Markets & Finance

Mineral Economics and Finance

Net Present Value in Early Stage Technical Studies vs Market Value

WR

William E. Roscoe SLR Consulting

GM

Grant A. Malensek

Pierre Landry SLR Consulting Canada Ltd.

GC

Graham G. Clow SLR Consulting

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Abstract

Preliminary Economic Assessments (PEA) of gold projects commonly use discount rates of 5%, rarely more than 8%. We have compared the Net Present Value (NPV) in PEAs to (a) the market value of a transaction on the project and (b) the adjusted market capitalization of a junior company for which the project is its major asset. In most cases, there is a significant difference between the NPV and the other two parameters, where the transaction value and the market cap are a fraction of the NPV. The differences can be rectified by applying a higher discount rate to bring each project NPV into line with the transaction value or the market cap. We have also compared NPV in Preliminary Feasibility Studies (PFS) with market value and market capitalization of gold projects.

Published in CIM 2022 Convention Vancouver

Publisher X-CD Journal

Date of Conference May 1–4, 2022