Mineral Property Valuations
Mineral Properties: State, Freehold and Leasehold
In Australia, all States distinguish between minerals and extractive materials (hard rock, sand and gravel for construction purposes). However, legislation regulating the winning of these resources are different between States. Ownership of minerals are vested in the Crown, administered by the States, and as such are regulated by the respective States mining legislation. In Western Australia, South Australia and Northern Territory, extractive materials are vested in the Crown and regulated by their respective mining legislation. In Queensland, New South Wales and Victoria, extractive materials are owned by landholders regulated by the respective States land-use planning and development legislation.
In the situation of Crown ownership, title is leased by the State giving the right to explore and remove either the minerals or extractive materials with the relevant authority. Where extractive materials are regulated by State land-use planning and development legislation, ownership of extractive materials lies with the freeholder of the land who may either extract or lease the right to extract the construction materials with the relevant develpment approval.
Value
The International Valuation Standards (IVS) define Market Value as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
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The IVS defines the Investment Value "as the value of an asset to a particular owner or prospective owner for individual investment or operational objectives."
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Synergistic Value is "the result of a combination of two or more assets or interests where the combined value is more than the sum of the separate
values." The Synergistic Value may be different to the Market Value to one specific buyer and is also referred to as the "marriage value".
Valuation Approaches
There are three broad approaches to valuing mineral properties that include: Market, Cost and Income. The Income based approach assumes that the valuer can model the future economic returns based on the information available at the date of the valuation.
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The market-based approach uses the historical transaction prices of projects in similar geographical, geopolitical, and geological environments to derive a market value. The market-based approach can be presented in a range of unitised values including on a dollar per ounce or tonne of contained metal/mineral, dollar per square kilometre, or as a percentage of the prevailing commodity price.
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The cost-based approach is based on the notion a project is at least worth what the owner has previously spent and/or has committed to spending in future. This approach can be both retrospective and forward looking. By taking the position of the vendor who is likely to seek re-imbursement of sunk costs with a risk premium, a possible market position may be determined. By analysing the historical and future costs associated with a project, and the anticipated risk-adjusted returns, the acquiring party’s view of value may be quantified.