As mentioned, the NPV is in part based on the amount of money in and out of a business. In our case, there’s two businesses involved (Teck and Copper Fox). Based on the SCJV, both have different financial obligations. Teck needs to fund the project and the money they have to invest does in theory lose value in time. Therefore, each entity doesn’t necessarily have a NPV based on their share of the project. I’ll try to better explain this with numbers.
For Teck (75%), see below the approximate stream of net cash flows (in millions) based on the 2013 FS.
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Year -5: -100
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Year 1: -225
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Year 6: 543.75
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Year 11: 37.5
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Year 16: 18.75
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Year -4: -300
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Year 2: 600
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Year 7: 468.75
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Year 12: 150
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Year 17: 300
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Year -3: -1000
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Year 3: 487.5
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Year 8: 393.75
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Year 13: 318.75
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Year 18: 506.25
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Year -2: -1000
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Year 4: 356.25
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Year 9: 318.75
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Year 14: 431.25
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Year 19: 600
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Year -1: -825
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Year 5: 431.25
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Year 10: 187.5
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Year 15: 168.75
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Year 20: 675
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Year 21: 243.75
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Entering all these values in the calculator should give you a negative NPV (8%) around (251M).
For Schaft Creek (25%), see below the approximate stream of net cash flows (in millions) based on the 2013 FS.
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Year -5: 0
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Year 1: 0
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Year 6: 181.25
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Year 11: 12.5
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Year 16: 6.25
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Year -4: 0
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Year 2: 200
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Year 7: 156.25
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Year 12: 50
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Year 17: 100
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Year -3: 0
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Year 3: 162.5
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Year 8: 131.25
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Year 13: 106.25
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Year 18: 168.75
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Year -2: 0
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Year 4: 118.75
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Year 9: 106.25
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Year 14: 143.75
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Year 19: 200
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Year -1: 0
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Year 5: 143.75
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Year 10: 62.5
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Year 15: 56.25
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Year 20: 225
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Year 21: 81.25
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Entering all these values in the calculator should give you a positive NPV (8%) around 771M.
Conclusion: The sum of each individual NPV does equal 520M, but we can clearly see that the business case for each company is completely different. For Teck, the project is not profitable and for Copper Fox its way better than the 128M they are taking credit for today.
IMO.
MoneyK
