Computer Application In Financial Analysis

This paper describes the use of a computer in analyzing the expected return on a mining venture. The computer program is designed to incorporate all aspects of a mining project, including the mine, mill, smelter, and refinery. Data input may consist of the operating variables in each phase such as the mining rate, grades, reserves at the mine, and the technical operating characteristics of the mine, mill, smelter, and refinery. Detailed tax computations are shown for a domestic operating company, for a foreign company and for a foreign subsidiary. In addition, the use of the various options that are available such as expense write-offs or deferments to create tax credits during preproduction years are considered, and its effect on the DCF. The program is also constructed to accommodate changes in metal prices, and escalation of capital requirements and operating costs. Output consists of profit and loss statements for entire projects using different methods of depreciation, cash flows, discounted cash flows, net present value and returns on investment. Returns on investment are computed for equity investment, total investment, and total investment less tax credits. Allowances are made for bank and guaranteed loans. Additional financial statements can be made for the following: a) A mine-mill segment with a concentrate selling schedule b) A mine-mill-smelter complex with a smelter product selling schedule c) Profitability of the smelter separately d) Profitability of the refinery separately