Nov 11 2008
The Valuation of Mining Companies – Post #17 of 17
Background to this Series of Posts
This is the 17th in a Series of 17 Posts that published on this Blog from September 16 to November 11. All 17 Posts can be found under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.
Required Rates of Return on Investment
As a result of the high risks inherent in mining exploration and mineral mining and production, in my view the rates of return investors should seek are much higher at the beginning of the exploration process and through to and including production than are conventional required rates of return. Required rates of return are relevant to, and hence determined at, specific points of time. They can change instantly with mineralization discoveries, enhancements, poor drilling results, quantification of NI43-101 compliant proven and probable reserves, mine permitting, material changes in commodity pricing, and so on.
In my experience conventional ‘starting point’ ‘targeted’ ‘strategic corporate acquirer’ ‘nominal’ (i.e. including consideration of prevailing inflation rates) unlevered (i.e. a pre-levered ‘return on equity’)
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