Hi guys,
Just got staffed on a minerals company deal in China and was wondering if anyone could share any insight that you may have with respect to modeling or valuation of such companies? I'm a generalist first year analyst so I don't really know what's going on yet but based on what I see so far from the stuff the client sent over, there's a lot of figures with respect to reserves, probable reserves, and grade of the minerals so I would imagine it'd be somewhat similar to oil and gas modeling?
Cheers guys!
Didn't you just answer your own question? I was reading your post, and all I could think of was, "oh, I'll point him to BIWS or WSO for O&G modelling" until you dropped that bombshell at the end.
Yes, modelling natural resources is the same as modelling oil & gas, because fundamentally they are the same. You have reserves, you have market prices, you have production costs, you have win. Go with a NAV + Multiples model and change "Oil" to "Gold" and "Boe" to "Oz".
Your first step should be to familiarize yourself with the fiscal treatment of your asset(s) - this will really drive your company's economics. Chinese O&G companies will be PSC based for example with a number of peculiarities specific to China (and the individual assets). Don' t know about the particular resource that you would be focusing on.
If you have the DD materials (ideally production profile, capex/opex), then you can can build a model based on this using the appropriate fiscal/tax regime.
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