CIM Management and Economics Society
The Management and Economics Society has undertaken a survey of industry practice in the evaluation of mineral projects. The survey questionnaire was distributed by e-mail to groups and organizations around the world. The responses, although a small number, show a consistency that suggests that the survey has captured the views of the industry.
The 2005 survey is the third undertaken by MES. Surveys were also conducted in 1996 and 1997-99. The results shown in Tables 1 and 2 present data from the all three MES surveys. The surveys suggest that there are several consistent patterns between surveys:
- Discount rates for gold projects are two to three per cent lower than for base metal projects.
- Discount rates are increased at higher levels of perceived risk.
- The increment in discount rates is increasing larger from scoping study to preliminary feasibility study to feasibility study to operating mines.
The survey results should be thought of as indicating a range of values, not as single average values. The ranges indicated in the tables are set to a spread of two per cent. The values shown for the ranges are the individual average values +/- 25 per cent of their standard deviation for gold and +/- 37 per cent of their standard deviation for base metals. The reader is cautioned that the results are a snapshot of industry practice at a point in time as represented by a small sampling of the industry’s practitioners. These results should be viewed as indicative values.
The figure plots the average discount rate values for gold and base metals from the 2005 survey. These values are expressed in real terms.
The increments or steps between the discount rates at the different levels of studies are as significant as the absolute values of the discount rates plotted. Note the lower discount rates applied to gold projects.