Docstoc

Bid

Document Sample
Bid Powered By Docstoc
					                                                        Instructions




WARNING: DO NOT RENAME THE SPREADSHEET. ALWAYS NAME IT "Bid.xls".
OTHERWISE THE MACRO WILL NOT RUN AND EXPLODE ON YOU!

                                                 OVERVIEW

This workbook allows you to construct a decision analysis simulation of the Antamina mine described in
the "Bidding for Antamina" case. The simulation consists of a number of "trials". In each trial, a random
set of monthly copper and zinc prices and convenience yields is simulated for the first two years of the
mine life, during the feasibility study and before the mine begins operations. At the end of two years, a
forward copper and zinc price curve is constructed, and used as input to a DCF analysis of the three
scenarios described in the case. Summary statistics of the NPV of each of the scenarios and other variables
is presented.

The workbook consists of nine worksheets. All worksheets except the "Summary" worksheet are locked.
You may unlock them by going into the "Tools" menu and choosing "Protection". This will allow you to
change variables with abandon. Don’t forget to make a copy of the spreadsheet before doing so.

(1) "Summary" -- This worksheet takes as inputs the initial payment, the investment commitment, and the
number of trials that the simulation is supposed to run for. Input variables are highlighted in red (if you
have a color screen, of course.) This sheet also generates as output (i) the amount of the bid, (ii) the NPV
of the mine without the option to abandon (Section A), (iii) the NPV of the mine with the option to
abandon after 2 years, without penalty (Section B), and (iv) the NPV of the mine with the option to
abandon after paying the penalty described in the case (Section C). This worksheet also shows the penalty
 to be paid as a function of the investment commitment and the required investment for each of the three
 scenarios.

(2) "Parameters" – This worksheet has all the input parameters required to calculate the WACC, inflation
rates, and other capital markets data used by the DCF calculations. It also allows the user to change the
probability of each of the three outcomes for the mine ore quantity. The lower portion of the worksheet
has all the parameters required to calculate the paths for the copper and zinc prices and convenience yields
The drift rates are the long-run trend of copper prices, which are assumed random around the long-run
trend. The convenience yields are modeled as mean reverting processes, which tend to oscillate around
their means. A measure of how quickly this oscillation happens is given by the mean reversion parameter.
The correlations between the commodity prices and convenience yields are also included. For more
on the prices and convenience yields of see the "Copper and Zinc Markets: 1996" note for the case.

(3) "Simulation Summary" – This worksheet has the summary statistics from each of the runs, which are
shown in (4) "Simulation Results".

(5) "2-yr prices" – This worksheet has the monthly copper and zinc prices and convenience yields as
calculated by the Monte Carlo model. For each run, a price and convenience yield path is constructed
on a monthly basis according to the commodity’s volatility, mean reversion parameters, and correlations
with the other parameters. The final price and convenience yield path (at month 24, 2 years), is used as
input to calculate a 20 year forward curve of copper and zinc prices, which is then input into the DCF
analysis to model the future prices of copper and zinc.

(6)-(8) DCF spreadsheets – These three spreadsheets have a full DCF analysis of the mine for the three
quantity scenarios described in the case.

(9) "Macro" - This worksheet is the macro that drives the Monte Carlo simulation.


                                                           Page 1
                                                        Instructions



                                                 Instructions

(1) In the "Summary" worksheet input the initial payment and your investment commitment. Also input
the number of trial runs you want the simulation to run for. You will need at least 1000 trials to get
reasonable Monte Carlo estimates.

(2) Click on the "Run Simulation" button with your mouse. Excel hides the worksheet while calculating,
and shows you in the upper left hand corner the iteration number. When the simulation is done, the output
is shown in the "Summary" worksheet for the three different options described in the case questions. To
halt the simulation, press the "Esc" key, and Unhide the spreadsheet (under the File toolbar). If you want,
unlock the worksheets and change the assumptions to see what happens. Hint: If the spreadsheet runs
slowly, save the spreadsheet to disk before running again. This clears the clipboard and makes the
simulation run faster.




                                                          Page 2
                                                              Summary




Initial payment (millions)*                  $      17.50        10    Trials
Investment commitment (millions)             $     600.00        in Simulation
Total Bid (millions)                         $     197.50
* Minimum payment is 17.5 million

NPV of Project (Section A)
No option to abandon                                                    Required
                                                               Outcome Investment          Penalty
Mine PV at year 2                            $    2,280.13    Low         581                6
PV of required investment at year 2          $     (593.16)   Expected    602                0
Feasibility study PV at year 0               $      (22.76)   High        622                0
Project NPV at year 0 (discounted at WACC)   $    1,366.52
                                                              NPV of Project (Section C)
NPV of Project (Section B)                                    Option to abandon at year 2 with penalty
Option to abandon at year 2
                                                              Mine PV prior to penalty at year 2               $2,391.38
Mine PV at year 2                                $2,391.38    Expected PV of required investment at year 2      ($345.23)
Expected PV of required investment at year 2      ($345.23)   Expected value of penalty at year 2                 ($0.80)
Feasibility study PV at year 0               $      (22.76)   Feasibility study PV at year 0                 $    (22.76)
Project NPV at year 0 (discounted at WACC) $      1,662.31    Initial Payment                                $    (17.50)
                                                              Project NPV at year 0 (discounted at WACC)     $ 1,644.15




