Valuation of Exploration Project
Exploration project is a laborious exercise. In order to form an opinion regarding the value of an exploration project, there is a need for you to subject it to an expert. Professional judgments and experience are essential in forming and justifying your opinion for the valuation exercise.
Exploration projects can be divided into advanced exploration- stage and early-stage project. During these stages, the market valuation is carried out. The market value is based on whether the land is capable of hosting or has the potential of hosting mineral assets of great economic importance.
You should note that valuation is subjective. This subjectivism is based on the fact that different geologists or mineral resources professions/experts may have a diverse opinion about the valuation of the projection.
For you to get a valuation range, you must take into consideration several valuation techniques. These numerous techniques should be ones that are capable of knowing the project’s potential. It must also be capable of examining the diverse areas of the property. The purpose of conducting these assessments is to allow the valuer to consider several other results. With this, the valuer will have the chance to explore a rational number of values.
Once the value assessments have been successfully conducted, the information derived from the evaluation is what will influence the valuation technique to be employed.
For instance, it will be baseless to use a piece of information based on actual cost assessment when it was the cost-based technique that was used. Again, it will cause undue hardship to state that the ground has the potential for specific mineralization when you have no factual information to support such a statement.
There are several factors you should take into consideration when doing the valuation assessment. The most crucial ones are;
- What are the bases on which you consider to value the exploration project?
- You must decide on what value measure you wish to use,
- The project’s developmental stages.
You must measure the value of the exploration project. The purpose of the assessment largely influences the valuation, and the most widely used value measurements are the market value and technical value.
The market value deals with the current market requirements, while the technical cost is the inherent asset’s value. The technical value does not take the market value into account.
The project’s developmental stage at a particular period is of the utmost importance when examining the factor of value exploration. It is vital because it helps determine whether or not specific information is available. With this, it is expected that there should be limits to the valuation techniques capable of being applied.
Again, when you are carrying out your valuation assessment, you should note the following approaches: the cost, market, and income approaches. This is because any valuation technique you adopt will ultimately rely on these mentioned approaches.
In conclusion, the value of an exploration project will be based on the valuation assessments carried out. These assessment methods will be affected by the mineralization in that particular region. Also, the geographical potential will come into play.