While the intrinsic value of a mineral project is still a key consideration, understanding the interrelationship between technical and financial risk to truly comprehend the long-term value of an asset helps companies make better investment (or divestment) decisions. Companies that can secure debt finance for both the development and acquisition of advanced projects have greater strategic flexibility. Understanding how debt impacts the valuation of projects allows for an objective approach to determining levels of gearing; this is relevant to both the investment banking and mining communities and is the core narrative of this book.
This third edition retains sections on both conventional and financial engineering treated in a quantitative manner with fresh case studies. New sections address softer issues around environmental impact and social licence from a qualitative perspective, albeit acknowledging that without the related approvals a mining licence will not be issued. The book also develops a completely fresh thread around the energy transition, recognising the drivers behind the decarbonisation of natural resource industries and the role played by oil and gas companies in developing renewable energy.
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Sample Chapter(s)
Chapter 8: Metals and Energy Project Appraisal and Finance
Contents:
- Extractive Industry Finance and Mineral Economics
- Management and Business:
- Cash Flow Modelling and Financial Accounting
- Strategic Management
- Management of Projects, Markets and Supplies
- Mineral and Petroleum Geosciences:
- Mineral Deposits
- Petroleum and Coal
- Project Evaluation:
- Resource Evaluation
- Metals and Energy Project Appraisal and Finance
- Minerals Engineering
- Quantitative Finance:
- Quantitative Finance
- Financial Engineering
- Appendices:
- A Technical and Financial Appraisal of a Gold Project in Canada's Low Arctic
- Andean Polymetallic Skarn Silver, Lead and Zinc Project
- PGE Deposit, Platreef of the Bushveld Complex, South Africa
- Share Performance Metrics and Valuation of a Single Operation Copper Mining Company
- Rights Issue with Accretion for a Nickel Laterite Project at the Development Stage
- Rescue Capital Raising for a PGE Operation Based on Lonmin
- Mine Scheduling Open-Pit Optimisation Exercise
Readership: This book is intended for professionals and graduate students in the fields of mineral and petroleum economics and business management. The book will also be of interest to professionals in the fields of international development and government, financial services and commodity trading.
Reviews of the Second Edition:
"Dennis Buchanan's text clearly shows how an understanding of the complementary disciplines of geoscience, conventional engineering and advanced financial engineering is essential to making the right decisions concerning how to appraise a resource or project and how to structure the funding of natural resources assets in order to mitigate technical and financial risk and to maximise value for owners. Crucially, the book also looks at how other sources of capital, such as limited recourse lenders, appraise metals and energy assets. Such an understanding is essential to optimising the capital structure and valuation of natural resources assets … The advanced methodologies revealed in Dennis Buchanan's book will have great value to those working in the technical and financial functions, or to those spanning both functions, of the natural resources industry."
Christopher Worcester in Mineral Economics
"The book is well-written and I for one found it a pleasant and informative read. As someone who mainly works in the area of real options it was very illuminating to see the amount of work and technical detail that goes into a proper valuation of minerals and energy projects. The book is accessible to students who do not have much background in finance … I found the case studies a delight. The author's (laudable) views about the importance of correct financial valuation in the minerals and energy field really shine through here. This is where everything comes together and, because of the lengthy exposition of the technical side of mining, the figures really come to life … I expect my students will very much appreciate the both-feet-firmly-on-the-ground attitude of the book and its strong focus on applicability to real-world problems."
Jacco Thijssen in Quantitative Finance
Dennis L Buchanan has over 40 years of experience teaching mining geology, mineral exploration and mineral project appraisal and created the MSc in Metals and Energy Finance at Imperial College, London. This is a joint degree between the Department of Earth Science and Engineering and the Business School at Imperial College. Professor Buchanan has worked as a Mining Geologist in both gold and platinum mines in South Africa and has wide experience as an industry consultant, as an expert witness in legal cases and in designing and delivering short courses for industry.
Professor Buchanan's current research interest lies in addressing the underlying technical principles applying to mineral projects and demonstrating how these influence financial modelling. Particular interest is directed towards the treatment of key independent variables, such as grade and metal price, dependent variables, such as grade–tonnage relationships, and the way these influence the rate of mining, associated operating and capital costs, and the optimisation of the NPV of a project. These models are then applied to concepts of enhancing shareholder value for minerals companies and the role of gearing in maintaining an efficient balance sheet.