Yesterday, your friend from graduate school called you to see if you wanted to invest in her gold mine in West Africa. She tells you that West Africa is the place to invest and that if you want big returns, this is the place to do it. The mine is located in the landlocked nation of Burkina Faso, just outside the capital of Ouagadougou 50 km NW. Burkina Faso has a gold industry with some gold mining service companies and favorable tax and regulatory regimes.

Measured resources were estimated to be 12 million metric tons (MT) at a grade of 1.5 grams per metric ton (g/T) gold. Following the completion of the bankable feasibility study, the company decided to continue with the development of the project and to bring it into production, which is projected to begin in 2023. The company will produce 25,000 troy ounces (oz t) of gold in the first year and then will ramp up to capacity pf 50,000 oz t/year in subsequent years. The average extraction cost for this resource has been estimated to be $650/oz t.

Your friends company has a weighted average cost of capital WACC of 9%--it used to be 7%, but thanks to inflation, it has gone up in recent months. Your friend is willing to sell you a 10% ownership stake in the company.

Cash flows will be determined by:

Mine Size

Gold Price

Cost

Extraction Equipment

Labor

Security situation

Climate change

What is your bid for 10% of the company?