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By James Finlay

(New York Meeting, February, 1913) AT first blush one is tempted to say that iron-mines are like any other mines, and that principles governing mining-property in general will apply to them. But there are certain considerations which seem to repay reflection. Gold and copper are more or less independent of transportation. The proof of this is that those metals are profitably mined and shipped from the remotest corners of the earth. Their value is determined by the cost of production on the ground. This is quite true of gold, not quite so true of copper, not at all true of iron. If New York were a fishing-village and Chicago' a swamp, Calumet & Hecla might still be a bonanza. The main element of its value is the 60 lb. of fine copper per ton which it produced for years. But the Mesabi Range is absolutely dependent upon the industrial activity in the United States. Iron-manufacture in Europe would give it no value whatever. If Chicago and New York had a population of Peruvians or Hindus, the Hull-Rust mine would be as worthless a bit of landscape as any tundra in Alaska. I have discussed these facts more or less casually and dimly in my book on the cost of mining and in my report to the Tax Commissioners of Michigan1 I shall try here to bring them out in more detail. I have already referred to some differences in the problem of mining as between the more precious metals, e.g., gold, and the less precious and more abundant minerals, like iron and coal; but it is interesting to note that the literature of the eco-

Jan 3, 1913

Discussion of the paper of James R. Finlay, presented at the New York meeting, February, 1912, and printed in Bulletin No. 75, March, 1913, pp. 487 to .503. CHAIRMAN JOHN BIRKINBINE :-Having been invited to preside at this session, the Chairman feels that the part he takes in discussions should be limited, although the subject presented is one of much interest to him and there are diverse viewpoints concerning methods of valuing expectancies from what may be considered " ore in sight," a term itself subject to various definitions. Estimates of quantities upon which valuations are made may differ without subjecting the estimators to criticism of unfairness if made by a prospective purchaser or by a seller, or if they are used as the basis for taxation. The hopes of the seller may influence a liberal allowance for estimated reserves, while the expectancies of a willing purchaser are less optimistic, and the tax assessor is expected to limit his consideration to the producing capacity of a mine, with possibly modest allowance for reserves. The knowledge that a property contains or yields mineral or the expectancy that it may be a producer of value adds to the estimate placed upon it by any of the above classes, and a just determination of this value is often a complex problem.

Jan 5, 1913

R. B. BRINSMADE, Puebla, Puebla, Mexico (communication to the Secretary*) :-As I have previously considered the general equations for mine-valuation,1 I will here discuss only that part of Mr. Finlay's paper criticized by E. E. White, along with some of the general principles of mining taxation, under the following six topics: 1. Rate of interest earned by sinking-fund. 2. Rate of interest earned by investment. 3. Place of royalty item in valuation. 4. Place of taxation item in valuation. 5. Calculation of future ore-prices. 6. Valuation of undeveloped mining land. 1. Rate of Interest Earned by Sinking-Fund.-Mr. Denny's quoted opinion of a 3 per cent. rate is evidently based on English conditions before the Boer war. The great destruction of liquid capital by the great wars and catastrophes since 1897, along with the flood of gold and consequent rise in the average index of commodity prices, has undoubtedly increased the rate of interest at least one-half per cent. In the United States sound savings banks now allow 4 per cent. on deposits, while safe bonds are quoted at prices which yield even 5 per cent.. 2. Rate of interest Earned by Investment.-Gold-mines with uncertain and scanty ore reserves, the objects of Mr. Denny's quoted remarks, are quite different from iron,. copper, or coal mines with definite mineral reserves blocked out ahead by drilling or driving. While 10 per cent is often all inadequate yield from gold-mines, the latter class of mines are often, as safe as city real estate and resemble it as an investment in more ways than one.

