Key Learning Objectives
- Understand the key sources of value creation in the mining industry
- No longer be at the mercy of financial jargon
- Understand the theory behind discounted cash flow analysis, NPV, IRR
- Develop effective and practical financial modelling techniques
- Examine resource rent taxes and royalties and their impacts
- Understand and interpret balance sheet and profit and loss statements
- Identify the key accounting issues for mining companies
- Discover how to value listed mining companies using fundamental techniques
- Develop the confidence to have an effective conversation with corporate finance and accounting staff
- Improve your career prospects by moving from being a technician to a manager
About the Course
This course teaches project modelling and corporate valuation techniques in a mining industry context. The course is structured around the value chain from exploration through extraction and to the market, and the methods by which resource companies seek to create shareholder value at all of these stages. It gives an insight into the economics of mining projects and the sources of success and failure.
The course intends to address two aims. The first is to understand investment decisions that are faced within a resource company:
- What is the best path to commercialisation for a newly discovered resource?
- What impact will commodity prices have on our project?
- How will resource rent taxes affect project profitability?
The second aim is to understand the financial information that mining companies release to the market so that we may compare the performance of mining stocks
- What is the difference between proved and probable reserves?
- How sustainable are a company’s earnings?
- What is this company’s competitive advantage (or disadvantage)?
The course is a ‘hands on’ program where participants will gradually develop a number of Excel models with increasing flexibility and complexity.
A basic knowledge of Excel is assumed (such as using the “IF” function). The course culminates with an integrated exercise that values a small publicly listed Australian mining company on the basis of information available in the public domain (eg Annual Reports, reserve statements etc.)
Who Will Benefit
Course Level: Beginner/Intermediate
This hands on course is specifically for all those working both with the mining industry and its support services who would like more confidence with finance and economics fundamentals of mining companies and the mining industry
- Engineers and scientists
- Geologists and metallurgists
- Mine managers
- Lawyers and HR professionals
- Accountants and business analysts
- Mining service industry personnel
- Any technically trained manager
A CPD Course
Use this course to help fulfil your Continuing Professional Development (CPD) educational requirements to retain your professional/chartered status. Contact your relevant association to learn how
“Excellent teacher – most knowledgeable and able to draw on vast relevant industry experience and knowledge”
Senior Geologist, Rio Tinto
“Comprehensive overview of everything a beginner needs to know. Cash versus profit analysis. James is a very clear communicator with a wide range of experience”
Geologist – Minerals Exploration, NZ Ministry of Economic Development
“Very clever and spontaneous. He could answer any questions and used great examples of real situations”
Executive Director, Department of State Development
- Course overview and objectives
- What financial issues are intrinsic to mining companies?
- What drives value in the mining industry?
SOURCES OF COMPETITIVE ADVANTAGE IN MINING THROUGH THE VALUE CHAIN
A REVIEW OF FINANCIAL THEORY
- The cost of capital
- Discount rates and hurdle rates
- NPV, IRR, VIR, payback
Building a simple mine valuation model to determine after tax cash flows in order to understand the basic concepts of discounted cash flow analysis
TAXATION IN MINING
- Taxable income
- Investment incentives
- Treatment of tax losses
Modelling depreciation and taxation in Excel
BUILDING FLEXIBILITY INTO THE MINE VALUATION MODEL
- Structuring and economic model
- Creating scenarios
- Reserve scenarios, price scenarios
Enhance our model so that we can switch between different assumptions and cases: proved vs probable, high versus low prices and costs
- Real and nominal cash flows
- Inflation impacts on prices and costs
- Building inflation impacts into our model
PROJECT FINANCING AND CASH FLOWS TO EQUITY
- Building loan accounts into the model
- Cash flow to equity method of valuation
Exercise: Complete our model by building in inflation impacts and a loan account
- Risks and sensitivities
- Using ‘What if’ analysis
- Simulation and Monte Carlo analysis
ROYALTIES AND RENT TAXES
- What is economic rent
- When/why do mining projects create ‘super profits’?
- Ad valorem royalties
- Minerals resource rent taxes
- Impacts on project value and life
Exercise: Understanding the impacts of royalties and rent taxes on project economics
EXAMINING MINING COMPANY FINANCIAL STATEMENTS
- Capital costs and operating costs
- Exploration accounting
- To what extent are mineral assets reflected on a balance sheet?
- Depreciation and depletion
- Provisions for remediation
VALUING A LISTED MINING COMPANY
- Estimating future cash flows from the accounting statements
- Making judgements about revenues and costs
- Adjusting for corporate costs and liabilities
Group Exercise: We will take a small listed mining company and on the basis of its publicly available information, build a valuation model and estimate the value of equity. Is it a buy or a sell opportunity?!
On-site & in-house training
Deliver this course how you want, where you want, when you want – and save up to 40%! 8+ employees seeking training on the same topic?
Talk to us about an on-site/in-house & customised solution.