NPV https://www.investopedia.com/terms/n/npv.asp
Net present value (NPV) is a financial metric that seeks to capture the total value of a potential investment opportunity. The idea behind NPV is to project all of the future cash inflows and outflows associated with an investment, discount all those future cash flows to the present day, and then add them together. The resulting number after adding all the positive and negative cash flows together is the investment’s NPV. A positive NPV means that, after accounting for the time value of money, you will make money if you proceed with the investment.
By definition; One is of actual earnings, the other is of projected earnings discounted for inflation (time money)
IRR https://www.investopedia.com/terms/i/irr.asphttps://www.investopedia.com/terms/d/discountrate.asp
NPV and IRR are closely related concepts, in that the IRR of an investment is the discount rate that would cause that investment to have an NPV of zero. Another way of thinking about this is that NPV and IRR are trying to answer two separate but related questions. For NPV, the question is, “What is the total amount of money I will make if I proceed with this investment, after taking into account the time value of money?” For IRR, the question is, “If I proceed with this investment, what would be the equivalent annual rate of return that I would receive?”
NPV's can still be applicable but really only make sense when one is considering allocation capital for an investment to work out if it's worth the investment. In stocks, ones earnings profits. They are generally valued on a PE ratio 10-20.
e.g Say a company with 10M p/a profit is worth around 150M (PE ratio of 15)
lets try and do an NPV calc.
What's the initial investment. Well its 0.
Project it across 20Y discount rate of 8% (fairly standard) and you'll land at 98M NPV. You can even calculate IRR as there is no initial investment we are already in production earning money.
If you used a discount rate of 99.99% in the NPV calc you land at 10M NPV. Which makes sense as if you're initial investment is 0 and Y1 earnings is 10M.
This is why NPV is the standard method used in FS/PFS/DFS/BFS. Because it's calculating an investment of capex and what the potential profits would be from that investment. As this is hypothetical, the FCF is discounted so that the financier can question whether on paper they should invest in the company capex or somewhere else.
Now companies are never valued at their NPV. Why because this figure is only real if you actually end up making those profits. Hence why i use the stage gates of a mining company as rough guides as to the probability and achieving ones NPV. Essentially. Once capex is secured, the project is built and you're about to earn these profit one should be worth close to their NPV. Once making profits steadily PE ratio for EPS calc makes more sense.
Hope that clarifies/help. Recommend reading the links i've tagged. Will have the formulas to construct you're own NPV calculators via excel.
For TLM is actually has earnings in terms of the royalty. So what would be the IRR and NPV? well the IRR doesn't exist because they don't need to spend anything. So it's essentially just ~8m p/a revenue. People would need to deduct TLM's annualised general working capital to come up with a true earning P/A which IMO with some exploration could be 5m. Therefore 50-75m would be a perfectly appropriate valuation. If they have nothin else. Of course with several exploration projects the market would probably place value on them. Maybe TLM is worth 20-25M without the royalty. Therefore i would say 75-100m is probably somewhere around fair value pending no huge exploration discovery on the current tenements. That's not bad considering they generally need to do nothing. An NPV calc on the royalty would yield something close to the same value as the EPS noting initial investment is 0 so IRR is infinity.
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