Kailua NPV $1.914 billion @ 8% Discount RateThat is for 116 MT indicated @ 6.09% copper. Picking up from the last calculation at $8.28 billion in undiscounted cash flows for the entire life of mine, based on just retaining 25% of the profit, there are two other factors to consider as well. Metal recoveries will not be a 100%. It may only be 86%, as described in Table 13.18 of the January 17 PEA study. In practise metal recoveries outside the lab may be even lower. Making the adjustment, we have
$8.28 billion x 0.86 = $7.13 billion in undiscounted profits. Next we'll see what happens when this value is discounted by 8%. Net Present Value reflects two aspects of investment, risk to capital and time value of money. Instead of buying a mine in the Congo you could, for example, buy a stock index like SPY. An 8 or 10% discount could be justified by the ease of owning an index, which is completely liquid and offers great returns. You also completely avoid any political or adverse commodity price risk. The point is you're not just going to stuff your money in a closet for 24 years, plus the time required for construction. You would put it to work in other profitable endeavours. That is the time value of money.
These are the after tax assumptions for the NPV model:
Undiscounted cash flow profit for 25% LOM = $7.13 billion
Initial CAPEX from Jan PEA study = $1.213 billion
Discount rate = 8%
Cash flow (based on IVN annual 25% of profits) = $297 million per annum over 24 years. In reality cash flow varies by year, but this won't affect the actual outcome too much for the purpose here.
NPV using the above inputs, for LOM = $1.914 billion
The deposit will continue to expand at Kakula, and as it does, this bottom line will increase as well. Once again, this is a rough guesstimate. But it's based on values provided by the company in it's last news release, and from the PEA study in January 2017. The next economic analysis, in an updated PEA or Prefeasibility, will provide a more accurate picture. Yet, that won't be entirely accurate either. Early studies, like a PEA or PFS can still be way off.