An Integrated Valuation and Risk Modelling approach to Dynamic DCF and Real Options

Colorado School of Mines – Center for Professional Development Education

Denver, Colorado

October 26 – 28, 2022

Mining industry investments are exposed to many risks that will likely result in an investment performing differently than initially expected – sometimes disastrously so. Conventional mining investment analysis often relies on a static cash flow model built around a single representative scenario to assess the quality of the project. Unfortunately, these models provide limited insight into how an investment will perform in an uncertain world even with work arounds such as scenario price decks and sensitivity analysis.

Advances in finance theory and risk management from the finance and insurance industries can translate a conventional cash flow model into a dynamic model that describes a wide range of project possibilities and recognizes management’s ability to adapt as the future evolves. Introducing dynamic analysis allows mining professionals to improve their understanding of how a proposed investment will perform and the design and operating policies that are best placed to support project value and manage risk.

This course will show participants how to create a spreadsheet-based dynamic cash flow model and interpret the value and risk information it generates. It teaches participants how to overlay a description of project market uncertainty with a decision-tree to assess the value of project flexibility and the level of investor risk exposure. A case study based on an adapted version of the Blackwater Project in B.C. Canada demonstrates the shortcomings of static cash flow analysis and how a dynamic model can correct these shortcomings.

Additional course information can be found at:

If you would like Michael Samis to present at your next conference or host a workshop, please fill in the form below or call 416-527-3421.

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