What's the NPV of Fort Hills?

If you want to compare apples to apples compare the Net Present Value of each project at current prices or whatever conditions you choose (ie. current commodity prices, anticipated prices, Base Case in each study etc.).

The people at Teck are smart (I would assume). The numbers for Schaft Creek are probably worse than Fort Hills for what they forecast over the next 5-10 years and beyond, otherwise they would pick Schaft Creek over Fort Hills. The NPV 8% for Schaft Creek was 513 million at commodity prices higher than we have now so I would take that as our best case since things have barely moved forward on the inferred waste or EA front...

The question is whether Fort Hills NPV > Schaft Creek NPV at $70/barrel? I'll leave that calculation to someone else...

Leave that to someone else? I guess let other ppl call the office too eh? haha

You can easily try googling "What is the NPV of Fort Hills?".

I googled NPV of Fort Hills. This is what I found.

https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CEQQFjAE&url=https%3A%2F%2Fwww.teck.com%2FDocumentViewer.aspx%3FelementId%3D216184%26portalName%3Dtc&ei=FWF-VIrWI4j5yQSx_4LYBg&usg=AFQjCNHSWbNJoAmY7DzmIsTzlOO7pz_d4g&sig2=m5J1vUAAb9RBwA0CiYu1Bg&bvm=bv.80642063,d.aWw&cad=rja

I found this link back to 2013 in Teck's Fort Hill's conference call.

Go to page 11.

Don Lindsay - Teck Resources Limited - President, CEO
Okay, well, thank you very much for being on the call this morning. We are excited about the decision today. There have been a lot of questions about IRR and NPVs. And one thing I would point out about these is, as we move closer and closer to 2017 and you do the IRR a year from now or two years from now, that it obviously gets higher in the NPV. The NPV goes up as you get closer to production starting up. That's the case with all of these projects, whether they be copper or coal or oil. So we are looking forward to going through the next 3 or 4 years and to getting to 2017 and having 50 years of cash flow for shareholders from a project in a safe geopolitical jurisdiction.

It doesn't tell me the NPV or IRR of the overall project but it does show what kind of thinking Don Lindsay has.

Then I found this.

http://www.suncor.com/pdf/2013_Fort_Hills.pdf

Page 5, IRR shows 13% vs SC of 10%.

http://www.teck.com/res/tc/documents/_ces_portal_meta/downloads/investors/ir%20presentations/2014/teck%20energy%20business.pdf

In this PP by Teck, on page 5, it seems like the NPV for Fort Hills is around $5 billion before they started. Fort Hills is a much bigger project though. 50 years mine life and also they have a capex budget of $14-15 billion or so.

MOST interesting slide is page 5 in the Teck's PP.

Teck compared typical bitumen producer vs a low quartile cost copper mine.

$65 net back

$25 cash cost. $40 cash margin.

62% margin at budgeted $100 a barrel oil.

Compare to a copper mine.

$3.25 a pound. (Sounds familiar? wait we used that figure in our FS too!)

Cash cost of $1.25. (SC is at $1.15 or less).

Cash Margin of $2.00. 62% margin as well.

IMO, it feels margins and cash flow wise, SC stands up pretty well with Fort Hills.