Discounted cash flow analysis - Methodology and discount rates

Abstract This paper examines the impact of the various assumptions that go into an economic evaluation, and shows how these can be combined to show an exciting result that may not really exist. An example of an embellished case (the kind that one frequently sees when projects are being promoted) is developed and the cumulative impact is analyzed to show the actual project underneath. The paper also points out some areas to watch for overly optimistic assumptions such as prices, inflation, and debt. The concept of a “bare bones” base case is proposed (constant metal prices, constant dollars, no inflation, no debt, no interest, on a project basis, after tax) as a common reference point. As well, the discount rate is examined as one of the fundamental means of reflecting risk in discounted cash flow evaluations. Current industry practice is discussed, and a methodology for the analysis of risk levels is proposed that assesses the constituent components of the discount rate: real interest, mineral project risks, and country risk.
Keywords: Economic evaluation, “Bare bones,” Cash flow, Discount rates, Net present value (NPV), Internal rate of return (IRR)
Full Access to Technical Paper
PDF version for $20.00
Search
Sort By:  Relevance
Showing results 1 - 4
Text
Summary: In the Bayer process, flocculants are introduced in the feed well to enhance the aggregation of red mud particles. To gain a better understanding of the flocculation process taking place in the feed well, shear-induced flocculation was achieved using concentric rotating cylinders (Couette system). Our previous work has shown the effect of the shear rate on the aggregate’s settling rate and on residual turbidity of the Bayer liquor. In this study, the data demonstrated that the aggregates at...
Publication: CIM Bulletin
Author(s): M.J. Gagnon, G. Simard, A. Charette, G. Péloquin
Keywords: Flocculants, Aggregates, Shear conditions, Red mud particles
Issue: 1062
Volume: 95
Year: 2002
Text
Summary: The recovery of additions in light metals is an important parameter influencing consistency of the finished product, which ultimately means cost. Recovery is a function of many parameters such as assimilation speed, addition density, addition practice, liquid metal processing conditions, etc. In liquid metal processing operations, it is desirable to have the maximum possible recovery at the shortest possible time. In this paper a new index will be presented, namely, the rate of recovery (RR)....
Publication: CIM Bulletin
Author(s): S.A. Argyropoulos, M. Pekguleryuz
Keywords: Light metals, Additions, Recovery, Aluminum, Liquid aluminum, Alloys
Issue: 1062
Volume: 95
Year: 2002
Text
Summary: In 1999, PFC measurements were carried out at Alcan smelters as part of a large measurement campaign led by the Canadian Aluminium Association. Side worked prebake (SWPB) and horizontal stud Söderberg (HSS) plants in Arvida were the selected sites. CF4 and C2F6 emissions were measured continuously in the exhaust duct and at the roof vents for a week. In parallel, voltages from four designated cells were recorded at a high scan rate. Results were analyzed and correlations between voltage,...
Publication: CIM Bulletin
Author(s): A. Gosselin
Keywords: Voltage measurement, Gas measurement, Anode effect, PFC emissions
Issue: 1062
Volume: 95
Year: 2002
Text
Summary: Since 1975, the Aluminium Pechiney Research Centre at Saint-Jean-de-Maurienne (LRF) has been concentrating its efforts on designing, testing and perfecting the Aluminium Pechiney point-fed prebaked reduction cell. In 1979, the AP18 cell (180 kA) was industrially launched with the construction and start-up of the F line in Saint-Jean. The following generation, the AP30 (300 kA), with prototypes started in 1981, was launched in 1986 on the Saint-Jean G line. Along with cell design, efficient...
Publication: CIM Bulletin
Author(s): C. Vanvoren
Keywords: Aluminum, Reduction cell, Process control, Design, Aluminum Pechiney
Issue: 1062
Volume: 95
Year: 2002
Powered by Coveo Enterprise Search