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By A. M. Nordale

Let us first trace a line, mentally, across Alaska and Yukon, starting at a point in the west slightly south of the delta of the Yukon river and from there continuing eastward, loosely following the 63rd parallel of latitude until we have passed beyond the eastern border of Yukon. We will make two pronounced digressions southward to include the greater parts of the Iditarod and Tanana River valleys. That visualized line roughly defines the southern boundary of permafrost. North of it lies a vast region, fully three-fourths of the area of the two territories, which includes Seward peninsula, the great Yukon River basin, and the tractless wastes of the Arctic. During some frigorific cycle in the distant geological past, the ground there was frozen to a depth of many hundreds of feet. How deep the frost actually penetrated is not known, but it has been found to exceed three hundred feet in many places. Nature afterwards provided a perfect insulating cover in the form of heavy moss and dense grass, which has protected the ground from the heat of the sun's rays during the intervening ages. This frozen condition has always been accepted as something indigenous to the North and little thought was given to -it until recently, when the United States Government and, I believe, the Canadian Government, began extensive studies of it, particularly in respect to its effect and bearing on the development of the great oilfields of the Arctic. Within this large region and but a short distance south of the Arctic circle are the three principal producing placer gold fields in the sub-arctic, whose hubs centre at Nome and Fairbanks in Alaska and at Dawson in Yukon Territory. The geological structure and history of the gold-bearing deposits of Dawson and Fairbanks are very similar and probably closely related. They are typical placer deposits produced by stream action during periods of erosion and inundation and subsequently covered with a thick layer of fine, powdery silt mixed with decayed vegetation which, locally, is termed 'muck'. The depth of muck varies from less than 10 to more than 250 feet, with the greater depth near the lateral edges of the valleys. The gravel underlying it is medium in size, well rounded, and composed mostly of quartz and schist. The proportion of sand or fines is approximately 40 per cent. No large boulders and little clay are found, for those districts, as well as that of Nome, have not been subjected to glaciation. The most common bed-rock found is either decomposed or hard schist, but infrequently it is slate, quartz, diorite, or a porphyry. The vertical concentration of the gold is invariably on bed-rock and in the lower few feet of gravel which overlie it. The horizontal concentration or paystreak is roughly parallel to the trend of the valley but does not ordinarily coincide with the course of the present stream. The width of the paystreak usually expands from a few feet at the head of a creek to several hundred feet near its mouth.

Jan 1, 1947

By Hrayr Agnerian

The fair market value of an exploration property is determined by its potential to host a mineral deposit. This potential is gauged by the results of previous exploration, exploration stage, meaningful past expenditures and remaining targets that are not yet tested. Values of exploration properties can be viewed as distinct points in a three-dimensional space defined by orthogonal axes, namely: Exploration Stage (x-axis); Cumulative Expenditures (y-axis); and Property Value (z-axis). In general, these values are estimated by applying activity factors on previous exploration expenditures, e.g. an activity factor of 100% for an active property with good potential and a factor of 50% for an active property but past expenditures have not upgraded the property. At certain periods, a market factor may also be applied to reflect the activity of mineral property acquisitions. For properties that do not exhibit any exploration potential, only nominal values are applied.

Jan 1, 1996

This paper examines the issues involved in the technical audit and valuation of exploration prospects. Certain methodologies are more appropriate to use depending upon whether the mineral property valuation is of an exploration area, a project under development, or an operating mine. Valuation approaches that are reviewed include the Multiple of Exploration Expenditure, Joint Venture Terms, Rules of Thumb, and particularly the Kilburn Rating Method. The DCF/NPV Financial Simulation Method, even modified by the use of Expected Values, is not considered appropriate for valuing exploration prospects. The choice of the most appropriate methodology and its successful application depends primarily upon the amount of reliable input data available and, more importantly, the experience and judgement of the valuer. It must be remembered that all valuations are time and circumstance specific and will be generally subject to revision as more data becomes available.

