×
INTELLIGENT WORK FORUMS
FOR ENGINEERING PROFESSIONALS

Log In

Come Join Us!

Are you an
Engineering professional?
Join Eng-Tips Forums!
  • Talk With Other Members
  • Be Notified Of Responses
    To Your Posts
  • Keyword Search
  • One-Click Access To Your
    Favorite Forums
  • Automated Signatures
    On Your Posts
  • Best Of All, It's Free!
  • Students Click Here

*Eng-Tips's functionality depends on members receiving e-mail. By joining you are opting in to receive e-mail.

Posting Guidelines

Promoting, selling, recruiting, coursework and thesis posting is forbidden.

Students Click Here

Jobs

Mine Property Valuation

Mine Property Valuation

Mine Property Valuation

(OP)
When applying the techniques of mine valuation a discount is applied to adjust the yearly income(s) to a present value. This discount rate is the preference of the mining company to reflect the value needed to go for an investment. Q What is the lowest rate that is reasonalble if you are the property owner. Realizing the lower the discount rate the higher the PV. What justification is utilized for this low rate.

RE: Mine Property Valuation

You are talking about hurdle rate. This 'target discount rate' should equal AT LEAST the cost of capital to the company, PLUS a return for the risk involved in making the investment. You calculate the internal rate of return using the IRR function in your spreadsheet, compare it to the hurdle rate.

Hurdle rate is set from experience. A rough guide from Legge & Hindle 1997, Entrepreneurship, is: Use the current before-tax return on government bonds. The range of hurdles is from that +4% to +20%, with most in the middle third of this range. Lower-end hurdle rates around 15% are for very long-lived projects with secure returns, eg buying privatised power stations. My company has used this for mining projects, but given the grade risk this would not be appropriate in small gold deposits! They say hurdle rates of 25% or more should be used for projects with long development expense and time, or forcing entry to an established market.

Red Flag This Post

Please let us know here why this post is inappropriate. Reasons such as off-topic, duplicates, flames, illegal, vulgar, or students posting their homework.

Red Flag Submitted

Thank you for helping keep Eng-Tips Forums free from inappropriate posts.
The Eng-Tips staff will check this out and take appropriate action.

Reply To This Thread

Posting in the Eng-Tips forums is a member-only feature.

Click Here to join Eng-Tips and talk with other members!


Resources