1. Mining project evaluations A synopsis

2. Factors affecting the evaluation Geology, resources and reserves Process, plant and equipment required Environmental impacts Capital costs to invest Operating costs State regulations and fiscal Cost of production Market prices Project viability in a global strategy

4. Present values, interest rates and discounting factors

8. Applied to a project or an operating business, we can say that investing 747 million in year 1 and getting an annual income of 100 million during 20 years, is as if we had saved and invested 747 million at a rate interest of 12%. Whereas by investing 982 million in year 1 and getting the same annual income of 100 million during 20 years, it is as if we had saved and invested at an interest rate of 8%. It is clear that getting an interest rate of 12% is better than 8%: it is 4 percentage points higher and we get the same annual income by saving and investing 235 million less or 24% less. The use of this saving investment is therefore more productive in absolute terms.

9. Internal rates of return

17. The two projects are compared in graph 8. This clearly shows project A to be better than project B. Project A generates more wealth than project B so it has more potential for sharing between the stake-holders: --State for development, infrastructures and social expenses (through taxes), -- lenders (through interest payments) and -- equity owners (through surplus cash generated; on this more later). An interesting point, is that the PWVs of project A are always far above project B PWVs; but the difference decreases as the discount rate increases. After 16% discount rate, project B becomes better than project A. This reflects the higher sensitivity of big capital projects to the interest/discount rate.