Jan 10, 1913

By Orr Hamilton

VALUATION of a mine is an approximation of its true cash value which requires the application of fundamental principles of economics. Mines are valued from necessity, for the following reasons: (a) Transfers of titles. (b) Dissolutions of partnerships or corporations. (c) Mergers of mining companies. (d) Appraisals for the purpose of State and Federal taxation. (e) Establishment of the fact of worth as a basis of loans. (f) Determination of values as frequently required in litigation. (g) Listing of stock for sale by a reputable stock exchange. For the majority of purposes a valuation is required as at the present time, but for some purposes valuations as of bygone times may more nearly reflect the intrinsic worth of a mine because its subsequent history can never be, entirely ignored, but valuations made as at the present time are better indicators of cash values. Many mines with great intrinsic worth have been sold for small cash prices. The object of legitimate mine valuations is to deter-mine salable value, or that price in cash at which a transfer of the property from a willing seller to a willing buyer might be consummated, assuming that both vendor and vendee have knowledge of all pertinent data and that the owner, is not forced to sell at a sacri-fice-the definitions of fair market value precluding a forced sale.

Jan 11, 1923

By George F. Weaton

Mining differs from the ordinary industry in that most industries and enterprises have an indeterminate life, apparently perpetual, and therefore, are not called on to replace the original investment. In mining, however, when the ore bodies are mined out, there is nothing left, The original capital investment must, therefore, be returned to the investor by the time that the profitable life of the mine is ended. When the operating company makes no provisions for perpetuating its life by investing a portion of its earnings in other properties, the usual procedure is to pay the investor, periodically, a dividend sufficiently larger than the risk return on his investment to enable him, if he reinvests this overplus at a safe rate of compound interest, to replace his original capital by the time the mine is exhausted. This overplus constitutes a return of invested capital. In estimating the value of a mining enterprise, the work leading to the final result may be divided into two parts. The first is the examination of the property to determine ore reserves, mining costs and profits, financial requirements and future prospects. Whatever conclusions are reached in this phase of the work depend on the experience, thoroughness and integrity of the examining engineers. The second is the calculations pursuant to the field examination.

Jan 5, 1973

By W. E. Roscoe

"Mineral exploration properties are those on which an economically viable mineral deposit has not yet been discovered. Such properties are bought, sold, optioned and joint ventured on the basis of their perceived potential for the existence and discovery of a viable mineral deposit. The intrinsic value of an exploration property is therefore based on the exploration potential. One measure of the exploration potential is the amount that can be justified to spend on exploration for a viable deposit.The appraised value method uses a cost approach to value exploration properties. It is based on the premise that an exploration property is worth the meaningful past exploration expenditures plus warranted future costs to test remaining exploration potential. Results of past exploration work are analyzed in order to retain only those past expenditures that are productive in terms of identifying remaining potential. Warranted future costs comprise a reasonable exploration budget to test that potential."

Jan 1, 2002

By William E. Roscoe

"Mineral exploration properties are those on which an economically viable mineral deposit has not yet been discovered. Such properties are bought, sold, optioned and joint ventured on the basis of their perceived potential for the existence and discovery of a viable mineral deposit. The intrinsic value of an exploration property is therefore based on the exploration potential. One measure of the exploration potential is the amount that can be justified to spend on exploration for a viable deposit.The appraised value method uses a cost approach to value exploration properties. It is based on the premise that an exploration property is worth the meaningful past exploration expenditures plus warranted future costs to test remaining exploration potential. Results of past exploration work are analyzed in order to retain only those past expenditures that are productive in terms of identifying remaining potential. Warranted future costs comprise a reasonable exploration budget to test that potential.INTRODUCTIONThe purpose of this paper is to describe a cost approach to the valuation of mineral exploration properties and to provide some valuation examples. The particular cost approach described is the Appraised Value Method, which is best applied to mineral properties at the exploration stage.At present there are no comprehensive regulations or guidelines in Canada which specify what approaches and methods to use for the valuation of mineral properties. In this paper, the Appraised Value Method described is one method that the writer considers to be accepted industry practice for mineral properties at the exploration stage.Mineral properties are valued for a number of reasons, including mergers and acquisitions, non arm's length transactions, pricing of initial public offering of stock, support for property agreements, litigation, expropriation, and insurance claims."

