David Laughton Consulting Ltd. Real Asset Risk Analytics
Industrial PictureWhere DCF and Real Options (RO) methods differ fundamentally is in determining the effect of cash-flow uncertainity on asset value. Using a single DCF discount rate to value a wide range of assets is similar to doing a copper min feasibility study by assuming its grade is the average of all the copper deposits the company owns. RO tunes its analysis to the actual uncertainties involved.

Market-Based Real Asset Valuation

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) asked Dr. Laughton and two of his colleagues, Michael Samis and Graham Davis, to write a column for the mining industry on this topic.

This was published in the May 2005 (Vol. 98, No. 1087) issue of the CIM Bulletin in its Voices from Industry series.

Dr. Laughton has revised this column for a more general audience.

The revised version of the column, uploaded on 28 March 2007, is available in .pdf - here.

A scan of the original column is available in .pdf - here.

A printer-friendly version of the original column is available in .pdf - here.

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The photo, taken by Dr. Laughton as he was driving across Canada, is of the TeckCominco/Barrick Williams mine, at Hemlo, Ontario. The mine is right beside the TransCanada Highway. It is the largest gold producer in Canada. The deposit was discovered after the highway was built.

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