This month’s edition of the AHA Investor magazine features an article on investing in iron ore projects by Corality’s Managing Director and founder Rickard Wärnelid. In the article, Investing in iron ore projects – where are the risks?, the 3rd in a series of articles for AHA, Rickard presents an overview of the key risks that need to be considered when assessing iron ore investments.
Iron ore investment – government risk
Although government risk is difficult to influence it is critical to understand. Government decisions both at a state and federal level might have an impact on your mining project, so it is essential to research what policy decisions you might be facing. Speaking to experts about the different policy positions and hearing opposing parties can be crucial for your success.
Iron ore investment – infrastructure risk
Facilitating the transport of your product to the customer is one of the most common risks associated with iron ore investments. For almost any iron ore project, due to their location, new infrastructure is needed which could become one of your largest investments. Infrastructure is always coupled with the risk of delays; however assessing and modelling infrastructure and delay risks using financial models will give you the right insight into the viability of your project.
Iron ore investment – funding risks
Mining projects, no matter the commodity, are expensive to establish and without funding a project will not be developed into an operating asset. In our advisory capacity, Corality works with clients to prepare for the bank negotiation phase. In order to prove the viability of a project to investors and banks all risks associated with iron ore projects are critical cost inputs and should be tested under a range of different high, low and base scenarios. This work needs to start years before the funding is required as the to-do lists are extensive and some processes can’t and shouldn’t be rushed.
Best practice financial modelling – scenario analysis
As thought leaders in financial modelling, Corality will always run multiple case scenarios to ensure our clients can identify key costs and value drivers. This analysis offers companies the opportunity to identify and prove the commercial viability of the project to investors and bankers.
Corality’s best practice financial modelling methodology, SMART, meets the needs of decision makers and finance professionals across all industry sectors. It is a set of best practice guidelines that will help you develop flexible, transparent and well presented financial models that offer comparability and clarity on your mining projects.
A finishing word of wisdom from Rickard Wärnelid for anyone looking at investing in mining – “do your homework before betting your life savings and ensure you are diligent and understand project economics before parting with hard earned cash”.
Read the full article in the AHA magazine, out in the shops now.