Jan 1, 1993

By J. G. Russell

The valuation of known mineral re-serves entails the economic evaluation of the mining enterprise and the valuation of other assets employed, including mining and processing plant and intangible assets. A case study approach analyzes two reserve situations: ownership of reserves (phosphate rock), and leasing of reserve lands (kaolin). The appraisal of the physical property is outlined, along with the economic analysis of the operation. The discounted net cash flow approach is used to value the enterprise, leading to value of the reserves after correlation with other assets employed.

Jan 1, 1989

By E. E. White

I disagree with Mr. Brinsmade on serveral points, and I will discuss this remards under the same six topics which he has used.

Jan 1, 1915

By E. E. White

I DISAGREE with Mr. Brinsmade on several points, and I will discuss his remarks under the same six topics which he has used. 1. Rate of Interest Earned by Sinking-Fund.-I believe Mr. Brinsmade is confused in his ideas as to the effect of new gold on the interest earned on money. The flood of gold which he mentions certainly should not operate, to increase interest rates, but since it replaces and adds to liquid capital should reduce interest rates and counteract the destruction of liquid capital which he mentions. Furthermore, it is doubtful if the destruction of capital since 1897 by wars and catastrophes has been any greater in proportion than in similar periods before 1897. With regard to savings banks, I would say that only 3 per cent. is allowed on deposits through a large part of the West. As to bonds, they can be bought to yield any rate. of interest desired up to 6 per cent., but, a 5 per. cent. bond is not as safe as a 4 per cent. bond, nor a 4 per cent. bond as safe as a 3 per cent. government security. I do not understand why Mr. Brinsmade says that Mr. Denny's quoted opinion of a 3 per cent. rate is evidently based on English conditions before the Boer War. Certainly there is no reference to the Boer war or to English conditions in Mr. Denny's article. M. Howard Burnham, in his admirable work on mine valuation, says': ". For instance, redemption is taken at 3 per cent., because even 4 per cent. represents a greater risk, as is indicated by the purchase of Government paper to bear only 3 per cent., the great desideratum of the .latter being security." . Again, Mr. Burnham says:2 "The tables are calculated on the assumption that the dividends shall accumulate at 3 per cent. only, as in accordance with the general idea set out elsewhere, a rate greater than 3 per cent. involves appreciable risk with which it were inaccurate to saddle the sinking-fund if risks are to be segregated, this being the basis of all the writer's calculations."

Jan 6, 1914

By John C. Smock

THE question of the proper valuation of mines of iron ore was suggested to me by the difficulties experienced in getting answers for the United States Census Office, while I was engaged in the work of collecting the statistics of mines in New Jersey and New York The answers to the questions relating to values of real estate of mine properties varied so greatly that it was necessary to revise them according to some general principles of valuation. Generally the returns of mine proprietors Seemed to be too low. There were, however, examples of what would be termed excessive valuation. The Subject appeared to be of practical importance, and led to the paper here presented. The following table of selected mine statistics is given, prefacing the discussion of the principles of valuation. It is in part made up of census returns and partly of data obtained directly from mine owners and managers. The mines which were Selected for the Several groups and mining districts include nearly all of those from Which the more full and carefully filled returns were received, and are also representative of their respective districts. Hence the averages obtained from them become good types of these groups or districts. The mines of New Jersey appear in Six groups, each containing from three to eleven mines, or, in all, thirty-four mines. The magnetic iron ores of New York are in four well-marked groups, and there are twenty-six mines in them. Then follow the red hematite mines of St. Lawrence and Jefferson counties; and, lastly, the brown hematite groups of Dutchess and Columbia counties, and those of the adjacent parts of Connecticut and Massachusetts. The whole number of mines represented by the table is eighty-eight, of which twenty-eight are hematite mines. The first column gives the value of the real estate; the second that of the plant; the third is the sum of these two, or the capital invested. Then follow the number of men employed, the amount of wages paid during the census year, and the value of materials used in mining and preparing the ores for market.* The seventh column gives the total expendi- * The value of materials is somewhat uncertain in many cases, as royalties are included under this head. Likewise, under wages, the cost of explosives and light is often included. Hence it is impossible to draw the line sharply between these items of expenditure.

