DR = Discount Rate

It's the percentage at which future cash flows are discounted yearly, and is used as a comparison to other investments.

I guess we'd have to start with a comparable no (or at least very low)-risk investment that spans a similar period of time. US 20 and 30-year T-bills are yielding around 4.6% right now, so that's a decent place to start. You then multiply this by a risk factor to reflect the added risk of less secure investments.

Very risky investments like exploration-only plays seem to have a risk factor of 3 or even 7, depending on the level of the discovery, location, etc. My guess is that an only somewhat risky investment such as this one might have one of 1.5 - 2, which would put a reasonable discount rate in here at around 7-10%. Of course, that DR/T-bill rate decreases the closer we get to steady-state cash flows, but should never reasonably go to 1, since there is always some risk involved (bad management, government seizure, war, labour strife, etc.). This I think would limit the DR to ~5-6%, with current bond yields, of course.

I hope this helps.

D.