Mining Financial Modeling Course Lecture Notes

Instructor Details

• Instructor: Tim Vipond
• Background: Worked in Corporate Development at Goldcorp (2012-2015)
  • Experience with mergers, acquisitions, asset sales
  • Developed internal operating models

Course Objectives

• Read and interpret technical reports or feasibility studies
• Input assumptions into a dynamic Excel model
• Calculate net present value (NPV) of mining assets
• Run sensitivity analysis

Career Applications

• Fields: Investment Banking, Equity Research, Corporate Development, Financial Planning & Analysis, Treasury
• Outcome: Create a model illustrating investment drivers, risks, and returns

Overview of Mining Industry

• Categories of Mining Assets:
  • Projects: Exploration, Feasibility, Planning, Construction
  • Operating Mines: Ore extraction, processing, and metal production
• Lifecycle Stages: Exploration, Planning & Construction, Operation, Closure

Financial Model Structure

• Sections: Assumptions, Mining, Financials, DCF Model, Sensitivity Analysis, Charts & Graphs

Assumptions Section

• Content: Conversion rates, metal prices, production schedule, reserves, mill capacity, royalties, operating costs, capital costs, reclamation costs, balance sheet items
• Conversion Rates: Grams to troy ounces, pounds to metric tons
• Price Decks: Management, Analyst Consensus, Spot Price
• Excel Techniques: Use of choose function, CTRL-R, CTRL-D for data filling

Mining Section

• Schedules: Mining and Milling schedules
• Outputs: Payable metal

Financial Section

• Components:
  • Revenue Calculation
  • Deduction of Royalties and Operating Costs
  • EBITDA and Net Income
  • Adjustments leading to Free Cash Flow

DCF Model

• Process:
  • Calculate NPV and IRR
  • Payback Period Calculation
• Assumptions: Discount rate (5%), Acquisition Cost ($3 billion)
• NPV: $3.4 billion
• IRR: 8.2%
• Payback Period: Approximately 7 years

Sensitivity Analysis

• Purpose: Test different scenarios (e.g., metal prices, milling rates)
• Key Sensitivities: Metal prices, unit operating costs
• Excel Techniques: Data What-If Analysis, Data Table functions

Graphs and Charts

• Cumulative Free Cash Flow: Illustrates payback period
• Production & Cost Graphs: Gold production and all-in costs variability

Final Model Review

• Layout: Clearly organized sections with labeled headings
• Inputs vs Formulas: Inputs in blue, formulas in black

Conclusion

• Certificate of Completion: Adds value to LinkedIn profile
• Next Steps: Prepare for further courses