Jan 1, 2003

By J. H. Heintz

This paper discusses the law as it relates to appraising operational mining properties in the context of a takings claim. Topics include the need for valuation expertise, the differences between de jure and de facto takings, an overview of the law of condemnation, including jurisdictional issues, and defining your strategic options according to the controlling statute. State condemnation law varies by jurisdiction and just compensation can be calculated by comparable sales unit-times-price, before ¬after-valuation, capitalization of income and discounted cash flow methods. Takings under Federal laws are reviewed, as is the necessity of assembling a team including attorneys, valuation experts including a mineral appraiser, a real estate appraiser, economists and geologists.

Jan 1, 2002

The aim of this paper is to broadly review the purposes of valuations and the methods used to calculate them. Examples are provided by coal and alluvial gold properties. Important factors are consistency, how to deal with uncertainty, and the selection of discount rates. The purposes of valuation are seen as: 1.  valuations for sale; within this category are sales to third parties, sales between partners, and vendor valuations for prospectuses; 2.  to provide bankable estimates for financing; and 3. to provide values for local body rating. The methods used depend on the purpose of the valuation and the amount of information to hand.

Jan 1, 1988

By Lionel C. Kilburn

"This geological engineering method is based on jour main characteristics of mineral properties, viz; location: inclusion of valuable mineralization; inclusion of geophysical and/or geochemical targets; and inclusion of geological targets. These are subdivided into a total of 19 subcategories, which are used to determine the value of the property.The nineteen subcategories are prioritized and assigned relative value factors from 1.3 to 10. Value of each mineral claim unit is determined by applying the appropriate subcategory factors to a base value of $400per 16.2 hectare unit. Property value is calculated by totalling the values of such individual claim-units.The boundary between ore grade and sub-ore grade must be estimated for each property under valuation, thereby making the method sensitive to mineral commodity prices.A clear and disciplined sequence of decisions based on personal experience forms the basis of this method. The method utilizes all factors normally used to value a mineral property.IntroductionIt is generally accepted in the exploration industry that valuation of exploration properties is a subjective rather than objective process (Roscoe, 1986; Lawrence, 1988; Lawrence, 1989; Woodcock, 1985), and that it is greatly influenced by the experience and qualifications of the person who is doing the valuation. However, the significantly low degree of objectivity in mineral property valuation at this point in time invites effort to achieve a more quantitative engineering basis.Value of a mineral property depends basically upon metal prices, recoverable grades, mining and metallurgical practices, commodity supply and demand , and political-economic conditions, all of which vary with time. Therefore, any valuation is valid for only that point in time when it is made. Mineral deposits can decrease as well as increase in technical value with time."

Jan 1, 1990

By R. D. Lawrence

"Comparable transaction analysis is the best known of the market approaches to valuation of exploration-stage mineral properties. The analysis of option and farm-in agreements can also provide useful guidance to valuators. While such approaches can be distorted by incomplete analysis, market-based methods are capable of providing consistent, credible results when carried out carefully with due consideration paid to all factors which buyers and sellers consider when dealing in the real market. IntroductionMineral properties without defined resources present one of the most challenging tasks to the mineral valuator. This paper will concentrate on market-based approaches to valuation of such properties. Other authors at MM2000 presented papers on cost and income approaches. Sorentino (2000) also provides a useful overview with some provacative commentary on methods.Market based-approaches are based on the principle of substitution and include such techniques as: comparable transaction analysis (sometimes referred to as sales comparison analysis); farm-in commitment (or option agreement) analysis; rules-of-thumb; and comparable market value analysis.Are there any valuation standards available to assist the valuator? In Canada there are none that apply to the valuation of mineral assets or securities. This problem is being addressed, at least in part, by the CIMVal Committee of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)1. Further, the recently established Canadian Association of Mineral Valuators will be giving consideration to the adoption of valuation standards."

