Building a Mining Valuation Model

The mining industry is continuously growing due to a growing population and income levels requiring the production of more goods and therefore drive demand for natural resources. Since there’s a demand, tapping the potential market that goes with it will raise the chances of the mining business to be profitable and in turn, the feasibility will help attract business executives, venture capitalist, and others who wants to invest in a mining project.

Before deciding on which project to invest on, it is important to create a mining valuation model and financial feasibility study. Mining projects usually require high capital investment so the need for a valuation model is critical in determining if it’s worth your money. 

In building a valuation model, there are usually three methods used such as:

• Discounted Cash Flow (DCF) – A valuation method that is usually used for valuing businesses or projects. It helps determine the present value of estimated future earnings from the mining business or projects.

• Internal Rate of Return (IRR) Analysis – Another method that determines the financial feasibility when looking at your mining project from a financial return perspective. You will need to figure out the Project IRR (return of the project excluding a financial structure) and a levered IRR (including the effect from debt financing). Both IRRs need to be above their respective cost of capitals in order to make the project financially feasible. Also, the financial projects need to be based on a realistic scenario.

• Asset-based Valuation – This method of valuation usually takes a lot of time for this will depend on the information and data gathered before the start of the business or project. A lot of estimations are needed based on the data gathered about the mining field and their expected resource content. In other words, the asset is estimated if it’s worth the investment and arriving at an amount that is equivalent to its worth.

It is a lot of work to complete but no worries, for there are available mining valuation model templates available for download in platforms that offers financial modeling templates for a little amount. The templates will serve as the base to start building a mining valuation model to completion. Since it is made by experienced and skilled financial modeling experts, the template will offer a professional framework and it will save you time redoing things from scratch. If you’re looking for a platform where to get one for yourself, you can go to eFinancialModels. No more spending too much time and money in building a valuation model for you can easily get yourself a mining valuation model for your future ventures.

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