Valuations
Expert Valuation Services
MEC offers a comprehensive suite of valuation services tailored to projects at every stage, from initial exploration to operational mines. Utilising three primary approaches—Market-Based, Income-Based, and Cost—we ensure accuracy and reliability in determining fair value. Whether your project is in its early stages or advanced development, our methodologies are adaptable to provide precise insights
General Appraisal Approaches
There are three generally accepted approaches to obtain the fair value of a Project; the Market-Based Approach, the Income-Based Approach, and the Cost Approach (Appraised Value Method). The Geoscience Approach may also be applied. Each of these approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to select a particular approach will be determined by the most commonly adopted in valuing business entities that are similar in nature.
The fair value of the asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.
Valuation techniques consistent with the market approach, income approach, and/or cost approach shall be used to measure fair value. Key aspects of those approaches are summarised below:
Market Approach
The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The valuation technique using the market approach to provide the most accurate estimate of the asset value of an undeveloped mineral property is that of Comparable Transactions. In some instances, a particular mineral project may include assets that range from prospecting and exploration tenements through to Mineral Resources and Ore Reserves, and producing mines.
Where Comparable Transactions relating to the sale, joint venture or farm-in/farm-out of mineral assets are known, such transactions may be used as a guide to, or a means of, valuation.
For a transaction to be considered comparable it should be similar to the asset being valued in terms of location, timing and commodity, and the transaction can be regarded as of “arm’s length.”
The Comparable Transactions method is best applied to Exploration and Advanced Exploration areas, and Pre-Development Projects.
In the case of Exploration Areas, and to a lesser extent Advanced Exploration Areas, the assets have “hidden” potential that has a speculative effect on their value. The valuation of Exploration Areas is therefore to a significant extent dependent on the informed, professional opinion of the valuer.
Market Approach
The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The valuation technique using the market approach to provide the most accurate estimate of the asset value of an undeveloped mineral property is that of Comparable Transactions. In some instances, a particular mineral project may include assets that range from prospecting and exploration tenements through to Mineral Resources and Ore Reserves, and producing mines.
Where Comparable Transactions relating to the sale, joint venture or farm-in/farm-out of mineral assets are known, such transactions may be used as a guide to, or a means of, valuation.
For a transaction to be considered comparable it should be similar to the asset being valued in terms of location, timing and commodity, and the transaction can be regarded as of “arm’s length.”
The Comparable Transactions method is best applied to Exploration and Advanced Exploration areas, and Pre-Development Projects.
In the case of Exploration Areas, and to a lesser extent Advanced Exploration Areas, the assets have “hidden” potential that has a speculative effect on their value. The valuation of Exploration Areas is therefore to a significant extent dependent on the informed, professional opinion of the valuer.
The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The valuation technique using the market approach to provide the most accurate estimate of the asset value of an undeveloped mineral property is that of Comparable Transactions. In some instances, a particular mineral project may include assets that range from prospecting and exploration tenements through to Mineral Resources and Ore Reserves, and producing mines.
Where Comparable Transactions relating to the sale, joint venture or farm-in/farm-out of mineral assets are known, such transactions may be used as a guide to, or a means of, valuation. For a transaction to be considered comparable it should be similar to the asset being valued in terms of location, timing and commodity, and the transaction can be regarded as of “arm’s length.” The Comparable Transactions method is best applied to Exploration and Advanced Exploration areas, and Pre-Development Projects.
In the case of Exploration Areas, and to a lesser extent Advanced Exploration Areas, the assets have “hidden” potential that has a speculative effect on their value. The valuation of Exploration Areas is therefore to a significant extent dependent on the informed, professional opinion of the valuer.
Cost Approach
The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost). From the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence. Obsolescence encompasses physical deterioration, functional (technological) obsolescence, and economic (external) obsolescence and is broader than depreciation for financial reporting purposes (an allocation of historical cost) or tax purposes (based on specified service lives).
Income Approach
The income approach uses valuation techniques to convert future amounts (for example, cashflow or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Those valuation techniques include present value techniques; option-pricing models, which incorporate present value techniques; and the multi-period excess earnings method, which is used to measure the fair value of certain intangible assets.
Applicability
The Market approach is applicable to all stages of project development.
The Income approach is applicable to more advanced projects, and the Cost approach to early stage projects.
Valuation approaches and applicability
Valuation approaches and applicability
Swipe ↔ on the table to scroll.
| Valuation Approach | Exploration Projects | Pre-development Projects | Development Projects | Production Projects |
|---|---|---|---|---|
| Market | Yes | Yes | Yes | Yes |
| Income | No | In some cases | Yes | Yes |
| Cost | Yes | In some cases | No | No |