Ok, now that the NPV concept is well understood, let’s calculate the NPV (8%) with the below assumptions.
- Capex at 2.7B and 4 year construction with below cash out.
o Y1: -400M
o Y2-3: -800M
o Y4: -700M
Net cash flows:
o Y1-7: 900M
o Y8-21: 600M
Entering all these values in the calculator should give you a positive NPV (8%) around 3.2B for 100% of the project.
The interesting portion is to look at the change for each company. Let’s remember that the NPV (8%) values were 151M for Teck and 369M for Copper Fox.
For Teck (75%), see below the approximate new stream of net cash flows (in millions) based on the above assumptions.
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Year -4: -400
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Year 1: 900
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Year 6: 675
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Year 11: 450
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Year 16: 450
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Year -3: -800
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Year 2: 900
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Year 7: 450
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Year 12: 450
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Year 17: 450
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Year -2: -800
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Year 3: 900
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Year 8: 450
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Year 13: 450
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Year 18: 450
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Year -1: -700
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Year 4: 675
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Year 9: 450
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Year 14: 450
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Year 19: 450
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Year 5: 675
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Year 10: 450
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Year 15: 450
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Year 20: 450
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Year 21: 450
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Entering all these values in the calculator should give you a positive NPV (8%) around 2.3B
For Schaft Creek (25%), see below the approximate stream of net cash flows (in millions) based on the above assumptions.
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Year -4: 0
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Year 1: 0
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Year 6: 225
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Year 11: 150
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Year 16: 150
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Year -3: 0
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Year 2: 0
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Year 7: 150
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Year 12: 150
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Year 17: 150
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Year -2: 0
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Year 3: 0
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Year 8: 150
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Year 13: 150
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Year 18: 150
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Year -1: 0
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Year 4: 225
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Year 9: 150
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Year 14: 150
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Year 19: 150
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Year 5: 225
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Year 10: 150
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Year 15: 150
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Year 20: 150
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Year 21: 150
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Entering all these values in the calculator should give you a positive NPV (8%) around 900M
Conclusion: Teck would move from 151M to 2.3B (15x the initial value) and Copper Fox would move from 369M to 900M (2.5x the initial value).
IMO.
MoneyK
