When perusing my posts, you may find All-in Costs numbers that are larger than is stated elsewhere in technical reports and corporate presentations. That’s because I have made an effort to account for royalties and income taxes, as the impact of royalties and income taxes on the overall valuation of a company is enormous, and is very often the factor that determines whether or not a company has a snow ball’s chance in hell of producing Net Income.
Current cost methodologies, including the much-improved All-in Costs methodology, which expands upon AISC, are gravely flawed, in so far as the above mentioned inputs are ignored. I try to remedy that in my valuation scenarios.
In order to differentiate between the traditional All-in Costs methodology and my own costing methodology which incorporates royalties and income taxes, I will hereafter utilize the term, ‘True All-In Costs.’
Once True All-in Costs are calculated, I am able to determine what I refer to as True Value, or Projected Book Value per Share. True All-in Costs are also required for our Total Acquisition Cost (TAC) calculations, but are not required for the less important PMCV10/15 formulas.
Several flavors of our PMCV10/15 formula are common in the industry, but we are quite certain that our True Value methodology and approach to TAC are original, so it is doubtful that we will ever publish the formulas.
The Future of True All-in Costs and True Value
In the future, I would like to incorporate Exploration and Development Capital, Working Capital and Financing into the True All-in Costs methodology formula. Were all of these inputs used regularly when appraising development-stage companies, I believe investors would be better armed when confronting management about the economics of proposed projects.