Net Present Value

A demonstration of how Net Present Value declines in a low interest rate environment is the following chart. Of course, gold will rise in the same environment.

A negative real interest rate is the cause as much as the decline in the discount rate, because there is a drastic change in the Net Present Value calculation going forward. It looks like rising costs, but in actual matter of fact, your returns are falling directy behind inflation.

It would be the inverse for gold-related assets. Most large miners have relatively exposure to advances in the gold price, because they mostly mine low-grade disseminated deposits as well as copper deposits with gold by-product.

But the miners with direct exposure to gold price advances in narrow-vein deposits with robust grades are the most likely to have exposed leverage to the gold price and see major advances in their Net Present Value. Quite the inverse of the example below.

If your Net Present Value is affected, then your IRR, your Internal Rate Of Return is directly affected.

Net Present Value

Thompson Creek down sharply after miss, downgrade

Jonathan Ratner Feb 28, 2012 – 1:17 PM ET | Last Updated: Feb 28, 2012 2:16 PM ET

Courtesy Thompson Creek Metals

Ferromolybdenum smelting at Thompson Creek's Langeloth plant west of Pittsburgh. The alloy is needed to produce a type of stainless steel critical to water desalination plants.

• 
  Thompson Creek Metals Co. is taking a beating in the wake of a downgrade from Deutsche Bank that followed disappointing fourth quarter results from the miner.