Valuing Mineral Assets and Operations – Understanding Valuation Issues
By: Alan K. Stagg, PG, CMA, Stagg Resource Consultants, Inc.
May 1, 2019
The need to establish the value of mineral assets and operations arises in many contexts—acquisitions and divestitures, investment decision-making, collateralizing assets, public reporting, financial accounting, shareholder disputes, and a variety of other adversarial actions. Each can entail a different set of issues and, accordingly, each may require the determination of a different standard of value.
In conducting any valuation, two concepts should be kept in mind: 1) value is a perception and 2) there are various standards of value. Regarding the first, it should be noted that value is not inherent in the goods, commodity, or service to which it is ascribed but rather is created in the minds of those who make up the market. Regarding the second, it should be noted that value expresses an economic concept and, as such, is never a fact but always an opinion. In expressing such an opinion, the term “value” must be accompanied by a specific definition of the term and the term must also be qualified, for example: market value, liquidation value, investment value, and so forth. This workshop is designed to provide participants the basic foundation to allow the selection of appropriate standards of value and valuation approaches and techniques. This workshop is intended to benefit both those who conduct valuations and those who may be required to use them.
The following modules will be presented in this workshop.
• Resource/Reserve Classification Systems –
It is not uncommon in valuing mineral assets, whether the resources/reserves themselves, mining enterprises, or equity interests, for the appraiser to have only a superficial understanding of industry accepted classification systems and the implications of the designations used in these systems. These issues and their appropriate applications will be addressed for both international and domestic classification systems.
• Valuation Standards – Definitions and the appropriate uses of the six most commonly encountered standards of value will be addressed, notably, Investment Value, Market Value, Fair Value, Use Value, Liquidation Value, and Intrinsic (Fundamental) Value.
• Public Reporting Issues –
Public reporting requirements do not necessarily coincide with the valuation practices and standards used by market participants. In this module, both international and domestic reporting standards will be reviewed and their impact on various valuation circumstances will be addressed.
• Valuation Process –
This module will address the valuation process itself, including standards of value; valuation approaches and techniques, including the allocation of enterprise value to reserves and resources; and examples from the presenter’s industry experience. Additionally, this module will address what the presenter terms the “Inferred Resource Conundrum.”
• Closing –
Although participation will be encouraged during the presentation of the various modules, the final segment of the workshop will provide a recapitulation of the issues addressed and a dialogue in response to attendees’ questions.
Instructor
Alan K. Stagg, PG, CMA – President & CEO, Stagg Resource Consultants, Inc.
Alan is an economic geologist with 55 years’ experience in the mining, minerals, and energy industries and 40 years’ experience in natural resource-related appraisals, including the appraisal of mineral estates and leasehold interests; the appraisal of plant, machinery, and equipment; the appraisal of intangible assets such as sales contracts, storage field easements, and interests in oil and natural gas enterprises; and the appraisal of business enterprises and equity interests. Natural resources appraised include coal, oil and natural gas, coalbed methane, a variety of precious and base metals, fluorspar, phosphate, potash, uranium, trona, gypsum, hectorite, kaolin, salt, crushed and dimension stone of various types; and sand and gravel. Appraisals have been conducted in 40 states; several Canadian provinces; and in Brazil, Mongolia, and Russia. Alan is a registered professional geologist in 15 states, a Certified Mineral Appraiser by the International Institute of Minerals Appraisers, and an SME Registered Member.
