Practice Metals and Mining Model

find (or make up) price assumptions for the underlying commodity that you trust. Mining companies often file technical reports for assets prepared by third party industry consultants that provide estimates for long term costs. Canadian and Australian companies typically provide more details in filings than U.S. companies, though if this is a one asset company, a U.S. firm will also provide significant detail to entice funding. Once you've got all that, the NAV analysis should be easy to construct. When estimating what a mine is worth, many look at per unit margins. The underlying commodity price is an obvious reflection of revenue, but most mines have significant fixed costs, so the step up in volumes as the mine reaches full capacity often results in lower per unit costs, meaning margins should expand in a stable price environment at higher output levels. The other thing to keep in mind is whether there are multiple commodities being produced from a single mine (like copper and gold). Often some mining companies will adjust accounting to reflect the secondary commodity as a byproduct that they mark as a credit against costs. For the sake of an NAV, it all works out in calculating cash as revenues in vs. costs out remains the same. Generally, because up front capex costs are high, mining companies don't undertake a project unless the asset supports multiple decades of production, so looking at a mine from an NAV basis is much more helpful over 20 years rather than just 5 because it will take many years to make back the capex and justify the project spend. hope this helps but happy to add more if this is unclear.