Valuation Methodology for Iron Ore Mineral Properties Thoughts of an Old Valuer

摘要

Having worked as a consultant for most of his 40-year working life, mostly as a mineral property valuer, the author has seen many poor valuations. Most were valuations of exploration tenements where the selection of the rather subjective, but necessary, geological inputs raised the main concerns. Those valuations involving iron ore prospects raise particular problems due to the special characteristics of such deposits. Iron ore is more like an industrial mineral rather than precious or base metals and Reserves are determined not by a traditional cut-off grade but by customer specifications. This is intended to be an overview/keynote paper on the current state of the growing (yet consolidating) Australian Iron Ore industry. It has now moved beyond Western Australia's 'Pilbara Big Two' of Rio/BHPB (with the emergence of the irrepressible FMG and Hancock Prospecting) to include the Yilgarn's 'Midwest Many' (including US re-entrant Cleveland Cliffs through Portman) and projects in other States. Ore types have moved from haematite Brockman to martite-goethite Marra Mamba (including the Robe's mesas and below water table Yandicoogina CIDs) and magnetite ore types. There are DSOs and secondary process feed. Mineral valuers have to reflect today upon these and many other determinants of value when choosing the most appropriate methodologies to adopt when technically assessing and valuing exploration tenements containing iron ore. Set against a frame work of the JORC Code (2004) and VALMIN Code (2005), the general valuation issues involved in using the cost methods (eg multiple of exploration expenditure), market methods (eg comparable sales, rules-of-thumb and joint venture terms) and income methods (eg synthetic discounted cash flow (DCF)/net present value (NPV) modelling) are discussed. Relevant factors when valuing iron ore properties are discussed, eg ore type, lump/fines ratio, stripping ratio, water table, impurities and grade, particularly the JORC confidence category of the identified mineralisation. Remoteness and access to existing rail infrastructure is a key consideration.