COLLEGE OF ENGINEERING, MATHEMATICS & PHYSICAL SCIENCES

CAMBORNE SCHOOL OF MINES

Module Name and Number Assignment title Assignment value Staff Member Submission Deadline Assignment returned by: Instructions for Assignment Page limit or Word limit applies? Max number of pages/Max number of words(indicate penalty if the limit is exceeded e.g. no marks or percentage deduction) Minimum font size and margins

CSM3044 Mining Economics & Design PW1 NPV Calculation 25% module weighting Paul Wheeler Monday 17th March (12h00 ) 2nd May

Yes 4 sides A4 (typewritten) maximum; you should aim for c. 2 pages summary of calculations + 2 pages maximum for answers to Q2/Q3.
Minimum 10 pt font size.

Other instructions/guidelines for presentation of assignment

Margins etc. at students discretion (but note only single column layout please). Essential that a copy of the spreadsheet used to answer this assignment is emailed to csm@exeter.ac.uk See sheets below See sheets below

General guidance on Assignment Guidance for breakdown of marks

Method of Feedback Comments on BART sheet Individual electronic feedback Group electronic feedback Other feedback method details

Yes No No

UNIVERSITY OF EXETER

CAMBORNE SCHOOL OF MINES

(CSM3044) MINING ECONOMICS & DESIGN 2013-14 ASSIGNMENT PW1_NPV Calculation (25% module weighting) DEADLINE FOR SUBMISSION: Monday 17th March
Work should be handed in to the CSM Office, clearly labelled for my attention (Paul Wheeler). You MUST also submit an electronic copy of your spreadsheet. Failure to submit both hard copy summary documents and an electronic copy of the spreadsheet(s) will be heavily penalised.

GLORIA COPPER-ZINC MINE: PRELIMINARY ECONOMIC ASSESSMENT

Using the spreadsheet Paul Wheeler has distributed (3044_Assignment PW1_NPV Calculation_2014); calculate the answers to the following questions. You MUST submit a copy of your spreadsheet calculations electronically (to csm@exeter.ac.uk) but you should ALSO provide suitable summary pages/tables/charts etc. with your answers as a hard copy submission with BART sheet via the CSM Office. Q1. Using the production and cost data provided you are required to build up a discounted cashflow statement for the Gloria Cu-Zn project, Canada; sufficient to calculate the: (i) Net Present Value (NPV) (ii) Internal Rate of Return (IRR) (iii) discounted payback period (iv) life of mine mining cost (LOM Mining $/t ore) of this project under the following base case scenario: All economic data is reported in US$ terms; Discount rate (i) = 8% Long term copper price assumption = $7716/t Long term zinc price assumption = $2000/t Royalty payment = 2.5% of NSR (i.e. 2.5% of Net Revenue) C$ :US$ exchange rate = 1:1 For the purposes of this exercise you can ignore tax, capital allowances and loan repayments. (30 marks; cashflow statement- 20 marks, items (i)-(iv) - 10 marks)

(cont.)

(cont.) Q2. Further investigation the base case scenario is required so that the sensitivity of the project can be tested. By flexing your base case cashflow calculations, identify which of these scenarios gives the biggest source of risk to the project. a) a 15% rise in operating csost b) a 10% fall in metal prices c) a 20% increase in all capital costs Give an overall indication of the attractiveness of this project as an investment opportunity. (10 marks) Q3. Some of the most difficult parameters to estimate during the financial analysis of a mining project are the metal price assumptions used to generate revenue streams. Do the copper and zinc price assumptions used in Glorias PEA seem reasonable? For either copper or zinc; identify and discuss FOUR factors (either supply side or demand side) that might influence the future prices for the chosen metal. (10 marks)

Paul Wheeler, February 2014 CSM3304 Mining Economics & Design