                                                              Page 3
                                                                   Parameters




     DISCOUNT RATE PARAMETERS                                               WACC CALCULATION
Variable                                              Debt                            Equity
Annual Risk-free Rate        7.0%                     Nominal Cost of Debt       7.7% Risk Free Rate       7.0%
Long-term Inflation          2.6%                     Debt (millions)           2,205 Beta                 0.53
Tax Rate                    30.0%                     MV of Firm (millions)    15,535 Risk Premium         7.5%
Nominal Cost of Debt         7.7%                     Tax Rate                    30% Cost of Equity      11.0%
Risk Premium                 7.5%                     Cost of Debt               5.4%
                                                                                                  WACC:   10.2%
       OUTCOME PROBABILITIES
Probability of Low Outcome              0.2
Probability of Expected Outcome         0.6
Probability of High Outcome             0.2

                   COMMODITY PARAMETERS                                                  CORRELATION TABLE
Variable                             Copper     Zinc                                   Copper   Zinc   Cu CY      Zn CY
Initial Commodity Price                 $1.00 $   0.55                     Copper       1.00
Annual Commodity Volatility               20%      20%                     Zinc         0.44    1.00
Initial Convenience Yield                 20%      -5%                     Cu CY        0.57    0.00    1.00
Convenience Yield Volatility              25%      25%                     Zn CY        0.00    0.73    0.00      1.00

Commodity Drift Rate in (%/year)              -2.8%       -1.4%
Convenience Yield Mean                         6.0%       -0.2%
Convenience Yield Mean Reversion Parameter      0.8         0.6




                                                                     Page 4
                                                          Simulation summary




                 NO OPTIONS PV AT YEAR 2                       COMMODITY PRICES AND YIELDS
Statistic          PV HI      PV EX      PV LO     TOT PV     Cu Price Zn Price Cu CY   Zn CY
Mean             $ 3,720.45 $ 2,095.85 $ 1,392.66 $ 2,280.13 $    0.82 $   0.59   3.31%  -0.56%
Median               2620.44    1625.82   1072.17   1,714.01      0.74     0.57   4.21%  -3.02%
Minimum              (887.40)   (706.21)  (625.34)   (726.27)     0.57     0.35  -8.59%  -7.13%
Maximum            13,509.09   7,070.94  4,631.20   7,870.62      1.30     0.79  10.00%  10.00%
Std. Deviation       4632.80    2657.96   1879.86    2897.30      0.23     0.15   5.89%   6.35%

                          OPTIONS I (NO PENALTY) PV AT YEAR 2                         OPTIONS II (PENALTY) PV AT YEAR 2
Statistic          PV HI       PV EX      PV LO     TOT PV    PV INVST    PV HI       PV EX     PV LO    TOT PV PV INVST PENALTY
Mean               $3,844.64  $2,210.13   $1,481.86 $2,391.38  ($345.23) $3,844.64   $2,210.13 $1,481.86 $2,391.38 ($345.23) $0.80
Median              2,620.44    1,625.82     804.57  1,710.10   (518.65) 2,620.44     1,625.82    804.57  1,710.10  (518.65)  1.14
Minimum                 0.00        0.00       0.00      0.00   (574.09)      0.00        0.00      0.00      0.00  (574.09)  0.00
Maximum            13,509.09    7,070.94   4,631.20  7,870.62      0.00 13,509.09     7,070.94  4,631.20  7,870.62     0.00   1.14
Std. Deviation      4,502.11    2,531.66   1,768.14  2,763.40    275.82   4,502.11    2,531.66  1,768.14  2,763.40   275.82   0.55




                                                                Page 5
                                                    Simulation results


        No Options PV at Year 2                 Commodity Prices and Yields                   Option I (No penalty) PV at year 2   O
    PV HI       PV MID        PV LO      Cu Price Zn Price    Cu CY       Zn CY    PV HI       PV EX      PV LO      TOT PV
$    1,431.88 $ 1,119.38 $       918.15     $1.10 $   0.65      8.94%      1.69%    1431.88     1119.38     918.15    1141.63
$     (676.83) $ (636.62) $     (613.48)    $0.61 $   0.48      5.12%     10.00%       0.00         0.00      0.00        0.00
$    1,208.33 $    778.58 $      535.20     $0.95 $   0.79     10.00%      0.33%    1208.33       778.58      0.00     708.81
$     (887.40) $ (706.21) $     (625.34)    $0.73 $   0.73     10.00%     10.00%       0.00         0.00      0.00        0.00
$    5,424.08 $ 3,470.52 $ 2,512.99         $0.98 $   0.72      1.21%     -3.28%    5424.08     3470.52    2512.99    3669.73
$      322.35 $     (64.31) $   (221.15)    $0.57 $   0.44      6.44%     -2.77%       0.00         0.00      0.00        0.00
$   13,509.09 $ 7,070.94 $ 4,631.20         $0.67 $   0.48     -8.59%     -6.58%   13509.09     7070.94    4631.20    7870.62
$    4,528.59 $ 2,473.06 $ 1,609.14         $0.68 $   0.52      1.08%     -7.13%    4528.59     2473.06    1609.14    2711.38
$    8,910.29 $ 5,429.35 $ 3,854.16         $0.98 $   0.62     -3.04%     -4.06%    8910.29     5429.35    3854.16    5810.50
$    4,032.54 $ 2,878.84 $ 2,211.10         $1.30 $   0.74      3.31%      3.11%    4032.54     2878.84    2211.10    2976.03
$      833.47 $    264.38 $       32.75     $0.75 $   0.35      7.58%     -5.19%     833.47         0.00      0.00     166.69




