NPV of 6A and 6B at the 15% Corporate Minimum Rate: 24-MMP-A4 Mine Valuation and Mineral Resource Estimation, December 2018, Q26

Question 26 of 29: NPV of 6A and 6B at the 15% Corporate Minimum Rate

Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)

Notes on this paper

EGBC National Exam — Mining and Mineral Processing Engineering, 09-MMP-A4 Mine Valuation and Mineral Resource Estimation, 2018-Dec. 3 hours duration; one handwritten 8.5×11 in reference sheet permitted (not an open-book exam); only approved Sharp or Casio calculators allowed. Question 1 is compulsory (40 marks, parts 1.1–1.8); candidates then select THREE of the five optional Questions 2–6 (20 marks each) to complete the paper.

Reference texts: Isaaks & Srivastava, An Introduction to Applied Geostatistics (variogram modelling, kriging, anisotropy); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV/IRR and cut-off grade methodology); Gentry & O'Neil, Mine Investment Analysis (smelter/refining contract terms, net smelter return, taxation and risk); Guilbert & Park, The Geology of Ore Deposits, and Evans, Ore Geology and Industrial Minerals (VMS/SEDEX and porphyry deposit models); SME Mining Engineering Handbook, 3rd ed. (mineral exploration/evaluation stages, ore reserve classification); CIM Best Practice Guidelines and NI 43-101 (Canadian Securities Administrators).

Question 6.5: NPV of 6A and 6B at the 15% Corporate Minimum Rate (3 marks)

Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.

Approach. Apply the 15% PV factors (from Table 6) to each alternative's cash flow stream, exactly as in Question 6.3's screening step.

Alternative 6A at 15% (factors 0.8696, 0.7561, 0.6575, 0.5718, 0.4972): $$NPV_{6A}(15\%)=-80+50(0.8696)+30(0.7561)+20(0.6575)+10(0.5718)+12(0.4972)=\boxed{+11.00\ \text{USD M}}$$
Alternative 6B at 15% (4-yr cumulative factor 2.855, year-5 factor 0.4972 on 38M): $$NPV_{6B}(15\%)=-80+28(2.855)+38(0.4972)=\boxed{+18.83\ \text{USD M}}$$

Alternative	NPV @ 15%
6A	+USD 11.00M
6B	+USD 18.83M (higher)

Both alternatives clear the 15% hurdle (positive NPV), but Alternative 6B is best on the NPV criterion, with roughly USD 7.8M more value created at the corporate discount rate — consistent with 6B's higher IRR found in Question 6.3.