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chance of heat radiation.z . All personnel operating on the flare unit will be trained by the original <br />equipment manufacturer (OEM) to handle combustion devices, and will be required to wear fire -proof <br />clothing and personal methane gas detectors while working on the unit. Maintenance on the unit is <br />nominal, requiring a scheduled preventive review only every six months, which can be performed by <br />trained mine personnel. Also, because the flare is enclosed, it will not give off light, whereas any <br />artificial light at this location can potentially have a negative impact on the local ecosystems. It has been <br />proven that artificial light disrupts animal's nocturnal activity, interfering with their reproduction and <br />thus reducing natural wildlife populations. Given the intrinsic safety of the flare, with proper installation, <br />operation and maintenance performed by properly trained personnel, the flare should not endanger the <br />surrounding forest, the mine or its workers. <br />Economic Evaluation of CMM Abatement <br />Raven Ridge analyzed the option of reducing methane emissions at the mine as an investment <br />opportunity. Our analysis was performed by calculating a string of annual free cash flow values, which <br />are calculated by subtracting outflows of investment capital, operating capital, loan repayment, and <br />other costs from the revenues or inflows from sales of verified carbon emission reductions. To allow <br />comparison of the economic performance of the proposed investment opportunity at the coal mine <br />against other investment opportunities which may be available to MCC, Raven Ridge performed a <br />discounted cash flow analysis. <br />Discounted Cash Flow Analysis <br />Discounted cash flow analysis uses the string of annual cash flows to calculate the profit that will be <br />realized over the life of the project. To make the future invested capital and profits relevant in today's <br />monetary terms, a discount factor is used. This factor is used to discount future cashflows because we <br />recognize cash flows in the future are worth less than cash flows realized in the present. This is to say, <br />that even if the values occur in year six of a project that lasts 10 years, the values are brought forward to <br />the present by discounting the future cash flows by an annual discount factor. We used a range of <br />discount factors to analyze the investment, but we report the results using a discount rate of 10 percent, <br />as it is a factor commonly used by analysts. As an example, the results of our analysis could be compared <br />against an investment where the investment paid out in ten years and had a compound interest rate of <br />ten percent per year. <br />Net present value (NPV) is the value that is calculated and commonly used to evaluate investment <br />opportunities. It is a measurement of profit calculated from the present value of a string of annual free <br />cashflows (positive or negative) over time using a discount rate. Again, in our analysis we use a ten <br />percent discount rate, and based on our analysis, as explained later in the report the most likely NPV of <br />the project is $6.51 million USD. <br />Internal rate of return (IRR) is used to evaluate an investment by comparing the annual rate at which the <br />value of the project increases. The IRR is the discount rate at which the NPV of a string of annual cash <br />z P. Kondagari (2017), personal conversation with P. Kondagari, manager of enclosed combustion for Aereon, <br />October 20, 2017. <br />12 <br />