Fundamental Value, page-130

Good work to the people that put this together.

If you want to get more serious with it though you will need to account for any interest costs and/or the effect of dilution from equity raises to fund appraisal and/or development. A brief cashflow forecast for the next 10 years taking into account both projects capex and cash flows would show what (if anything) was needed to cover any cash shortfalls, rather than just assuming there is enough cash and future cashflows to cover any shortfall. Appraisal and development costs (and any future exploration such as FAR has seen) and the timing of these costs would need to be taken into account.

Also the future cashflows need to be discounted back to their current value (ie $10m now is worth more than that same $10m of cash in 5 years). I use a 10% discount rate as that is my minimum required rate of return for investments particularly resource small/mid caps and hence use at least 10% in my discount calcs. This will take some of the top off the values as future cash inflows (eg oil sold in 5 years time) are more heavily discounted than capex spent in two years time.

Hope this helps.