Jan 1, 2002

By Ross D. Lawrence

"Comparable transaction analysis is the best known of the market approaches to valuation of exploration-stage mineral properties. The analysis of option and farm-in agreements can also provide useful guidance to valuators. While such approaches can be distorted by incomplete analysis, market-based methods are capable of providing consistent, credible results when carried out carefully with due consideration paid to all factors which buyers and sellers consider when dealing in the real market.RÉSUMÉRoss D. Lawrence graduated from the University of Toronto with a B.A.Sc. (Applied Geology-1956) and an M.Comm. (Mining Finance-1959). As a student and following graduation, he worked across Canada on a variety of mineral exploration projects.In 1962, he was one of the founders of Watts, Griffis and McOuat, and has practiced as consulting engineer since then. For the past 20 years, Mr. Lawrence has headed up the WGM valuation practice, responsible for a group of professionals which has carried out scores of valuations of mineral properties and mining companies. He is a Certified Minerals Appraiser of the AIMA and an active participant in professional affairs.INTRODUCTIONMineral properties without defined resources present one of the most challenging tasks to the mineral valuator. You will hear from others at this conference about the use of cost and income approaches to the problem of valuing exploration properties. This paper will concentrate on market-based approaches. Market based-approaches are based on the principle of substitution and include such techniques as:??Comparable transaction analysis (sometimes referred to as sales comparison analysis).??Farm-in commitment analysis??Rules of thumbAre there any valuation standards available to assist the valuator? In Canada there are none that apply to the valuation of mineral assets or securities. This problem is being addressed, at least in part, by the CIMVal committee of the Canadian Institute of Mining, Metallurgy & Petroleum (CIM)1. Further, the recently established Canadian Association of Mineral Valuators will be giving consideration to the adoption of valuation standards."

Jan 1, 2003

By L. C. Raymond

Valuations in the mineral industry differ from those of other enterprises because mines and oil wells have a definite life so cannot be considered a perpetuity. This requires that in any mineral-property evaluation the recovery of invested capital is necessary during the life of the property. Capital write-offs for nonextractive industries are assumed to be continuously plowed back to sustain the operation and produce yields on the capital invested. The extractive or mineral industry, however, generally attempts to return to the investor both interest and principal during the life of a property. Normally this is done currently and the dividend includes both items. Where the mineral property possesses large reserves and the life factor approximates a perpetuity, the return on investment is generally comparable to that of industrial stocks. The valuation of a mineral property, at best, is based on educated estimates and judgment factors. This is particularly true as it relates to estimating selling prices over a long term or assessing the quality of management. Also, it is possible to make various assumptions as to rapidity of working out the deposit, varying time for start-up of operations, varying earning rates, so as to obtain different results with the same basic facts. Thus it is not surprising that two engineers, irrespective of their abilities, may not agree exactly even when given the same facts, but their results should be close enough to be used in establishing a fair value for trading purposes. The valuation is no better than the source of basic data and the soundness of judgment factors. Fundamentally the basic principles of mineral valuation are similar for base metals, sulfur, oil, or any other mineral. Each mineral, however, requires an engineer to have a knowledge of such factors as its occurrence, distribution, mining and processing methods, and marketing problems in order to gather and analyze all the facts and data that have a bearing on the earning potential of the property. Present Value of a Mineral Property In essence the present value of a mineral property is a sum of money in today's dollars that future income from the property are worth. It differs from the total anticipated earnings by the amount of the interest that the unrecouped investment could be expected to earn during the period of recoupment. Thus, if one could accurately estimate what a mineral property will earn during its life, after deducting all operating, administrative, capital, interest, and tax charges, the determination of present value would be a relatively simple mathematical calculation. Normally, where the expected life of the mineral property extends beyond 20 or 25 years, the discounted value of earnings beyond this period is relatively small. The petroleum industry generally discounts the annual cash flow of an operation rather than earnings since, for tax-saving purposes, earnings are kept

