Please assume figures are USD currency unless otherwise specified and provide all answers in USD.

1	You've been given the following information:
	- Market/reference prices for a variety of metals and specific commercial terms for 2 assets.
	- Budget and Actuals sales volumes for each asset

Metal Prices
Nickel	$/t	20,000
Copper	$/t	9,000
Cobalt	$/t	32,000
Gold	$/oz	1,500
Platinum	$/oz	1,000

Asset A	Sales Volume			Realized Price
	Unit	Actual	Budget	Unit	Actual	Budget
Nickel	t	45,000	54,000	$/lb	7.54
Copper	t	25,000	20,000	$/lb	3.25
Cobalt	t	700	1,000	$/lb	15.30
Gold	oz	20,000	20,000	$/oz	1,350
Platinum	oz	31,000	30,000	$/oz	1,165

Asset B	Sales Volume			Realized Price
	Unit	Actual	Budget	Unit	Actual	Budget
Nickel	t	37,000	35,000	$/lb	7.45
Cobalt	t	14,500	15,000	$/lb	15.50

Specific commercial terms:
Asset A - Nickel: Sells at $0.08/lb premium vs reference price. Pays a 1% commission fee on the net price.
Asset B - Nickel: Sells at a 2% discount vs reference price. Cobalt: $1,000/t discount vs reference.

Abbreviations used

t = metric tonnes

lb = pounds

oz = troy ounces

1a.

Use the reference prices and specific commercial terms provided to calculate Budget realized prices for each asset and metal. Please note unit conversions might be required for some metal prices.

1b.

Calculate the consolidated net realized prices for Nickel and Cobalt. Please show answers in $/lb.

1c.

Please perform price volume variance analyses for the consolidated business (A + B).

2

Based on the information below, please calculate how much of the variance was related to FX and how much was due to cost (spend).

Actual

Budget

Opex ($m)

320

290

FX rate (1 USD = CAD)

1.33

1.30

Cost variance ($m)

FX variance ($m)

3

C1 unit cost is a standard KPI used in the nickel mining industry to measure the cash costs of running a mining operation. The Brook Hunt definition below is the most widely accepted.

C1 costs: Direct costs, which include cash costs incurred in mining and processing plus local G&A, freight and selling costs. Any by-product revenue (BPC's) is credited against costs at this stage. Expressed in $/lb of Ni produced.

Please calculate C1 given the following information:

Costs ($m)

Metal production

t

Mining/ Milling

145

Ni production

Further processing costs

50

Cu production

G&A

5

Co production

Depreciation

100

Production

C1 cost

$/lb Ni

Production (kt)

100

Costs

Contained nickel in production

15%

BPC's

Contained copper in production

5%

C1

Contained cobalt in production

1%

Metal Prices

Nickel

$/lb

8.00

Copper

$/lb

4.00

Cobalt

$/lb

15.00

4

DCF valuation

Macro assumptions

Asset A

Total asset life

10yrs

Nickel sales price

$/t

20,000

Production Y1

45,000t of Nickel

WACC rate

%

8%

Production growth

Nickel: +10% per year until reaching max capacity of 90,000t

Operating costs

$280m in Y1, straight line increase until reaching $400 CADm in Y5, flat thereafter

Capital expenditures

$180m per year

Taxes

Assume no taxes

4a.

Please build a simple DCF valuation model, assuming cash flows occur at year-end, and show this operation's NPV.

4b.

Please chart the cash flows of the operation against the production for each of the years. Cash flows should be shown as bars and production as a line on a secondary axis.

4c.

What observations would you take from this exercise? Any assumptions you would question?

5

Asset A's product contains several different metals. If we wanted to allocate cost to each of the metals, how would you do this?