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IC-MinEval User Manual

1. Ratios DSCR RTR RC PLR B ur PCR o Chart Type Bar Add Labels Scatter Line Figure 10 15 The charts menu You can display multiple cash flows or ratios on the same chart but not mix them both The different cash flows are taken from wshtDCF and are as follows Before Interest and Tax Discounted Before Interest and Tax Cumulative Before Interest and Tax Before Interest but After Tax Discounted Before Interest but After Tax Cumulative Before Interest but After Tax After Interest and Tax Cumulative After Interest and Tax The ratios are taken from wshtFinance and are described in section 10 2 7 wshtFinance They are as follows Debt Service Cover Ratio Project Life Ratio Loan Life Ratio Reserves Tail Ratio Interest Cover Ratio Principal Cover Ratio Residual Cover Chart Type You can change the type of chart displayed by selecting either Bar or Scatter line Add Labels Selecting this check box adds data labels to each point on the Chart 48 2007 IC FinEval Ltd IC MinEval User Guide Once you have selected the parameters and the type of chart you require select the corresponding Chart button If you do not wish to continue select Exit to return to the main menu Selecting Chart displays the selected chart as in figure 10 16 If you like the displayed chart you can add the chart into the current model as an Excel chart by selecting Add to Excel where you can edit it f
2. Royalty Rate s L Straightline Tax Rate 55 o Depleting Orebody Annual Inflation 35 o Li Calculate NPV Using J C Discount Rate Discount Rate 35 1o LI WACC Figure 11 8 Financial IC MinEval Project Finance Capital Structure Debt Equity of total e r 40 Year 1 2 3 4 5 Total Amount M 31 02 22 04 lo lo o 53 06 Loan Type and Repayment Schedule Term Years s E Grace Years 2 E Straight Loan Production Loan Up Front fee 95 EA Commitment Fee s E T a 0 25 Contingency e IB A 9 5 Weighted Average Cost of Loan Interest Rate 955 Capital WACC Return on Equity 15 gy 9 99 Figure 11 9 Project Finance Results and Analysis If you have correctly entered the data on each of the input forms on the main menu you will have created a fully linked financial model of the coal project The DCF output sheet wshtDCF should yield the following results Pay Back Period ATBI Years Max Cash Exposure ATBI M NPV ATBI M IRR ATBI 59 2007 IC FinEval Ltd IC MinEval User Guide These figures suggest that the case example project is financially viable You can survey the projected profit and loss accounts balance sheets and cash flow charts that IC MinEval has automatically created to assess the project economics in mo
3. 2 Transport Costs T lz Recalibrate O Hara Cost Estimations Change in Canadian mining costs since 1978 95 106 r US Canadian Exchange Rate 1 0 87 7 Cancel dj Figure 11 4 Costs 57 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Commodity Sales Spot Price C Inflate Fixed Escalated D Price t 40 Annual Escalation 9 5 Forward Sales Production Hedged 0 Number Years Hedged Sold Foward Fixed Ha Price Sold Foward Escalated G Price Escalation 9 Sold Foward Floor Price Premium t Ok Cancel Figure 11 5 Commodity Sales IC MinEval Expenditure m Capex Payments Year 2 3 4 5 Total 1 Percentage feo fo b m lo 100 00 Amount M 25 52 17 02 0 00 0 00 0 00 42 54 Working Capital Working Capital of Annual Op Costs zs Amount M 9 44 HEFT Figure 11 6 Expenditure IC MinEval Environmental amp Closure Provision fx Bullet Payment At End Of Mine Life M ol E Sink Fund At Beginning Of Production M o m Annual Environmental Costs During Production M Jos E Annual Rehabilitation Costs After Mining M 1 L Number Of Years For Environmental Clean Up 2 m Figure 11 7 Environmental amp Closure Provision 58 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Financial r Depreciation Method
4. OoOo 3 m uw E egi oo Figure 10 20 Load Dataset 10 3 3 4 Save Tax Once you have created custom tax formulae on the wshtTax worksheet you can save it as a tax file Save Tax from the Files Menu will produce a dialog box prompting the user for a file name The default name will be the first 8 letters of the project name defined in the General Information menu The file produced will have the extension tax and will be an Excel workbook with wshtTax containing all customised tax calculations IC MinEval Tax Data Files Figure 10 19 Save Tax 52 2007 IC FinEval Ltd IC MinEval User Guide 10 3 5 Settings The settings form allows the user to specify which worksheets and rows are updated by IC MinEval each time it updates the model excluding some of the worksheets or including their own custom sheets IC MinE val Model Recalculation Settings X Enable Customised Updating Worksheet Rows to Update wshtDCF 38 wshtReserves 50 wshtCosts 50 wshtE amp c 50 wshtTax 80 wshtRevenue 80 zl Remove All OK Cancel Remove ema Figure 10 20 Settings Enable Customised Updating Forces IC MinEval to only update the worksheets specified in the list Defaults Fills the list with the default worksheets and rows Add Use the add button to include worksheets and specify which rows are automatically updated figure 10 21 This work
5. experience errors in the model 50 2007 IC FinEval Ltd IC MinEval User Guide Load IC MinE val Data File Oime A gy lle ee eles Bl Ud H8 fre EEE Figure 10 18 Load Dataset 10 3 3 2 Save Data set Once a project model has been produced it is possible to save the value of all the input variables in a project file Selecting Save Data set figure 10 19 from the Files Menu will produce a form prompting the user for a file name The default name will be the first 8 letters of the project name defined in the General information menu The file produced will have the extension mvl and will be an Excel workbook with wshtInputData containing all the input variable settings and all the name definitions Save IC MinE val Data File EX amp e a Spanish mvl r IC MinEval Data Files gt Figure 10 19 Save Dataset 10 3 3 3 Load Tax If you have previously saved a custom tax sheet using Save Data set or have a pre built tax sheet produced by IC FinEval you can re load it using the Load Tax button from the Files Menu You will then be prompted for the filename of the tax sheet by the Load TAX form figure 10 20 51 2007 IC FinEval Ltd IC MinEval User Guide Note The file you load must have been previously saved using Save Tax otherwise you may experience errors in the loading the tax module Load IC MinE val Tax Data File pe ales
6. low value mine products Chromium is won from the mineral chromitite which occurs in stratiform and podiform deposit types Stratiform chromitites are associated with ultrabasic layered igneous complexes Podiform deposits show a different structural form and are associated with tectonised ultrabasic sequences of ophiolite complexes Tantalum is won from tantalite a mineral often associated with sheared Archaean granite greenstone terranes Tantalite is a low volume high value mine product O 2007 IC FinEval Ltd
7. 60 40 those with lower risk 75 25 e Residual Cover PV of post loan maturity cash flows maximum loan 64 2007 IC FinEval Ltd IC MinEval User Guide Appendix C Commodity Groups and Host Deposit Types Metal Group Host Deposit Type Deposit Example General Characteristics Pb Zn Ag Shear hosted Palaeo conglomerates Carbonatite Epithermal silver Carbonate hosted Porphyry Porphyry Volcanogenic Fimiston Sunrise Dam WA Ashanti Ghana Witwatersrand SA Alluvial Magaden Russia Palabora SA Galmoy Ireland Reocin Spain Pine Point Canada La Escondida Chile Nickel Plate Canada La Luz Nicaragua Grasberg Indonesia Bingham USA Neves Corvo Portugal Black Mountain SA 65 Archaean age mesothermal lode deposits located in crustal scale shear zones accreted terranes associated with Archaean convergent plate margins Large vertical extent with subtle vertical zonation and strong structural controls on mineralisation Gold bearing conglomerates formed by weathering of Archaean greenstone belts Occur in basin controlled reefs Average grade is around 7g t Au Proterozoic to recent intrusive magmatic carbonates and associated alkaline igneous rocks found in the marginal parts of stable cratonic regions with major rift faulting Economic deposits of silver formed by hydrothermal fluids at shallow depth near surface to 1500 m Associ
8. 8 which allows you to set up the environmental costs prior during and post production It also allows you to set the time of the environmental clean up and closure period Financial Alt F Displays the Financial screen 10 1 9 which allows you to set the royalty rate tax rate annual inflation and the discount rate as well as set the method for calculating depreciation Project Finance Alt J Displays the Project Finance screen 10 1 10 which allows you to set the capital structure loan repayment schedule and interest rate Multi Partner Alt P Displays the Multi Partner screen 10 1 11 which allows you distribute the cash flows post funding to all the partners in the operation View Model Select the worksheet you wish to view and select the View button to be taken to the relevant worksheet or chart which are described in section 10 2 DCF Model Default Alt D Displays the wshtDCF worksheet before and after funding 100 Equity Alt E Displays the wshtDCF worksheet assuming 100 equity Financed Alt F Displays the wshtDCF worksheet including funding taxation and interest payments All three of these DCF Model options use Custom Views These views must exist in the IC MinEval worksheet for these functions to work By using Custom Views if you change the layout of wshtDCF you need to change the settings of the three views for the correct information to be displayed Analyse Model Sensitivity
9. Average Cost of Capital Tax Adjusted Cost of Debt x Percentage Debt Cost of Equity x Percentage Equity As the NPV is calculated on the cash flows before funding but after tax an allowance is made for the tax implications of interest payments on debt Interest payments on debt act as a tax shield In IC MinEval the cost of debt is calculated as Tax adjusted Cost of Debt Interest Rate x 1 Tax Rate See section 70 1 10 Project Finance for calculating the weighted average cost of capital and the cost of equity Variable WACC Selecting variable WACC changes the WACC as the Debt Equity ratio changes as loan repayments are made 37 2007 IC FinEval Ltd IC MinEval User Guide 10 1 10 Project Finance Investment banks use a particular type of lending called Project Finance when funding the development of a mining project The loan is repaid from the cash flows generated by the project with no recourse or only limited recourse to the parent company Project finance thus allows the sponsor to risk less of its own funds without diluting its equity investment in the project The cost of debt capital is usually less than the cost of equity producing a lower WACC for the project and maximising the resulting NPV see 70 1 9 Interest charges on debt and loan repayments can both serve as tax shields thus off setting the negative effect of debt servicing on the project s cash flows see wshtTax 10 2 6 The Project Finance me
10. O W 1 e Total Coking Recovered Mt 1 49 Total Insitu Ore at cutoff 0 Mt 39 00 Total Diluted Ore Mined Mt 35 10 Total Ore Recovered Mt 3215 Total Mined Ore Waste Mt 245 70 Figure 11 2 Resources 56 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Mining Rates r Mining Rate Working days year 325 00 Estimate Mining Rate ia a Ore Mined Per Day T 10000 00 Mining Rate i Day Cn 0000 00 Ore Mined Per Year MT 3 25 Calculate Mining Rate Using Taylors Formula Total Mined Per Year Exp Mining Factor 2 00 Ore and Waste MT 22 75 Mining Rate Day T 0 02 Mine Life 11 46 Initial Mining Rates 1 3 Percentage 35 so vs 100 100 100 Amount MT 11 38 17 06 eee 22 75 22 75 Cancel Figure 11 3 Mining Rates a Year 2 4 5 IC MinEval Costs Open Pit r Capex Ratio in construction Capex between ulate Capex Canada and proposed location Total Capex M Estimate Capex Capex mine mill M Capex processing plant M 42 54 m Overhead costs of capex m a TELL TE Operating Costs Total Op Costs T Ore f Calculate Operating Costs Ratio in Operating Costs between Canada and proposed location 13 00 Op Costs Estimate Operating Costs Mining Ore T Year M Mining Waste T mu Processing T 44 25 Annual Fixed Costs M
