Review the provided excerpts from the 2015 Annual Report for Kibo Mining PLC (in particular the discussion of the mining component of the MCPP) and respond to the questions / requirements below.
Based on the payback period analysis, does this seem to be an attractive investment opportunity? Considering the payback period provided and values for estimated sales and margins, what is the approximate equity investment necessary for this project?
- Modified terrace mining method applicable with overburden stripping by free dig and coal seam mining using continuous surface miner eliminating the need for explosives; - Processing limited to de-stoning of raw coal product with no washing required which significantly reduces environmental impact of run-off and associated environmental mitigation costs; - River diversion shown not to be required with consequent lesser environmental impact on site area; - Annual estimated coal revenues of approximately $48 million at all in cost margins of 49% to 62% generating profit margin of between US $24 million* to US\$ 27 million; - Capital Investment of US\$38 million" to $73 million, NPVs of US\$211* million to US $244 million (discount rate of 5.5% ) and payback period of 2.6 to 3.65 years and; - IRR of 54% for preferred option. - Annual estimated coal sale revenues of US\$48,4 million based on an annual coal production of 1.48 million tonnes; - All-in cost margin ranges from 47.9% to 48.1%. Applying the aforementioned all-in cost margin, Kibo interprets that annual earnings before interest and tax ("EBIT") of between US\$ 23.5 million to US\$ 23.6 million will be generated; - Applying a real discount rate of 5.51%, the best estimated Net Present Value ("NPV") of free cash flow to equity ranges between US\$ 214 million and USS 219 million; - Equity IRR (leveraged) range between 131% and 146%, with a Project IRR of 54%; - Cash return on capital invested ranging between 726% and 732%; and - Modified terrace mining method applicable with overburden stripping by free dig and coal seam mining using continuous surface miner eliminating the need for explosives; - Processing limited to de-stoning of raw coal product with no washing required which significantly reduces environmental impact of run-off and associated environmental mitigation costs; - River diversion shown not to be required with consequent lesser environmental impact on site area; - Annual estimated coal revenues of approximately $48 million at all in cost margins of 49% to 62% generating profit margin of between US $24 million* to US\$ 27 million; - Capital Investment of US\$38 million" to $73 million, NPVs of US\$211* million to US $244 million (discount rate of 5.5% ) and payback period of 2.6 to 3.65 years and; - IRR of 54% for preferred option. - Annual estimated coal sale revenues of US\$48,4 million based on an annual coal production of 1.48 million tonnes; - All-in cost margin ranges from 47.9% to 48.1%. Applying the aforementioned all-in cost margin, Kibo interprets that annual earnings before interest and tax ("EBIT") of between US\$ 23.5 million to US\$ 23.6 million will be generated; - Applying a real discount rate of 5.51%, the best estimated Net Present Value ("NPV") of free cash flow to equity ranges between US\$ 214 million and USS 219 million; - Equity IRR (leveraged) range between 131% and 146%, with a Project IRR of 54%; - Cash return on capital invested ranging between 726% and 732%; and
