Due to the inherently unique characteristics of mining as an industry, it is more challenging than other businesses to valuate. Even the most profitable mines are finite businesses – meaning they will stop operating when the resource that they are mining runs out. This is completely different to more “traditional” manufacturers, who can potentially stay in business almost indefinitely.

Add to this the fact that mining is a vastly capital intensive industry, mining assets are controlled by governments, mines earn return by liquidating assets, and they’re at the mercy of market trends and risks, and you begin to see why valuations are tricky!

Yet despite these factors, mining and exploration continue to attract the interest of investors looking for that sweet spot between calculated risk and estimated reward.

This is why the accurate valuation of mines and mining companies is so important.

So How Do You Value A Mine?

There are two main ways to value a mine and/or mining company. The first is to determine the enterprise value and Dollar value you’re paying per ounce of resource, and the second is to work out that company’s net present value. Both methods usually end up with similar conclusions, so it really boils down to the personal preference of the valuation team.

Although all mines are different, they are united by one unique characteristic – their business models are based on using up all their assets! The challenge is that no one knows for sure how much is in a given deposit until it’s all gone. As such, the valuation of a mine often follows the market value of its reserves. Those companies with a long track record of successfully bringing those reserves to market are generally being paid a premium.

At The Property Valuations East Rand, we offer a wide range of services and asset valuations – including Mining Valuations. Call us today on 0860 999 440 for more information and a free no obligation quote, or visit www.property-valuation.co.za