Lar: read that bigger post a few days back.

The valuation analyses I see always include a "discount rate". It can be 8% for good jurisdictions, 15% for crap. You'll also see those whenever you read a company's Technical Report - it adds up the money the mine will earn each year, but then future years always have a compounded discount. So Net Present Value is a discounted Net Asset Value.

The discount happens because there is risk between now and 2013. There is also opportunity cost of money between now and 2013.

The market always prices risk into everything - or at least it should. (You could say the 2008 crash happened because securities were no properly priced to take into account risk, and when the true risk was shown, the securities had to be radically revalued.)

One type of risk is political risk: if this mine were in Bolivia or Venezuela, for example, you'd want maybe a 10%/year risk premium, because the government could do any number of crazy things to jeopardize your future mine. Even in Peru, a mining-friendly country, there is political risk: don't buy a mine in the north, because the druglords up there put your property at risk. Quebec has little political risk.

Next is commodity price risk. Let's stay away from gold for a sec, and assume this was a beautiful huge Zinc mine. Well, price of Zinc used to be $1; but now it's 80 cents. So what's it going to be in 2013? $2? Could be, if China keeps expanding. Then again, it could be 50 cents if supply of zinc outpaces demand - say, if China opens a gigantic Zinc mine in Afghanistan or Mongolia. That adds a risk premium to your price, because you're unsure what the price will be in the future.

Next is opportunity cost of money. Why do you want to put your money in GNH? To make more money. Well, if you're guaranteed to make 3%/year in bonds, or 8% a year in the broader stock market, then you have to discount GNH's stock by at least that amount per year, since the money you sink into GNH is losing the opportunity to make this guaranteed 3% or 8% somewhere else.

Next is inflation risk. If it would cost you $100M to build a mine in the Beauce today, how much will it cost in 2013? In my field, we've seen horrific price inflation in concrete and steel, so bad that we can't even trust our own construction estimates for next year. That inflation risk will affect the bottom line when GNH tries to sell to Goldcorp or whoever, because the cash costs will be greater than they are now, so the profit margin will be lower, so the property will get a somewhat lower bid.

There are other types of risk as well. You'd include management risk if the people running the company weren't dependable. This is related to the management premium that some really fantastic companies have.