                                                         Page 6
                                                                          Simulation results


y) PV at year 2                   Option II (With Penalty) PV at year 2
               PV INVST     PV HI     PV EX     PV LO      TOT PV PV INVST PENALTY
                 (574.09)    1431.88   1119.38    918.15    1141.63 (574.09)   1.14
                    0.00        0.00      0.00      0.00        0.00    0.00   0.00
                 (463.21)    1208.33    778.58      0.00     708.81 (463.21)   1.14
                    0.00        0.00      0.00      0.00        0.00    0.00   0.00
                 (574.09)    5424.08   3470.52   2512.99    3669.73 (574.09)   1.14
                    0.00        0.00      0.00      0.00        0.00    0.00   0.00
                 (574.09)   13509.09   7070.94   4631.20    7870.62 (574.09)   1.14
                 (574.09)    4528.59   2473.06   1609.14    2711.38 (574.09)   1.14
                 (574.09)    8910.29   5429.35   3854.16    5810.50 (574.09)   1.14
                 (574.09)    4032.54   2878.84   2211.10    2976.03 (574.09)   1.14
                 (118.63)     833.47      0.00      0.00     166.69 (118.63)   1.14




                                                                               Page 7
                                                 2-yr prices




                                                                        Correlation Table
Month   Copper      Zinc     Cu CY     Zn CY                            Copper     Zinc        Cu CY      Zn CY
  1       $1.00   $   0.55    20.00%    -5.00%                 Copper         1.00
  2       $1.03      $0.54    15.50%    -4.62%                 Zinc           0.44        1.00
  3       $0.99      $0.53     7.51%    -4.72%                 Cu CY          0.57        0.00       1.00
  4       $0.96      $0.50     3.77%    -2.39%                 Zn CY          0.00        0.73       0.00       1.00
  5       $1.02      $0.51    20.96%     3.26%
  6       $1.05      $0.56    22.08%    12.00%                          Mean Reversion Parameters
  7       $1.01      $0.50     8.34%     1.81%                          x-bar       eta                  Drift/year
  8       $0.97      $0.53    -4.71%     5.39%                 Cu CY          5.97%     0.80                  -2.80%
  9       $1.12      $0.52     3.69%     9.19%                 Zn CY        -0.17%      0.60                  -1.42%
 10       $1.15      $0.47    10.32%     0.09%
 11       $1.17      $0.50     5.65%     6.50%
 12       $1.16      $0.51    -2.83%    -3.54%
 13       $1.14      $0.52     4.37%    -1.60%
 14       $1.09      $0.53     5.38%     7.59%
 15       $1.11      $0.54     6.38%    13.29%
 16       $1.08      $0.60     4.76%    12.87%
 17       $1.07      $0.58     3.07%     0.64%
 18       $1.05      $0.60    10.22%     4.64%
 19       $1.06      $0.57     9.88%    -1.30%
 20       $1.13      $0.62    13.97%    17.26%
 21       $1.10      $0.61     7.79%    10.50%
 22       $1.10      $0.66    -5.05%    10.47%
 23       $1.05      $0.60     1.10%    -5.86%
 24       $1.10      $0.65     8.94%     1.69%




                                                  Page 8
                                                                                  DCF - HIGH




Plan C: Depreciation starts in 2001/all costs and revenues are in nominal terms

Mine life                                    18    Years                                    1998 price of copper (USD/lb):               $1.10                  WACC Calculation
Payable copper                              365    Millions of lbs                          1998 price of zinc (USD/lb):                 $0.65                  DEBT
payable zinc                                181    Millions of lbs                                                                                              Nominal cost of debt:
operating costs                             145    1996$ p.a.                               1998 convenience yield of copper             8.94%                  Debt:
copper treatment charge                    0.28    $/lb payable cu                          1998 convenience yield of zinc               1.69%                  MV of firm
zinc treatment charge                      0.22    $/lb payable zinc                                                                                            Tax rate:
                                                                                            Long term inflation:                         2.60%                  Cost of debt:
capital cost
                              1988           55 1996 millions
                              1999          264 1996 millions
                              2000          303 1996 millions
Feasibility study
                              1996             6   1996 millions
                              1997            18   1996 millions
Closure costs                                 45   1996 millions
tax rate                                    30%
Sustaining capex                           1.5%    p.a. of initial capex
working capital                             25%    of net revenue (gross revenue - treatment charges)
capital allowances                          20%    straight line for all capital
PV of project at year 2:               1,431.88
PV of feasibility study:                 (22.76)
PV of initial capital expenditures      (593.16)
Year                                                                                                              1            2             3             4             5             6
                                           1996          1997            1998       1999          2000         2001         2002          2003          2004          2005          2006
Revenues
 Amount of copper (Millions lbs)                                                                              365          365           365          365            365           365
 Price of copper (USD/lb)                                                                                $   1.04     $   1.02      $   1.00      $   0.99      $   0.97      $   0.95
 Revenues from copper (Millions USD)                                                                       379.34       372.66        366.09        359.63        353.29        347.06
 Amount of zinc (Millions lbs)                                                                                181          181           181          181            181           181
 Price of zinc (USD/lb)                                                                                  $   0.76     $   0.80      $   0.84      $   0.89      $   0.93      $   0.98
 Revenues from Zinc (Millions USD)                                                                         137.70       144.92        152.52        160.52        168.94        177.81
Total Gross Revenues                                                                                       517.04       517.58        518.61        520.15        522.23        524.87

