Chapter 11: Valuation methodologies
Valuation techniques can be divided into two broad categories:
• Fundamental — where the underlying ‘fair’ or ‘intrinsic’ value is derived by such methods as discounting future cash flows to the present time.
• Technical/statistical/graphical — where most commonly historical charts are used to predict a potential change in value or share price, or both.
A resource company’s primary asset is the opportunity to extract its ore reserves and mineral resources. The most representative way to calculate this value is by using a discounted cash flow (DCF) methodology, which measures the net present value (NPV) of future cash flow streams under specific commodity-pricing and operating cost assumptions.1 The net present ...
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