RE:Paul West interview this weekAll good - except you are coming up with $12 usd and that's because you are using 50% NPV....personally I would us 30% (which I think is more in line with actual deals realizing there are definitely ranges). I think using spot is also not correct and typically something different used. That's our key differences. I think the only chance for more than $6 usd is if another suitor enters the dance....so you heard it first from Sooner....$6 usd!!!
I do agree with the discount factor 8% too high...even the interviewer seemed to double take on that. Rio cost of capital is less than 3% I believe! In addition stating future cash flows outside of the next 25 years are basically worthless in NPV calc due to discount factor is accurate, but that just highlights the flaw in the NPV calc...I mean to use an 8 % discount factor on future cash flows from a down front cost, but to also consider future cash flows not influenced by any metals increases is ridiculous. 200k ounces of gold mined in 30 years is the same as 200k mined today! If inflation 8% then assume gold increases 8% per year as well...I think Paul could have been better during interview on this subject...unless I'm off base.