11. Project Life Ratio Cash Cover Debt Service Coverage Reserves Tail Ratio Interest Cover Ratio Principal Cover Ratio and the Residual Cover see Appendix B Financial Ratios These ratios are widely used by investment banks and can be graphed by selecting chart on the main menu see section 10 3 2 10 2 8 wshtP amp L The wshtP amp L worksheet contains the projected Profit and Loss accounts generated from the DCF and Balance sheets This sheet follows formal accounting formats and analyses the project s ability to generate profit over each year of the projected mine life 10 2 9 wshtBalance The wshtBalance worksheet contains the projected Balance sheets for the project This sheet follows formal accounting formats and allows analysis of the projected financial state of affairs at the end of each year of the mine life 10 2 10 wshtSensitivity This worksheet displays the results of running a sensitivity analysis see section 10 3 1 and these results are plotted on the sensitivity chart 10 2 11 wshtMultiPartner The whstMultiPartner calculates the NPV and IRR for up to three partners based on the criteria entered in the Multi Partner form described in section 10 1 11 It lays out each trigger point as well as the cash flow for each stakeholder before calculating the NPV and IRR Note that if a stakeholder has a free carry then logically you will be able to calculate the IRR 10 2 12 IC MinEval Options This worksheet stores the sett
12. allows you to set up the projects basic parameters Project Name Sets a title for the current project This is a text string and can contain any combination of letters and numbers Commodities Sets which commodities the project is to mine Selecting different commodities updates all the labels and units in the worksheets This is a drop down menu and you can select one of the following Au Cu Ag Pb Zn Ag Cu Mo Cu Au Cu Zn Cu Zn Sn Au Cu Ag Cu Ag Au Ag Cu Ni Diamonds Pt Pd Rh Ir Ru Os Pt Pd Rh Ir Ru Os Cu Ni Pt Pd Rh Au Pt Pd Rh Ir Ru Au Cu Ni Coal Industrial Minerals Mineral Sands Rutile IImenite Garnet and Zircon U308 Uranium and Custom Each of these commodity groups represents a group of metals or non metaliferous elements that commonly occur together in economic quantities in the major mineral deposit types found in nature See Appendix C for details of the deposit type s each commodity group is associated with Custom is a special range of commodities that is specified by the user through the Custom Commodities form This is accessed by selecting Custom from the commodities dropdown list and then clicking on the Custom button 10 1 2 1 The Custom function can be used to modify the commodity group if it varies from the characteristic metal association of one of the deposit types detailed in Appendix C and includes some commodities not included in the main list Mining Method This drop down menu displays the a
13. installation directory Although this version of IC MinEval does not include the required links to Risk by Palisade you should always start Risk before IC MinEval if you wish to use it in conjunction with IC MinEval to carry out Monte Carlo simulations on the generated model IC MinEval requires Visual Basic for Applications to be installed with Excel in order to function VBA comes with Excel and if you have not installed it you will need to do so see section 3 System Requirements for details of how to do this When you start IC MinEval you may be presented with the dialog shown in figure 8 1 If so you must select Enable Macros in order to fully use IC MinEval Once IC MinEval has been successfully opened the opening screen will be displayed Figure 8 2 This screen contains your user information as well as product information including the serial number and version number You will require these should you wish to contact us see section 6 Contacting Us for further details If you do not see this screen and IC MinEval exits you may have a problem with the installation and you should re install IC MinEval using the installation disks Microsoft Excel x The workbook you are opening contains macros Some macros may contain viruses that could be harmful to your computer If you are sure this workbook is from a trusted source click Enable Macros If you are not sure and want to prevent any macros from running click D
14. mining ore or in the cost of processing and set the rest to zero In such a case don t enter the value in the cost of mining waste as the value will be multiplied by the strip ratio 31 2007 IC FinEval Ltd IC MinEval User Guide 10 1 6 Commodity Prices The Commodity Prices menu figure 10 6 lets you set the sale price of your product how the price will vary over the project life and set the hedging price if any Each metal has a separate tab which you select by clicking on the name Spot Price This is the value sales of the metal will get on the open market Price This is the price at the start of the project Inflated Selecting this option increases the metal price by the rate of inflation each year Fixed Selecting this option keeps the metal price constant over the project s life Escalated Selecting this option allows you to set the rate of increase or decrease in metal price each year Annual Escalation This is the rate of increase positive or decrease negative in the metal price as a percentage The effects of this escalation are cumulative IC MinE val Commodity Sales X m Spot Price C Inflate Fixed C Escalated M Price oz 390 Annual Escalation Forward Sales Production Hedged 0 Number Years Hedged Sod koward Fixed Fixed Price 02 Sold Fowerd escalated slo Price Escalation oz Sold Foward Floor Price
15. press Alt A Hot keys are written in this manual as Alt letter and are usually included within brackets Sometimes it is impossible to avoid having the same hotkeys for different controls in the same sheet such as on the Main Menu In such cases repeatedly pressing the hotkey combination will rotate through the controls As with most windows applications the currently active form can be dismissed by pressing Escape often displayed as Esc on your keyboard Pressing Return or Enter activates the default button usually OK so care should be taken not to press Return when you enter values Pressing F7 will display the context sensitive help where available which will give information on the currently active screen This can also normally be done by pressing Alt H When you are in Excel there will be an additional menu displayed This is the C MinEval menu and allows you to display the main Menu Colour code the input sheet display additional Help or display information About IC MinEval including the serial and version numbers 11 2007 IC FinEval Ltd IC MinEval User Guide 8 Running IC MinEval To start running IC MinEval either 1 Double click on the IC MinEval icon on your desktop see section 4 Installing IC MinEval for details on how to set this up 2 Select the IC MinEval icon from your start menu 3 Double click on the IC MinEval xls file in windows explorer 4 Whilst in Excel open the file IC MinEval xls in the
16. required funding to act as a cushion against unexpected cost rises etc Loan Interest Rate This is the annual rate of interest on the debt Return on Equity This is the annual expected return on equity invested This can be calculated by a variety of methods including the Capital Asset Pricing Model CAPM 39 2007 IC FinEval Ltd IC MinEval User Guide 10 1 11 Multi Partner Projects often involve multiple stakeholders each with their own investment criteria and expected returns The Multi Partner module allows each stakeholder to calculate their expected return from the project based on their level of participation and can include stakeholders with a free carry such as Black Economic Empowerment BEE groups The Multi Partner menu figure 10 11 is used to structure the participation level of up to three stakeholders and set rate of cash returned to each Equity Structure Investment Amount This is amount invested by each partner as a percentage of the Total Equity Funding see Project Finance 10 1 10 The actual amount is displayed below in M and if any stakeholder has a free carry then the should be left at zero although the total must equal 100 IC MinEval MultiPartner Partner 1 Partner 2 Partner 3 Investment Amount 9 5 u Yo 6o Yo 40 Yo Investment Amount M 0 00 357 84 238 56 x Investment Free Cash Free Cash Free Cash Trigger 1 1 0 Yo Trigger 2 4 20 Yo Trigger 3 40 Yo Partner 1
17. scenario we have only been provided with basic costs and so we can enter the Capex of US 55 million and operating costs of US 40 per tonne We have no fixed costs and so can leave this as zero The other options on this module refer to the built in cost estimation Commodity Prices The commodity prices menu allows us to set the initial gold price and specify how this will vary over the life of the project increase with inflation increase decrease by fixed percentage or remain constant The base case we are looking at here has a constant gold price of US 300 so we Set the spot price as thus and select fixed IC MinEval Commodity Sales Gold Spot Price C Inflate Fixed Escalated T Price oz 399 Annual Escalation 95 Forward Sales Production Hedged H Number Years Hedged Fixed Price oz m vo Ses az Escalation Premium oz Cancel Figure 9 6 The Commodity Prices Menu As well as setting up the spot price you have the option to forward sell a percentage of production for a specified number of years Although this is not required in the base case it is something that we can look at when doing some scenario analysis Expenditure As we have specified US 55 million as Capex we are able to split this 40 60 over the 2 year construction period by entering these values under the Capex payment schedule When doing this the actual amount is calculated and displayed for you to check In
18. the mining rate Taylor s Formula calculates an approximate rate based on published data Exp Mining Factor This is the factor used in Taylor s formula This is usually 0 78 but as this tends to underestimate the optimum mining rate you can alter the factor here Work Days Year The number of days per year that mining occurs This is multiplied by the mining rate to determine the total mined per year the total ore mined per year and from these the mine life IC MinE val Mining Rates X r Mining Rate Working days fyear 555 00 E Estimate Mining Rate E Ore Mined Per Day T 1700 00 Mining Rate Day T 1700 00 Ore Mined Per Year MT 0 60 C Calculate Mining Rate Using Taylors Formula t Total Mined Per Year Exp Mining Factor fo 00 Ore and Waste MT 0 60 Mining Rate Day T 0 01 Mine Life 7227 Initial Mining Rates Percentage 4 106 106 106 100 Amount MT 0 50 0 60 0 60 0 60 0 60 Cancel Figure 10 4 Mining Rates Initial Mining Rates This allows you to vary the initial mining rates over the first five years of production to simulate a ramp up period The value entered is a percentage of the mining rate 28 2007 IC FinEval Ltd IC MinEval User Guide 10 1 5 Costs The costs menu figure 10 5 sets the Capex and Operating costs for the current project If these are known or you have a good idea what they will be from similar operations they can
19. the necessary files to be installed correctly 2 Do you have a valid serial number Each copy of IC MinEval requires the correct serial number to be entered during installation If you are sure you have the correct serial number but you still can not install IC MinEval correctly please contact us via one of the methods given in the next section 3 Is Excel fully installed including VBA Visual Basic for Applications If not see section 3 System Requirements 4 Is the correct version of Excel installed IC MinEval required Excel version 8 0 Excel 97 or higher to run To check this select Help and then System Information in Excel 5 Did you click on Enable Macros when IC MinEval started See section 8 Running IC MinEval if you did not IC MinEval will not work Close and the reopen IC MinEval and click on Enable Macros 6 Do you have enough memory to run Excel and IC MinEval If you do not you will get a Not Enough Memory message and notice problems with the display If this is the case you can attempt to increase the amount of virtual memory to improve the situation as follows Under the Windows Control Panel double click on System 2 Select the Performance tab 3 Click on the Let Windows manage my Virtual Memory settings option 4 Click on Ok and then Ok in the System dialog to finish If these items do not describe your problem please contact our technical support via one of the methods described below 9 2007 IC Fi
20. to contact us See section 6 Contacting Us you should always include you serial number You may wish to create a desktop shortcut to run IC MinEval If so 1 Open Windows Explorer if it is not open already 2 Double click on the IC MinEval folder on your hard drive 3 Locate the file IC MinEval xls 4 From the Windows Explorer Edit menu select Copy or press Ctrl C simultaneously 5 Close or minimise Windows Explorer 6 Place your mouse in an empty area of the Desktop window and press the right mouse button 7 From the resulting menu select Paste Shortcut This will now create an icon in your desktop that you can select to run IC MinEval If you wish to change the name or icon of the shortcut 1 Select the IC MinEval shortcut icon don t double click as this will start IC MinEval 2 Press the right mouse button 3 From the resulting menu select Properties This will display a list of options you can choose to change the label or icon of the shortcut For more information on this press F1 or consult your Windows user manual There is an icon IC MinEval ico in the IC MinEval installation directory you may wish to use 8 2007 IC FinEval Ltd IC MinEval User Guide 5 Troubleshooting If you have a problem with the operation of IC MinEval please check the following before contacting us 1 Did you install IC MinEval using the installation disks You must install IC MinEval using the installation disks in order for all
