Question: If you were a consultant and for the below M&A case, what questions would you ask as a consultant of the acquiring company of the mine and in order to complete the valuation:

• A firm is considering buying a gold mine in Mongolia. It is fully operational and produces 120,000 ounces/year. The Mongolian government is selling the mine in order to raise foreign currency, which is needed to pay down dollar-denominated debt. The purchase price the government is asking is $200M, while the operating costs are $800/ounce and fixed costs are $25M/year. The acquirer has an option of expanding the mine to produce an additional 20,000 ounces per pear. The purchase price on the option to expand is $20M. If the expansion were to proceed, the total development time would be 6 months, whereupon the mine would immediately be operating at this new capacity. With the new capacity, total fixed costs increase by 10% and total variable costs by 15%. Assume the price of gold will be $1800/ounce. The client has hired your team as a consultant to provide a go/no-go recommendation.

Answer rating: 100% (QA)

As a consultant for the acquiring company here are some key questions I would ask to complete the valuation of the Mongolian gold mine and provide a g... View the full answer