The Effect of Inflation On the Evaluation of Mines

CIM Bulletin, Vol. 70, No. 778, 1977

Herbert D. Drechsler, Associate Professor, and James B. Stephenson, Assistant Professor, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, B.C.

The paper identifies the major components of price change which affect the determination of the internal rate of return of a mining project. It illustrates several price indexes which may be used to measure general price increases, identifying techniques which might incorporate them into mine valuation procedures. The "hurdle rate" for new investment is discussed.
Keywords: Mineral economics, Inflation, Mine evaluation, Cash flows, Price indexes, Copper, Lead, Zinc, Silver, Taxation, Depreciation.