preparing-real-asset-investment-cases

# Preparing Real Asset Investment Cases

Structures real asset investment recommendations with commodity thesis, asset-level analysis, and risk assessment for Investment Committee (IC) presentation across natural resources, energy, and commodity sectors.

## When To Use

- Preparing an IC memo for a new real asset opportunity (mining, timberland, farmland, energy infrastructure, upstream/midstream oil & gas)
- Building a recommendation package for follow-on capital into an existing resource position
- Documenting a commodity-linked thesis for portfolio construction or allocation review
- Structuring diligence findings into a presentable investment case for committee vote

## Inputs To Gather

- **Commodity thesis**: Supply/demand fundamentals, price outlook (spot, forward curve, long-term equilibrium), key macro drivers (decarbonization, electrification, population/caloric demand)
- **Asset-level data**: Reserve/resource estimates (proven, probable, possible), production profiles, decline curves or yield projections, remaining useful life
- **Operator/counterparty profile**: Track record, management team, operational capabilities, ESG posture
- **Financial model or projections**: Capital expenditure schedule, operating cost structure, revenue assumptions, IRR/MOIC sensitivity tables, breakeven commodity price
- **Title and rights documentation**: Mineral rights, surface rights, royalty obligations, lease terms, concession/license status [VERIFY jurisdiction-specific title requirements]
- **Regulatory and permitting status**: Environmental permits, water rights, reclamation/bonding obligations, political/sovereign risk assessment [VERIFY applicable regulatory regime]
- **Comparable transactions**: Recent M&A comps, royalty/streaming deal benchmarks, public market trading multiples for similar assets
- **Risk register**: Geological/technical risk, commodity price risk, regulatory/political risk, operational/execution risk, ESG and social license risk

## Workflow

1. **Frame the commodity thesis** — State the macro view on the target commodity. Identify where the asset sits on the global cost curve. Summarize supply/demand dynamics with a 3-5 year outlook and a long-term structural view. Cite forward curves, consultant forecasts, or internal models with clear date stamps.

2. **Profile the asset** — Describe the physical asset: location, geology/soil/resource base, infrastructure access, production history, and remaining reserve life. For extractive assets, present reserve categories (1P/2P/3P) with source and effective date. For renewable resources (timber, ag), present sustainable yield estimates and rotation/harvest cycles.

3. **Assess the operator** — Evaluate management capability, operational track record at comparable assets, capitalization, and alignment of interests. Note any key-person dependencies or governance concerns.

4. **Present the financial case** — Lay out the base-case financial model: entry price/valuation, capital deployment schedule, projected cash flows, target IRR/MOIC, and payback period. Include sensitivity tables across at least two axes (commodity price vs. production volume; discount rate vs. terminal value). State the breakeven commodity price explicitly.

5. **Analyze risks and mitigants** — Structure risks into categories:
   - **Geological/technical**: Resource uncertainty, recovery rates, decline assumptions
   - **Commodity price**: Downside scenario at trough pricing, hedging strategy if applicable
   - **Regulatory/political**: Permitting timeline, sovereign risk, carbon pricing exposure [VERIFY specific regulatory jurisdictions]
   - **ESG/social license**: Community opposition, water/emissions footprint, tailings/waste management
   - **Execution**: Construction/development risk, contractor availability, supply chain
   - For each risk, state the mitigant or residual exposure.

6. **Benchmark against comparables** — Present 3-5 relevant transaction comps or public-market comps. Normalize on standard metrics ($/acre, $/boe of reserves, $/MW, EV/EBITDA). Explain premium or discount relative to comps.

7. **State the recommendation** — Clearly articulate the investment recommendation (invest/pass/conditional), requested allocation size, proposed structure (equity, royalty, JV, streaming), key conditions precedent, and any IC-specific asks (e.g., staged capital commitment, co-invest rights).

## Output

The IC investment case should include:

- **Executive summary** (1 page): Commodity thesis, asset snapshot, headline returns, key risks, recommendation
- **Commodity market overview** (1-2 pages): Supply/demand, price outlook, cost-curve positioning
- **Asset description** (2-3 pages): Physical profile, reserves/resources, production, infrastructure
- **Financial analysis** (2-3 pages): Base case, sensitivities, breakeven, return waterfall
- **Risk matrix** (1-2 pages): Categorized risks with likelihood/impact ratings and mitigants
- **Comparable transactions** (1 page): Comp table with normalized metrics
- **Recommendation and terms** (1 page): Structure, size, conditions, voting request
- **Appendices**: Detailed reserve reports, maps, regulatory filings, model assumptions

## Quality Checks

- Commodity price assumptions are sourced and dated; forward curves reference a specific date
- Reserve/resource estimates cite a qualified person's report or equivalent technical authority [VERIFY reporting standard: NI 43-101, JORC, SEC S-K 1300, PRMS]
- IRR and MOIC are presented on both levered and unlevered basis where debt is involved
- Sensitivity tables span a realistic range including at least one stress scenario below cycle-trough pricing
- All acreage, mineral rights, and concession terms are confirmed against title documentation
- ESG risks are addressed with specificity, not generic boilerplate
- Comparable transactions are within 24 months unless market conditions justify older data
- Recommendation clearly states vote requested, capital amount, and any staged deployment conditions
- All figures reconcile between the executive summary and the detailed financial analysis