The financial evaluation establishes whether a mining project recovers its investment and how long that takes. It is prepared before capital is committed, with the reserves, grade, costs and price that can be supported, because a model fed with unsupported assumptions produces indicators the operation later fails to confirm.
What goes into the model
The model starts from the mine plan, that is, how much material is extracted in each period, at what grade, how much the plant recovers and how much is sold. To that base are added the initial investment, operating costs, royalties, taxes and working capital, plus the cost of closure, which since 2026 is submitted with the PTO. The result is a cash flow per period over the life of the mine.
Indicators calculated
The cash flow yields the indicators on which the investment decision rests:
- Net present value (NPV): expresses what the future cash flow is worth today.
- Internal rate of return (IRR): the project's own return.
- Payback period: indicates when the capital is recovered, a figure that in small-scale mining weighs as much as profitability.
- Cost per ounce or per tonne: compared against the selling price.
- Sensitivity: shows the effect of a fall in price or grade, the variables that move the result the most.
Royalty price and selling price
Royalties are settled at a percentage the law sets for each mineral, applied to an official base price published for that purpose, which is not the market price. That is why the model works with two prices, the royalty price and the selling price, and using one in place of the other distorts the results.
What you receive at the end of the work
Mining engineers, metallurgists and the financial team work on the model with the same data, consistent with the PTO. We review every assumption with you and flag those that are not supported before closing the model. You receive the model with its scenarios, ready to update when the price, the grade or the mine plan changes. The financing decision rests with the bank or the investor.
Legal framework
- Law 141 of 1994, art. 16, amended by art. 16 of Law 756 of 2002Royalty percentages by mineral at the mine mouth
- Law 141 of 1994, art. 17, amended by art. 19 of Law 756 of 20021.5 % royalty for emeralds and precious stones
- Resolutions 708, 709 and 213 of 2026 of the UPMEBase price for royalty settlement, not a market price
- Decree 0742 of 2026Mine closure regime, with terms of reference and guarantees pending regulation
Regulations reviewed in October 2026. This is general guidance; the decision on each procedure rests with the competent authority.
