Mine Valuation Flashcards
implies the assigning of a currency value to the worth of a mine or mining project and provides a measure of the desirability of ownership of that property.
mine valuation
amount of money which a purchaser desires to pay for the ownership of a mineral property.
Value
Valuation vs Evaluation
where evaluation simply focuses on the technical aspects of an asset, and valuation focuses on value of the asset
the net sum, over and above the Cost of removal and sale, realized for a property or asset when it is retired from service.
Salvage
the property or asset retired from service is scrapped for the value of its materials.
Salvage Value
refers to the existing value of a property or asset as determined on the basis of what it would cost to replace the property or its service with at least equally satisfactory and comparable property and service
Replacement Value
the original investment in the property or asset as carried on the organization’s books less any cumulative allowance for depreciation or amortization entered on the books.
Book Value
the value entered on the official assessor’s records as the value of the property applicable in determining the amount of ad valorem taxes to be paid by the property owner.
Assessed Value
refers to that value at which the property has been insured against loss or disaster. This value is generally associated with replacement value for tangible assets and earning capacity for property such as mines (ore deposits).
Insured Value
is the sum of discounted future annual net earnings generated by the property; is synonymous with the income approach to value estimation for mining properties
Capitalized Value
The process of determining the value or worth of a mining property
> Income/cash flow approach
Market related approach
Cost approach
Option pricing
This formula results in an undervaluation of mineral property
Hoskold
is the present value of future cash inflows of an investment or project minus the present and any associated future cash outflow; is widely used to appraise a project or investment.
Net Present Value Model
If the NPV arrives____________, then theoretically the project or investment should be implemented;
greater than or equal to zero
if the NPV is________, the project should be discarded
less than zero
What does the Income/Cash flow approach assume
a purchaser would not be justified in paying more to acquire income-producing property than the present value of the income stream to be derived from the property.
The income/cash flow apporach is dependent on
reserves, production rate, operating
reflects the present value of all estimated future cash flow within predetermined budgetary periods and possible continuing value. These cash flows include: operational expenses, sales income, and dividends. The future cash flow are discounted by the discount factor incorporating adjusted risk factor.
Discounted cash flow (DCF) model
This approach is an indicator of market value of an item or any project, including a mineral project. The value of a mine is reflected by balance of supply and demand in the market, particularly for an operating mine
Market (Comparable Sales) Approach
The market approach is considered by most appraisers and the courts to provide the best indicator of fair market value, since it reflects _______________ in the marketplace.
the balance of supply and demand
The market approach assumes that
a purchaser would not be justified in paying more for a property than it would cost him to acquire an equally desirable substitute property.
The practical problems of a market approach when it comes to mining
> there are very few sales of mining properties, and therefore few comparative data are available
since each mineral deposit is unique in quality, size, geographical location, degree of development, and many other parameters, any market data are of modest value at best.
The _____ to mine valuation attempts to determine the depreciated replacement cost for the asset in question. That is, what would it cost to reproduce an asset of identical quality and state of repair
cost approach
The fundamental concept with the cost approacn approach is____________
that a purchaser would not be justified in paying more for a property than it would cost him to acquire land and construct improvements that had comparable utility with no undue delay.
An option’s price is primarily made up of two distinct parts
instrinsic value and time value
is a measure of an option’s profitability based on the strike price versus the stock’s price in the market.
intrinsic value
based on the underlying asset’s expected volatility and time until the option’s expiration.
time value
The primary goal of option pricing theory
is to calculate the probability that an option will be exercised at expiration
Options pricing theory also derives various risk factors or sensitivities based on those inputs, which are known as an option’s _____`
Greeks.
Purpose Of Mine Valuation Studies
> Acquisition
- Taxation
- Financing
- Regulatory Requirements
means that a sum of money is worth more now than the same sum of money in the future
Time value of Money
defined as money paid for the use of borrowed money
interest