Jan 1, 1976

By L. C. Raymond

Valuations in the mineral industry differ from those of other enterprises because mines and oil wells have a definite life so cannot be considered a perpetuity. This requires that in any mineral-property evaluation the recovery of invested capital is necessary during the life of the property. Capital writeoffs for nonextractive industries are assumed to be continuously plowed back to sustain the operation and produce yields on the capital invested. The extractive or mineral industry, however, generally attempts to return to the investor both interest and principal during the life of a property. Normally this is done currently and the dividend includes both items. Where the mineral properly possesses large reserves and the life factor approximates a perpetuity, the return on investment is generally comparable to that of industrial stocks. The valuation of a mineral property, at best, is based on educated estimates and judgment factors. This is particularly true as it relates to estimating selling prices over a long term or assessing the quality of management. Also, it is possible to make various assumptions as to rapidity of working out the deposit, varying time for start-up of operations, varying earning rates, so as to obtain different results with the same basic facts. Thus it is not surprising that two engineers, irrespective of their abilities, may not agree exactly even when given the same facts, but their results should be close enough to be used in establishing a fair value for trading purposes. The valuation is no better than the source of basic data and the soundness of judgment factors. Fundamentally the basic principles of mineral valuation are similar for base metals, sulphur, oil, or any other mineral. Each mineral, however, requires an engineer to have a knowledge of such factors as its occurrence, distribution, mining and processing methods, and marketing problems in order to gather and analyze all the facts and data that have a bearing on the earning potential of the property. PRESENT VALUE OF A MINERAL PROPERTY In essence the present value of a mineral property is a sum of money in today's dollars that future earnings from the property are worth. It differs

Jan 1, 1964

By L. C. Raymond

Valuations in the mineral industry differ from those of other enterprises because mines and oil wells have a definitive life so cannot be considered a perpetuity. This requires that in any mineral-property evaluation the recovery of invested capital is necessary during the life of the property. Capital writeoffs for nonextractive industries are assumed to be continuously plowed back to sustain the operation and produce yields on the capital invested. The extractive or mineral industry, however, generally attempts to return to the investor both interest and principal during the life of a property. Normally this is done currently and the dividend includes both items. Where the mineral properly possesses large reserves and the life factor approximates a perpetuity, the return on investment is generally comparable to that of industrial stocks. The valuation of a mineral property, at best, is based on educated estimates and judgment factors. This is particularly true as it relates to estimating selling prices over a long term or assessing the quality of management. Also, it is possible to make various assumptions as to rapidity of working out the deposit, varying time for start-up of operations, varying earning rates, so as to obtain different results with the same basic facts. Thus it is not surprising that two engineers, irrespective of their abilities, may not agree exactly even when given the same facts, but their results should be close enough to be used in establishing a fair value for trading purposes. The valuation is no better than the source of basic data and the soundness of judgment factors. Fundamentally the basic principles of mineral valuation are similar for base metals, sulphur, oil, or any other mineral. Each mineral, however, requires an engineer to have a knowledge of such factors as its occurrence, distribution, mining and processing methods, and marketing problems in order to gather and analyze all the facts and data that have a bearing on the earning potential of the property. PRESENTVALUEOFAMINERALPROPERTY In essence the present value of a mineral property is a sum of money in today's dollars that future earnings from the property are worth. It differs

Jan 1, 1959

This paper examines the methods and people required for the evaluation of project or corporate acquisitions. Experience over the past five years has shown that some growth can be achieved by carefully evaluated acquisition of gold projects within regions where the acquiring company has gold processing facilities. Many Western Australian companies have participated in this process and the trend seems likely to continue with a diminishing number of larger producing companies controlling through joint venture or direct purchase of widely spaced ore deposits. In some cases the acquisition may include ore processing facilities, however an increasing number of smaller project acquisitions, involving small open pit gold deposits, which are within trucking distance of the acquiring company's mill. Whilst gold prices remain at the current depressed level we can expect to see this trend continue.

