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Estimation of deposits value



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ESTIMATION OF DEPOSITS VALUE



What does estimation of mineral deposits commercial value mean?

In Ukraine, there is a notion of “geological-economic evaluation of deposits”, which procedure is governed by the appropriate regulatory documents and shall be carried out after certain stage of geological exploration (see «Deposits Exploration»). Such evaluation is similar to one in the construction (where its value is estimated based on the State Construction Norms) and other industries. At the same time, evaluation of deposits based on the normative documents, which is required by many governmental regulating/controlling bodies, does not reflect real commercial value of your project as a rule.

In our country, estimation of deposits commercial value is required for:

  • Making a decision regarding investments in development of a specific mining project.

Based upon data on deposit exploration performed by other company/companies, Protocol of the State Commission on Mineral Reserves for the deposits explored at the expense of state funding in the previous years, official feasibility study and purchasing of a license via tender procedure everything may look rather attractive. Nevertheless, taking into account that development of even a small deposit requires not less than one million dollars today, it is better to order and obtain an expert judgement of independent specialized company, which is not interested in your investments, being able to estimate reliability of exploration data, quality and tonnage of a mineral commodity within the specified area of subsurface resources and financial value of a project as a whole.

  • Same evaluation of a company, owner of a special permit (license) for an area of subsurface resources is required during implementation of agreements on purchase/sale of mining operations or deposits.
Although a seller and buyer can agree on a sales price by themselves, independent evaluation of a deposit and rights for its development enables to determine the real market value of a sale item. Independent evaluation allows to convince persons, whose interests can be affected by a sale/purchase of a deposit (company shareholders, supervisory board, etc.), that the agreement was fulfilled in good faith, each party to the agreement acted for the benefit of its own part and was aware about real market conditions, actual market value of a deposit, rights or license (special permit for an area of subsurface resources or deposit) and cost of similar projects.
  • Obtaining of debt financing, credit or share participation of an investor.
  • Determining of initial shares cost during privatization or sale of shares at the securities market.
Our experience proves, that audit results provide our clients with convincing arguments, which allow to substantially decrease the starting purchase price of a business in most cases. Rather often, decisions about refusal from acquisition of one or another deposit or mining operation are made based on audit results.


 
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