Simplified Analysis, sans NPV
FWIW, I'll throw in my simplified analysis, sans NPV. But I'm phrasing it in the form of a question, in two parts.
Part one:
The year is 2026. You are offered the opportunity to purchase an investment that will pay $0.90 at the end of each year for 14 straight years, adjusted to 2026 dollars.
(The price of copper over that period will affect the payout – Cu goes up, payout goes up, etc., in much the same way as the price of copper affects the earnings of a full-production in-situ copper mining operation, for example.)
How much do you think you should be willing to pay for that?
I say around $5.18.
Discuss. Show your work.
Part deux:
The year is 2017. You are offered the opportunity to purchase an investment that will pay $5.18 after 9 years, adjusted to 2017 dollars.
(The price of copper over that period will affect the payout – Cu goes up, payout goes up, etc., in much the same way as the price of copper affects the stock price of a pre-full-production in-situ copper mining operation, for example.)
How much do you think you think you should be willing to pay for that?
I say around $1.58.
Discuss. Show your work.
I'm not going to show my work because TL;DR. Suffice to say I'm using 10%, 12% and 14.1% in my various calculations – and these were not that scientifically selected, but they do reflect my comfort level. Try to guess how they were applied if you're clever.
"Or not", he said, ambiguously.
My attitude: they've already published complete projected financials in the feasibility report, so I don't see the point of talking about NPV or capex ever again. I know,....where's the fun in that.
I suspect that you can see where I'm going with this. Feel free to let me know what you think.
Cheers.