Wk 5 - Applying Mineral Economics Flashcards
What is the relationship of price vs volume on the demand and supply curve
Demand curve - volume drops with increased price
Supply curve - volume increases with increased price
Price equilibrium is at the intersection
What are the corporate objectives of valuation and evaluation
buy
sell
hold
improve
partner
What is project evaluation
the process to decide the future of a mineral project
it determines the monetary value of the mineral assets at a set valuation date
What is the purpose of valuation
*determine sale or purchase price
*compare alternative investments
*advise shareholders and stakeholders
*determine the base value related impost or taxes
*quantify asset levels in company balance sheets
*determine entry or participation levels in joint ventures
*assess the potential for adding value by exploration or development
What is evaluation and valuations relationship
Evaluation is the starting point for valuation
What are some evaluation tools
Exploration results
Mineral Resources and Ore Reserves Statements
Scoping Studies
Preliminary Economic Assessments
(Canadian terminology)
Pre-feasibility studies
Feasibility studies
Detailed engineering
Operational budgets
Historical operational data
What is included in evaluation reports
*project location
*project ownership
*project history
*geology
*mineral resources and ore reserves
*mining
*processing
*infrastructure
*environmental
*capital and operating costs
*product marketing
*political/regulatory
*cash flow schedules
*sensitivity analyses
*risk and opportunities
What are the stages of an evaluation report
Exploration
Pre-development
Development
Production
What is highest and best use of the asset
it is inherent and when there is a conflicting issue it is that requires the highest net return
What are market considerations
Location
Commodity
Percentage ownership
Management control
Perceived risk
Markey volatility
What are the common valuation approaches
Market based
Income based
Cost based
What are market based approaches
exploration projects
pre-development projects
development projects
production projects
What are income based approaches
pre-development projects
development projects
production projects
What are cost based approaches
exploration projects
pre-development projects
What are common valuation methods for each valuation approach
income - discounted cash flow; real options
cost - appraised value; geoscience factor
market - comparable transactions; option agreement terms
What is the reporting regulatory framework
- National law, in reporting jurisdiction
- Stock exchange rules, in reporting jurisdiction
- Professional codes, in home jurisdiction
What are the Australian codes of practice
JORC code
VALMIN code
What is the cascade of regulatory framework
each of the above components taking precedence over the one below in the event of conflicting rules or advice
What is the overarching authority
national law
What are the commonly used methods for producing assets
*discounted cash flow to give NPV
*real options
*comparable transaction
*option agreement terms
What is comparable transaction analysis
commonly used in valuations for assets in any stage of development
there are no true comparables can obtain a large range of values from similar properties
Why do non producing assets have value
*they represent potential for eventual mineral production through exploration, enhancement of mineral resource, new ownership
*market exists with of without defined mineral resources
What are the commonly used valuation methods for non producing assets
*actual transaction
*comparable transaction
*geoscience factor
*yardstick
*past effective expenditure
*joint venture terms
*bespoke methods
