That's my understanding of the role of the %age in NPV calculations. A lot of projects (e.g. South American) with geopolitical risk use a discount factor as high as 15%.

I dont' think of the %age as being only set to capture inflation but also the risk of the project being successful due to political meddling, engineering and market uncertainties and the fear of the unknown.

Tck chose the 8% that we must use in our BFS. They could have chosen 5% which would have been fair but the extra 3% allows buffer room for extra, unforseen risk.

It is interesting that CUU brought up the notion of using another accounting/valuation method (July 2011) a while ago but that notion seems to have dropped off the page.

July 2011 MD&A (pg4):

"Porphyry deposits of the scale to be mined over a number of decades are difficult to value due to the inherent uncertainties in estimating long term costs and metal prices.

Recognizing this reality, Copper Fox’s strategy is to reduce the payback period for recovery of the initial capital expenditures and then concentrate on maximizing the cash flow over the life of the proposed mine.

The most common valuation method used to determine the value of a mining project is the discounted cash flow method (“DCF”). Using this method, a long mine life results in a longer discount period thus lowering the estimated NPV.

It is essential that the initial capital costs are recovered as soon as possible. After recovery of the initial capital costs, the annual cash flow is the primary metric used to value the project. The longer the mine life, the more value is added, hence the need to move Inferred resources into the Indicated and Measures categories to extend the mine life.

An alternate method that is now being used to value long term mining assets is referred to as Real Option valuation. This method uses the same input parameters as the DCF method but treats future pricing of metal prices differently due to changes in metal pricing cycles."