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Valuation Simulation for a Net Smelter Return Royalty on a Mining Project

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  • Bell, Peter

Abstract

This paper provides a rough calculation of the economic value of a hypothetical mining operation for a profitable of mineral deposit. I present simplifying assumptions for the deposit geometry and mine production constraints to calculate the value of a net smelter recovery royalty on the mine, which is due a small fraction of gross income from the mine. I calculate the value of the royalty with constant prices and conduct a simulation exercise where the metal price changes quarterly based on historical data for gold futures contracts.

Suggested Citation

  • Bell, Peter, 2018. "Valuation Simulation for a Net Smelter Return Royalty on a Mining Project," MPRA Paper 87683, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87683
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    File URL: https://mpra.ub.uni-muenchen.de/87683/1/MPRA_paper_87683.pdf
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    References listed on IDEAS

    as
    1. Bell, Peter, 2017. "Example of a Rising NPV Profile for a Mining Project," MPRA Paper 81353, University Library of Munich, Germany.
    2. Bell, Peter, 2018. "Simulation Framework for Economic Modeling of Mineral Resources," MPRA Paper 85075, University Library of Munich, Germany.
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      More about this item

      Keywords

      Engineering Economics; Mining; Royalties; Finance;
      All these keywords.

      JEL classification:

      • C00 - Mathematical and Quantitative Methods - - General - - - General
      • G00 - Financial Economics - - General - - - General
      • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
      • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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