Course description

Metal mining investments are practically irreversible, hundreds of million dollar investments with limited lifetimes. The importance of economic analysis of metal mining investments has become widely acknowledged as the decreasing profitability of new projects and unpredictable metal markets pose a challenge to the currently applied models of profitability analysis.

The first purpose of this course is to introduce participants to simulation and system dynamic (SD) models. Second, we will deal with the concept of Real Options (ROs). In general, RO's refer to flexibility of projects and they can be used to both decrease the negative effects of uncertainty and, on the other hand, enhance the positive future realizations of the projects. In this course, we will practice the hands-on building and applying techno-economic profitability models with embedded real optionality.

Course content

After this course, participants will be able to:

• Use the concepts of numeric uncertainty presentations in spreadsheet (Excel) cash flow modeling
• Take advantage of option theory and how it is converted into flexibility value in metals mining industry
• Create and analyze System Dynamic models of metal mining investments

This two-days intensive course covers the following topics:

i. Introduction
ii. Basics of real option analysis in the industrial context
  a. Real option theory for metals mining
iii. Specific issues of modeling
  a. Uncertainty representations
  b. Modeling of metal prices
  c. Importance of financing in the profitability of mining    investments
iv. Real Option valuation methods for metals mining
  a. Pay-off method
  b. System dynamic models and Monte Carlo simulation
v. Practice valuing real options with
  a. Pay-off method (Excel)
  b. System dynamics (XCos or equivalent)
vi. Summary and wrap-up

BEFORE the intensive course:
- Participants write down key issues he/she is facing with the current cash flow models used in his current work OR thinks of a case example of an investment analysis problem he/she has encountered with
- Participants will return material to the lecturer 2 weeks before the course and parts of the material will be used as a material to formulate practical exercises for the course

AFTER the intensive course:
- Participants will continue solving their provided case examples using the methods learnt in the course
- A Skype-consulting (min. ~1h) will be offered individually for each participant for a case example follow-/wrap-up

Type of training

The course combines classroom lectures and self-study.

Language

English

Executives / leading / senior experts of metal mining companies interested in improving economic profitability of operations; parties investing or interested in investing in mining operations, e.g. Operational CEOs / CFOs; Business Controllers; Business Analysts; Industry / Banking / Investment Industry Consultants