Jan 1, 1989

By William E. Roscoe

"Valuation methods are well established for mineral properties with production or imminent production, and include discounted cash flow and comparable transactions. Valuation methods for non-producing mineral properties, however, are more subjective. Non-producing mineral properties include those at various stages of exploration, properties at the prefeasibility or feasibility stage, properties with currently uneconomic mineral resources, and past-producers. Different valuation methods may be appropriate for different types of mineral properties.Income approach methods such as discounted cash flow and option pricing are generally not applicable to properties at the exploration stage. The market approach is generally appropriate to all types of mineral properties, although it is difficult to find good comparables because of the unique nature of mineral properties and the small number of transactions. Cost approach methods, such as appraised value and geoscience factor, are commonly used for exploration stage properties.Canadian standards and guidelines for valuation of mineral properties are in the process of being finalized by a Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum (CIMVal Committee). The CIMVal Standards are intended to be consistent with National Instrument 43-101, which sets regulatory standards of disclosure for mineral projects, and with International Valuation Standards. The intent of the CIMVal Standards and Guidelines is that mineral property valuation be carried out by appropriately qualified individuals and that all relevant information be disclosed."

Jan 1, 2003

By William E. Roscoe

"Non-producing mineral properties include those at various stages of exploration, properties at the pre-feasibility or feasibility stage, properties with currently uneconomic mineral resources, and past-producers. The market approach is applicable to all these types of non-producing mineral properties. Income approach methods such as discounted cash flow and option pricing are generally not applicable to properties at the exploration stage, but may be applicable to non-producing mineral properties with defined mineral reserves or mineral resources.The value of a non-producing mineral property depends on its perceived potential for the existence and discovery of an economic mineral deposit. The potential, in turn, depends on a number of factors which must be considered when choosing market comparables. These comparability factors include such items as geology, mineralization, stage of exploration and results, mineral resources, location and geography, and political jurisdiction. The date of the market comparables must be within a reasonable time period of the valuation date of the subject property. Although it is difficult to find good market comparables because of the unique nature of mineral properties and the small number of transactions, these difficulties are compensated for by analyzing a number of transactions on similar properties to develop a range of values for the subject property.For valuation purposes, market comparables can be expressed in terms of total property value, value per unit area (e.g., $ per hectare), or value per unit of metal contained in mineral resources (e.g., $ per ounce of gold, or $ per pound of copper). The market comparable value can be used to estimate the value of the subject property by using the total property value, unit area value or contained metal value."

Jan 1, 2003

By A. A. de Gast, R. B. James

"The metal content of ore blocks can be calculated by the use of many different methods. These methods range in sophistication from manual calculation to computer. oriented techniques. In this case a cubic polynomial regression model is developed to depict the grade distribution of an orebody. Mine production, in stope dimensions, is then simulated on a computer to predict the output of metal content. The volume, grade and variance of the grade are estimated by triple integration and matrix algebra. A case study shows reasonable agreement between the results from the mathematical model and the mine geologists' estimate of production and ore reserve grade and tonnage."

Jan 1, 1972

By A. Noël, R. Lapierre, M. Provencher

"Modem aluminum smelters are facing significant operating cost pressure. Key methods used by smelters to manage this pressure are automation and production-information systems to optimize processes, manage quality, anticipate problems and reduce operating costs. In 2002, Aluminerie Alouette Inc. began its Phase II Expansion project, and retained the joint venture of SNC-Lavalin and Hatch (SLH) as its engineering, procurement and construction management (EPCM) team. Alouette had the distinction of being one of the most efficient aluminum smelters in the world. Alouette already understood the importance of systems integration in project delivery. For Phase II, key objectives were identified to ensure ""a state of the art"" integrated architecture that would support Alouette's production goals to integrate the existing facilities with the expansion, to form a single efficient facility and meet project schedule and budget targets. Achieving those objectives within the context of a large project often creates major challenges due to the nature of the traditional EPCM delivery model, which relies on several vendors and third-party-systems integrators. In this case, an integrated Alouette-SLH team was made responsible for all aspects of the systems integration, taking over the task from most suppliers. The integrated team was responsible for delivering an automation system and plant-wide-production IT system for the new facilities while accommodating migration for the existing systems. Through the use of rigorous methodology and advanced state of the art technology, the IT and automation strategy led to significant value creation and is recognized today as one of the key factors of the project's success. The primary results were: fast and efficient start-up of facilities, due to quality programming and implementation; a plant able to operate as a single entity; automation and IT systems delivered before time and under budget; standard programming methods implemented throughout the plant; and reduced and simplified maintenance."

Jan 1, 2006