Economic Investment Appraisal

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Economic Investment Appraisal

• Cost and benefit analysis of the
• BHP Ravensthorpe project
• Winnie Kwok

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BHP Ravensthorpe Project

• Background
• The nickel industry
• The Ravensthorpe project
• Financial Analysis
• Cost Benefit Analysis

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The Nickel Industry

• Nickel is mainly used in making stainless steel
• Recently the demand has exceeded the supply

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The Nickel Industry

• Firms cant easily increase supply
• 2 types of nickel ores sulphide and laterite
• Laterite is abundant but difficult to process

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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

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Financial Analysis

• Estimate the expected financial return, with
  consideration to the following
• Capital expenditure
• Operating cost
• Tax
• Depreciation/amortisation
• Royalties

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Cost Benefit Analysis

• Estimate the expected cost/benefit, with
  consideration to the following
• wages
• environment
• social discount rate
• infrastructure housing
• .

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• Questions/comments?