Jan 1, 1882

By James Finlay

(New York Meeting, February, 1913) AT first blush one is tempted to say that iron-mines are like any other mines, and that principles governing mining-property in general will apply to them. But there are certain considerations which seem to repay reflection. Gold and copper are more or less independent of transportation. The proof of this is that those metals are profitably mined and shipped from the remotest corners of the earth. Their value is determined by the cost of production on the ground. This is quite true of gold, not quite so true of copper, not at all true of iron. If New York were a fishing-village and Chicago' a swamp, Calumet & Hecla might still be a bonanza. The main element of its value is the 60 lb. of fine copper per ton which it produced for years. But the Mesabi Range is absolutely dependent upon the industrial activity in the United States. Iron-manufacture in Europe would give it no value whatever. If Chicago and New York had a population of Peruvians or Hindus, the Hull-Rust mine would be as worthless a bit of landscape as any tundra in Alaska. I have discussed these facts more or less casually and dimly in my book on the cost of mining and in my report to the Tax Commissioners of Michigan1 I shall try here to bring them out in more detail. I have already referred to some differences in the problem of mining as between the more precious metals, e.g., gold, and the less precious and more abundant minerals, like iron and coal; but it is interesting to note that the literature of the eco-

Jan 3, 1913

Discussion of the paper of James R. Finlay, presented at the New York meeting, February, 1912, and printed in Bulletin No. 75, March, 1913, pp. 487 to .503. CHAIRMAN JOHN BIRKINBINE :-Having been invited to preside at this session, the Chairman feels that the part he takes in discussions should be limited, although the subject presented is one of much interest to him and there are diverse viewpoints concerning methods of valuing expectancies from what may be considered " ore in sight," a term itself subject to various definitions. Estimates of quantities upon which valuations are made may differ without subjecting the estimators to criticism of unfairness if made by a prospective purchaser or by a seller, or if they are used as the basis for taxation. The hopes of the seller may influence a liberal allowance for estimated reserves, while the expectancies of a willing purchaser are less optimistic, and the tax assessor is expected to limit his consideration to the producing capacity of a mine, with possibly modest allowance for reserves. The knowledge that a property contains or yields mineral or the expectancy that it may be a producer of value adds to the estimate placed upon it by any of the above classes, and a just determination of this value is often a complex problem.

Jan 5, 1913

R. B. BRINSMADE, Puebla, Puebla, Mexico (communication to the Secretary*) :-As I have previously considered the general equations for mine-valuation,1 I will here discuss only that part of Mr. Finlay's paper criticized by E. E. White, along with some of the general principles of mining taxation, under the following six topics: 1. Rate of interest earned by sinking-fund. 2. Rate of interest earned by investment. 3. Place of royalty item in valuation. 4. Place of taxation item in valuation. 5. Calculation of future ore-prices. 6. Valuation of undeveloped mining land. 1. Rate of Interest Earned by Sinking-Fund.-Mr. Denny's quoted opinion of a 3 per cent. rate is evidently based on English conditions before the Boer war. The great destruction of liquid capital by the great wars and catastrophes since 1897, along with the flood of gold and consequent rise in the average index of commodity prices, has undoubtedly increased the rate of interest at least one-half per cent. In the United States sound savings banks now allow 4 per cent. on deposits, while safe bonds are quoted at prices which yield even 5 per cent.. 2. Rate of interest Earned by Investment.-Gold-mines with uncertain and scanty ore reserves, the objects of Mr. Denny's quoted remarks, are quite different from iron,. copper, or coal mines with definite mineral reserves blocked out ahead by drilling or driving. While 10 per cent is often all inadequate yield from gold-mines, the latter class of mines are often, as safe as city real estate and resemble it as an investment in more ways than one.