Treatment Costs
 Copper treatment costs (Millions USD)                                                                       116.20       119.22        122.32        125.50        128.76        132.11
 Zinc treatment costs (Millions USD)                                                                          45.27        46.45         47.66         48.90         50.17         51.47
Total Net Revenues                                                                                           355.57       351.91        348.63        345.76        343.31        341.29

Discounted Net Revenues                                                                                      290.09       268.27        248.34        230.14        213.51        198.34

Annual Operating Costs (Millions USD)                                                                        164.86       169.14        173.54        178.05        182.68        187.43
Pretax Profits (Millions USD)                                                                                190.72       182.77        175.09        167.71        160.63        153.86

Capital Expenditures
 Feasibility (Millions USD)                6.00        18.47
 Capital expenditures (Millions USD)                                   57.90     285.13        335.76         10.18        10.45         10.72         11.00         11.28         11.58
Depreciation                                                            0.00       0.00          0.00        137.79       139.88        142.03        144.23        146.48         11.00
EBIAT                                                                   0.00       0.00          0.00         52.92        42.88         33.07         23.48         14.14        142.85
Taxes                                                                   0.00       0.00          0.00         15.88        12.86          9.92          7.04          4.24         42.86
PAT                                                                      -          -             -           37.05        30.02         23.15         16.44          9.90        100.00

Adjustments:
 Depreciation                                                             -          -             -         137.79       139.88        142.03        144.23        146.48         11.00
 Total working capital                                                                                        88.89        87.98         87.16         86.44         85.83         85.32
 Change in working capital                                                                                    88.89        (0.92)        (0.82)        (0.72)        (0.61)        (0.50)
 Capital expenditures                      6.00        18.47           57.90     285.13        335.76         10.18        10.45         10.72         11.00         11.28         11.58
 Closure costs                                                                                                 0.00         0.00          0.00          0.00          0.00          0.00
Free Cash Flow (Millions USD)             (6.00)      (18.47)          (57.90)   (285.13)     (335.76)        75.77       160.37        155.27        150.39        145.71         99.93

PV Calculations
Discounted net revenues                                                                                      290.09       268.27        248.34        230.14        213.51        198.34
Total costs                                6.00        18.47          57.90       285.13       335.76        279.81       191.54        193.36        195.38        197.59        241.36
Total costs discounted at WACC             6.00        16.76          57.90       258.75       276.51        209.11       129.90        119.01        109.12        100.15        111.02
DCF                                       (6.00)      (16.76)        (57.90)     (258.75)     (276.51)        80.98       138.37        129.33        121.02        113.36         87.32
PV:                                                                1,431.88




                                                                                    Page 9
                                                                                          DCF - HIGH




                            EQUITY
     7.65%                  Rf:                     7.0%
     2,205                  Beta:                   0.53
    15,535                  Risk premium:           7.5%
       30%                  Cost of equity:        11.0%
      5.4%

                            WACC:                  10.2%




         7             8                9             10            11           12           13           14           15           16           17           18            19
      2007          2008             2009           2010          2011         2012         2013         2014         2015         2016         2017         2018          2019

    365            365               365           365           365          365          365          365          365          365          365         365             -
$  0.93       $   0.92      $       0.90      $   0.89      $   0.87     $   0.85     $   0.84     $   0.82     $   0.81     $   0.80     $   0.78     $   0.77      $    0.75
 340.94         334.93            329.03        323.23        317.53       311.93       306.43       301.03       295.72       290.51       285.39       280.35           0.00
    181            181               181           181           181          181          181          181          181          181          181         181             -
$ 1.03        $   1.09      $       1.15      $   1.21      $   1.27     $   1.34     $   1.41     $   1.48     $   1.56     $   1.64     $   1.72     $   1.81      $    1.91
 187.13         196.95            207.28        218.15        229.59       241.64       254.31       267.65       281.69       296.47       312.02       328.39           0.00
 528.08         531.88            536.31        541.38        547.12       553.57       560.74       568.68       577.41       586.98       597.41       608.74           0.00


    135.54        139.07          142.68          146.39        150.20       154.10       158.11       162.22       166.44       170.76       175.20       179.76         0.00
     52.81         54.18           55.59           57.04         58.52        60.04        61.60        63.21        64.85        66.53        68.26        70.04         0.00
    339.72        338.63          338.03          337.95        338.41       339.42       341.03       343.26       346.13       349.68       353.94       358.94          -

    184.48        171.82          160.27          149.72        140.09       131.29       123.26       115.93       109.23       103.11        97.52        92.41         0.00

