How much is it worth . . .?

Can you afford to make the wrong decision?

STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
 Do you know your real market value?
We do . . .
“Our cross-disciplinary
knowledge can help you to
extract value from more
than just metal content”
our sectors Alumina | Aluminium | Cobalt | Coking Coal | Copper | Energy Costs | Ferroalloys | fertilizers | Gold | Lead | N
VALUATION
The Valuation Practice specialises in providing expert advice on the
value of an asset, group of assets, or company in the mining and
metals industries. Typically, we have worked in the areas of
pre‑feasibility and bankable feasibility studies, asset acquisitions and
disposals, leveraged buyouts, credit decisions and counter-party risk,
valuing the components of a minerals business, and valuing
real business options.
We provide superior value to clients through:
• Industry knowledge: We do not re-invent the wheel
• S pecialised methods and models: We understand the markets,
cost drivers, and key risk factors in metal and minerals
projects. We focus on long-term structural as well as short-term
cyclical risks
• R isk analysis: We analyse project risks in a systematic and
quantifiable way
• S peed of response: We have existing data and models that
can rapidly be customised. Our team is dedicated to single client
work and can meet the particularly high service element that
is demanded of us by our clients, especially those in the
financial community
• R ecognition: We have a reputation as the foremost name in
metals consulting
• Independence

our expertise
CRU Strategies is a specialist
management consultancy providing
independent, exclusive and
proprietary advice to the world’s
leading metals and mining
companies, financial institutions and
governments. As a division of CRU
International Ltd, our consultants can
draw on an unparalleled wealth of
knowledge accumulated over the past
40 years since its formation.
our capabilities
With over 40 consultants spread
throughout our offices in Beijing,
London, Perth, Santiago and Seattle
our capabilities stretch across a world
of business solutions – from initial
design to proven implementation.
Nickel | phosphates | Platinum | Silver | Stainless Steel | Steel | sulphur | Tin | Tungsten | Vanadium | Wire and Cable | Zinc
“We translate industry knowledge
and experience into actionable insights
for potential investors”
OUR TYPICAL ASSIGNMENTS INCLUDE:
DUE DILIGENCE
We have an edge over less specialised due diligence providers and
offer a comprehensive and detailed process that supports all stages from
Pre-transaction screening to Negotiation through to Post‑acquisition.
Typically we offer an extensive review of:
•  Market Outlook •  Target Awareness
•  Competitor Assessment •  Sales and Supply Review
•  Management Interviews •  Technical and Environmental Reviews
•  Performance Improvement •  Growth Strategy
IPOs AND OTHER EQUITY MARKET ACTIVITIES
At CRU Strategies we have supported $7bn of deals in the past
three years alone. We offer support through the financing process.
This includes:
•  Industry overview for public domain prospectus
• In-depth analysis for institutional investor marketing materials –
e.g. for private placements;
• Ad hoc support to bank/company during financing process – e.g. interaction with
potential investors and other advisors
•  Target statements
PROJECT-RELATED ACTIVITY
We offer a wealth of experience in helping clients navigate through all
aspects of their project development. Our core capabilities include:
•  Valuing Undeveloped Deposits
•  Value in Use Analysis
•  Project Financial Model
•  Marketing and Contract Negotiation Support
•  Pre-feasibility and Bankable Feasibility Studies
•  Independent Market Consultant to Lenders
 VALUATION

Conceptual study
of a silicon metal plant
in the Middle East
Methodology
CRU Strategies provided an overview of the silicon metal market, and constructed a financial
model for a hypothetical silicon smelter. This enabled us to determine the proposed project’s
A Middle Eastern investment group NPV and IRR under various scenarios, and to draw conclusions about the economic viability
of the smelter.
wished to examine the economic
rationale for establishing a silicon Our recommendation
The most viable development options were determined, and next steps were recommended to
metal plant in the region. the client.

Outcome
The client is considering CRU Strategies’ recommendations.

Overview
The client was interested in examining the economics of constructing a new silicon smelter
in the Middle East.

CRU Strategies provided a detailed study covering all aspects of the silicon metal market.
Supply, demand and price trends were analysed and forecast. The profitability of existing
silicon producers was discussed, and capital and operating costs at a range of smelters were
examined at a conceptual level. Specific attention was given to the Chinese silicon market,
and our report made use of locally gathered research. The report also analysed technical
issues facing the industry.

The detailed valuation model was based on CRU Strategies’ view of future operating costs,
derived from our silicon cost model, and revenue projections, based on long term price
forecasts from CRU Analysis. The model generated NPV and IRR figures for the project under
several scenarios. A range of prices for the key inputs (e.g. power, raw materials) was
analysed, and various product mixes and target markets were considered.

CRU’s in-depth knowledge of the silicon market, along with our experience of financial
modelling across numerous power-intensive industries, enabled us to establish realistic
parameters for analysing the economics of the project, and thus to provide valuable
recommendations to the client, which will underpin its investment decision.

STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA

An integrated aluminium producer
wished to understand the full value
of a high-cost alumina refinery,
incorporating the value of the
flexibility to open and close the
refinery in response to spot or
contract alumina prices.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Option value of a high-cost
alumina refinery
Methodology
CRU Strategies developed a dynamic, decision based valuation model which incorporated the
flexibility to open and close the plant in response to price movements. A Monte Carlo price
simulation component was developed to generate possible price scenarios for spot and
contract alumina. Under each price scenario the model selected the maximum-value decision
path. The model calculated the value and probability of every possible combination of
decisions, and hence the full value of the refinery.
Our recommendation
The full value of the asset (which a straightforward DCF valuation would have severely
underestimated) was recognised, and we were able to make clear recommendations for
actions to realise the maximum value.
Outcome
Client is taking action on the basis of CRU Strategies’ recommendations.
Overview
The client wanted to understand the full value of a high-cost alumina refinery and on the basis
of this understanding, to take action to maximise the value of the asset.
The alumina refinery could be viewed, in simplified terms, as a call option on alumina (i.e. the
right, but not the obligation to buy alumina at a certain price). Unfortunately, the
methodologies used to value financial options (Black-Scholes type options calculators) are
not appropriate for this type of ‘real’ option, as they are not always able to incorporate the real
world constraints imposed by physical assets.
CRU Strategies developed a valuation model which incorporated a decision tree, detailing all
possible combinations of start-up and shut-down decisions, and a price simulation
component for quarterly spot and contract alumina prices. Rather than forecasting prices, the
price simulation model generated possible price tracks based on analysis of historical spot
and contract price series (as opposed to industry fundamentals, such as supply and demand).
The output of the price simulation model was validated by comparison with price forecasting
models based on fundamentals developed by CRU Price Risk Management and the CRU
Analysis Aluminium team.
CRU’s expert knowledge of the alumina and aluminium industries, combined with a detailed
understanding of the realities of management and decision making in these industries,
enabled us to develop an innovative approach to this valuation which retained the full
confidence of our client’s senior management and clearly illustrated the full value of the asset.

A junior mining company was
interested in reopening a derelict
mine, concentrator, smelter and
refinery in Congo and wanted to
identify the most valuable.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Valuation of African
mining assets for a
junior mining company
Methodology
A financial model was built that enabled all the possible development options to be examined
under various scenarios and the most valuable one selected.
Our recommendation
The highest value development option was recommended.
Outcome
External factors caused project to be put on hold.
Overview
The client was interested in raising finance to reopen a derelict mining complex in Congo.
CRU Strategies worked with the client and the three engineering contractors to design and
develop a detailed valuation model. This was based on the anticipated mine plans and
engineering parameters and built on CRU’s market and price outlooks. 125 different
combinations of the mine, concentrator, smelter and refinery options were identified and
modelled. The most promising options were subjected to sensitivity analysis looking at the
possible ranges of price for the key inputs e.g. acid, electricity, finance.
CRU was uniquely placed to carry out this work due to our in depth market understanding
of the copper and zinc markets and our ability to translate technical parameters into
financial models. Our understanding of the acid market obtained, from our sister
consultancy group British Sulphur Consultants, enabled realistic scenarios for acid price
and availability to be developed.

An Australian metals company got
into difficulties and become
available for acquisition. Our client
wanted to know what the company
and the individual assets were
worth in a very short space of time.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Valuation of a troubled
Australian metals company
for a diversified miner
Methodology
A full financial model was built of each of the component parts of the target company
including exploration areas, mines, smelters and refineries based on CRU data, this was
combined with public financial data to value the entire corporation.
Our recommendation
The price at which the assets were a good buy.
Outcome
Our valuation was borne out by subsequent events.
Overview
The client company was interested in acquiring the assets of an Australian company that was
in financial difficulty and wanted to know the real value of the assets.
CRU Strategies worked with the client to design and develop a complex valuation model based
on CRU Analysis cost work and price forecasts, which looked at each of the company’s assets
individually and in combination. Theses were then combined together with financial information
e.g. debts, metal loans, hedging positions, to value the entire company as a going concern.
CRU was uniquely placed to be able to carry out this work in the short space of time required
due to our in depth knowledge of lead, zinc and precious metal markets. Our client was able to
make an informed decision before the financial institutions had completed their analysis. We
helped our client to a strong position where they could have been one of the first bidders had
they wished to be.