Jan 10, 1913

By Orr Hamilton

VALUATION of a mine is an approximation of its true cash value which requires the application of fundamental principles of economics. Mines are valued from necessity, for the following reasons: (a) Transfers of titles. (b) Dissolutions of partnerships or corporations. (c) Mergers of mining companies. (d) Appraisals for the purpose of State and Federal taxation. (e) Establishment of the fact of worth as a basis of loans. (f) Determination of values as frequently required in litigation. (g) Listing of stock for sale by a reputable stock exchange. For the majority of purposes a valuation is required as at the present time, but for some purposes valuations as of bygone times may more nearly reflect the intrinsic worth of a mine because its subsequent history can never be, entirely ignored, but valuations made as at the present time are better indicators of cash values. Many mines with great intrinsic worth have been sold for small cash prices. The object of legitimate mine valuations is to deter-mine salable value, or that price in cash at which a transfer of the property from a willing seller to a willing buyer might be consummated, assuming that both vendor and vendee have knowledge of all pertinent data and that the owner, is not forced to sell at a sacri-fice-the definitions of fair market value precluding a forced sale.

Jan 11, 1923

By George F. Weaton

Mining differs from the ordinary industry in that most industries and enterprises have an indeterminate life, apparently perpetual, and therefore, are not called on to replace the original investment. In mining, however, when the ore bodies are mined out, there is nothing left, The original capital investment must, therefore, be returned to the investor by the time that the profitable life of the mine is ended. When the operating company makes no provisions for perpetuating its life by investing a portion of its earnings in other properties, the usual procedure is to pay the investor, periodically, a dividend sufficiently larger than the risk return on his investment to enable him, if he reinvests this overplus at a safe rate of compound interest, to replace his original capital by the time the mine is exhausted. This overplus constitutes a return of invested capital. In estimating the value of a mining enterprise, the work leading to the final result may be divided into two parts. The first is the examination of the property to determine ore reserves, mining costs and profits, financial requirements and future prospects. Whatever conclusions are reached in this phase of the work depend on the experience, thoroughness and integrity of the examining engineers. The second is the calculations pursuant to the field examination.

Jan 5, 1973

By W. E. Roscoe

"Mineral exploration properties are those on which an economically viable mineral deposit has not yet been discovered. Such properties are bought, sold, optioned and joint ventured on the basis of their perceived potential for the existence and discovery of a viable mineral deposit. The intrinsic value of an exploration property is therefore based on the exploration potential. One measure of the exploration potential is the amount that can be justified to spend on exploration for a viable deposit.The appraised value method uses a cost approach to value exploration properties. It is based on the premise that an exploration property is worth the meaningful past exploration expenditures plus warranted future costs to test remaining exploration potential. Results of past exploration work are analyzed in order to retain only those past expenditures that are productive in terms of identifying remaining potential. Warranted future costs comprise a reasonable exploration budget to test that potential."

Jan 1, 2002

By William E. Roscoe

"Mineral exploration properties are those on which an economically viable mineral deposit has not yet been discovered. Such properties are bought, sold, optioned and joint ventured on the basis of their perceived potential for the existence and discovery of a viable mineral deposit. The intrinsic value of an exploration property is therefore based on the exploration potential. One measure of the exploration potential is the amount that can be justified to spend on exploration for a viable deposit.The appraised value method uses a cost approach to value exploration properties. It is based on the premise that an exploration property is worth the meaningful past exploration expenditures plus warranted future costs to test remaining exploration potential. Results of past exploration work are analyzed in order to retain only those past expenditures that are productive in terms of identifying remaining potential. Warranted future costs comprise a reasonable exploration budget to test that potential.INTRODUCTIONThe purpose of this paper is to describe a cost approach to the valuation of mineral exploration properties and to provide some valuation examples. The particular cost approach described is the Appraised Value Method, which is best applied to mineral properties at the exploration stage.At present there are no comprehensive regulations or guidelines in Canada which specify what approaches and methods to use for the valuation of mineral properties. In this paper, the Appraised Value Method described is one method that the writer considers to be accepted industry practice for mineral properties at the exploration stage.Mineral properties are valued for a number of reasons, including mergers and acquisitions, non arm's length transactions, pricing of initial public offering of stock, support for property agreements, litigation, expropriation, and insurance claims."

