The best way to value a mining asset or company is to build a discounted cash flow (DCF) model that takes into account a mining plan produced in a technical report (like a Feasibility Study). Without such a study available, one has to resort to more crude metrics.
Are junior mining stocks worth the risk?
Even though junior mining stocks have strong profit potential, they entail higher risk than more established mining companies, for a number of reasons. For one, the odds that the companies behind junior mining stocks will find an “anomaly,” or a geological formation that might attract a prospector’s interest, are slim.
Are junior mining companies a good investment?
Juniors mining stocks are low capital exploration companies searching for new deposits of natural resources. Anything over that would be considered a ‘mid-tier ‘or ‘major’ company. Investments related to juniors are high risk as they are new in the market and don’t yet have a proven asset base.
What is a good IRR for a mining project?
For a good mining project the IRR needs to be at least 30-40% and some are much higher, but others are closer to the 20% which, in my view, indicates an only marginally attractive project – unless for a solid business with guaranteed offtake and prices, like energy generation (but, again, depending on other factors in …
How do you evaluate a gold mine?
An easy way to determine the cost structure of a gold mining company is to divide their cash cost per ounce by the current price of gold. If it is near 1/3, then it is a low-cost producer. Conversely, if it is near 2/3, then it is a high-cost producer.
Is mining a risky investment?
There is no simple answer because mining has always been a cyclical industry and a risky play for investors, especially in recent years. A quick review of the S&P/TSX Global Mining Index over the past decade reveals how during any market cycle, mining stocks can produce strong returns, but can also produce big losses.
What does NPV mean in mining?
Net present value
Net present value (NPV) is the universally accepted tool for measuring the value of a mining venture.
What is mining IRR?
Internal Rate of Return (IRR) The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. As such, IRR can be used to rank several prospective projects a firm is considering.
How to value junior miners gold in the ground?
Here’s How to Value a Junior Miner’s Gold in the Ground (+26K Views) 1 Given sufficient data, you can estimate a reasonable net present value (NPV) for a project and deduce what each of… 2 Another approach is to compare the value the market is giving a company per ounce of gold in hand against the average… More …
Which is the best indicator of ore loss?
Ore loss shall be examined by two different indicators. One is the indus- trial ore quantity loss rate (hereinafter referred to as ore loss rate) for calculating the ore loss in the mining field, mining team or work area.
How to value a gold mining company ( download model )?
What this means is, looking at Avnel Gold’s Kalana Mine example, its feasibility study has proven & probable reserves of 1.96 million ounces (or “oz”): In my valuation model, I’m going to cap the number of ounces produced by the mine at 90% of 1.96 million ounces or 90% of 21.7 million tonnes which is 19.5Mt.
What is loss rate of industrial ore quantity?
Industrial ore quantity refers to the ore quantity to be extracted ac- cording to the design in the balance sheet; its loss rate is one of the important indicators to reflect mining and technical management level. Ore grade reduce due to mixture of waste ore and loss of rich ore powder during the mining process is called dilution.
