Hi Guys, i'm building a NAV for a mine for equity research and it has a LOM of 95years
In this scenario, would i model the entire 95 years till depletion or do like 20 years and then for the remainder of LOM as a “steady-state annuity”?
Thanks!
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Every year
Thankyou!
And one more question. When calculating Corporate-overhead NPV, do i run that flat over the full 95 LOM or assume that once the mine is up and running (maybe model out till 10 years?), all corporate startup costs vanish?
Thanks!
As said above, you should model the LOM, if available.
For the corporate overhead (cost from the corporate, off-site), you should also model it on a yearly basis. If your model is in real terms (usually it is) you can take a flat value.
Please be careful with consistency in the model: if its real (nominal) terms, use real (nominal) prices, opex, capex, discount rate etc. Also, be careful if you are using a FCFF discounted by WACC or an Adjusted Present Value (FCFF discounted at unlevered equity rate + tax shield discounted at cost of debt). APV is quite common considering that you usually value as a sum-of-the-parts and you could have different debt structures along assets and the HoldCo due to Project Finance or Bond issuances
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