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Valuation Simulation for a Net Smelter Return Royalty on a Mining Project

Bell, Peter (2018): Valuation Simulation for a Net Smelter Return Royalty on a Mining Project.

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Abstract

This paper provides a rough calculation of the economic value of a hypothetical mining operation for a profitable of mineral deposit. I present simplifying assumptions for the deposit geometry and mine production constraints to calculate the value of a net smelter recovery royalty on the mine, which is due a small fraction of gross income from the mine. I calculate the value of the royalty with constant prices and conduct a simulation exercise where the metal price changes quarterly based on historical data for gold futures contracts.

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