Jan 1, 2003

By J. H. Heintz

This paper discusses the law as it relates to appraising operational mining properties in the context of a takings claim. Topics include the need for valuation expertise, the differences between de jure and de facto takings, an overview of the law of condemnation, including jurisdictional issues, and defining your strategic options according to the controlling statute. State condemnation law varies by jurisdiction and just compensation can be calculated by comparable sales unit-times-price, before ¬after-valuation, capitalization of income and discounted cash flow methods. Takings under Federal laws are reviewed, as is the necessity of assembling a team including attorneys, valuation experts including a mineral appraiser, a real estate appraiser, economists and geologists.

Jan 1, 2002

The aim of this paper is to broadly review the purposes of valuations and the methods used to calculate them. Examples are provided by coal and alluvial gold properties. Important factors are consistency, how to deal with uncertainty, and the selection of discount rates. The purposes of valuation are seen as: 1.  valuations for sale; within this category are sales to third parties, sales between partners, and vendor valuations for prospectuses; 2.  to provide bankable estimates for financing; and 3. to provide values for local body rating. The methods used depend on the purpose of the valuation and the amount of information to hand.

Jan 1, 1988

By Lionel C. Kilburn

"This geological engineering method is based on jour main characteristics of mineral properties, viz; location: inclusion of valuable mineralization; inclusion of geophysical and/or geochemical targets; and inclusion of geological targets. These are subdivided into a total of 19 subcategories, which are used to determine the value of the property.The nineteen subcategories are prioritized and assigned relative value factors from 1.3 to 10. Value of each mineral claim unit is determined by applying the appropriate subcategory factors to a base value of $400per 16.2 hectare unit. Property value is calculated by totalling the values of such individual claim-units.The boundary between ore grade and sub-ore grade must be estimated for each property under valuation, thereby making the method sensitive to mineral commodity prices.A clear and disciplined sequence of decisions based on personal experience forms the basis of this method. The method utilizes all factors normally used to value a mineral property.IntroductionIt is generally accepted in the exploration industry that valuation of exploration properties is a subjective rather than objective process (Roscoe, 1986; Lawrence, 1988; Lawrence, 1989; Woodcock, 1985), and that it is greatly influenced by the experience and qualifications of the person who is doing the valuation. However, the significantly low degree of objectivity in mineral property valuation at this point in time invites effort to achieve a more quantitative engineering basis.Value of a mineral property depends basically upon metal prices, recoverable grades, mining and metallurgical practices, commodity supply and demand , and political-economic conditions, all of which vary with time. Therefore, any valuation is valid for only that point in time when it is made. Mineral deposits can decrease as well as increase in technical value with time."

Jan 1, 1990

By R. D. Lawrence

"Comparable transaction analysis is the best known of the market approaches to valuation of exploration-stage mineral properties. The analysis of option and farm-in agreements can also provide useful guidance to valuators. While such approaches can be distorted by incomplete analysis, market-based methods are capable of providing consistent, credible results when carried out carefully with due consideration paid to all factors which buyers and sellers consider when dealing in the real market. IntroductionMineral properties without defined resources present one of the most challenging tasks to the mineral valuator. This paper will concentrate on market-based approaches to valuation of such properties. Other authors at MM2000 presented papers on cost and income approaches. Sorentino (2000) also provides a useful overview with some provacative commentary on methods.Market based-approaches are based on the principle of substitution and include such techniques as: comparable transaction analysis (sometimes referred to as sales comparison analysis); farm-in commitment (or option agreement) analysis; rules-of-thumb; and comparable market value analysis.Are there any valuation standards available to assist the valuator? In Canada there are none that apply to the valuation of mineral assets or securities. This problem is being addressed, at least in part, by the CIMVal Committee of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)1. Further, the recently established Canadian Association of Mineral Valuators will be giving consideration to the adoption of valuation standards."