21. 0 fio D 10 Discount Rates o Yo Yo Cancel Figure 10 11 MultiPartner Return of Cash The return of cash to each stakeholder is based on two criteria the Trigger and the Free Cash Free Cash This is the amount of free cash After Funding and Debt Service that each stakeholder receives and the total must equal 100 This amount can be varied by setting different rates for different triggers Trigger You can set up to two triggers to change the distribution of free cash to each stakeholder A trigger is based on the total amount of free cash distributed to stakeholders relative to the total equity investment amount For example in the example shown in figure 10 11 the total equity investment by all stakeholders was 596 4M As trigger 1 was set to one the free cash back to three stakeholders would be distributed at 0 60 and 40 up until 596 4M in total had paid 1 x 596 4 At this point the free cash would be distributed 20 60 and 20 up until a total of 2385 6 M 4 x 40 2007 IC FinEval Ltd IC MinEval User Guide 596 4 and includes the amount distributed through trigger 1 From then on the cash is distributed 40 60 and 0 until the end of the project Discount Rate This is the discount rate used to calculate the after tax and debt service NPV for each stakeholder and can be different for each one 41 2007 IC FinEval Ltd IC MinEval User Guide 10 2 worksheets The worksheets pr
22. 100 0 36 0 36 0 36 0 36 Percentage 9 5 Amount MT Figure 9 4 The Mining Rates Menu Costs 100 0 36 The project costs are an important part of any project and IC MinEval is flexible enough to allow you to make your cost estimations as detailed as you require enabling you to link into your own cost models or use the built in functionality of IC MinEval IC MinEval Costs UG Long Hole Stoping r Capex Ratio in construction Capex between Calculate Capex Canada and proposed location Estimate Capex Capex mine mill M ss Capex processing plant M amm o Overhead costs of capex Total Capex M 55 00 Operating Costs Operating Costs Ratio in Operating Costs between Canada and proposed location f Estimate Operating Costs Mining Ore T Mining Waste T B Processing T R E E Total Op Costs T Ore 40 00 Op Costs Year M 14 40 Annual Fixed Costs M E Recalibrate O Hara Cost Estimations Change in Canadian mining costs since 1978 9 5 100 0o87 r US Canadian Exchange Rate 1 Figure 9 5 The Costs Menu 17 ema 2007 IC FinEval Ltd IC MinEval User Guide If you have no cost figures available IC MinEval can calculate basic Capex costs for open pit and underground gold projects and Op Costs for Open pit gold projects For this
23. 4 Mine Type Au Cu Ag Mining Method Open Pit 5 Volume m Cul oit Mt 4 40 1 6 5G Mt 4 40 7 Mining Recovery 96 Mt 0 00 8 Dilution 96 Mt 4 40 9 Stripping Ratio Mt 4 40 11 Mining Rate 13 Total Mined Per Day 14 Ore Mined Per Day 2000 00 1 15 Ore Mined Per Year Mt y 0 60 16 Ore and Waste Mined Per Year Mt y 0 60 i 17 Percentage of Capacity Mined 96 7596 9096 10096 100 100 i Metals 18 Au Grade gt 8 00 Au Recovery 96 90 Au Price 20 Cu Grade 0 75 Cu Recovery 72 Cu Price 21 Ag Grade gt 48 00 Ag Recovery 96 72 Ag Price L E 4 23 Costs Mine 24 Work Days Year 300 P j HETAN wshtinpurData C usi anne 7 mee 1 EE E MMEESIEET E Figure 10 13 Selecting a cell to be flexed by clicking on it in the worksheet Cell Name 45 2007 IC FinEval Ltd IC MinEval User Guide This is the parameter name that will be displayed in the legend of the sensitivity analysis spider diagram Spider Diagrams Once the sensitivity analysis module of IC MinEval is run a spider diagram is produced in the Sensitivity chart Figure 10 14 The spider diagram compares the percentage change in a parameter against the percentage change in either the RR or NPV 50 00 40 00 30 00 20 00 10 00 0 00 10 00 Change in NPV 20 00 30 00 40 00 50 00 Example Gold Project 25 20 15 10 5 0 5 10 15 20 25 Change In Parame
24. 53 million tonnes As this is an underground operation the striping ratio has been disabled IC MinEval Resources Total Mineralised Vol Mcub m 1 246 Gold Grad t 10 m Specific Gravity of Ore 2 6 r rade gjt Plant R L 90 z Mining Recovery 9 5 100 ant Recovery Total Insitu Au t 32 40 Tonnage Dilution grade 0 o Bice t 32 40 Stripping Ratio O W T Total Au Recovered t 29 16 Total Insitu Ore at cutoff 2 0 Mt 3 24 Total Diluted Ore Mined Mt 3 53 Total Ore Recovered Mt 3 24 Total Mined Ore Waste Mt 3 53 Dilution Mined Mt 0 29 l Cancel Figure 9 3 The Resources Menu Once the total resource has been defined we are able to define the grade and plant recovery The in situ grade here is 10 g t and we have been given a plant recovery of 90 Based on these figures we have 32 4 tonnes of gold in situ of which we are able to extract 29 16 tonnes In a multi commodity deposit extra tabs would be displayed for each commodity for entering the grade and recovery Once we have entered all the relevant figures we can click on OK and the model will be updated setting up each commodity with the correct units g t etc Mining Rates With the deposit s resources defined we can now specify how the deposit is to be mined and calculate the mine life The Mining Rates form gives us several different ways of entering the mining rates We can either estimate it by entering the mining r
25. 7 IC FinEval Ltd IC MinEval User Guide General Information After entering the project name the project basics are entered As this scenario is a gold project Au is selected however IC MinEval can be used to model multi commodity projects including Gold Silver Lead Zinc Copper Nickel Molybdenum Tin Platinum Palladium Rhodium Iridium Ruthenium Osmium Diamonds Coal Steam Coking and Anthracite and Industrial Minerals either as predefined deposit types or using the custom type to define your own specific combination of commodities IC MinEval General Information Project Name Botswana Gold Mine Commodities Au custom Mining Method jus Long hole stoping Y D Pre Production Period Permitting Period Years 0 E e OK Construction Period Years 2 E Cancel Figure 9 2 General Information Menu After the deposit type has been defined the mining method is selected from the available list The differing mining methods enable different options including stripping ratio for underground and specific costs information For this scenario the mining method long hole stoping is selected The pre production period allows both the permitting period and the construction period to be defined This is useful if you have a period before the first expenditure and or production starts In this case we have two pre production years during which construction takes place and so we enter 2 into the co
26. Alt Y This button displays the Sensitivity Analysis form 10 3 1 which allows for the automatic generation of spider diagrams to show the sensitivity of the project to changes in the selected parameters 22 2007 IC FinEval Ltd IC MinEval User Guide Funding Alt G Allows the model to automatically calculate the required amount of funding at the selected level of debt and equity subject to the constraints selected in the Project Finance form 10 1 10 Charts Alt C Displays the Charts form 10 3 2 which allows the required cash flows or ratios to be selected and displayed in chart form Colour Inputs Alt R Checks the contents of wshtInputData worksheet and colour codes the contents depending on whether they are values formulae or text This makes it easier when checking the worksheet to identify which values can be changed manually Files Alt F Displays the Files screen which allows the saving and loading of data sets or custom tax sheets 10 3 3 Settings Alt T Displays the Settings screen which allows the user to set which worksheets are updated by IC MinEval 10 3 4 Help Alt H Displays the IC MinEval Help file Close Menu Alt C Closes the main menu so the user can examine the model in Excel You should use this option if you wish to save any changes or graphs you have made 23 2007 IC FinEval Ltd IC MinEval User Guide 10 1 2 General Information This menu figure 10 2
27. K to exit the project finance form Later we can model how the project is to be funded and the effect this has on the project viability by using this module to structure the funding and calculate the distribution to multiple partners post funding We can also then look at revenues for multiple participants in the project As well as setting up the funding IC MinEval includes the ability to calculate the minimum level of funding required so as never to give a negative cash balance over the project life if possible and automatically calculates all the standard ratios required for examining the loan structure Results We have now finished setting up the model in around 20 minutes This has generated a fully linked Excel spreadsheet model detailing how the financial model is built up from the initial inputs through the resources the production schedule revenues tax to produce the DCF worksheet fully linked into the P amp L and Balance sheets A series of charts are automatically produced allowing you to visually compare the cash flows and others can be selected from the IC MinEval main menu The sheets are accessed by clicking Close Menu and selecting the desired worksheet from the tabs displayed at the bottom of the screen The menu can be accessed again at any time by pulling down the IC MinEval tab on the tool bar at the top of the screen and selecting Show Menu Once the model has been created it is very easy to vary the parameters and run wh
28. NPV will be calculated using the weighted average cost of capital An up front fee of 196 of the total debt is assumed with a 5 commitment fee Fixed financing charges will amount to US 0 25 million and there is a contingency of 2 to act as a cushion against unexpected cost rises 55 2007 IC FinEval Ltd IC MinEval User Guide Exercise Follow the instructions for opening IC MinEval described in chapter 8 in order to bring up the Main Menu You can now set up the DCF model by identifying the key project data from the scenario described above and entering it into the appropriate IC MinEval data form Try to decide yourself which data is required for each particular entry form Screenshots of the correctly completed forms are shown below in case you encounter difficulties Ignore the Amount tabs on the Project Finance form for the time being IC MinEval General Information Project Name Project Finance Coal Model Commodities coa X E Mining Method Open Pit v E m Pre Production Period Permitting Period Years a OK Construction Period Years 2 a Cancel Figure 11 1 General Information IC MinEval Resources Total Mineralised Vol Mcub m 3o Coking Coal Steam Coal Anthracite o 5 E Specific Gravity of Ore 1 3 Grade 9 90 a PRESE cs P Wash Recovery Total Insitu Coking Mt 1 95 Tonnage Dilution grade 0 s l Total Coking Mined Mt 1 66 Stripping Ratio
29. Premium oz ENECE Figure 10 6 Commodity Prices Forward Sales This allows you to sell a percentage of your production at a different price hopefully higher to the spot price 96 Production Hedged This is the percentage of your annual production that you are selling at the hedged price Number Years Hedged This is the number of years that you have arranged to sell some of your production at the hedged price Sold Forward Fixed Select this option if the hedged price is fixed over the contract period 32 2007 IC FinEval Ltd IC MinEval User Guide Fixed Price This is the fixed price you will get for the metal Sold Forward Escalated Select this option if the hedged price increases or decreases by a set rate over the contract period Base Price This is the initial contract price Escalation This is the rate the contract price will vary over the contract period Sold Forward Floor Price Select this option if you will always receive a fixed premium on the floor price Floor Price This is the base price Premium This is the premium you will receive on top of the floor price 33 2007 IC FinEval Ltd IC MinEval User Guide 10 1 7 Expenditure The Expenditure menu shown in figure 10 7 is used to spread the Capex payments over the first five years of the project and to set up the amount of working capital to be used Capex Payments The Capex is unlikely to all be employed in the first
