June 8 - 10, 2016POSTPONED
Golden, Colorado USA
Day 1 • Morning

The Integrated Valuation and Risk Modelling (IVRM) framework; Valuation fundamentals; Introduction to price uncertainty

  • Introductory comments
  • Integrated valuation and risk modelling
  • Project structure (cash flow, design flexibility, stakeholders)
  • Project uncertainty
  • Valuation estimation – DCF and real options
  • Organizational considerations
  • Commodity price uncertainty models
Day 1 • Afternoon

Price model equations; Monte Carlo simulation; Parameter estimation

  • Equations for commodity price uncertainty modelsExample: Build copper / gold forward curves and associated forecasts
  • Re-interpreting static price equations as a Monte Carlo simulationExample: Build a stochastic simulation model for gold and copperExample: Using simulation to value a gold earn-in financing agreement
  • Parameter estimation
Day 2 • Morning

Valuing cash flows with no flexibility

  • Rethinking DCF discounting
  • A simple example of discounting differences between real options and DCF
  • Demonstration of discounting effects at the Oyu Tolgoi Project. Example: Valuing a stranded gas field with a take-or-pay pipeline transport agreement
  • Design decisions: Higher capital spending and lower operating costs versus lower capital spending and higher operating costs. Example: Valuing competing designs at a SAGD oil sands project
  • Summary of differential discounting
Day 2 • Afternoon

Valuing non-linear payoffs; Binomial techniques

  • Non-linear cash flow payoffs
  • Royalties, corporate income taxes, windfall taxes. Example: Mongolian windfall taxes at a Cu/Au project Example: Assessing a project finance proposal at a small gold project
  • The relationship between Monte Carlo and binomial techniques
  • Approximating a price process with a binomial tree
  • Developing a true and risk-adjusted probability price trees. Example: Building a true risk-adjusted probability price tree on a spreadsheet
Day 3 • Morning

Introduction to valuing projects with flexibility

  • Overview of management flexibility in project design and valuation
  • A simple binomial example of valuing a mine with an abandonment option
  • Building a project valuation model for a flexibly designed project
  • Using the Excel Binomial Real Options / DCF Valuation Add-in
  • Early closure at marginal project Example: A marginal mine closure decision Example: A closure decision at a coal-bed methane project
Day 3 • Afternoon

Valuing natural resource projects with flexibility

  • Valuation Example: Valuing two design choices for a gold project – high capital vs low capital tradeoffExample: Valuing a gold mine with sequential development optionsExample: Valuing an undeveloped gold property
  • New frontiers in the valuation of natural resource projects
  • Course summary