Chapter 12: Net Present Value
Yang Xueping sat in her office at the company headquarters, deep in thought. After a long hesitation, she finally stood up and made her way to the office of General Manager Zhou Tianqi.
"Director Zhou." She sat down across from him, clearly uneasy.
"Just got back from Qianzhou Province? You've worked hard." Zhou Tianqi's hair was graying—he was close to retirement.
"I've been back for a week," Yang replied, a little embarrassed.
"You came to see me today about the Guanling Gold Mine project, I assume?" Zhou's tone was calm and smiling, giving off an air of kindness. "I've been waiting on your report."
Beneath the gentle tone, however, was a subtle rebuke for not reporting sooner.
Yang knew she couldn't dodge this anymore, so she braced herself. "The recent work at the Guanling project hasn't yielded any breakthroughs. The current gold reserve remains at what I reported two months ago—three tons."
"I see."
Zhou's expression didn't change. He pulled out a cigarette, lit it with a match, and took a puff. "Jianshe got back before you did. He already gave me a full rundown of the situation at Guanling."
Yang inwardly cursed Qin Jianshe. It wasn't even his project—why did he rush to report on it?
"He also told me that the project hit a bottleneck and there was no technical breakthrough. You were planning to terminate the project."
Zhou tapped the ash into the tray without concern. "But after his team arrived, they proposed a new exploration model. He went on and on about Carlin-type gold deposits. I don't really understand the technical details, but I could tell Jianshe had done his homework."
"Yes, it is a Carlin-type deposit. That's a relatively new classification in China," Yang tried to regain control, though she wasn't technically inclined.
"You folks in the Mineral Exploration Department should learn from the Resource Evaluation team—turn theory into practice," Zhou said, his tone still gentle.
But to Yang, that felt like a slap in the face.
Qin Jianshe didn't understand Carlin-type deposits either—why did he get to appear so superior?
In this round, Qin Jianshe had clearly gained the upper hand.
And it was all because of that new hire, Li Tang.
Just his luck that Li Tang had ended up in the Resource Evaluation Department!
Feeling indignant, Yang retorted, "The new exploration strategy wasn't proposed by Director Qin—it was suggested by a recent university graduate in the Resource Department!"
"That just proves Jianshe has a good eye for talent," Zhou said, crushing his cigarette in the ashtray. He tapped his finger on the desk, "I've been waiting for your report, and you kept delaying. What were you afraid of?"
"Well, I'm here now."
Despite the scolding, Yang felt oddly relieved.
From how Zhou laid out everything Qin Jianshe had reported, it was clear that Zhou still valued her more—he wanted to hear her version firsthand.
"Let's hear it," Zhou said, leaning back into his chair and adopting a more relaxed listening posture.
"Director Zhou, I've come to report some good news. The project recently achieved a major breakthrough. We've identified stronger indicators for gold mineralization and have high hopes of locating a new ore body."
"So the new strategy Qin's team proposed is working?"
"…"
Yang realized that no matter how much work she put in from here on, Qin Jianshe would get a big share of the credit.
She had worked so hard to plant the seeds, and now Qin had come in to help harvest the fruits—acting like it was his right.
The thought made her furious.
She composed herself and continued, "The project team reported the discovery of high concentrations of arsenic and mercury—key geochemical markers for gold. The anomaly is quite significant."
"In that case, increase exploration efforts!"
"Funds are a bit tight. To confirm the new ore body, we'll need more drilling…"
"Out of money again?"
Just as Zhou began to feel optimistic, his mood quickly soured.
He sat up straight. "How many times have you revised the exploration plan and increased the budget? It started at 2 million, then jumped to 5 million, and now it's at 8 million!"
Yang had no defense.
Zhou pulled out a notebook, jotting down figures with a pen. "Exploration costs so far: 8 million. If we build a small-scale mine with a ten-year life span, plus roads and equipment—say another 20 million. That's 28 million in upfront costs. Let's forget about management and 'gray' costs for now."
He continued calculating. "With 3 tons of gold, a refinery isn't cost-effective. We'll just sell concentrate. At the current gold price—70 yuan per gram—concentrate fetches about 40 yuan per gram. Three tons equals 120 million yuan. Assume a 90% recovery rate, the actual revenue is about 100 million."
"Now, factor in operating costs and high taxes. If we're lucky, the profit margin is 10%. That's 10 million in profit over ten years."
Zhou did the math and slid the notebook to Yang. "Final net present value: negative 18 million. You tell me—is this project worth pursuing?"
As someone with a finance background, Zhou preferred to let numbers do the talking—simple and clear.
Yang stared at the formulas and figures, her eyelid twitching.
But from her understanding of Zhou, if he truly had no hope for the project, he wouldn't be talking at all.
The fact that he presented all this data meant there was still room to negotiate.
"Director Zhou, what if gold prices rise…"
"Can you or I control market prices?" Zhou shot back.
"If reserves turn out to be more than three tons, the project's net value could improve."
"Fine. So how much gold would it take to break even?"
Zhou looked over his numbers again and made a quick estimate. "Ten tons. That would get us a positive NPV."
Ten tons—a medium-sized deposit.
Three tons to ten tons was a huge leap.
Yang felt a heavy weight pressing down on her chest. But with her usual tenacity, she wasn't about to back down. "I still believe in this project's potential."
"You said the same thing last time when you asked for more funding."
"This time is different—we have solid data proving more gold is underground."
"And if it still turns out empty?"
"I'll resign!" Yang blurted out, staking her entire career.
Zhou narrowed his eyes slightly, pondering for a long moment. "How much more do you want?"
"Two million."
"I'll give you one. Draft a new proposal outlining the revised drilling plan and a detailed breakdown of how the million will be spent."
"Thank you, Director Zhou!"
Yang forced a smile—but in her heart, she felt the burden growing heavier than ever.
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