EME 460
Geo-Resources Evaluation and Investment Analysis

Summary and Final Tasks



In this lesson, the effects of income tax on individuals and corporations in the natural resource industries are discussed. These effects vary widely from one investment alternative to another, and generally, it is imperative to compare the relative economics of investment on an after-tax basis. Income tax, both federal and state if applicable, are project costs, just as labor, materials, utilities, property taxes, borrowed money, interest, and insurance.

Working capital is the money necessary to operate a business on a day-to-day basis. It is normally comprised of money required for raw material inventory, in-process materials inventory, product inventory, accounts receivable, and ready cash. When evaluating a geo-resource project, working capital generally is considered to be put into a project at the start of a business or production operation, and to be fully recovered at the end of the project life when inventories are liquidated.

Certain mining/petroleum projects are eligible for special investment tax credits. These credits are "Energy Credits," "Enhanced Oil Recovery," "Research & Experimentation Credit," and "Bio-Diesel Fuels Credit."

After introducing the income tax, the after-tax analysis of mining the petroleum project is also covered in this lesson. The unique feature about discounted cash flow analysis of mining or petroleum projects compared to non-mineral projects is the handling of certain tax deductions.

Reminder - Complete all of the Lesson 8 tasks!

You have reached the end of Lesson 8! Double-check the to-do list on the Lesson 8 Overview page to make sure you have completed all of the activities listed there before you begin Lesson 9.