Introduction

Traditional mining project appraisal—discounted cash flow (DCF)—typically involves the use of static variables that remain unchanged across project life and the use of a constant discount rate to account for risk, which ultimately provides a singular view of project value across time. Such a passive management approach is fast becoming outdated. Modern project appraisal should be dynamic and flexible to accommodate changing market conditions by constantly evaluating options to abandon, defer, open or expand a project while managing risk. This course introduces and explores modern project appraisal techniques with a view to increasing expected value.

Scope

This course focuses on the use of modern project appraisal techniques culminating in the introduction of real option valuation (ROV) applied to mining projects. While traditional project appraisal concepts form the basis for the modern approach discussed, the in-depth use of these remain beyond the scope of this course. It is recommended that participants complete the Introductory Mining Project Evaluation course (see Related Courses tab) for a full account and discussion of traditional project appraisal concepts.

Learning Outcomes

1. Recognize modern project appraisal techniques including the incorporation of risk and probability to generate an expected net present value (ENPV).
2. Identify the sensitivity of key project variables.
3. Use option theory and option pricing to apply real option valuation (ROV) to mining projects.

Duration: 17 Hours

Category: Financial

Level: Advanced