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UBC Theses and Dissertations

Canadian evaluation of a Mexican mining venture and the next investment step Bach, Geoffrey D.,


This study evaluates a minority interest in a silver orebody in Zacatecas, Mexico, leading to a decision in mid 1979 by a Canadian mining company, whether to sell, hold or develop the orebody into a silver mine on a joint venture basis. The framework employed in the evaluation emphasizes the importance to mining companies of exploration to identify mineral orebodies, and strives to assess the Canadian miners' view of the political and economic circumstances in Mexico as they may affect a long-term mine investment in that country by a Canadian corporation. Alternative methods of evaluating an orebody are established and reviewed in conjunction with the selection of what has value to whom, and what influences the value. Success of the Canadian mining investment in Mexico depends on the relationships between the three joint venture partners in addition to the existence of an identified orebody ready for development. Before measurement of the value of the minority interest in the orebody is attempted, an examination is made of the needs of partners, the selection of partners and the relationships between the partners to the joint venture. Measurement of the value of the minority interest is based on a feasibility study prepared in 1975 and up-dated by the writer to early 1979 conditions. Production data, revenue forecasts and mine costs of construction and subsequent operations are presented and analysed to provide an overview of the financial aspects of the potential mine. Valuation of the minority interest in the orebody is achieved after determining mine cash flow forecasts, net earnings forecasts and forecast social benefits and costs to Mexico. The conclusions of the study are that the Canadian's investment has a value in the range US $3 100 000 to US $3 900 000 and that the orebody will continue to be held until circumstances allow improved returns to the owners of the orebody.

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