30. Version 1 2 IC MinEval Software for the Financial Evaluation of Mineral Deposits IC FinEval Ltd IC MinEval User Guide Legal Information Copyright IC MinEval is a trademark of IC FinEval Ltd Trademarks and copyright All products mentioned are trademarks or registered trademarks of their respective companies Microsoft is a registered trademark and Windows Windows NT Excel Visual Basic and Visual Basic for Applications are registered trademarks of the Microsoft Corporation Disclaimer of Warranty Although IC MinEval has been tested on a wide variety of computers there are no warranties either express or implied as to its quality performance merchantability or fitness for any particular purpose We do not assume responsibility for any damage or loss caused by the use of IC MinEval License The use of IC MinEval is under the terms and conditions expressed in the accompanying user license 2 2007 IC FinEval Ltd IC MinEval User Guide Contents 1 Introduction 5 2 Description of IC MinEval 6 3 System Software Requirements 7 4 Installing IC MinEval 8 5 Troubleshooting 9 6 Contacting Us 10 7 Navigating Through IC MinEval and Conventions Used in the Manual 11 8 Running IC MinEval 12 9 IC MinEval Quick Start Tutorial Botswana Gold Project 14 10 Description of Controls Worksheets and Output 21 10 1 Input Sheets 21 10 1 1 Main Menu 21 10 1 2 General Information 24 10 1 3 Resources 27 10 1 4 Mini
31. ancing costs have also been deducted Tax payable is automatically transferred to the wshtDCF and wshtP amp L 10 2 8 worksheets where the impact on cash flow and profit can be seen 42 2007 IC FinEval Ltd IC MinEval User Guide You can add additional rows and enter your own tax on wshtTax to create your own custom tax calculations These can be saved and later reloaded as pre built custom tax sheets from the files menus section 0 3 3 The values of the rows named in Excel as Tax and TaxAfterFunding are taken to wshtDCF to calculate the cash flows after tax and so your final tax payable should be calculated in these rows see Appendix A Producing Custom Tax Models 10 2 7 wshtFinance The wshtFinance worksheet allows you to fully analyse the financing structure of the project This sheet calculates the total amount of debt and equity required to finance the project and can be used to adjust the drawdown schedule for this funding From this the interest and repayment schedules can be calculated WshtFinance thus allows analysis of the optimum drawdown amount each year to ensure there is never a negative after funding cash balance in any particular year and this can be calculated automatically by IC MinEval using the Funding option on the main menu see 0 3 2 This worksheet also calculates several financial ratios that are important tools in the analysis of project financings These include the Debt Service Ratio Loan Life Ratio
32. at if scenarios using either the built in Excel or IC MinEval functions such as sensitivity analysis which is included in the IC MinEval package Together with the formal financial statements and cash flow charts produced these facilitate a thorough analysis of the project s economics 20 2007 IC FinEval Ltd IC MinEval User Guide 10 Description of Controls Worksheets and Output As you have seen from the quick start tutorial IC MinEval consists of two main components The first are the input screens which are written in Visual Basic and prompt you for all the necessary technical and financial data The second are the worksheets and graphs that contain all the data calculations and output generated by IC MinEval The following three sections describe all of these detailing the type of information required and the results produced 10 1 Input Sheets 10 1 1 Main Menu The main menu shown in Figure 10 1 controls IC MinEval allowing you to edit data view the worksheets create charts run a sensitivity analysis or to load and save data IC MinEval Mineral Project Appraisal Edit Data i on Example PGE Model Resources View Model wshtInputData view DCF Model Costs Default 100 Equity Financed Commodity Prices Analyse Model Optimise E Sensitivity Funding Files R Charts Settings Environmental Financial Colour Inputs Project Finance Help Multi Partner Figure 10 1 The IC Mi
33. ate per day this is the amount of rock and waste removed or use a calculation based approach to approximate the rate based on published data We know that the mining rate will be 1000 tonnes per day so we can select the Estimate Mining Rate option to estimate the rate and enter 1000 in the mining rate box We also know that the mine should operate for 360 days per year which when we enter into the working days year box automatically calculates the total mined per year We also have the option to ramp up the production rates over the start of the project as it may take a year or more to achieve the optimum production rates However we will keep the production rates at 100 throughout the mine life which is calculated as 9 81 years Once we have made these changes and select OK the model will automatically update and the correct number of columns will be setup throughout the model 10 for the production period and 2 for the construction period 16 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Mining Rates Mining Rate Estimate Mining Rate Ez 1000 00 C Calculate Mining Rate Using Taylors Formula Mining Rate Day T Exp Mining Factor 0 01 Mining Rate Day T Mine Life Working days year Ore Mined Per Day T Ore Mined Per Year MT Total Mined Per Year Ore and Waste MT x 360 00 r 1000 00 D 36 m Initial Mining Rates E Year 1 2 3 4 100 100 100
34. ated with extrusive or near surface intrusive igneous rocks Phanerozoic base metal deposits of variable type found in thick sequences of dolomite or limestone rocks Formed in warm seas in cratonic basin shelf environments Average grade is 3 10 combined Variable tonnage Low grade 0 5 2 copper large tonnage up to 1000 Mt deposits associated with calc alkaline intrusive suites in continental margins cordillera and island arcs Most are younger than 200 Ma and are hosted in or adjacent to narrow porphyritic stocks associated with large batholiths Molybdenum may also occur in economic quantities Phanerozoic deposits formed by the replacement of pre existing rocks at high temperatures at contact with medium to large sized igneous intrusions Found in orogenic belts at convergent plate margins and are usually associated with syn to late intracratonic island arc intrusions emplaced into calcareous sequences in arc or back arc environments Average grade is around 4 5g t gold See Cu Mo porphyries Stratiform massive sulphide deposits developed at the interfaces between two volcanic units or a volcanic and sedimentary unit Form at active constructive or destructive plate margins and 2007 IC FinEval Ltd Cu Zn Sn Diamonds Pt Pd Rh Ir Ru Os Pt Pd Rh Ir Ru Os Cu Ni Granite hosted tin Hydrothermal Kupferschiefer Epithermal gold Mafic magmatic sulphide hosted Kimberlite Alluvial and marin
35. axation and the discount rate we will use to value the project For this scenario we are using straight line depreciation This allows us to use the Capex to reduce the taxable income by the same amount each year of production The royalty rate is set to 2 and the basic tax rate to 35 This sets up the basic tax parameters for the project If you have a more complex tax structure IC MinEval allows you to design custom tax modules which you can save and import into models as required 19 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Financial Depreciation Method C None Royalty Rate 95 Straightline Tax Rate 35 C Depleting Orebody Annual Inflation 9 5 Calculate NPV Using Discount Rate Discount Rate C WACC Figure 9 9 The Financial Menu The model assumes zero inflation so we can leave the annual inflation to 0 The cost of capital for the project is 8 which we set as the discount rate IC MinEval can be used to model the project finance and allows you to calculate the NPV using the Weighted Average Cost of Capital WACC including variable WACC as debt is repaid instead of using a fixed discount rate if required However the base case scenario assumes no debt finance and so discount rate is selected to calculate NPV Project Finance And Multi Partner At this stage we are only performing a basic financial analysis of the project and so all the tabs are left at zero before we click O
36. be entered directly as values However if you do not have a reasonable idea what these will be you can use the calculate option to determine a rough cost from the empirical formulae produced by O Hara 1980 These formulae were produced in the late 1970 s based on studying cost data from Canadian projects In this version of IC MinEval O Hara formulae are available for open pit Capex and operating costs and underground Capex gold projects In the final version it is hoped to have these available for different metals and underground mining methods Capex Capital Costs Capex are costs in a particular year that will produce benefits in later years Calculate Capex Select this option if you wish to use the recalibrated O Hara s formulae to calculate Capex Ratio in construction Canadian mines and proposed location As the formulae were calculated using Canadian data you may wish to multiply them by a factor if the Capex varies between the location of your project and Canada A ratio of one gives the same Capex costs as Canada less than one reduces the Capex whilst a value greater than one will increase the Capex Estimate Capex Select this option if you wish to enter your own Capex values The total Capex is calculated as Capex Mine Mill Capex Processing Plant x Overhead Costs Capex Mine Mill M This is the cost of constructing the mine site and mill Capex Processing Plant M This is the cost of constructing the process
37. been entered it is checked and a comprehensive series of Visual Basic routines ensures that a set of Excel worksheets are generated to form a customised DCF model As these variables are added to or altered the Visual Basic routines ensure that all the cells and columns in the worksheets are automatically revised Consequential changes to the model such as mine life are also automatically implemented IC MinEval therefore provides a quick and flexible way of producing a customised DCF model of a mining project while minimising the potential for human error inherent in conventional Excel modelling Subsequent changes to input variables are incorporated and the model automatically updated IC MinEval allows the user to consider a range of financial parameters such as environmental costs taxation and the proportion of debt and equity Variable production rates during the initial period of the project can be accommodated as can the rate of capital expenditure If the user wishes to include debt financing in the model IC MinEval can automate the financial engineering required to define the optimum funding structure and drawdown schedule IC MinEval also produces a Balance Sheet and Profit and Loss account all linked to the DCF model including the tax scenarios Output modules include the base case discount cash flows as well as key financial ratios and performance indicators such as NPV IRR payback maximum cash exposure and debt service ratios Sensi
38. ducing Custom Tax Models Due to the complexities of international mining taxation it is impossible to produce a model that will be applicable in all situations As a result we have tried to simplify the process of producing a customised tax model in IC MinEval Using the load and save Tax Model in the Files module it is possible to create a series of Tax Models for different taxation regimes that you can load into IC MinEval As a quick guide to customising the Tax Models a sample tax model Tax tax is included in the samples directory of IC MinEval and the changes made are discussed as follows IC MinEval uses names to refer to ranges of cells in Excel making it easier to modify the models as only these names and not the actual cell references are used in most cases Changing Tax Formula Only the Tax Paid named Tax and Tax Payable named TaxAfterFunding are take through to the DCF and P amp L accounts In the example there is a simple loss carried forward calculation where the taxable income is equal to the current years profits PBIT or PAIBT as appropriate the previous years losses with losses carried forward indefinitely As you can see all the changes for depreciation and tax are only carried out on wshtTax making the tax models self contained and independent of the rest of the model Depreciating Capex Any changes to depreciation should be only done on wshtTax The sample tax sheet shows how this can be achieved a
39. e Layered mafic intrusions Layered mafic IC MinEval User Guide South Crofty UK Muruntau Uzbekistan Lublin Poland Carlin USA McLaughlin USA Lepanto Philippines Mt Keith WA Voisey Bay Canada Premier SA Kleinsee SA Bushveld UG2 SA Bushveld Merensky 66 usually underlain by a hydrothermal stockwork Stockwork deposits hosted in granitic plutons often of a porphyritic texture These deposits have much in common with porphyry coppers and are associated with ancient convergent plate margins Generally low grade Sediment hosted precious metal deposits Diagenesis of source rocks re mobolises and concentrates metals in hydrothermal fluids Stratiform sulphide deposits of sedimentary affiliation that occur in non volcanic marine or deltaic environments The host sediments are frequently organic rich and there is often more than one ore layer present Proterozoic to Tertiary in age Highly variable tonnages Gold deposits formed at shallow depth near surface to 1500 m in active convergent plate tectonic settings Associated with felsic to calc alkaline volcanic suites and are divided into low sulphidation types vein mineralisation and high sulphidation types disseminated mineralisation May also yield economic concentrations of silver as a by product Primary sulphide deposits hosted in ultramafic igneous rocks in Archaean greenstone terranes Nickel grades are ty
