Redrafted from canadian institute of mining, metallurgy and petroleum. An entire info to mining funding analysis designed for use by financial and mining analysts, executives, and consumers, the mining valuation handbook. In order to investigate the variability in valuation methods and to explore the outcomes of. The underlying valuation premise is that value reflects the current net economic benefit of the net cash flows that are expected. Mining and energy valuation for investors and management kindle edition by rudenno, victor. Real property interest coal reservesresources, land surface, buildings, other surface improvements 2. Valuation methods of mineral resources 3 of resources, highlighting the advantages, disadvantages and issues and limitations of each method. Fuer homepage valuation of metals and mining companies. Valuation of mining projects using option pricing techniques finsia.
Valuation of mineral exploration properties amc consultants. The guidebook for evaluating mining project eias reflects many years of experience evaluating the environmental impact assessments eias for proposed mining projects around the world. Some of the tools in the survey will be discussed along with the significance of their results. The use of different supplemental valuation methods by cfos of fortune companies. Evaluating investment projects in mining industry by. Mining, extractive industries, mine valuation, valuation methodology. In this mining financial modeling course, we will work through a case study of a real mining valuation for an asset by pulling information from the feasibility study, inputting it.
Mining and energy valuation for investors and management rudenno, victor on. Three steps beyond a static dcf model the primary valuation methodology for development properties and producing mines is discounted cash flow dcf. Interpretation and analysis of mining industry financial statements. Mine valuation professionals have been actively investigating how to improve discounted cash flow dcf valuation methods so that they can better represent mining industry complexities. Market value appraisal our specialization is the development of market valuation reports for mineral properties, mines and quarries. Valuation of the mineral asset could be required at any stage in its life, but not all of the valuation techniques are. The purpose of this paper is to present available mine project evaluation methods and more specifically discounted cash flow dcf, decision trees dt and monte carlo simulations mcs and subsequently apply them to a mine project using different. The raw ore is extracted by surface open pit or subsurface underground mining methods. Each approach includes different valuation methods. The final valuation is an experiencebased judgement based on weighting of the individual values. A valuation report and opinion from an independent third. The appropriate approach and method will depend on the circumstances.
I have known trevor ellis and his firm, ellis international services, inc. The approaches used to value a company depend on how marketable its assets are, whether it generates cash flow, and how unique it is in terms of its operations. Valuation of mineral resources in selected financial and. A code for the valuation of mineral properties and projects. Valuation methods mineral projects discounted cash flow. Based on the different valuation methods, we propose that the value of a 100% shareholding in nasrettin hoca kimya as of 30 september 2011 can be estimated as being in the range of eur 30. Mining and energy valuation for investors and management. Evaluating investment projects in mining industry by combining discount method and real option valuation cvjetko stojanovic1 modern specialised literature and business practice differentiate an increasing number of methods for evaluating investment projects. The above indicated codes share some important features regarding scope of mineral assets considered, preferred valuation methodologies as well as aspects not discussed in this article like. The essential info to investing in mining options, now in its fourth model. This paper outlines some technical inputs that form the basis for. The material from the piles may be sent to processing facilities onsite or offsite. Our thorough valuation methodology considers the key elements in valuing the operations of a mine.
Price to net asset value pnav is the most important mining valuation metric, period. In contrast, real options techniques compute project. Ellis is recognized as a world leader in refining transaction analysis and transaction adjustment methods, advancing the employment of the market sales comparison approach in mineral property valuations. Having discussed the net asset value approach, well now discuss multiplesbased valuation methods that you can also use to value gold mining stocks. We believe relative valuation models provide a reasonable method to deter mine how firms are valued relative to one another, but they do little to help forecast future equity returns on. Valuation methods mineral projects free download as powerpoint presentation. There are three key approaches to valuing a business. Understanding the multiplesbased valuation approach for. The pdf doesnt cover everything by all means but it is a quick beginning step for one to build out their model. Numerous methodologies in the valuation of mineral rights. Here is an overview of the main valuation methods used in the industry. They all recommend dcf as the primary method for valuing operating mines, or mineral assets with at least indicated resources and some form of feasibility study containing engineering, production and capital and operating cost data.