    192.30        197.30          202.43          207.70        213.10       218.64       224.32       230.16       236.14       242.28       248.58       255.04           -
    147.42        141.33          135.60          130.25        125.31       120.79       116.71       113.10       109.99       107.40       105.36       103.90           -



     11.88         12.19           12.50           12.83         13.16        13.50        13.85        14.21        14.58        14.96        15.35        15.75         0.00
     11.29         11.58           11.88           12.19         12.51        12.84        13.17        13.51        13.86        14.22        14.59        14.97         0.00
    136.13        129.74          123.71          118.06        112.80       107.95       103.54        99.59        96.13        93.17        90.77        88.93         0.00
     40.84         38.92           37.11           35.42         33.84        32.38        31.06        29.88        28.84        27.95        27.23        26.68         0.00
     95.29         90.82           86.60           82.64         78.96        75.56        72.48        69.71        67.29        65.22        63.54        62.25          -


     11.29         11.58            11.88          12.19         12.51        12.84        13.17        13.51        13.86        14.22        14.59        14.97           -
     84.93         84.66            84.51          84.49         84.60        84.86        85.26        85.81        86.53        87.42        88.48        89.74          0.00
     (0.39)        (0.27)           (0.15)         (0.02)         0.11         0.25         0.40         0.56         0.72         0.89         1.06         1.25        (89.74)
     11.88         12.19            12.50          12.83         13.16        13.50        13.85        14.21        14.58        14.96        15.35        15.75           -
      0.00          0.00             0.00           0.00          0.00         0.00         0.00         0.00         0.00         0.00         0.00        79.15          0.00
     95.09         90.49            86.13          82.03         78.19        74.64        71.39        68.45        65.85        63.60        61.71       (18.93)        89.74


    184.48        171.82          160.27          149.72        140.09       131.29       123.26       115.93       109.23       103.11        97.52        92.41          0.00
    244.63        248.14          251.90          255.92        260.21       264.78       269.64       274.80       280.28       286.08       292.23       377.87        (89.74)
    102.11         93.99           86.59           79.83         73.66        68.02        62.86        58.14        53.81        49.84        46.20        54.22        (11.68)
     82.37         77.83           73.68           69.88         66.42        63.27        60.40        57.79        55.42        53.27        51.32        38.19         11.68




                                                                                            Page 10
                                                                                 DCF - EXPECTED




Plan C: Depreciation starts in 2001/all costs and revenues are in nominal terms

Mine life                                    14    Years                                  1998 price of copper (USD/lb):                $1.10
Payable copper                              339    Millions of lbs                        1998 price of zinc (USD/lb):                  $0.65
payable zinc                                168    Millions of lbs
operating costs                             138    1996$ p.a.                             1998 convenience yield of copper              8.94%
copper treatment charge                    0.28    $/lb payable cu                        1998 convenience yield of zinc                1.69%
zinc treatment charge                      0.22    $/lb payable zinc
                                                                                          Long term inflation:                          2.60%
capital cost
                               1988          55 1996 millions
                               1999         255 1996 millions
                               2000         292 1996 millions
Feasibility study
                               1996            6   1996 millions
                               1997           18   1996 millions
Closure costs                                 45   1996 millions
tax rate                                    30%
Sustaining capex                           1.5%    p.a. of initial capex
working capital                             25%    of net revenue (gross revenue - treatment charges)
capital allowances                          20%    straight line for all capital
PV of project at year 2:               1,119.38
PV of feasibility study:                 (22.76)
PV of initial capital expenditures      (574.30)
Year                                                                                                             1            2             3             4
                                           1996          1997           1998      1999          2000          2001         2002          2003          2004
Revenues
 Amount of copper (Millions lbs)                                                                             339          339           339           339
 Price of copper (USD/lb)                                                                               $   1.04     $   1.02      $   1.00      $   0.99
 Revenues from copper (Millions USD)                                                                      352.32       346.11        340.01        334.01
 Amount of zinc (Millions lbs)                                                                               168          168           168           168
 Price of zinc (USD/lb)                                                                                 $   0.76     $   0.80      $   0.84      $   0.89
 Revenues from Zinc (Millions USD)                                                                        127.81       134.51        141.57        148.99
Total Gross Revenues                                                                                      480.13       480.62        481.58        483.01

Treatment Costs
 Copper treatment costs (Millions USD)                                                                      107.92       110.72        113.60        116.56
 Zinc treatment costs (Millions USD)                                                                         42.02        43.11         44.23         45.38
Total Net Revenues                                                                                          330.19       326.78        323.74        321.07

Discounted Net Revenues                                                                                     269.38       249.12        230.61        213.70

Annual Operating Costs (Millions USD)                                                                       156.90       160.98        165.16        169.46
Pretax Profits (Millions USD)                                                                               173.29       165.81        158.58        151.61

Capital Expenditures
 Feasibility (Millions USD)                6.00        18.47
 Capital expenditures (Millions USD)                                   57.90   275.41        323.57           9.85        10.11         10.37         10.64
Depreciation                                                            0.00     0.00          0.00         133.35       135.37        137.44        139.57
EBIAT                                                                   0.00     0.00          0.00          39.95        30.44         21.13         12.04
Taxes                                                                   0.00     0.00          0.00          11.98         9.13          6.34          3.61
PAT                                                                      -        -             -            27.96        21.31         14.79          8.43

