Our Approach

Dynamic Cash Flow Modelling

SCM Decisions demands more from conventional investment analysis to improve our client’s understanding of how value and risk in an uncertain world are distributed between investment stakeholders.

We use Integrated Valuation and Risk Modelling (IVRM) to better understand how capital allocation and investment risk is influenced by:

  • Long investment lead times
  • Significant capital requirements
  • Technical uncertainty
  • Management flexibility/real options
  • Execution concerns
  • Operating leverage
  • Commodity price volatility
  • Financing and taxation structure
  • Long investment lead times
  • Significant capital requirements
  • Technical uncertainty
  • Management flexibility/real options
  • Execution concerns
  • Operating leverage
  • Commodity price volatility
  • Financing and taxation structure

We believe financial risk modelling and investment decision-making in the mining industry should be supported by dynamic cash modelling providing information about the characteristics, quality, and risk exposure of each stakeholder investment and provide insight into future management investment and operating decisions.

DymaicCashFlowModel_5

Static Cash Flow

This approach provides only summary statistics and investment quality information. This information can be misleading because it does not recognize the impact of non-linear cash flow structures and real options.

Dynamic Cash Flow

This approach provides decision-makers with all four information types. This information is unbiased as non-linear cash flow structures and real options are recognized.

Integrated Valuation and Risk Modelling

Our approach uses an IVRM framework to provide insight into how an investment generates value and creates risk.

IVRM overlays a statistical depiction of investment uncertainty with a description of future management options and the structure of financing and taxation to generate a large number of future cash flow possibilities.

We translate the raw cash flow data into summary information by combining advanced finance theory, risk management concepts, decision analytics, and numerical business modelling with a dynamic mining financial risk modelling analysis.

Our investment analysis uses the following approach.

1

MAP UNCERTAINTY

Identify primary risk exposures and describe them with statistical models based on management outlook, technical knowledge, and financial market data

2

DESCRIBE THE INVESTMENT

Overlay the uncertainty map with management options, tax obligations, and financing details to create a dynamic investment cash flow model

3

EVALUATE THE INVESTMENTS

Generate a large number of cash flow scenarios and use option-based numerical methods to flag operating policy changes and distribute investment cash flows between equity, financing, and government interests

4

SUMMARIZE THE ANALYSIS

Provide key insights by reducing the raw data from the previous step into graphical and numerical summary information for investment decision-making