40. e all the variables from the list just click on Remove All Analyse Spider diagrams can be produced to compare the various variables against either the NPV or the IRR To choose either just highlight the associated option button Flex Amount The flex amount is the maximum positive and negative variation in a variable that will be calculated and displayed on the spider diagram Flex Increment This is the amount of variation that will be calculated up to the maximum flex amount for each variable to be analysed 44 2007 IC FinEval Ltd IC MinEval User Guide IC MinE val Select Cell to Be Flexed EA Figure 10 12 Sensitivity Analysis Selecting Add on the sensitivity analysis form displays the variable selection form shown in figure 10 12 Select Cell This is a special type of input box that as well as allowing the cell reference to be entered as text also lets you actually select a cell by clicking on it in the worksheet see figure 10 13 When selecting a cell you can click on the worksheet tabs to change sheet and you may select variables from more than one sheet However you can only select one cell at a time and cannot select a range of cells B x IE 18 x 0 ua v 5 Metelradei r Lil Spanish Example 2 Input data 3 Ore Reserves
41. e figure 11 9 Sensitivity Analysis Now try and run a quick sensitivity analysis to test the project s sensitivity to Capex Operating Costs and Mining Recovery Bring up the Main Menu and click on the Sensitivity button under the Analyse Model section We want to analyse the project s NPV so make sure this is selected on the Sensitivity Analysis menu and keep the flex amount at the default settings You can now select the variables to be flexed using the Add button as described in section 70 3 1 Use the Select Cell feature to select the variables from wshtInputData that are to be analysed You should select the total Capex figure M 42 54 total Operating Costs figure 11 t and Mining Rate figure 8596 to analyse these variables When you have selected all the variables you want to analyse click OK on the Sensitivity Analysis menu A spider graph displaying the project s sensitivity to changing Capex Operating Costs and Mining Rate will automatically appear and should look like the chart shown in figure 11 10 60 2007 IC FinEval Ltd IC MinEval User Guide Coal Tutorial 40 00 30 00 20 00 10 00 e Mining Recovery 0 00 m Capex Op Costs 10 00 Change in NPV 20 00 30 00 40 00 25 20 15 10 5 0 5 10 15 20 25 Change In Parameter Figure 11 10 Coal Project Sensitivity Analysis You have now learnt to use IC MinEval to model an operation with pr
42. eciated before the end of the project life you can check the total Capex total Depreciation otherwise you will need to add extra years This can be done by increasing the rehab period in the environmental sheet to cover the necessary period However this would not be very realistic in real terms as you would want all your Capex depreciated whilst you had revenue to write it off against 63 2007 IC FinEval Ltd IC MinEval User Guide Appendix B Financial Ratios IC MinEval calculates a series of financial ratios in wshtFinance whose analysis is the primary cash flow tools in project finance These can be split into e Annual cover ratios e PV cover ratios e Overall ratios Annual Cover Ratios The Annual Cover Ratios are e Interest Available Cash Flow Interest Rate e Principal Available Cash Flow Principal or available Cash Flow Interest Rate Principal e Debt Service Cover Ratio Available Cash Flow Debt Service Debt Service PV Cover Ratios The Present Value PV cover ratios are e Loan Life Ratio LER NPV of cash flows after funding during loan period discounted by the interest rate e Project Life Ratio PLR NPV of cash flows after funding during entire project discounted by the interest rate The difference between LLR and PLR is a measure of the residual cash flow cover Overall Ratios Other ratios that are used are e Debt Equity Ratio Projects with high market risk typically 50 50 or
43. ed that the dilution will be 996 and the mill recovery will be 9096 The capital cost is estimated to be US 55 million There will be two pre production years 40 of the capital cost will be incurred in the first pre production year and 60 of the capital cost will be incurred in the second pre production year The unit operating costs have been estimated to be US 40 per tonne of ore Working capital has been assumed to be 25 of annual operating costs The assumed gold price is US 300 troy oz in calculations use 31 1 g troy oz Assume a tax rate of 35 of taxable income Capital allowances can be claimed as straight line depreciation over the mine production life A royalty of 296 of gross mineral value is payable Starting IC MinEval When you start IC MinEval you will be presented with the main menu which allows you to set up the model view the output or run more complex analysis on the project once it is set up However before you will need to create the initial project so select the General Information button IC MinEval Mineral Project Appraisal Edit Data Botswana Gold Mine Resouces View Model wshtInputData view DCF Model Costs Default 100 Equity Financed Commodity Prices Analyse Model Optimise Expenditure Sensitivity Funding Files Environmental o hats Settinas Financial Colour Inputs Project Finance Help Multi Partner Figure 9 1 The IC MinEval Main Menu 14 200
44. ied directly to the revenue before the operating costs are taken into consideration Royalties are usually paid on sales of minerals extracted from the land to the landowner or government who have granted the mineral rights to the project Tax Rate 96 This is a flat rate of tax applied directly to the cash flows Annual Inflation 96 This is the annual rate of inflation The rate of inflation is applied to the costs and can be applied to the metal sale price if so selected in the Commodity Prices menu Discount Rate 96 This is the discount rate used to calculate the Net Present Value NPV Depreciation Method This option allows the method used to depreciate the tangible fixed assets Capex for tax purposes None The Capex is not depreciated over the life of the mine Straight line The Capex is depreciated at a constant rate over the mine life The Capex is depreciated by Total Capex each year Mine Life Depleting Ore body The Capex is depreciated by a variable rate as the ore body is mined The annual depreciation is calculated as Ore Mined in Year Total Reserves Mining Recovery Calculate NPV Using This provides you with two methods of setting the discount rate used to calculate the NPV 36 2007 IC FinEval Ltd IC MinEval User Guide Discount Rate Uses the discount rate entered in the adjacent box WACC Uses the weighted average cost of capital This is calculated as Weighted
45. ing plant Overhead Costs of Capex This covers additional costs and expenses that will be incurred and is entered as a percentage of the Capex 29 2007 IC FinEval Ltd IC MinEval User Guide IC MinE val Costs Open Pit X Ratio in construction Capex between Canada and proposed location Total Capex M Estimate Capex Capex mine mill M 44 6 Capex processing plant M o 44 60 Overhead costs of capex m Operating Costs C Calculate Operating Costs Ratio in Operating Costs Total Op Costs between Canada and T Ore proposed location 28 00 Estimate Operating Costs Mining Ore T e pere Mining Waste T 16 90 E Processing T zz Annual Fixed Costs M o E m Recalibrate O Hara Cost Estimations Change in Canadian mining costs since 1978 9 5 100 r US Canadian Exchange Rate 1 0 87 dd Cancel Figure 10 5 Costs Operating Costs Operating Costs OpCosts are costs that only produce a benefit for that year and are calculated annually Calculate Operating Costs Select this option if you wish to use the recalibrated O Hara s formulae to calculate the operating costs Ratio in Operating Costs between Canadian mines and proposed location This is the same as for Capex but is applied to the calculated operating costs Estimate Operating Costs Select this option if you wish to enter your o
46. ings used to customise the updating of the model as described in section 10 3 5 Settings 10 2 13 wshtDCF The main Discounted Cash Flow DCF calculations are carried out on this sheet which takes data from most of the other worksheets 43 2007 IC FinEval Ltd IC MinEval User Guide 10 3 Additional Controls Analyse Model 10 3 1 Sensitivity Analysis The Sensitivity Analysis menu figure 10 11 is used to generate spider graphs to show how the viability of a project is effected by changes in key parameters The calculations are made on wshtSensitivity see 10 2 9 and the resulting spider diagram is displayed in Sensitivity figure 10 14 to allow graphical analysis of the project s sensitivity Once you have selected all the required variables you can run the sensitivity analysis by clicking on Ok IC MinE val Sensitivity Analysis x Total Mined per Day wshtInputDatal C 13 Analyse E NPV C IRR Flex Amount 20 9 Flex Incrementt 5 Remove All ox c Figure 10 11 Sensitivity Analysis Add Clicking on the Add button allows you to add a variable to the list of parameters to be analysed in the sensitivity analysis up to a maximum of 20 Clicking on this button allows you to select the variable and assign a name to it see Figure 10 12 Remove If you wish to alter or remove one of the variables you have entered just select it from the list and click on Remove Remove All If you wish to remov
47. isable Macros Tell Me More V Always ask before opening workbooks with macros Enable Macros Do Not Open Figure 8 1 Excel dialog informing the user that the workbook they are attempting to open contains macros 12 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval About License Support Name 4 N Other Company IC FinEval Ltd Serial Number xxx xxx xxx IC MinEval Version v1 2 Figure 8 2 The IC MinEval opening screen 13 2007 IC FinEval Ltd IC MinEval User Guide 9 IC MinEval Quick Start Tutorial Botswana Gold Project The following scenario of a gold project in Botswana shows how quick and easy it is to create a full DCF model using IC MinEval This tutorial should take no more than about 20 minutes after which you will have created a full set of Excel based output sheets for your perusal The scenario used here covers the basics of IC MinEval but does not incorporate project finance or inflation etc To create the model simply work through the instruction guide that follows the scenario description below This tutorial is designed to familiarise you with the IC MinEval data input forms Scenario It is proposed to establish an underground gold mine and mill with a capacity of 1 000 tonnes of ore per day in calculations 360 working days per year in Botswana The mining reserves are 3 24 million tonnes of in situ mineralised material with an in situ grade of 10 g Au tonne It is estimat
48. mental and Closure Provision Bullet Payment At End Of Mine Life M This is a fixed amount which is payable at the end of the mine life to pay for the environmental rehabilitation of the mine site retrenchment costs etc Environmental Sink Fund at Beginning of Production This is a fixed amount which is payable before the start of production and acts as an environmental bond to cover the cost of the environmental rehabilitation of the mine site Annual Environmental Costs During Production M This covers on going annual environmental costs during production Annual Rehabilitation Costs After Mining M This is the annual cost of rehabilitating the mine site and is not included in either the sink or bullet payments that have been made Number of Years for Environmental Clean Up Essentially the length of time after the completion of mining that the annual rehabilitation costs have to be paid 35 2007 IC FinEval Ltd IC MinEval User Guide 10 1 9 Financial The Financial menu figure 10 9 sets the basic financial parameters such as the tax and inflation rate depreciation etc IC MinE val Financial X Depreciation Method Royalty Rate 9 5 fo Straightline Tax Rate 35 s Fr Depleting Orebody Annual Inflation fo Calculate NPY Using Discount Rate Discount Rate fio LI C WACC Figure 10 9 Financial Royalty Rate 96 The royalty rate is a tax appl
