For toll milling a 5% discount rate makes the most sense in my view. The project is fully funded, the expected cashflows are near-term and a 3rd party mill has been locked in.
For Hualilan standalone, 5% ensures alignment with the company's previous studies. I clearly recognized the company should trade at a gargantuan discount to this NPV. So rather than arbitrarily raising the discount rate to 8% or some other said number we can all argue about, I accounted for development risk by applying a gargantuan discount to the valuation multiple (at ~0.4x this NPV5), which effectively prices in the LT development risk. It's also important to recall this NPV5 has been done at US$2500/oz gold which markedly undersells the potential value that can be extracted from Standalone Hualilan at today's gold prices.
The company would probably target 2028 for first gold from Standalone Hualilan.
Great write-up.
Why use NPV5 though? I feel like you should use at least NPV8%.
And when are you expecting first gold from the standalone project? Late 2028 possibly?
Thank you!
For toll milling a 5% discount rate makes the most sense in my view. The project is fully funded, the expected cashflows are near-term and a 3rd party mill has been locked in.
For Hualilan standalone, 5% ensures alignment with the company's previous studies. I clearly recognized the company should trade at a gargantuan discount to this NPV. So rather than arbitrarily raising the discount rate to 8% or some other said number we can all argue about, I accounted for development risk by applying a gargantuan discount to the valuation multiple (at ~0.4x this NPV5), which effectively prices in the LT development risk. It's also important to recall this NPV5 has been done at US$2500/oz gold which markedly undersells the potential value that can be extracted from Standalone Hualilan at today's gold prices.
The company would probably target 2028 for first gold from Standalone Hualilan.