Financial modelling in a mining setting is discussed. Financial models allow you to understand the drivers of your project so that you can adjust them to maximise the financial success of your mining project.

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Why is Financial Modelling Important?

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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

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Process of Financial Modelling
Conceptual
Model
Spreadsheet
Model
Model
Insights
Management
Insights
Business
Situation
Specification Design Development Testing Implementation
Agile Approach
Traditional Approach

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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

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Construction of a Financial Model

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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

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Overview of Project Financial Metrics
DiscountedCashflows(ZAR)

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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

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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