Purpose of the Study
Importance of the Study
Rationale for the Study
Overview of the Study
Review and Analysis of the Literature
Data Analysis
“Larger companies, naturally, are much more sophisticated in the ways that they analyze their capital budgets. Companies that have sales greater than 500 million often use combination of all three of the DCF techniques that are available. Many of these companies also performed escalated dollar analyses and constant dollar analyses that depended not only on financing alternatives but also on time constraints. Companies also used even more advanced techniques in performing various valuations into mining projects, but this was not seen to be on a consistent basis. Some of these techniques included computer simulations on various investment activity similar to Monte Carlo analyses and a specific way of utilizing options pricing into valuing of copper properties.”

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