sensitivity of gold price on npv calculations

Doing a little more digging, that NPV at 8% of 103m was actually based on $1700 AUD.

If you scroll to page 11 of the news release on 3 July 2012 (BFS Confirms Mutiny’s Deflector as a Premium Gold Project) you will see some interesting graphs – particularly the gold price sensitivity graph.

As a gold bull I could not resist the urge to do the following calculations:

I noticed that the NPV at 8% jumps from 103m to 115m when a gold price of $1800 AUD is considered......a nice healthy increase of 11.7%.

When I extrapolate this to $1900 and $2000 AUD for the price of gold (since it appears to be a linear relationship), I get NPV’s of 124m and 135m respectively (at 8%). This equates to increases from the original 103m NPV of 20% and 30% respectively. What I notice is that the NPV value is increasing approximately 10% with every $100 AUD increase in the price of gold!

I also recall some people arguing that the discount rate (8%) was not aggressive enough and should have been higher (leading to a lower NPV value).

Well even if that was the case I think once the ball mill and other plant and equipment come on line and financing is secured, a rate of 8% seems more and more realistic.

Remember this does take into account the gold equivalent ounces too i.e the silver and copper credits).

I'm not to good at this FA stuff so correct me if I'm wrong, but I am simply using (and extrapolating a little) data supplied by JG and the management team.

Bring on the first pour!

Cheers
riskninja