An existing producer of ferroalloys
unfamiliar with country of proposed
expansion needed a pre-feasibility
study to determine the viability of
the scheme by understanding more
clearly the investment and
operating cost environment involved.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Pre-feasibility analysis
of a greenfield
ferro-manganese plant
Methodology
A valuation of the plant under different production configurations was carried out, including
a detailed analysis of country-specific factors including tax rates, government incentives,
country risk, site selection and risk, equipment and construction cost .
Our recommendation
The proposed project would not deliver a satisfactory return.
Outcome
The client subsequently engaged us to explore further options in the country.
Overview
CRU Strategies provided a macro-economic profile of the host country, covering such issues
as demographics, political background, and an understanding of the key institutions in the
labour and financial markets. We carried out a detailed survey of the investment environment,
including incentives available, the structure of corporate taxation, and the required permits
and agreements. An analysis of the local labour market was also performed, highlighting
employment practices and legislation that any prospective employer would need to consider,
including an estimate of wage rates for different grades of staff.
CRU Strategies provided an assessment of three sites that could potentially be suitable for
large scale industrial activities, considering land costs, proximity to deep water ports, and the
development of local infrastructure (including a consideration of the local labour pool). We
gave a bottom-up estimate of the investment costs for the project, as well as the likely
timescale for construction.
This information was fed through into our valuation analysis, where we assessed the
feasibility of the project under different production configurations using our client’s own
valuation templates.
If you would like to discuss any aspect of our Valuation capabilities please contact our
Practice Area Leaders:

A prospective bidder for an
integrated aluminium complex
(bauxite, alumina and primary
aluminium) required our advice as
the power contract for the smelter
was due to expire, therefore
becoming a critical determinant
of the plant’s sale value.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Acquiring an integrated
aluminium complex
Methodology
CRU Strategies built an NPV (Net Present Value) valuation model as the platform for an
analysis of power options. Technical and commercial due diligence was also carried out.
Our recommendation
Advised on an overall valuation for the complex, and recommended options to resolve
the power situation.
Outcome
The client was ultimately the successful bidder, and has since engaged CRU Strategies
for other assignments.
Overview
The new owner would have to decide whether to build a co-generation plant, import power
from abroad, renegotiate a contract with the state-owned utility, or close the smelter and
operate as a third party alumina supplier. Critical to that decision was obtaining an
understanding of how much the smelter could truly afford to pay. While this is conceptually a
simple exercise, in practice it is a complicated calculation that requires considerable
aluminium industry-specific knowledge.
For long-term aluminium forecasts, CRU has developed the “Compass Model”. A key strength
of the Compass Model is that it uses a Monte Carlo simulation technique, whereby the user
can specify not only the most likely value for each of the fundamental assumptions, but also
establish the range of risk associated with it.
CRU Strategies carried out technical due diligence at the complex, conducting a technical
audit at the data room and on-site.

The owner of a metallurgical
coke plant in North America was
considering its ongoing strategy
for the plant, including whether to
construct a co-generation facility.
STRATEGY DEVELOPMENT | VALUATION | PERFORMANCE IMPROVEMENT | MARKET DECISIONS | NEGOTIATION SUPPORT | CHINA
VALUATION
Valuation of a metallurgical
coke plant
Methodology
CRU Strategies developed an NPV (Net Present Value) valuation model to analyse different
energy source scenarios, based on information obtained from a detailed technical analysis
to verify owner’s claims about plant lifespan, maintenance and sustaining capital plans,
closure costs, and constraints imposed by coke chemistry.
Our recommendation
A co-generation facility and additional coke battery would exploit tight energy markets. We
also concluded that the current market for coke assets was significantly ahead of NPV
valuations; therefore it was a good time to sell.
Outcome
The client was considering its options based on our recommendations.
Overview
CRU Strategies analysed the value of the options available to the client by building a free cash
flow model, using data from the CRU Analysis steelmaking cost model for each stage of the
steel production process.
Our technical expert visited the coke plant to review the condition of the equipment;
maintenance records, expenditures and scheduled maintenance plans; and any current
investment plans. Coke batteries have a finite lifespan, and it was important to verify that a
sufficient allowance was made for maintenance and sustaining capital investment to ensure
that the plant would be able to operate throughout the period of the valuation. Also considered
was the residual value of the plant, and in particular any clean-up liabilities. We then assessed
the likely investment cost for a new battery and co-generation facility.
The valuation revealed that investing in the new coke battery would deliver superior results,
exploiting the prevailing tight energy markets. Based on comparable transactions, CRU
Strategies advised that the market for coke assets was significantly ahead of NPV valuations,
suggesting that there could be an excellent opportunity to sell the plant
 Pick our brains Nick Collier
nick.collier @ crugroup.com

before making
+44 20 7903 2106

your next move

If you are interested in scheduling a Phil Newman
no obligation 30 minute consultation to phil.newman @ crugroup.com
discuss any aspect of our valuation +44 20 7903 2105
services, please contact:

Alison Parums
alison.parums @ crugroup.com
+44 20 7903 2311

CRU STRATEGIES
31 Mount Pleasant
London WC1X 0AD
UK

Telephone +44 20 7903 2000

Fax +44 20 7837 4342
Email sales@crugroup.com
Website www.crugroup.com / strategies