RE: Playing with the numbers we know28 Mar 2021 12:27
Mines are not valued on what's underground. They're valued on what's underground, divided by number of years to extract it, minus costs. So a trillion dollars underground is not worth a trillion dollars. It's valued on how much can be made over, say, 20 years given reasonable extraction rates, likely sale prices and extraction costs. If the resource expires after 20 years, the buyer has to make their return during the 20 years, plus profits, as the resource will then be worthless. If it's huge, the value will still be there after 20 years, assuming demand is maintained, so the investment is sound.... cash will be returned and profit also made in the interim.
So, value equals potential the annual extraction rates times a fixed number of years, minus extraction and processing costs, less overall resource depreciation. Or something like that. Just multiplying the number of ounces in the ground by the market price is way too simplistic. Some of the resource will not be viable.