"Using Dynamic DCF and Real Options to Value
and Manage Natural Resource Projects"

PURPOSE AND SCOPE OF THE COURSE
Recent advances in finance theory and risk management have heavily influenced investment decision-making in the finance and insurance industries.  Building on the discounted cash flow (DCF) technique, these advances allow valuation professionals to improve their economic and risk analysis via sophisticated cash flow models that combine dynamic descriptions of uncertainty with the ability to manage these uncertainties using flexible operational strategies.  Non-financial industries, such as power generation and pharmaceuticals, are now applying these concepts to generate new investment insights and improve project economic analysis and management.  Mining and petroleum projects are ideally suited to these same techniques and many natural resource firms are beginning to incorporate these ideas into their project valuation and management practice.

This three-day course on Using Dynamic DCF and Real Options to Value and Manage Natural Resource Projects will teach you how to:

1) Use these new concepts to develop a consistent, market-based valuation approach that can differentiate and value projects according to their unique cash flow uncertainty and risk characteristics;

2) Identify important elements of project structure, such as management flexibility and operating leverage, and understand how they influence project value;

3) Move from using a conventional static cash flow model and ad-hoc risk adjustments to adjusting for risk to a dynamic valuation approach that can more fully represent the variability of the mining and petroleum project environment and the options that may exist to limit and take advantage of that variability;

4) Build confidence with practical examples so you can adapt these methods to a wide range of projects and situations.

THREE MAIN COURSE TOPICS
How characteristics of the natural resource environment influence project value.  These include mineral price, cost, and foreign exchange uncertainty; resource uncertainty; operating leverage and management flexibility.

How to build a dynamic valuation model that calculates a market-based project value and optimizes operating strategy by incorporating financial market information, finance theory and a detailed project description.  This includes discussions on the risk adjustment information contained within financial markets; the concepts that allow a dynamic project environment to be represented within a valuation model; and the use of Monte Carlo analysis and decision trees to investigate the impact of operating leverage and management flexibility on project value.

How to determine the investment decision situations in the mining and petroleum industries for which advanced valuation methods can provide new insights, and those for which these methods are not feasible or appropriate.  Suitable applications include cost-reducing capital spending, capacity choice, multi-zone mining and satellite oil field development, and exploration or development deferral.

COURSE MATERIALS
Participants receive an extensive set of course notes detailing valuation concepts, numerical calculations, and practical valuation examples.  A course CD is provided containing spreadsheet-based examples, graphical aids, topical papers, and a Microsoft Excel^® Binomial Dynamic Discounted Cash Flow / Real Option Valuation Addin for valuing natural resource projects for educational and professional development purposes.

COURSE INSTRUCTORS
Dr. Graham A. Davis is Professor of Economics and Business at the Colorado School of Mines.  Dr. Davis has a Bachelor's degree in Metallurgical Engineering, an MBA, and a Ph.D. in Mineral Economics.  He is recognized as an expert in applying modern valuation techniques to real world problems, and has undertaken real options valuation projects for government and private organizations worldwide.  He teaches a 15-week graduate-level course in real options applications in the mining and petroleum industries, and has presented workshops on real options valuation techniques to hundreds of practitioners in the energy and mineral industry.

Dr. Michael Samis, P.Eng., is a leading practitioner of using advanced valuation methods such as real options to value natural resource projects.  He began his professional career in South Africa with positions in production, planning and valuation at several gold and coal mines.  While in South Africa, he completed a M.Sc. in Mineral Economics that focused on using real options to analyze project financing for marginal gold mines.  In 2000, Dr. Samis completed his Ph.D. at the University of British Columbia where his research considered the interaction between geological structure, capital and operating costs, flexibility and project uncertainty.  He has extended professional experience using stochastic valuation models to evaluate natural resource projects with complex forms of flexibility and risk exposures ranging from the exploration stage through to late-stage capital investments.  He also develops and leads professional development courses that discuss using advanced valuation methods such as real options to value and manage natural resource projects.  Dr. Samis is an Adjunct Professor at Laval University’s Department of Mining Engineering, a registered Professional Engineer in Ontario, Canada, and a qualified person for project valuation under NI43-101 guidelines.  Dr. Samis was previously the Director of Financial Services (Mining and Metals) at AMEC Americas Limited and is currently a Vice President (Valuation and Business Modeling) in the Toronto office of Ernst and Young LLP’s Transaction Advisory Service.

WHO SHOULD ATTEND
The course is designed for mining and petroleum industry managers, geologists, engineers, bankers, and analysts involved in evaluating or managing projects or dealing with investment risk.

Participants do not require advanced mathematical skills to understand and apply the course material.  However, to get the most from the course, they should be familiar with:

• Basic statistical concepts such as variance, standard deviation, and covariance;
• Constructing a traditional discounted cash flow valuation;
• Introductory financial concepts such as the time value of money and risk-adjusted discounting.

REGISTRATION FEE The registration fee, which includes the course notes and coffee breaks, is US $1,800 if received 15 working days prior to the start of the course and $1,895 if received thereafter.  The fee must accompany the registration form.  Space is limited and early registration is encouraged.  The sponsor reserves the right to cancel the course and return all registration fees if enrollment is insufficient.  Cancellations initiated by the participant will be charged a $150 service fee.  No refunds will be made to participants who fail to substitute or cancel at least 5 working days before the start of the course.  Participants will receive 2 Continuing Education Units for the hours of instruction included in this course. Register

 

ACCOMMODATIONS, TRAVEL, AND MEALS
Registrants are responsible for their own lodging, food, and travel arrangements. The course will be held at the Colorado School of Mines in Golden, Colorado. For accommodations information for the Golden area, click here. For travel information, click here.

COURSE CONTENT INFORMATION
For further information on course content, contact:

Dr. Graham Davis at gdavis@mines.edu or Dr. Michael Samis at michael.samis@ca.ey.com.

REGISTRATION INFORMATION