MNGN427 - Mine Valuation

Designation:

Required

 

Catalog Description:                 

  Core emphasis is on the business aspects of mining. Topics include time valuation of money and interest formulas, cash flow, investment criteria, tax considerations,

risk and sensitivity analysis, escalation and inflation and cost of capital.

 

Prerequisite(s):        

Senior in mining, graduate status, or consent of course instructor. Successful completion of MNGN 210 is strongly encouraged for students majoring in other options

than mining.  

 

Textbook(s) and/or other materials:

 

Required Text:  Gentry, D.W. and O’Neil, T.J., Mine Investment Analysis, SME, 1984.

 

Reference Materials: (not required but strongly suggested)      

1.  Lowrie, R.L. Mining Reference Handbook. SME 2002

2.  Cavender, B. Mineral Production Costs: Analysis and Management. SME 1999

3.  Stermole, F.J. and Stermole, J.M. Economic Evaluation and Investment Decision Methods. Investment Evaluations Corp.

4.  Runge, I.C. Mining Economics and Strategy. SME 1998

5.  Torries, T.F. Evaluating Mineral Projects: Applications and Misconceptions. SME 1998

6.  Hartman, Howard L. (senior editor), SME Mining Engineering Handbook, 2nd Edition, 1992.

7.  Class Handouts and Xeroxed Articles (will be distributed)

 

Course objectives:                     

Overall Educational Objectives

To provide the student with a fundamental understanding of the methodology, theory, and philosophy of mine evaluation and project feasibility analysis.  Topics of

discussion include the principles and procedures of mineral property valuation, engineering economics, and investment analysis.  At the conclusion of the course,

students will be capable of performing a rudimentary cost estimate, generate a cash flow analysis, and assess whether the prospect meets an established investment

criteria for capital budgeting decisions. 

 

The course also places great emphasis upon professional development with regard towards technical writing and presentation, 3-dimensional analysis (manual and computer-aided), computer literacy (i.e., ACAD and Spreadsheets), and engineering ethics.

 

Topics covered:

Basic Mine Economics

Project Investment, Equity Markets, and Mine Finance

Mineral Commodity Markets and Economics

Project Feasibility Analysis and Technical Due-Diligence

Engineering Economics & Time Value of Money

Value, Depreciation, and Depletion

Cost and Revenue Estimation

Cash Flow Analysis and Capital Budgeting

Investment Analysis

Risk and Sensitivity Analysis

Tax Considerations

Resource/Reserve Classification

Mine Life Cycle Economics

Engineering Ethics

 

Class/laboratory schedule    

 

            Lectures:          Tues/Thurs  8:00-9:00 AM

                                    Brown Bldg. Rm #125

                                    Field Trip:         TBA

                                                           

            Office Hours:    Tuesday/Wednesday/Thursday:  9:00–10:00 AM

                                    Open Door Policy:  Students are welcome anytime!

 

Contribution to professional component:     

 

Math and basic science:               10%

                                                     Engineering topics:                       70%

                                                     Design experience:                       20%

 

Relationship to program outcomes: 

The course has been modified to address a broad spectrum of topics that integrate traditional engineering and economic principles with the realities of operating in the real world.  Topics underscore the importance of social, market, investor, and financing considerations as they pertain to the acquisition and evaluation of mineral resources and mining properties.  Key concepts related to time-value of money and interest formulas, cash flow, investment decision processes, and economic analysis are also introduced (learning outcomes D and G).  Special emphasis is given to presenting open-ended problems, where economic considerations like profitability, stockholder return, and capital budgeting are stressed.  Where possible, course modules have been formulated to address both place and unit value mineral commodities. Students learn about the commodity markets, the security exchanges, and resource financing (learning outcomes D and G).   To emphasize this effort, students keep an investment portfolio (learning outcomes E, F and G).  This semester long project allows students to select, track and trade mining and resource companies and mineral commodities through investor databases and published information. Students are given incentives for maximizing the return of their portfolio.  Social issues as well as the ethical and legal responsibilities of corporate governance are also introduced (learning outcomes E & G).  The course also includes 9 homework assignments, 2 exams, and guest speakers.  Homework assignments emphasize basic economic fundamentals pertinent to actual mining problems derived from industry. 

 

          Low                                    (Learning Outcome F)

          Medium                              (Learning Outcomes E & G)

          High                                    (Learning Outcome D)

 

Person preparing syllabus and date:

Prepared by: Hugh B. Miller, Ph.D.

Date:  February 2006