Three Pillars of Mineral Valuation; International Mineral Property Valuation Standards

"In his 1989 book, The New Realities, Peter F. Drucker, Clark Professor of Social Science at Claremont Graduate School, Claremont, CA, stated: “Information is data endowed with relevance and purpose. Converting data into information thus requires knowledge. And knowledge, by definition, is specialized” (p. 209).The discipline of mineral valuation is knowledge-based and requires a mineral valuer to collect, analyze and interpret data that are material to a mineral-valuation assignment. In so doing, the valuer turns the data into information (data come first, followed by information as determined by the mineral valuer) for use by the client (from whom the valuer obtained the mineral-valuation assignment) and other intended users. The valuer uses his or her experience and education (each valuer’s knowledge base) supported by a foundation built upon competency, materiality and transparency, the three pillars of mineral valuation (minerals valuation, mineral-property valuation).The International Mineral Valuation Standards Template (IMVAL Template), third edition dated May 2018, defines mineral valuation as: “The estimation of the value of a mineral property in money or monetary equivalent. The word ‘valuation’ can be used to refer to the estimated value (the valuation conclusion) or to refer to the preparation of the estimated value (the act of valuing)” (p. 14).Furthermore, the IMVAL Template clearly separates valuation from evaluation: “The template deals with valuation, which is distinct from evaluation. The distinction inherent in these defined terms is that valuation addresses the estimation of value of a mineral property, whereas evaluation addresses the broader assessment of a mineral property for an investment decision (p. 2).”This is an important difference because the minerals industry commonly makes investment decisions using feasibility studies to evaluate a proposed mineral development and production project. The purpose of such investment-decision analysis is distinctly different from valuation of a mineral property, no matter where that property lies upon the mineral explorationdevelopment- production-reclamation timeline (Fig. 1). Valuation involves terms such as market value, just compensation, fair value, etc., whereas investment-decision analysis is concerned with the economic viability of a given proposed project. Although feasibility analysis and market valuation can both use discounted cash flow (DCF) analysis as a tool, the formulation of the DCFs and their interpretation are different."