Stans Energy Corp V.HRE.H

Full Ruling online

[grammadux]

the full arbitration ruling is now available as pdf on Stans' homepage: https://www.stansenergy.com/blog/wp-content/uploads/2014/08/International-Arbitration-Ruling-Moscow-Chamber-of-Commerce-and-Industry-2014.pdf

As it's 99 pages, I really just skimmed it
Interesting IMO is the valuation of the market value of the mine starting on page 66

the right to use the deposit is valued at 107.781.000 USD
moreover the feasibility study seems to be almost finished as it was used for valuation, so this DCF model by the expert results in the value which is nothing else than the net present value


please correct me if I am wrong but this should be the NPV of the project as of June 25 2012, so I guess we finally have some sort of NPV at least


some excerpts here:

"the value of the right to u se “Kutessay II” rare - earth elements deposit was calculated using the discounted cash flow technique with application of the model of cash flow calculation for the aggregate invested capital. The main point in this approach is to forecast cash flows which were to be received in the process of development of the deposit in the course of mining and ore processing into float concentrate. In order to determine the value of the right to use the deposit, the discounted cash flows were summed up in accordance with the appraisal methodology. The forecast was made on the basis of the analyzed available data about prices for this product in the period from 2010 till 2013 and on the basis of the forecast prepared by the Nordest Financial ( Asian Metal ) international in formation centre"
...............

The market value of the right to use “ Kutessay II ” deposit as of the date of beginning of the creeping expropriation of “ Kutessay II ” ( June 25, 2012) made up 5.087.042.000 ( equivalent of 107.781.000 USD )
...............

In answer to the question of arbitrators concerning the source of information about the costs of “Kutisay Mining” for the development of “Kutessay II” deposit the expert said that the information material she used i n the course of calculations was in particular the feasibility study for the development of the deposit concerned from which she took capital expenditures for the development and mining volumes as well as the method of ore production.
..........

Discounted cash flow method used in the calculations is based on the evaluation of future revenues for each of several time intervals. When assessing the right to use “Kutessay II” rare - earth elements deposit by way of discounted cash flow method, the estimated future time period of operations related to the deposit development was divided into two periods: forecast and post - forecast period . “Kutisay Mining” LLC expected that the volumes of yearly ore production and processing would amount to 100 000 tons in the first year of completion of infrastructure construction with subsequent increase of up to 1 000 000 tons in 2012. “Kutisay Mining” LLC holds the license for the deposit development till December 21, 2029, i.e. its remaining term is 16 years. Duration of t he forecast period was chosen as 1 0 years in order to build a sufficient number of cash flows (in order to get a most true picture of development of the company and its outlooks, which is not insignificant for formation of the value) . The starting point for implementation of the project was chosen the year 2013 (the year of drafting the project documentation).