Sum the market value contribution of the component property types. It is important to take great care in choosing a primary valuation approach for a target mine or mines. However, formatting rules can vary widely between applications and fields of interest or study. The journal of the south african institute of mining and metallurgy. Dcf is a valuation method used to estimate the attractiveness of an investment opportunity through future free cash flow projections and discounts them most. The valuation difference occurs because the dcf value is the present value of expected future cash flows. The principal consumers of sand and gravel and crushed stone materials are the highway and building construction industries.
Determine using business value parameters drawn from the market indicators 2. A comparative study of valuation methodologies for mineral. The valuation approach to a greenfield project will be substantially different from that applied to a welldrilled, extensively explored mineral property. As a consequence, the appropriate valuation approach and method. Decreased certainty exists in the determination of mineral property value, being nonproducing mineral assets such as mineral rights or properties and resources that are excluded from operations life of mine plans or feasibility studies. According to the existing viewpoint, assets valuation methods based on income approach, i.
Valuation methods of mineral resources estrella domingo. In order to investigate the variability in valuation methods and. Capital includes the mining machinery and equipment, plus the processing plant, to produce a finished product. Master the art of building a financial model to value a mining company, complete with assumptions, financials, valuation, sensitivity analysis, and output charts. In this mining financial modeling course, we will work through a case study of a real mining valuation for an asset by pulling information from the feasibility study, inputting it into excel, building a forecast, and valuing the asset. Valuation methods approaches to valuing a business. Valuation approaches for metals and for mining companies are similar. Mine valuation prospective value price of metals amortization of capital valuation of mines development of mines shape of mining shafts subsidiary development methods of orebreaking methods of supporting excavation mechanical equipment drainagecontrolling factors machine drilling ratio of output to the mine labor efficiency working costs. Pdf valuation of mining operation with uncertainty and the power. The choice of the the choice of the valuation method s applied is a matter for the ju dgement of the cv, and the. The valuation and opinion can be used to support the companys business case and related corporate governance. Allen abstract economic evaluations of mining projects incorporate the examinination and assessment of the technical, financial, social and political aspects of the environment in which the mineral deposit is situated. An overview of environmental valuation methods for the mining.
Mine valuation, mineral valuation, mineral appraisal, mineral. Net asset value is the net present value npv or discounted cash flow dcf value of all the future cash flowcash flowcash flow cf is the increase or decrease in the amount of money a business, institution, or individual has. It also has links to about 1015 other pdfs that cover the topic. In the process, the other issues are also discusseddealt with.
Mining projects that only involve the reworking of abandoned mine waste piles avoid the environmental impacts of openpit mining. Interpretation and application of samcodes the south african code for mineral asset valuation. Furthermore, a valuation exercise may produce different outcomes for the same gold project depending on which method is applied. Pdf traditional discounted cash flow dcf method has been adopted as a standard tool in the mining industry to conduct economic prefeasibility and. Methods and techniques for the valuation of mineral assets. They are worth applying if the future economic benefits associated with. The best way to value a mining asset or company is to build a discounted cash flow dcf model that takes into account a mine plan produced in a technical report. Using monte carlo simulation with dcf and real options risk. Valuation of metals and mining companies wall street oasis.
Agian, the majority of these reported valuation methods are not always commonly used in property valuation practice, but are more commonly used in mine feasibility studies. Valuation of aggregate operations for banking purposes sand. Valuation approaches and methods for valuation of mineral assets. Due to the numerous methods available with varying degrees of use, the prospect of valuing different options in a project is not always a simple one. Pdf the valuation of an exploration project having. Valuation methods are essentially a subset of the various valuation approaches. Download it once and read it on your kindle device, pc, phones or tablets. An overview of environmental valuation methods for the mining industry article in journal of cleaner production 1434. Methods for valuating earlystage mineral projects csa global. A copper mining group, antofagasta, is valued with different valuation methods. Mining and energy valuation for investors and management has develop to be an important helpful useful resource for assessing the price and funding potential of mining.
775 1121 677 1470 313 411 1423 643 360 1148 458 917 312 136 716 147 954 36 1093 1534 1414 1566 1616 654 1582 1577 1451 646 481 731 533 748 1439 456 675 696 1241