A Critical Examination of the Hoskold Mineral Valuation Method

Abstract. The Hoskold mineral valuation method was critically examined. The original derivation was presented and found to contain a number cf erroneous assumptions as follows: the sinking fund must be available for reinvestment in another property; the series of reinvestment of the sinking fund results in a perpetual annuity to the investor, and; evaluation of the present value of the net cash flows at the speculative rate of interest. The proper procedure of deriving the Hoskhold mineral valuation formula was discussed and illustrated with a cumulative cash position diagram, a useful tool in economic evaluation and investment decision methods.