The valuation of the mineral project is based on the propensity of the project to be capable of hosting minerals with potential economic benefits. These mineral projects have possible economic assets deposited in the ground, which are yet to be discovered.
It is in this inherent value of the exploration asset that gives it the exploration potentials. The value of a mineral asset may differ from time to time depending on the market interest, neighbouring project, among others.
Before we delve into the assets to take into consideration when valuing a mineral project, there are specific classifications of valuation models according to the type of mineral assets. These models are also referred to as approaches. They include,
In this approach, the mineral asset would be compared with the value of a similar mineral project, which is traded in an open market. The valuation technique for this approach involves the comparison of transactions, the Net present value per unit of metal, gross metal value, among others.
This depends on the future or the historical amounts expended on the mineral asset. The valuation technique adopted for this approach involves market capital, geoscience factor, the value per unit area, appraised value.
Lastly, the income approach operates on the “value-in use” principle. This demands you to present the value of future cash flows and compare it with the lifetime of the mineral asset. Valuation style for this approach usually includes the real options, discounted Cash Flow, among others.
When you have successfully chosen the approaches, you can apply them to the three major classifications of mineral assets. These are the asset to consider when valuing mineral projects. They are;
Here, the assets have an economic mineral deposit. The existence of the mineral must have been proven by a Feasibility or Pre-Feasibility Study. The presence of these properties is highly visible at the advanced stage or during the production of mines.
Again, there must be sufficient and dependable piece of information which must be present to value the property by discounted cash flow technique. This is applicable under the income approach.
With the availability of reasonable degree of information such as the capital and operation cost, feasible mineable reserves, viable mining strategy and production rate, and the metallurgical test results, you will be able to engage in mineral projects valuation successfully.
In exploration assets, the economic possibility of the mineral deposit has not been proven to exist. The primary importance of an exploration property is in its potential to eventually discover the existence of the economic mineral deposit in the ground.
You should note that only in a very few circumstances will exploration properties become mining properties. However, until its exploration potential is duly assessed, they have little to no benefits.
Generally, production assets are mineral projects which are viable in production. This is only feasible when the level of production has been achieved.
When doing the valuation of your mineral project, ensure you put in place a feasibility study for the examination of the valued assets.