An Integrated Valuation and Risk Modelling approach to Dynamic DCF and Real Options

October 23 – 25, 2024

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Successful capital allocation in an uncertain business environment requires measuring investment performance across a range of future possibilities.

About this course:

Mining industry investments are exposed to many risks that will likely result in an investment performing differently than initially expected – sometimes disastrously so.  Conventional mining investment analysis often relies on a static cash flow model built around a single representative scenario to assess the quality of the project.  Unfortunately, these models provide limited insight into how an investment will perform in an uncertain world, even with workarounds such as scenario price decks and sensitivity analysis.

Advances in finance theory and risk management from the finance and insurance industries can translate a conventional cash flow model into a dynamic model that describes a wide range of project possibilities and recognizes management’s ability to adapt as the future evolves.  Introducing a dynamic cash flow model and real options analysis allows mining professionals to improve their understanding of how a proposed investment will perform and the design and operating policies that are best placed to support project value and manage risk.

This course will show participants how to create a spreadsheet-based dynamic cash flow and real option model and interpret the value and risk information it generates.  It teaches participants how to overlay a description of project market uncertainty with a decision tree to assess the value of project flexibility and the level of investor risk exposure.  Two case studies based on the Blackwater Project in B.C. Canada and Copper World Project in Arizona demonstrate the shortcomings of static cash flow analysis and how a dynamic cash flow/real option model can correct these shortcomings.

Who should attend?

The course is designed for mining executives, geologists, engineers, corporate development professionals, bankers, analysts, and government officials involved in evaluating, designing, or managing projects or dealing with investment risk.

Participants do not require advanced mathematical skills to understand and apply the course material. However, to get the most from the course, they should be familiar with:

  1. Basic statistical concepts such as variance, standard deviation, and covariance;
  2. Constructing a traditional discounted cash flow valuation;
  3. Introductory financial concepts such as the time value of money and risk-adjusted discounting.


Continuing education credits

Colorado School of Mines will award 1.8 Continuing Education Units (CEUs) upon successfully completing this course. This course is offered as part of the Statewide Extended Studies Program of the Colorado Commission on Higher Education.

Michael Samis, PH.D., P. Eng.
Principal, SCM Decisions
Instructor Background
Dr. Michael Samis, P.Eng..  Dr. Samis is a leading Integrated Valuation and Risk Modelling practitioner in the natural resource industries with more than 30 years of mining experience.  He has extensive professional experience valuing base and precious metals, diamond, and petroleum projects with complex forms of flexibility and risk.  His assignments have ranged from exploration stage to late-stage capital investments and have also included the analysis of project financing and contingent taxes.  Mike has presented more than 30 professional courses on advanced valuation at universities, natural resource companies, and professional organizations world-wide and has published or presented numerous valuation papers about flexible pushback development, multi-stage exploration programs, windfall taxes, and the economic impact of project finance and hedging.  Dr Samis is a registered Professional Engineer in Ontario, Canada, and a qualified person for project valuation under NI43-101 guidelines.  In 2013, the Canadian Institute of Mining and Metallurgy awarded Mike with the Robert Elver Award for his contributions to the Canadian mining industry in the field of mineral economics.  He was also the CIM’s 2017 Distinguished Lecturer for Mineral Economics.  Mike holds a Ph.D. from the University of British Columbia that combines the fields of mining engineering and finance.

Dr Samis was previously an Associate Partner and Senior Manager in the Toronto office of Ernst and Young’s Transaction Advisory Service for 11 years where he valued complex financial securities such as employee stock options, convertible debt with embedded derivatives, contingent contracts, and interest rate, commodity, and foreign exchange derivatives in addition to his valuation work in the mining industry.  Prior to this, he worked for AMEC as the Technical Director of Mineral Economics for three years and held various operational and technical positions in South Africa.  He currently assists clients in the natural resource industries align their capital allocation decisions with business strategy through SCM Decisions.

What You Will Learn

This three-day course on Integrated Valuation and Risk Modelling will combine a hands-on instruction style and a real-world example to teach you how to demand more from your cash flow analysis.  It will show you how to deepen your insights about a proposed investment by expanding and refining your information about:

Investment characteristics:   Reduce bias in information summarizing project attributes such as revenue generating capacity, equivalent unit metal costs, expected reserve / resource base, expected investment horizon, and annual and cumulative expected cash flow.

Operating policy:  Provide insight into how an investment may be managed by flagging project environments in which there is a change in policy, calculating early closure and other event probabilities, and competing policy likelihood maps.

Risk exposure:  Quantify risk exposure through the calculation of cash flow CoVs and expected cash flow losses.  Communicate risk exposure through cash flow expectation / confidence boundary graphs, cash flow variability graphics, and risk consequence / likelihood matrices.

Investment quality:  Recognize the influence of management flexibility and contingent taxation structures in calculations of net present value, internal rate of return, modified internal rate of return, and profitability index.

This course will help you:

  1. Use Integrated Valuation and Risk Modelling concepts to develop a consistent analytical approach that can differentiate and value projects and competing project designs according to their unique cash flow uncertainty and risk characteristics.
  2. Identify important elements of project structure, such as management flexibility and operating leverage, and understand how they influence project value and risk.
  3. Move from using a conventional valuation approach based on a static cash flow model to a dynamic valuation approach that can more fully represent the variability of the mining project environment and available management options.
  4. Build confidence with practical examples so you can adapt these methods to a wide range of projects and situations.


Participants must bring a laptop running Microsoft Windows 10 and have Microsoft Excel 2016 or 365 installed.  There is no guarantee that earlier versions of these software packages will work with the course teaching aids and examples.  The laptop must have software installation privileges to install an Excel Add-in used on the course.  Participants will be asked to install a trial version of Palisade’s @Risk program to run various course simulation examples.  You may need to contact Palisade directly to obtain permission to install a trial version if you have previously installed an expired trial version of @Risk.

Course Material

Participants will receive a digital and print set of course notes detailing valuation concepts, numerical calculations, and practical valuation examples.  Course materials also include spreadsheet-based examples, graphical aids, and topical papers by the presenter.  Monte Carlo simulation exercises are run using Pallisade’s @Risk Excel simulation Add-in that is available to participants under a limited trial license.  Case studies about flexibility are run with a Dynamic Discounted Cash Flow / Real Option Valuation Addin for Microsoft Excel™ that performs binomial tree and least-squares flexible simulation calculations. This add-in was developed by Dr. Samis and may be used without support after the course by participants for educational purposes.

Travel and accommodations

Registrants are responsible for their own travel arrangements, transportation, lodging, and meals. Additional information is available through the link below.

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