Adjustments:
 Depreciation                                                            -         -             -          133.35       135.37        137.44        139.57
 Total working capital                                                                                       82.55        81.70         80.93         80.27
 Change in working capital                                                                                   82.55        (0.85)        (0.76)        (0.67)
 Capital expenditures                      6.00        18.47           57.90   275.41        323.57           9.85        10.11         10.37         10.64
 Closure costs                                                                                                0.00         0.00          0.00          0.00
Free Cash Flow (Millions USD)             (6.00)      (18.47)        (57.90)   (275.41)     (323.57)         68.91       147.42        142.63        138.02

PV Calculations
Discounted net revenues                                                                                     269.38       249.12        230.61        213.70
Total costs                                6.00        18.47          57.90     275.41       323.57         261.28       179.37        181.11        183.04
Total costs discounted at WACC             6.00        16.76          57.90     249.93       266.47         195.27       121.65        111.47        102.23
DCF                                       (6.00)      (16.76)        (57.90)   (249.93)     (266.47)         74.11       127.47        119.14        111.47
PV:                                                                1,119.38




                                                                                        Page 11
                                                                                            DCF - EXPECTED




WACC Calculation
DEBT                                                    EQUITY
Nominal cost of debt:            7.65%                  Rf:                     7.0%
Debt:                            2,205                  Beta:                   0.53
MV of firm                      15,535                  Risk premium:           7.5%
Tax rate:                          30%                  Cost of equity:        11.0%
Cost of debt:                     5.4%

                                                        WACC:                  10.2%




         5             6             7             8                9             10            11           12           13           14            15          16         17         18
      2005          2006          2007          2008             2009           2010          2011         2012         2013         2014          2015        2016       2017       2018

     339           339          339            339                339          339           339          339          339          339            -            -          -          -
$   0.97      $   0.95      $  0.93       $   0.92      $        0.90     $   0.89      $   0.87     $   0.85     $   0.84     $   0.82      $    0.81     $   0.80   $   0.78   $   0.77
  328.12        322.34       316.66         311.07             305.59       300.20        294.91       289.71       284.60       279.59           0.00         0.00       0.00       0.00
     168           168          168            168                168          168           168          168          168          168            -            -          -          -
$   0.93      $   0.98      $ 1.03        $   1.09      $        1.15     $   1.21      $   1.27     $   1.34     $   1.41     $   1.48      $    1.56     $   1.64   $   1.72   $   1.81
  156.81        165.03       173.69         182.80             192.39       202.48        213.10       224.28       236.05       248.43           0.00         0.00       0.00       0.00
  484.93        487.37       490.35         493.88             497.98       502.69        508.01       513.99       520.65       528.02           0.00         0.00       0.00       0.00


    119.59        122.70        125.89        129.16           132.52         135.96        139.50       143.13       146.85       150.66         0.00         0.00       0.00       0.00
     46.56         47.78         49.02         50.29            51.60          52.94         54.32        55.73        57.18        58.67         0.00         0.00       0.00       0.00
    318.78        316.90        315.44        314.43           313.86         313.78        314.20       315.14       316.63       318.69          -            -          -          -

    198.26        184.16        171.29        159.54           148.81         139.01        130.06       121.90       114.44       107.63         0.00         0.00       0.00       0.00

    173.86        178.38        183.02        187.78           192.66         197.67        202.81       208.08       213.49       219.04           -          -          -          -
    144.92        138.52        132.42        126.65           121.20         116.11        111.39       107.06       103.13        99.64           -          -          -          -



     10.92         11.20         11.49         11.79            12.10          12.41         12.74        13.07        13.41        13.76         0.00         0.00       0.00       0.00
    141.76         10.65         10.93         11.21            11.50          11.80         12.11        12.42        12.74        13.08         0.00         0.00       0.00       0.00
      3.16        127.87        121.50        115.44           109.70         104.31         99.28        94.63        90.39        86.56         0.00         0.00       0.00       0.00
      0.95         38.36         36.45         34.63            32.91          31.29         29.78        28.39        27.12        25.97         0.00         0.00       0.00       0.00
      2.22         89.51         85.05         80.81            76.79          73.02         69.50        66.24        63.27        60.60          -            -          -          -


    141.76         10.65         10.93         11.21            11.50          11.80         12.11        12.42        12.74        13.08           -           -          -          -
     79.70         79.23         78.86         78.61            78.47          78.45         78.55        78.78        79.16        79.67          0.00        0.00       0.00       0.00
     (0.57)        (0.47)        (0.36)        (0.25)           (0.14)         (0.02)         0.10         0.23         0.37         0.51        (79.67)        -          -          -
     10.92         11.20         11.49         11.79            12.10          12.41         12.74        13.07        13.41        13.76           -           -          -          -
      0.00          0.00          0.00          0.00             0.00           0.00          0.00         0.00         0.00        71.43          0.00        0.00       0.00       0.00
    133.62         89.43         84.85         80.48            76.33          72.42         68.76        65.36        62.24       (12.03)        79.67         -          -          -


