LRS General Discussion, page-15259

hi mate

it seems a bit crazy that the npv’s are based on an 8% discount rate, particularly given that the risk free rate (govt bond) has increased by over 300bps recently.

the risk premia should have been maintained, therefore a discount rate in well in excess of 10% should be used.

I understand using 8% makes comparing PEA’s between companies easier, but reality is no one would buy a mine with a finite life for an annual return of 8%.

I don’t have a model but it would be interesting to know what the NPV would be if you used say 12%. I suspect it would wash off about a third of the NPV.