Development Of Canadian Standards And Guidelines For Valuation Of Mineral Properties

In the Canadian mining industry, there are at present no comprehensive regulations or standards for valuation of mineral properties. In January 1999, the Mining Standards Task Force of the Toronto Stock Exchange and the Ontario Securities Commission recommended that the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) establish a committee to review and advise on approaches and methodologies for the valuation of mineral properties. The authors were subsequently appointed Co-chairs of the CIM Special Committee on Valuation of Mineral Properties (CIMVal). A committee of experts from the mining industry, consulting, financial and legal communities was established with the task of reviewing available information, investigating various valuation methodologies and practices, soliciting input from interested parties, and recommending a Canadian code or standards plus guidelines for the valuation of mineral properties. As an initial stage of its work, the CIMVal Committee organized a one day session at the Mining Millennium 2000 Convention in Toronto in March 2000 on valuation of mineral properties. The 10 invited papers have been published by CIM. As a second stage, CIMVal has requested input and comments from all interested parties. The next stage will be to prepare a preliminary draft with a recommended code or standards and guidelines. This will be circulated for further input and comments prior to revision and publication of another draft. The final CIMVal report should be completed in early 2001. A variety of methods are in common usage for the valuation of mineral properties, depending on the stage of development of the property, the data available and the experience of the valuator. For example, the discounted cash flow method is commonly used for properties in production or at the feasibility stage, but is not generally considered appropriate for exploration properties. Market approaches such as comparable transactions are in wide general use, and various cost approaches are used for exploration properties. The option pricing approach has promise for valuation of marginal properties, but is not commonly used.