Mining & Metals · December 2025 · 5 min read
The commodity-price distribution the board paper always simplifies
Mine expansion papers in Central African copper and cobalt are almost always defended on a single long-run price. That number is a convention, not a forecast, and treating it as a forecast is why several recent expansions have earned out at half the base case.
The argument
A modern capital review runs the expansion case against the LME price distribution — not a single line, but the actual fifteen-year distribution of realised prices — combined with local-currency exposure on operating costs, EPC productivity from the operator's own historical data, and a permit-delay distribution built from comparable African brownfield expansions. The output is a P20 NPV that is frequently negative on the vendor schedule. That number is the one the chair should be defending, not the base-case single-point return.
What we see in the field
On an illustrative brownfield expansion, the deterministic NPV at the long-run price is healthy. The downside scenario across price, FX and permit delay turns negative. A board approving such a case would typically choose a scaled and phased alternative — smaller in year one, with an explicit price-and-permit trigger for phase two. That decision cannot be made from the base case alone.
What it changes
For boards, the long-run commodity price is a convention that should never appear in a capital paper without its distribution. For CFOs, the phased-with-trigger structure is now the default response to a negative P20.
Where to start
For any capital approval above a material threshold, require the P20 NPV against the fifteen-year LME distribution, permit-delay distribution and local-currency exposure. Fund the phase-one commitment; make phase two conditional on a stated trigger.