49. nEval Ltd IC MinEval User Guide 6 Contacting Us As part of our efforts to improve IC MinEval we d like to hear from you and encourage your questions comments and suggestions regarding this version of IC MinEval If you wish to contact us please do so either by Email info IC FinEval com or support IC FinEval com Phone 44 0 207 917 9838 Or by mail at IC FinEval Ltd 212 Piccadilly London W1J 9HG England If you do contact us please include your name company as well as the serial number and version number of IC MinEval you are using All this information is displayed on the opening screen when you start IC MinEval 10 2007 IC FinEval Ltd IC MinEval User Guide 7 Navigating Through IC MinEval and Conventions Used in the Manual As IC MinEval is a windows based product the controls will be familiar to all users especially those who have used Excel The forms and input sheets are all controlled by mouse and or keyboard Selecting an input box with a mouse activates it allowing you to change or add the information present Alternatively you can use the keyboard either by 1 Pressing TAB This cycles through all the available controls and you can move through all the controls until you reach the one you wish to use 2 Hot Keys Pressing Alt and a second key simultaneously activates hot Keys The required hot key is usually underlined on the button label e g Agree In this case to activate this button
50. nEval Ltd IC MinEval User Guide This allows you to set the total amount of funding debt and equity required by the project and the drawdown can be set over the first five years of the project The first year is the same as the first pre production year if any Note If you wish to calculate the amount of funding required by the project with the given debt equity ratio and interest rates etc you can do this automatically by selecting the Funding button on the main menu see section 10 1 1 Loan Type and Repayment Schedule Term Years Essentially the number of loan repayments to be made Grace Years The number of years post construction completion before loan repayments have to be made Loan Type Straight Loan The loan repayments are in equal instalments Production Loan The loan repayments are proportional to the production rate i e Annual Production Repayment Total Production During Loan Repayment Up Front Fee These are the charges set by the financier for arranging the loan etc and are a percentage of the total loan available These fees are incurred at the start of the project Commitment Fee This is an annual fee charged on the amount of the loan that has not been used drawndown Fixed Charges M These are charges incurred for agents and trustee s fees legal documentation independent completion engineers independent reports Contingency An additional percentage of the total
51. nEval Main Menu Each of the controls in the Main Menu are described as follows Edit Data General Information Alt G Selecting the General Information button displays the General Information screen 10 1 2 which allows you to change the project title the deposit type the mining method and the period required for permitting and construction Resources Alt O Displays the Resources screen 10 1 3 which allows you to alter the mineralised volume ore density mining recovery dilution and stripping ratio of open pit operations The Resources screen also allows you to set the grade and plant recovery for each metal Mining Rates Alt M 21 2007 IC FinEval Ltd IC MinEval User Guide Displays the Mining Rates screen 10 1 4 which allows you to change the mining rate per day the number of workdays per year and to set the initial mining rates over the first five years of mining Costs Alt C Displays the Costs screen 10 1 5 which allows you to set the Capex and operating costs for the project Commodity Prices Alt S Displays the Metals Sales screen 10 1 6 allowing you to set the spot and forward price of all the metals mined Expenditure Alt E Displays the Expenditure screen 10 1 7 which allows you to spread the Capex payments over the first five years and to set the percentage working capital to be employed Environmental Alt V Displays the Environmental and Closure Provision screen 10 1
52. nd allows Capex payments spread over up to 12 years can be less to be depreciated over X years By changing cell C3 you can vary the write off period Changing this to 1 lets you write off all Capex payments in that year immediately Obviously if you haven t made a Capex payment yet you can t write it off The formula for depreciation may look complex but it is in essence quite simple The main part iS IF AND CurrentYear gt 1 CurrentYear lt C 3 1 D 4 C 3 0 The first part AND CurrentYear gt 1 CurrentYear 2 C 3 1 checks year 2 Capex and checks whether it has been paid yet CurrentYear 1 and whether there is any left to be written off CurrentYear lt C 3 1 where C 3 is the depreciation period If there is Capex to be depreciated D 4 C 3 does it otherwise it is 0 As Capex payments this formula is repeated to cover extra years You can write off up to 12 years of Capex payments but if you wish to make Capex payments over a greater period you can add extra formula after F AND CurrentYear gt 7 CurrentYear lt C 3 10 M 4 C 3 0 Increasing the 7 and the M 4 e g IF AND CurrentYear gt 8 CurrentYear 2 C 3 10 N 4 C 3 0 IF AND CurrentYear gt 9 CurrentYear lt C 3 10 0 4 C 3 0 This is automatically linked to the P amp L account and so you should now only have one taxable income Please note If you have a very long depreciation period and or Capex spread you will need to check that all the Capex is depr
53. ng Rates 28 10 1 5 Costs 29 10 1 6 Commodity Prices 32 10 1 7 Expenditure 34 10 1 8 Environmental and Closure Provision 35 10 1 9 Financial 36 10 1 10 Project Finance 38 10 1 11 Multi Partner 40 10 2 worksheets 42 10 2 1 wshtInputData 42 10 2 2 wshtReserves 42 10 2 3 wshtRevenue 42 10 2 4 wshtCosts 42 10 2 5 wshtE amp C 42 10 2 6 wshtTax 42 10 2 7 wshtFinance 43 10 2 8 wshtP amp L 43 10 2 9 wshtBalance 43 10 2 10 wshtSensitivity 43 10 2 11 wshtMultiPartner 43 10 2 12 IC MinEval Options 43 10 2 13 wshtDCF 43 10 3 Additional Controls 44 10 3 1 Sensitivity Analysis 44 10 3 2 Funding 47 10 3 3 Charts 48 10 3 4 Files 50 10 3 5 Settings 53 11 IC MinEval Tutorial Exercise Coal Project Finance 55 12 Un Installing IC MinEval 62 Appendix A Producing Custom Tax Models 63 3 2007 IC FinEval Ltd IC MinEval User Guide Appendix B Financial Ratios 64 Appendix C Commodity Groups and Host Deposit Types 65 4 2007 IC FinEval Ltd IC MinEval User Guide 1 Introduction Valuation of mineral projects can be based on the following methods Discounted Cash Flow Earnings Multiples Market Capitalisation Of these the Discounted Cash Flow DCF method has the advantage that a model can be constructed which reflects the primary technical features of the project while minimising the inherent subjective element of the valuation process This does require a level of knowledge about the operation which may not be available o
54. nstruction period Resources Once the project has been defined we can set up the details of the project s resources and grades We have been told the project has an in situ resource of 3 24 million tonnes The In situ resource is what is in the ground and will be more than what we are actually able to mine Based on the geology we can calculate that given a specific gravity of 2 6 the total mineralised volume is 1 246 million m Alternatively if you do not know the SG you can enter 1 and then enter the volume as the in situ tonnage as this will not effect the calculations As you enter values into the forms several calculations are made and these are also displayed on the form such as in situ tonnage total mined etc We can now determine how much of the in situ ore is mined In this case we have entered 100 which would be unusual as we would expect some of the material to be uneconomic to extract Next we can enter any dilution factor in this scenario 9 which means that for every 9 1 tonnes of ore we extract we will also extract 0 9 tonnes of sub economic rock Having some dilution is normal as it is often caused by mining conditions but the key is to keep it to a minimum as it is also often caused by poor grade control Upon entering these values we can immediately see that over the entire life of mine we will be extracting 0 29 Mt of sub economic material or a 15 2007 IC FinEval Ltd IC MinEval User Guide combined total or 3
55. nu figure 10 10 is used to set up the financing structure of the project including the amount of debt and equity interest rate and repayment schedule It allows you to refine the financial model and explore the impact debt finance has on the project economics The menu allows you to manually input the amount of funding to be drawndown each year see Amount though IC MinEval can automatically undertake all necessary financial engineering to optimise the scale and schedule of funding The Project Finance menu should be left blank if the project is to be funded entirely by equity IC MinE val Project Finance X Capital Structure Debt Equity 95 of total 60 E 40 Year 1 E 3 4 5 Total Amount m 30 2o fio o o 60 00 Loan Type and Repayment Schedule Term Years J 5 g Grace Years 1 E Straight Loan C Production Loan T Up front fee 959 1 Commitment Fee 0 5 TJ Fixed Charges M 02 7 Contingency 96 10 q 8 Weighted Average Cost of Loan Interest Rate 95 L Capital WACC Return on Equity 9 5 15 9 9 12 Figure 10 10 Project Finance Capital Structure This option is used to set the Debt Equity ratio and the size of the debt of Total This is the percentage of the total finance required that will be funded as debt If the project is to be completely equity financed then this value should be set to 0 Amount M 38 2007 IC Fi
56. oduced are a set of Excel spreadsheets that detail how the financial model is built up from the initial inputs through the resources the production schedule revenues and tax charges to produce the DCF worksheet fully linked into the P amp L and Balance sheets 10 2 1 wshtInputData The wshtInputData is used to store all the variables and other data used to calculate the DCF model wshtDCF and is linked to all the other worksheets All the variables are referenced using Names rather than cell references and most of the names used by IC MinEval are defined in this sheet When you save an IC MinEval data set wshtInputData is saved to a separate file It is important that you only try to load saved data sets using IC MinEval otherwise the names will not be defined properly and errors will occur The input sheet contains values formulae and text which can be confusing To enable you to identify which variables you can change it is possible to colour code the contents of the input sheet by selecting Colour Inputs section 10 1 1 on the main menu 10 2 2 wshtReserves The wshtReserves worksheet calculates the depletion of the orebody using the mining rate The calculations include dilution and work out the amount of ore and waste mined per year over the mine life This sheet allows you to analyse the efficiency of the mining process itself 10 2 3 wshtRevenue The wshtRevenue worksheet calculates the amount of each metal mined per year the revenue fr
57. oject finance and have seen how the software can be used to carry out the financial engineering necessary too optimise the funding structure Experiment with varying the input data on the Project Finance form to investigate the effect on the project economics of changing the finance structure Practice using the Analyse Model functions on the Main Menu these are powerful evaluative tools and let you quickly carry out downstream level analysis on your project even if it is only at a very early stage of development 61 2007 IC FinEval Ltd IC MinEval User Guide 12 Un Installing IC MinEval IC MinEval creates an uninstall file during installation to simplify removal should you wish to upgrade to a newer version or remove IC MinEval completely To un install IC MinEval 1 Double click on the My Computer icon on your desktop 2 Double click on the Control Panel icon 3 Double click on the Add Remove Programs icon 4 Select IC MinEval from the list 5 Click on Add Remove and follow the on screen prompts IC MinEval will now have been completely removed from your system If you created a desktop shortcut to IC MinEval as described in section 4 Installing IC MinEval 1 Click on the shortcut icon once if you double click it will attempt to run IC MinEval 2 Press delete normally marked Del on your keyboard and select Yes to remove the shortcut 62 2007 IC FinEval Ltd IC MinEval User Guide Appendix A Pro
