This paper explains that capital allocation is extremely important to mining; and the efficiency and effectiveness with which this capital is allocated will be greatly affected by the valuation of a project. The author points out that determining the best method is not the purpose of this paper; rather, using a primary and secondary approach, the study will examine current practices, review the various financial principles and methods that are currently available and derive ideas for solutions that are somewhat more in favorable. The paper demonstrates that both the commercial and the technical aspects that have to do with mining investments have always been very high risk; however, in recent years, new elements of political risk are being created by the United States, which is considering changes in some of the mining laws that will be more stringent making mining even more economically risky. Tables and graphs. Table of Contents Introduction Statement of the Problem Purpose of the Study Importance of the Study Rationale for the Study Overview of the Study Review and Analysis of the Literature Methodology Data Analysis
"Larger companies, naturally, are much more sophisticated in the ways that they analyze their capital budgets. Companies that have sales greater than 500 million often use combinations of all three of the DCF techniques that are available. Many of these companies also performed escalated dollar analyses and constant dollar analyses that depended not only on financing alternatives but also on time constraints. Companies also used even more advanced techniques in performing various valuations into mining projects, but this was not seen to be on a consistent basis. Some of these techniques included computer simulations on various investment activity similar to Monte Carlo analyses and a specific way of utilizing options pricing into valuing of copper properties."