There are a couple ways to do this. Fastest and easiest is to find an unlevered or levered number that comes up with a pounds-in-the-ground valuation estimate. Example of an unlevered metric would be: EV/Reserves and Resources whereas a levered ratio would be something like: P/NAV. Although the NAV number is usually found by doing a DCF of the mine, many bankers use consensus P/NAV multiples.

A more accurate and complex method of valuation would be some sort of DCF as mentionned above. Take note, however, that your DCF would have an end date since there will be no terminal value to the mine (it is an exhaustible resource).

 

They are synthetic options created from real-life situations. In a mining context, the value of a mine also depends on the value of the option itself to either wait to extract, sell the mine...Essentially, in addition to holding the mine, your total value from the mine is actually higher because of these real options.

 

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