58. om each metal and the total revenue per year over the mine life This sheet thus allows analysis of the contribution of each of the metals mined to the total revenue produced by the mine For single metal gold mines the operating cost per ounce of gold produced is also calculated and displayed on this worksheet 10 2 4 wshtCosts The wshtCosts worksheet is used for Capex and Operating Cost calculations and estimates If the user has their own cost data it should be incorporated here either directly or by linking to their cost data This sheet allows you to directly analyse the capital and annual operating costs of the project and shows how these costs are generated by unit operation 10 2 5 wshtE amp C The wshtE amp C worksheet is used to calculate the provisions made for environmental and closure costs including capital and annual costs The rows named TotalAnnualOpCosts and TotalCapex are then taken and used in the DCF model This sheet allows you to analyse the total environmental costs of the project 10 2 6 wshtTax The wshtTax worksheet is used to calculate the amount of tax payable both before for the purposes of calculating NPV and IRR and after funding to take account of tax shields and calculate the actual payable tax Tax before interest is calculated after deducting annual depreciation from the annual net income However when debt financing is involved the actual tax payable is calculated after annual interest charges and any fin
59. pically 1 596 and tonnages are moderate to high Copper may be present as an economic by product Diamonds associated with volatile rich ultramafic igneous rocks occurring in volcanic pipes dykes and sills Kimberlites first appear in the Proterozoic and are found in continental cratons Their location appears to be controlled by deep seated fracture systems Diamonds are sparsely concentrated throughout the kimberlite host rocks Clastic sediment hosted diamonds in alluvial or shallow marine basin settings Weathering releases diamonds from their source kimberlite rocks and gravity separation by flowing water concentrates them into economic placer deposits Usually include gem quality stones but concentration is highly variable Orthomagmatic sulphide deposits formed in large stratiform layered igneous complexes in Proterozoic cratonic settings Their origin is intimately associated with the high temperature processes of magma formation and crystallisation High tonnage platinum group element ore bodies Same geological setting and genesis as 2007 IC FinEval Ltd Pt Pd Rh Au Pt Pd Rh Ir Ru Au Cu Ni Ind Min industrial minerals intrusions Alluvial Layered mafic intrusions Open Pit Laterite Ni Bauxite Al Stratabound Iron Stratabound Mn Chromitite Tantalite IC MinEval User Guide Reef SA Stillwater USA Goodnews Bay USA Bushveld Merensky Reef SA Norilisk Ru
60. r mining parameters If working on a polymetalic deposit the grades and plant recovery for the various metals will be displayed on a tab strip and a particular metal can be selected by clicking on that metals name Ore Body Model Total Mineralised Volume This is the total volume of the deposit This is multiplied by the specific gravity of the ore to calculate the Total Insitu Ore at cut off 0 the total ore tonnage Specific Gravity of Ore The specific gravity of the ore will vary depending upon the deposit type This is multiplied with the total mineralised volume to determine Total Insitu Ore at cut off 0 Mining Recovery The mining recovery is the percentage of the total in situ ore that can be mined Some areas of the orebody may not be amenable to extraction or a particular mining method e g room and pillar may not be able to extract all the ore The Mining Recovery is multiplied by the Total Insitu Ore at cut off 0 to determine the Total Ore Recovered Tonnage Dilution grade 0 The dilution is the amount of waste rock material whose grade is below cut off that is mined as ore In IC MinEval this material is considered to have 0 grade Stripping Ratio O W This is the amount of waste material that has to be removed for every tonne of ore mined in Open Pit operations IC MinE val Resources X Total Mineralised Vol Mcub m 1 68 Gold Copper Silver 528 Specific Gravity of Ore 2 6 Grade gj
61. re detail Funding Although the key results of the discounted cash flow analysis are favourable when looking at wshtFinance you will notice that the cash balance after funding is negative in the two pre production years and the cumulative cash flow is negative until year 5 The major financial ratios are also below the recommended minimum levels in the early years of the project This suggests that the level of debt and equity funding drawdown in the pre production years needs to be adjusted The financial engineering carried out by investment bankers in order to optimise this funding structure can be a lengthy and complex task However IC MinEval can carry out all the financial engineering and automatically update the model for you in a matter of seconds Bring up the Main Menu by clicking on C MinEval on the toolbar at the top of the screen and selecting Show Menu Click on the Funding button under the Analyse Model section of the menu IC MinEval will now spend a few seconds analysing the funding structure and re calculating each line in wshtFinance at the revised optimum drawdown level All the other output sheets in IC MinEval will be automatically updated You should now find that the cash balance after funding is positive even in the pre production years and that the major financial ratios in wshtFinance are more favourable The funding drawdown structure can be adjusted manually on the funding Amount entry on the Project Finance form se
62. rs with 60 of the total capital required in the first year and the remainder in the second The unit operating costs of the mining operation are estimated at US 6 per tonne of coal mined and US 0 5 per tonne of waste mined The milling costs are estimated to be US 2 per tonne and any further processing costs are met by the customer Working capital is budgeted at 25 of annual operating costs All coal is to be sold on contract to an adjacent power station who will carry out any further coal processing themselves The cost of transporting the coal to the customer is negligible For the purpose of modelling average coal contract sale prices are assumed fixed at US 26 per tonne of steam coal US 40 per tonne of coking coal and US 35 per tonne of anthracite Tax is set at 30 of taxable income and a royalty of 5 of gross coal value is payable Capital allowances can be claimed as straight line depreciation over the mine life Environmental costs will amount to US 0 5 million per annum during mining and US 1 million in each of the two closure years to meet land rehabilitation requirements The project sponsors are seeking to finance 60 of the total capital requirement with debt and 40 with equity The bank is willing to lend at an interest rate of 9 5 and require straight loan annual repayments over 5 years with a 2 year grace period before repayment commences The project discount rate is 10 and shareholders require a 15 return on equity
63. s the same way as the sensitivity analysis selection allowing the user to select a worksheet and then type in the number of rows to be updated IC MinE val Add Worksheet X Worksheet wshtBalance B Update Rows 30 TURIS Figure 10 21 Add Worksheet Remove Highlight the worksheet you want to remove in the list of worksheets and then click remove to remove it Remove All Removes all the worksheets from the list Note Removing all the worksheets from the list and selecting Enable Customised Updating will result in none of the worksheets being updated only the input data you entered in the forms 53 2007 IC FinEval Ltd IC MinEval User Guide If the user does not wish to update some of the data in the model from a form each form now has an option allowing the user to exclude that input when entering data e g b mw Dont Update Model if Checked LU Wi 54 2007 IC FinEval Ltd IC MinEval User Guide 11 IC MinEval Tutorial Exercise Coal Project Finance The following tutorial shows how quick and easy it is to create a full DCF model with sensitivity analysis using IC MinEval The session revisits and builds on the basic functions of IC MinEval covered in chapter 9 and introduces the project finance menu At the end of the tutorial you will have created a full DCF model of a large scale coal project with debt finance and will learn how IC MinEval can be used to automate the financial engineering and
64. sensitivity analysis The case history describes a large open pit coal project similar to those found in Western Australia Scenario It is proposed to establish an open pit coal mine with a capacity of 10 000 tonnes of mixed quality coal per day in calculations 325 working days per year The mining reserves are 39 million tonnes of in situ coal SG 1 3 with an estimated quality of 9096 steam grade 596 coking grade and 5 anthracite It is estimated that the dilution will be 5 and the mining recovery will be 85 The wash recovery for each coal product will be 90 Coal will be mined by truck shovel methods with blasted overburden being stripped by a combination of power shovels and hydraulic excavators and hauled to disposal sites by dump trucks The average striping ratio for the process is 6 tonnes of waste for each tonne of coal mined The exposed coal seam will be cleaned by bulldozers and loaded into coal dump trucks by front end loaders Bulldozers will also be involved in on going surface land rehabilitation in mined out areas The mine will operate at 5096 of its capacity in the initial production year and ramp up to 75 the following year Full production capacity will be reached by the third year The capital cost is estimated to be US 42 54 million based on the cost of purchasing the required mining equipment and developing the mine infrastructure US 38 67 million and capital overheads of 10 There will be two pre production yea
65. ssia Sudbury Canada Witbank SA Griffin WA Murrin Murrin WA Huntly WA Thabazimbi SA Hamersley WA Sichen SA Dwars River SA Greenbushes WA 67 described above Differences in the stage of geochemical evolution of the source magma results in the economic concentration of nickel and copper within certain layers in addition to accessory platinum group elements Clastic sediment hosted placer deposits found in alluvial basins Formed by the weathering of mafic igneous complexes see above and the subsequent concentration and deposition of the freed platinum group elements and gold by fluvial processes Same geological setting and genesis as described earlier Differences in the stage of geochemical evolution of the source magma results in the economic concentration of nickel copper and gold within certain layers in addition to accessory platinum group elements Shallow lying stratiform coal seams amenable to surface mining techniques Overburden usually consists of a relatively thin sequence of mid to late Phanerozoic sediments Coal may be classified as coking steam or anthracite depending on the level of coalificaton attained and its physical and chemical properties Laterally extensive surficial deposits often the result of secondary mineralisation in soil profiles due to the weathering of crystalline parent rocks in tropical climates Such commodities are usually bulk high volume
66. t o 88 E Mining Recovery 95 fioo m Plant Recovery Total Insitu Au E 22 65 Tonnage Dilution grade 0 o Unda d t 22 65 Stripping Ratio O W i o E Total Au Recovered E 19 93 Total Insitu Ore at cutoff 0 Mt 4 29 Total Diluted Ore Mined Mt 4 29 Total Ore Recovered Mt 4 29 Total Mined Ore Waste Mt 4 29 Figure 10 3 Resources Commodities Grade This is not the cut off grade minimum economic grade but the average grade of the ore mined and should normally be higher than the cut off grade Plant Recovery This is the percentage of the metal contained in the ore that can be recovered by processing through the plant 27 2007 IC FinEval Ltd IC MinEval User Guide 10 1 4 Mining Rates The Mining Rates menu figure 10 4 sets the rate at which the ore body is mined This is important because it directly effects the mine life and the Capex as the more rock mined per year the larger the processing plant and equipment that is required Mining Rate Estimate Mining Rate Select this option if you wish to enter the known or your own estimate of the mining rate Mining Rate Day T This is the amount of material that is mined per day This includes waste material so in an open pit operation the relationship with the amount of ore mined per day depends on the stripping ratio Calculate Mining Rate Using Taylor s Formula Select this option if you wish to use Taylor s formula to estimate
67. ter Figure 10 14 Sensitivity 46 Dilution l Processing Recovery Stripping Ratio lt Op Costs T Capex e Tax Rate 1 Inflation 2007 IC FinEval Ltd IC MinEval User Guide 10 3 2 Funding The funding option automates the calculation of the minimum level of funding required in order to ensure that there is never a negative cash balance plus funding contingency at the specified Debt Equity Ratio in any given year This is done by changing the total funding amount each year so that the cash balance in that year is not negative taking into account the effect of interest payments The funding option is a major tool in the modelling of project finance Calculating the optimum amount and schedule of funding can be a complex and time consuming task for investment bankers Selecting this option triggers IC MinEval to automate all the necessary financial engineering to ensure that the project s cash balance remains positive throughout the initial period of capital expenditure on development 2 2007 IC FinEval Ltd IC MinEval User Guide 10 3 3 Charts The charts menu figure 10 15 allows you to select the cash flows or ratios you require and display them as either a bar or scatter line chart with or without data labels IC MinE val Charts x Cash Flows BIT BIAT AIT BIT Disc BIAT Disc AIT Cum BIT Cum BIAT Cum Chart
