economic investment appraisal cost and benefit analysis of the bhp ravensthorpe project winnie kwok
TRANSCRIPT
Economic Investment Appraisal
Cost and benefit analysis of the
BHP Ravensthorpe project
Winnie Kwok
BHP Ravensthorpe Project
• Background – The nickel industry– The Ravensthorpe project
• Financial Analysis
• Cost Benefit Analysis
The Nickel Industry
• Nickel is mainly used in making stainless steel
• Recently the demand has exceeded the supply
The Nickel Industry
Firms can’t easily increase supply• 2 types of nickel ores: sulphide and laterite
• Laterite is abundant but difficult to process
Nickel stock level and price (source: LME)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
24-Jul-98 6-Dec-99 19-Apr-01 1-Sep-02 14-Jan-04 28-May-05
LME
Daily
Sto
cks
Leve
ls (t
onne
s)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Cash
pric
e ($
US/to
nne)
LME stock level
Cash price
The Ravensthorpe Project
BHP is investing $1.9 billion in a new technology for processing laterite ore.
Production capacity• Successful technology – 44.5 M tones/annum• Unsuccessful – 29.5 M tones/annum
Financial Analysis
Estimate the expected financial return, with consideration to the following:
• Capital expenditure• Operating cost• Tax• Depreciation/amortisation• Royalties • ……
Cost Benefit Analysis
Estimate the expected cost/benefit, with consideration to the following:
• wages• environment• social discount rate• infrastructure – housing• …….
Questions/comments?