Jan 1, 2002

By Ross D. Lawrence

"Comparable transaction analysis is the best known of the market approaches to valuation of exploration-stage mineral properties. The analysis of option and farm-in agreements can also provide useful guidance to valuators. While such approaches can be distorted by incomplete analysis, market-based methods are capable of providing consistent, credible results when carried out carefully with due consideration paid to all factors which buyers and sellers consider when dealing in the real market.RÉSUMÉRoss D. Lawrence graduated from the University of Toronto with a B.A.Sc. (Applied Geology-1956) and an M.Comm. (Mining Finance-1959). As a student and following graduation, he worked across Canada on a variety of mineral exploration projects.In 1962, he was one of the founders of Watts, Griffis and McOuat, and has practiced as consulting engineer since then. For the past 20 years, Mr. Lawrence has headed up the WGM valuation practice, responsible for a group of professionals which has carried out scores of valuations of mineral properties and mining companies. He is a Certified Minerals Appraiser of the AIMA and an active participant in professional affairs.INTRODUCTIONMineral properties without defined resources present one of the most challenging tasks to the mineral valuator. You will hear from others at this conference about the use of cost and income approaches to the problem of valuing exploration properties. This paper will concentrate on market-based approaches. Market based-approaches are based on the principle of substitution and include such techniques as:??Comparable transaction analysis (sometimes referred to as sales comparison analysis).??Farm-in commitment analysis??Rules of thumbAre there any valuation standards available to assist the valuator? In Canada there are none that apply to the valuation of mineral assets or securities. This problem is being addressed, at least in part, by the CIMVal committee of the Canadian Institute of Mining, Metallurgy & Petroleum (CIM)1. Further, the recently established Canadian Association of Mineral Valuators will be giving consideration to the adoption of valuation standards."

Jan 1, 2003

By L. C. Raymond

Valuations in the mineral industry differ from those of other enterprises because mines and oil wells have a definite life so cannot be considered a perpetuity. This requires that in any mineral-property evaluation the recovery of invested capital is necessary during the life of the property. Capital write-offs for nonextractive industries are assumed to be continuously plowed back to sustain the operation and produce yields on the capital invested. The extractive or mineral industry, however, generally attempts to return to the investor both interest and principal during the life of a property. Normally this is done currently and the dividend includes both items. Where the mineral property possesses large reserves and the life factor approximates a perpetuity, the return on investment is generally comparable to that of industrial stocks. The valuation of a mineral property, at best, is based on educated estimates and judgment factors. This is particularly true as it relates to estimating selling prices over a long term or assessing the quality of management. Also, it is possible to make various assumptions as to rapidity of working out the deposit, varying time for start-up of operations, varying earning rates, so as to obtain different results with the same basic facts. Thus it is not surprising that two engineers, irrespective of their abilities, may not agree exactly even when given the same facts, but their results should be close enough to be used in establishing a fair value for trading purposes. The valuation is no better than the source of basic data and the soundness of judgment factors. Fundamentally the basic principles of mineral valuation are similar for base metals, sulfur, oil, or any other mineral. Each mineral, however, requires an engineer to have a knowledge of such factors as its occurrence, distribution, mining and processing methods, and marketing problems in order to gather and analyze all the facts and data that have a bearing on the earning potential of the property. Present Value of a Mineral Property In essence the present value of a mineral property is a sum of money in today's dollars that future income from the property are worth. It differs from the total anticipated earnings by the amount of the interest that the unrecouped investment could be expected to earn during the period of recoupment. Thus, if one could accurately estimate what a mineral property will earn during its life, after deducting all operating, administrative, capital, interest, and tax charges, the determination of present value would be a relatively simple mathematical calculation. Normally, where the expected life of the mineral property extends beyond 20 or 25 years, the discounted value of earnings beyond this period is relatively small. The petroleum industry generally discounts the annual cash flow of an operation rather than earnings since, for tax-saving purposes, earnings are kept

Jan 1, 1976