Valuation of Iron Ore Investment

Overview
Our client invested in an iron ore mine in Sierra Leone in return for a 2% royalty payment. As a listed investment holdings company, the client needs to provide an annual independent valuation to the stock market.

Methodology
Each year, Core Consultants develops a Net Present Value (NPV) model of the mine. In order to complete this evaluation, Core Consultants updates its iron ore estimates and provides an accompanying documents, detailing reasons why the valuation may have changed owing to changes in iron ore prices and forecasts.

Our Recommendation
The last evaluation was conducted in January 2014. At this time, Core Consultants reduced the valuation by 20% based on changes to the long term forecast of iron ore.

Outcome
The company has used Core Consultants’ analysis from 2012 to 2014 and reported the Core Consultants’ valuation to its investors. In 2015, with the decline of iron ore prices, the mine was placed under care and maintenance.

Lara Smith

Lara is the CEO and founder of Core Consultants. She has been an analyst for over thirteen years and has focused on commodity markets for just over a decade. She began her career as a buy-side analyst at Foord Asset Management in Cape Town, before taking a Head of Research role at a mining corporate finance and investment firm.

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