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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers
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To: jpthoma1 who wrote (16511)8/14/2006 1:53:00 AM
From: aknahow  Read Replies (2) of 78409
 
At what point does a low base case become false and misleading?

A company would risk law suits if it used outrageously high base case price data.

CZZ uses such low prices that even the +20% case fails to do justice to the actual situation.

Base case assumptions: Nickel price: US$5.00; copper price: US$1.25

Using a base case of prices 50% lower than actual would result in a base case for Ni of $6.625 and for Cu of $1.75.

True that when the IRR was calculated actual prices may have been lower but my point is, is it normal practice to use base case price that are less than 50% of actual prices?

Would it not make more sense to start the base near actual prices and show how price drops of up to 75% would impact a project? A range showing impacts fro 25%, 50% and 75% would be much more informative than using ultra low base case numbers.
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