Insight

How mining companies can assess project viability with speed and confidence

How mining companies can assess project viability with speed and confidence

For people in the mining game there are many factors involved in the exploration, development, and operation of a mining project. Geologists and mine engineers play a key role in defining the resource and determining how best to extract and process the ore. Analysts and investors play a critical role in determining the economic returns of a project.

Defining the commercial viability and expected cash flows associated with the project is a challenge due to the large upfront investment for an unknown future revenue stream.  Commodity prices, exchange rates, operational challenges, and construction risk all create complexity when thinking about how to predict future cash flows.

Typically, the analysis responsibility falls to an experienced mining analyst who will develop a financial model in Excel and work with various stakeholders to populate the assumptions. Using their years of experience on what is important the model development is a process that typically will take a few weeks and will go through rigorous testing to ensure formulas are correct and the decision makers can rely on the outputs before deciding whether to progress with the project.

Mines come in many different forms and scales, including open-cut and underground, metals, coal, iron-ore, and rock quarries. Ensuring the model is fit for purpose is essential, there is no point in using an under-ground coal mine financial model to test the viability of an open-cut gold project.

Forecast has been developing financial models for clients for over a decade, we know the challenges associated with model development and the danger of making decisions based on a model that hasn’t been thoroughly reviewed and tested.

We have recently partnered with a cloud based mine viability software provider, NPV ONE, who have solved many of these challenges. The NPV ONE software is developed specifically for the mining industry and enables a cash flow forecast to be created and populated in hours, with the confidence that the logic and formulas are error-free.

The cloud based nature of the software makes collaboration easy, with user access to protect sensitive information and enable multiple approved users to create and update projects, and share the final reports and dashboards with key management and external parties.

Get in touch with us if you would like to see a demonstration of the product, or head to the website www.npvone.com to find out more.