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Economic Investment Appraisal

Economic Investment Appraisal. Cost and benefit analysis of the BHP Ravensthorpe project Winnie Kwok. BHP Ravensthorpe Project. Background The nickel industry The Ravensthorpe project Financial Analysis Cost Benefit Analysis. The Nickel Industry.

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Economic Investment Appraisal

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  1. Economic Investment Appraisal Cost and benefit analysis of the BHP Ravensthorpe project Winnie Kwok

  2. BHP Ravensthorpe Project • Background • The nickel industry • The Ravensthorpe project • Financial Analysis • Cost Benefit Analysis

  3. The Nickel Industry • Nickel is mainly used in making stainless steel • Recently the demand has exceeded the supply

  4. The Nickel Industry Firms can’t easily increase supply • 2 types of nickel ores: sulphide and laterite • Laterite is abundant but difficult to process

  5. The Ravensthorpe Project BHP is investing $1.9 billion in a new technology for processing laterite ore. Production capacity • Successful technology – 44.5 M tones/annum • Unsuccessful – 29.5 M tones/annum

  6. Financial Analysis Estimate the expected financial return, with consideration to the following: • Capital expenditure • Operating cost • Tax • Depreciation/amortisation • Royalties • ……

  7. Cost Benefit Analysis Estimate the expected cost/benefit, with consideration to the following: • wages • environment • social discount rate • infrastructure – housing • …….

  8. Questions/comments?

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