    198.26        184.16        171.29        159.54           148.81         139.01        130.06       121.90       114.44       107.63          0.00        0.00       0.00       0.00
    185.16        227.48        230.60        233.95           237.53         241.36        245.44       249.78       254.39       330.71        (79.67)       0.00       0.00       0.00
     93.85        104.63         96.25         88.62            81.65          75.29         69.48        64.17        59.31        69.97        (15.30)        -          -          -
    104.41         79.53         75.04         70.92            67.16          63.72         60.58        57.73        55.13        37.66         15.30         -          -          -




                                                                                                Page 12
           DCF - EXPECTED




      19
    2019

     -
$   0.75
    0.00
     -
$   1.91
    0.00
    0.00


    0.00
    0.00
     -

    0.00

    -
    -



    0.00
    0.00
    0.00
    0.00
     -


     -
    0.00
     -
     -
    0.00
     -


    0.00
    0.00
     -
     -




              Page 13
                                                                                      DCF - LOW




Plan C: Depreciation starts in 2001/all costs and revenues are in nominal terms

Mine life                                   12    Years                                  1998 price of copper (USD/lb):                $1.10
Payable copper                             313    Millions of lbs                        1998 price of zinc (USD/lb):                  $0.65
payable zinc                               155    Millions of lbs
operating costs                            131    1996$ p.a.                             1998 convenience yield of copper              8.94%
copper treatment charge                   0.28    $/lb payable cu                        1998 convenience yield of zinc                1.69%
zinc treatment charge                     0.22    $/lb payable zinc
                                                                                         Long term inflation:                          2.60%
capital cost                                                                             Mean drift of copper price per year:          0.00%
                               1988         54 1996 millions                             Mean drift of zinc prices per year:           0.00%
                               1999        246 1996 millions
                               2000        281 1996 millions
Feasibility study
                               1996           6   1996 millions
                               1997          18   1996 millions
Closure costs                                45   1996 millions
tax rate                                   30%
Sustaining capex                          1.5%    p.a. of initial capex
working capital                            25%    of net revenue (gross revenue - treatment charges)
capital allowances                         20%    straight line for all capital
PV of project at year 2:                918.15
PV of feasibility study:                (22.76)
PV of initial capital expenditures     (554.39)
Year                                                                                                            1            2             3             4
                                          1996          1997           1998      1999          2000          2001         2002          2003          2004
Revenues
 Amount of copper (Millions lbs)                                                                            313          313           313           313
 Price of copper (USD/lb)                                                                              $   1.04     $   1.02      $   1.00      $   0.99
 Revenues from copper (Millions USD)                                                                     325.30       319.56        313.93        308.40
 Amount of zinc (Millions lbs)                                                                              155          155           155           155
 Price of zinc (USD/lb)                                                                                $   0.76     $   0.80      $   0.84      $   0.89
 Revenues from Zinc (Millions USD)                                                                       117.92       124.10        130.61        137.46
Total Gross Revenues                                                                                     443.22       443.67        444.54        445.86

Treatment Costs
 Copper treatment costs (Millions USD)                                                                      99.64       102.23        104.89        107.62
 Zinc treatment costs (Millions USD)                                                                        38.77        39.78         40.81         41.87
Total Net Revenues                                                                                         304.81       301.66        298.84        296.37

Discounted Net Revenues                                                                                    248.67       229.96        212.87        197.26

Annual Operating Costs (Millions USD)                                                                      148.94       152.81        156.78        160.86
Pretax Profits (Millions USD)                                                                              155.87       148.85        142.06        135.51

Capital Expenditures
 Feasibility (Millions USD)               6.00        18.47
 Capital expenditures (Millions USD)                                  56.84   265.69        311.38           9.51         9.76         10.01         10.27
Depreciation                                                           0.00     0.00          0.00         128.69       130.64        132.64        134.69
EBIAT                                                                  0.00     0.00          0.00          27.18        18.21          9.42          0.82
Taxes                                                                  0.00     0.00          0.00           8.15         5.46          2.83          0.25
PAT                                                                     -        -             -            19.03        12.75          6.59          0.57

Adjustments:
 Depreciation                                                           -         -             -          128.69       130.64        132.64        134.69
 Total working capital                                                                                      76.20        75.41         74.71         74.09
 Change in working capital                                                                                  76.20        (0.79)        (0.70)        (0.62)
 Capital expenditures                     6.00        18.47           56.84   265.69        311.38           9.51         9.76         10.01         10.27
 Closure costs                                                                                               0.00         0.00          0.00          0.00
Free Cash Flow (Millions USD)            (6.00)      (18.47)      (56.84)     (265.69)     (311.38)         62.00       134.41        129.93        125.61

PV Calculations
Discounted net revenues                                                                                    248.67       229.96        212.87        197.26
Total costs                               6.00        18.47        56.84       265.69       311.38         242.80       167.24        168.92        170.76
Total costs discounted at WACC            6.00        16.76        56.84       241.11       256.43         181.46       113.43        103.96         95.37
DCF                                      (6.00)      (16.76)      (56.84)     (241.11)     (256.43)         67.22       116.54        108.91        101.89
PV:                                                               918.15




                                                                                         Page 14
                                                                                               DCF - LOW




WACC Calculation
DEBT                                                    EQUITY
Nominal cost of debt:            7.65%                  Rf:                    7.02%
Debt:                            2,205                  Beta:                   0.53
MV of firm                      15,535                  Risk premium:          7.50%
Tax rate:                          30%                  Cost of equity:       11.00%
Cost of debt:                    5.36%