68. the Custom option is selected from the Commodities dropdown list on the General Information form 10 1 2 IC MinE val Set Custom Commodity Group X Select Commodity Selected Commodities Au Au Cu Pt Ag Pd Pb zn Mo Sn Ni Diamonds Pt Figure 10 2 1 Custom Commodity Selection By Selecting the commodities from the left window the user can add up to 8 commodities to the custom group and can include the same commodity more than once in case the user needs to specify more than one industrial mineral or has the same commodity at different grades The range of commodities that can be added include Au Cu Ag Pb Zn Mo Sn Ni Diamonds Pt 25 2007 IC FinEval Ltd IC MinEval User Guide Pd Rh Ir Ru Os Coking Steam Anthracite Industrial Mineral Rutile IImenite Garnet Zircon Co and U308 Uranium If a commodity has been added in error it can be removed by selecting it in the right window and clicking remove Clicking remove all will remove all the commodities from the right window If the mineral you require is absent from the list select a mineral with the same units of production and sale e g g t and oz with Industrial mineral being a straight of extraction and sold in units of t 26 2007 IC FinEval Ltd IC MinEval User Guide 10 1 3 Resources The Resources menu figure 10 3 is used to set the size of the deposit the grades and several othe
69. this case US 22 million and US 33 million respectively 18 2007 IC FinEval Ltd IC MinEval User Guide IC MinEval Expenditure Capex Payments Year 2 3 4 5 Total 1 Percentage 9 5 40 eo lo o o E 100 00 Amount M 22 00 33 00 0 00 0 00 0 00 55 00 Working Capital Working Capital of Annual Op Costs 2s Amount M 3 60 a Ta Figure 9 7 The Expenditure Menu Also on the expenditure form we can set the level of working capital This is a percentage of annual operating costs so setting the value to 25 as specified in the project scenario is equivalent to 3 months and works out as US 3 6 million Environmental amp Closure Provision Included in the package is the ability to model ongoing environment and closure expenditure including up front sink fund post bullet and annual costs during production and for a specified period postproduction The base case used here does not include any E amp C provision so these values are left at zero IC MinEval Environmental amp Closure Provision Bullet Payment At End Of Mine Life M o Sink Fund At Beginning OF Production M o Annual Environmental Costs During Production M o Annual Rehabilitation Costs After Mining M Number Of Years For Environmental Clean Up Figure 9 8 The Environmental and Closure Provision Menu Financial After defining the deposit we can look at the financial regime in more detail including t
70. tivity analysis can be undertaken on key variables using spider diagrams C MinEval therefore produces a fully integrated set of output sheets that provide a comprehensive financial model of the project IC MinEval is not designed to replace the complex models generated as part of a full feasibility study of a specific project nor can it be compared with a stand alone software package However because it is based on an Excel spreadsheet it does provide flexibility and power through the ability to modify the worksheets generated by the menu driven forms These can be customised to incorporate project specific information such as tax concessions and grants When the modified worksheet is inserted into the spreadsheet IC MinEval will link and update the DCF model This flexibility also extends to the presentation of the results Because the model is produced as an Excel spreadsheet it is very easy to incorporate the charts and tables generated by IC MinEval directly into reports or presentations It also allows the user to undertake preliminary on site screening of projects during assessment exercises 6 2007 IC FinEval Ltd IC MinEval User Guide 3 System Software Requirements Pentium 100MHZ or higher with 32MB RAM Windows 95 98 or NT Microsoft Excel 97 or later English Version In order to use IC MinEval you must have Excel and have installed VBA Visual Basic for Applications when Excel was installed If you did not install the full
71. urther Otherwise just select Exit to return to the main menu IC MinE val Cash Flows x Spanish Example CashFlows PBIT m Disc PBIT Figure 10 16 The Cash Flows chart display 49 2007 IC FinEval Ltd IC MinEval User Guide 10 3 4 Files The files form Figure 10 17 allows the loading and saving of IC MinEval data sets and custom tax sheets IC MinE val Files x Dataset Load Data Load Tax Per Save Data _savetax_ Save Tax Figure 10 17 The Files form Data Set Load Data This button allows you to load a previously saved data set See section 0 3 3 1 Load Dataset Save Data This button allows you to save the current wsAtInputData as an IC MinEval data file see section 10 3 3 2 Save Dataset Tax Load Tax This button allows you to load a previously saved Tax sheet see section 0 3 3 3 Load Tax Save Tax This button allows you to save the current wshtTax as an IC MinEval Tax data file see section 10 3 3 4 Save Tax Help Displays the Files section of the help file Cancel Closes the form and returns to the main menu 10 3 3 1 Load Data set If you have previously saved a project using Save Data set you can re load it using the Load Data set button from the Files Menu You will be prompted for the filename by the Load Data set dialog box figure 10 18 Note The file you load must have been previously saved using Save Data set otherwise you may
72. utside the Company but it is still possible to develop a model based on comparative scenarios which can provide the basis for a preliminary valuation This approach was followed as part of a programme of research at Imperial College arising from comments received from delegates on related short courses on mineral deposit evaluation and resulted in the development of IC MinEval a new Excel spreadsheet based DCF modelling tool IC MinEval offers an expert approach to preliminary level valuations of mineral projects for the purpose of evaluating for economic feasibility potential project financing or merger and acquisition deals 5 2007 IC FinEval Ltd IC MinEval User Guide 2 Description of IC MinEval IC MinEval automates all the stages required to produce an Excel based DCF model of a mining project through a series of clearly defined menu driven forms These prompt the user to enter all the necessary technical and financial variables As independent technical variables such as grade tonnage and resource volume are entered corresponding values for dependent variables such as metal tonnage and resource tonnage are indicated in the forms Through the use of a dynamic Help system all the variables and their relationships are explained so the user knows what information is required f information is not available on the mining rate or costs typical values can be suggested using empirical formulae Once the key technical and financial data has
73. vailable mining methods including open pit and a range of underground mining methods In this version of IC MinEval the major difference between these are 1 Selecting Open Pit allows you to set a stripping ratio in Resources 10 1 3 2 Selecting Open Pit or an Underground Method gives different gold Capex costs when calculated using the modified O Hara formulae in Costs 10 1 4 3 Selecting Open Pit allows you to use the O Hara formula to calculate the Op Costs of a gold project in Costs 10 1 4 24 2007 IC FinEval Ltd IC MinEval User Guide IC MinE val General Information Project Name fau Cu Ag Example Commodities au cu Ag r Mining Method Open Pit x E Pre Production Period Permitting Period Years o Construction Period Years 1 E Figure 10 2 General Information Permitting Period This allows you to set the time taken to obtain the necessary documentation and permitting and the time required constructing the plant etc These are then combined and used to determine the pre production period the time after the initial Capex has been spent before production and revenue can begin In terms of project finance this end of this period signifies completion when the project s cash flows become the primary source of debt repayment 10 1 2 1 Custom Commodities The custom commodities form figure 10 2 1 allows the user to specify up to eight commodities to be used when
74. version you will need to install it 1 Quit Excel 2 Put the Microsoft Office or Microsoft Excel CD into the CD ROM drive 3 If a Microsoft Office or Excel window as appropriate does not appear 3a Either select the CD ROM drive in Explorer or double click on the My Computer icon and select the CD ROM drive 4 Click on the Install Microsoft Excel icon 5 Select the Add Remove components button 6 Select the Data Access checkbox 7 Click on the Continue button 8 When the installation has finished restart the computer when prompted 9 When the computer has restarted you will be able to use IC MinEval 7 2007 IC FinEval Ltd IC MinEval User Guide 4 Installing IC MinEval The simplest way to install IC MinEval on your hard drive is to use the Windows Explorer 1 Place the IC MinEval floppy disk in the floppy drive 2 Open Windows Explorer 3 Double click on the floppy drive icon 4 From the Windows Explorer Edit menu select Setup exe This will start the installation program and you will be prompted for the necessary information as it is required 5 You should put the IC MinEval installation disk in a safe place in case you need to re install the program in the future During the installation procedure you will be asked to enter your name company and serial number The serial number is required to run the installation procedure and IC MinEval It can be found inside the back cover of this manual and if you wish
75. wn operating costs The total operating cost per tonne of ore is calculated as Cost of mining one tonne of ore Cost of mining one tonne of waste x Strip Ratio Cost of processing one tonne of ore Mining Ore T Cost of mining one tonne of ore Mining Waste T Cost of removing one tonne of waste This is normally lower than the cost of mining ore as it is often not sampled Processing T Cost of processing one tonne of ore Annual Fixed Costs M Additional fixed costs per year 30 2007 IC FinEval Ltd IC MinEval User Guide Coal Mining Only Transport Costs T Where any of the three coal types is selected as a commodity an additional cost component is added for transporting the coal and is calculated in per tonne transported Transport Costs JT Recalibrate O Hara Cost Estimations Change in Canadian Mining Costs Since 1978 As the O Hara formulae were calculated using 1978 data based in Canada this allows you to inflate the 1978 costs to the current value This value is entered as a percentage and is multiplied to the Capex and Operating Costs US Canadian Exchange Rate 1 As the O Hara formulae were calculated in Canadian dollars if you wish to use the formulae you will need convert them into US The exchange rate in 1978 when the original calculations were made was 1 US to 0 87 Canadian If you do not know the individual costs you can just enter a single value in either the cost of
76. year of the project depending upon delays and the construction period This menu allows you to spread the capital expenditure over the first few years of the project Percentage This is the percentage of the total Capex spent in a particular year The sum of all five years must be equal to 100 Working Capital Working Capital of Annual Op Costs This is used to set the amount of working capital required This is expressed as a percentage of the annual operating costs and is normally set at around 25 IC MinE val Expenditure X Capex Payments Year 1 2 3 4 3 Total Percentage 3 5 100 fo fo fo fo p 100 00 Amount M 44 60 0 00 0 00 0 00 0 00 44 60 Working Capital Working Capital of Annual Op Costs o Amount M 0 00 Ok Cancel Figure 10 7 Expenditure 34 2007 IC FinEval Ltd IC MinEval User Guide 10 1 8 Environmental and Closure Provision The Environmental and Closure Provision menu figure 10 8 allows you to include the expected environmental costs and additional costs associated with the project s closure within your appraisal IC MinE val Environmental amp Closure Provision Bullet Payment At End Of Mine Life M jo Sink Fund At Beginning OF Production M amm Annual Environmental Costs During Production M lo Annual Rehabilitation Costs After Mining M ho B Number Of Years For Environmental Clean Up o n Figure 10 8 Environ

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