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Why is Financial Modelling important in doing a mining project?
- 1. www.ndme-inc.com Why is Financial Modelling Important?
- 2. www.ndme-inc.com Why is Financial Modelling Important In the end, the economic or business result is what matters most to the client. One of the top global Hatch clients has gone on record with..... “Rio has plenty of engineers, geologists and accountants but, according to Mr Walsh, it needs . . . people with a feel for business who treat the company’s money as if it were their own. I want people to act like business owners rather than solely for their disciplines . . . in terms of what delivers value to our shareholders” Sam Walsh, Copyright The Financial Times Limited, Neil Hume, Sydney and Christopher Thompson, London, 14 February, 2013
- 3. www.ndme-inc.com Process of Financial Modelling Conceptual Model Spreadsheet Model Model Insights Management Insights Business Situation Specification Design Development Testing Implementation Agile Approach Traditional Approach
- 4. www.ndme-inc.com Project Phases and Business Case Optimization Identify all possible scenario and wide scope. The focus is on effectiveness rather than efficiency. Establish Business Case Pre feasibility (FEL2) Option Selection Feasibility Study BFS (FEL3) Preferred option development Concept (FEL1) Business Case Divergent Phase Convergent Phase Eliminate obvious non-viable options saving time and money later The contingency and risk will reduce as more engineering is done and more confidence in the inputs, both financial and engineering Potentially increase the number of options. Each scenario having sub-options. Once the single option is picked a more classical approach to financial modelling, viz. input oriented modelling, can be applied. PFS (FEL2) Engineering The convergent phase of FEL 2 the aim is to go to one scenario that will be engineered. Output Oriented Modelling Output Oriented Modelling Output Oriented Modelling
- 5. www.ndme-inc.com Construction of a Financial Model
- 6. www.ndme-inc.com Scale of Activities through Project Phases 0 10 20 30 40 50 60 70 80 90 100 Percentage Time Accuracy Range Scope Definition Engineering Completion Size of Scope Contingency Benchmarks FEL 1 FEL 2 FEL 3 BusinessCase Option Selection Preferred Option Development
- 7. www.ndme-inc.com Overview of Project Financial Metrics DiscountedCashflows(ZAR)
- 8. www.ndme-inc.com Sensitivity -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% CapitalEfficiency(NPV@11.5%/Capex) Revenue Opex Capex SIB Capex and SIB ProductionRate
- 9. www.ndme-inc.com FAST standard of Financial Modelling FAST acronym • Flexible • Appropriate • Structured • Transparent Signatories to the FAST Standard Moving towards a common modelling language –Institute for Chartered Accountants in England and Wales Recognises FAST Financial Models are built using the FAST standard