                                                        WACC:                 10.19%




         5             6             7             8                9             10            11           12            13          14         15         16         17         18
      2005          2006          2007          2008             2009           2010          2011         2012          2013        2014       2015       2016       2017       2018

     313           313          313            313                313          313           313          313            -            -          -          -          -          -
$   0.97      $   0.95      $  0.93       $   0.92      $        0.90     $   0.89      $   0.87     $   0.85      $    0.84     $   0.82   $   0.81   $   0.80   $   0.78   $   0.77
  302.96        297.62       292.37         287.22             282.15       277.18        272.29       267.49           0.00         0.00       0.00       0.00       0.00       0.00
     155           155          155            155                155          155           155          155            -            -          -          -          -          -
$   0.93      $   0.98      $ 1.03        $   1.09      $        1.15     $   1.21      $   1.27     $   1.34      $    1.41     $   1.48   $   1.56   $   1.64   $   1.72   $   1.81
  144.68        152.26       160.25         168.66             177.50       186.81        196.61       206.93           0.00         0.00       0.00       0.00       0.00       0.00
  447.63        449.88       452.62         455.87             459.66       463.99        468.91       474.42           0.00         0.00       0.00       0.00       0.00       0.00


    110.42        113.29        116.23        119.25           122.35         125.54        128.80       132.15         0.00         0.00       0.00       0.00       0.00       0.00
     42.96         44.08         45.22         46.40            47.61          48.84         50.11        51.42         0.00         0.00       0.00       0.00       0.00       0.00
    294.26        292.52        291.17        290.22           289.70         289.61        289.99       290.85          -            -          -          -          -          -

    183.01        169.99        158.11        147.26           137.35         128.30        120.04       112.50         0.00         0.00       0.00       0.00       0.00       0.00

    165.04        169.33        173.74        178.25           182.89         187.64        192.52       197.53           -          -          -          -          -          -
    129.21        123.18        117.43        111.97           106.81         101.97         97.47        93.32           -          -          -          -          -          -



     10.54         10.81         11.09         11.38            11.68          11.98         12.29        12.61         0.00         0.00       0.00       0.00       0.00       0.00
    136.80         10.28         10.54         10.82            11.10          11.39         11.68        11.99         0.00         0.00       0.00       0.00       0.00       0.00
     (7.59)       112.91        106.88        101.15            95.71          90.58         85.79        81.34         0.00         0.00       0.00       0.00       0.00       0.00
     (2.28)        33.87         32.07         30.34            28.71          27.17         25.74        24.40         0.00         0.00       0.00       0.00       0.00       0.00
     (5.31)        79.03         74.82         70.80            67.00          63.41         60.05        56.94          -            -          -          -          -          -


    136.80         10.28         10.54         10.82            11.10          11.39         11.68        11.99           -           -          -          -          -          -
     73.56         73.13         72.79         72.55            72.42          72.40         72.50        72.71          0.00        0.00       0.00       0.00       0.00       0.00
     (0.53)        (0.44)        (0.34)        (0.24)           (0.13)         (0.02)         0.09         0.22        (72.71)        -          -          -          -          -
     10.54         10.81         11.09         11.38            11.68          11.98         12.29        12.61           -           -          -          -          -          -
      0.00          0.00          0.00          0.00             0.00           0.00          0.00        67.85          0.00        0.00       0.00       0.00       0.00       0.00
    121.48         78.94         74.61         70.48            66.55          62.84         59.35       (11.76)        72.71         -          -          -          -          -


    183.01        169.99        158.11        147.26           137.35         128.30        120.04       112.50          0.00        0.00       0.00       0.00       0.00       0.00
    172.78        213.58        216.56        219.74           223.15         226.78        230.64       302.61        (72.71)       0.00       0.00       0.00       0.00       0.00
     87.57         98.24         90.39         83.24            76.71          70.74         65.29        77.74        (16.95)        -          -          -          -          -
     95.44         71.75         67.72         64.02            60.64          57.56         54.75        34.76         16.95         -          -          -          -          -




                                                                                                Page 15
           DCF - LOW




      19
    2019

     -
$   0.75
    0.00
     -
$   1.91
    0.00
    0.00


    0.00
    0.00
     -

    0.00

    -
    -



    0.00
    0.00
    0.00
    0.00
     -


     -
    0.00
     -
     -
    0.00
     -


    0.00
    0.00
     -
     -




            Page 16
                                         Macro


Macro1
=OPTIONS.CALCULATION(3,,,0.001,,FALSE)
=HIDE()
=CALCULATE.NOW()
=ACTIVATE("Bid.xls")
=WORKBOOK.SELECT("Simulation Results")
=SELECT("R4:R16384")
=CLEAR(3)
=FOR("x",1,Summary!Trials)
=SELECT('Simulation results'!A3:T3)
=COPY()
=SELECT("R"&x+3&"C1")
=PASTE.SPECIAL(3)
=CALCULATE.NOW()
=NEXT()
=CANCEL.COPY()
=SELECT("R1C1")
=WORKBOOK.SELECT("Summary")
=UNHIDE("Bid.xls")
=RETURN()




                                         Page 17

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:40
posted:10/5/2011
language:English
pages:17