Mineral Resources and Energy Valuation

Precious Metal, Rare Metal, Rare Earth Element, Oil, Gas, Mining Right, Exploration Right

Circular:

According to HKEx Listing Rule 18.09 (3), in the case of a major (or above) acquisition, produce a Valuation Report, which must form part of the relevant circular, on the Mineral or Petroleum Assets being acquired as part of the Relevant Notifi able Transaction.

Note: Material liabilities that remain with the issuer on a disposal must also be discussed a statement that no material changes have occurred since the effective date of the Competent Person’s Report. Where there are material changes, these must be prominently disclosed; if relevant and material to the Mineral Company’s business operations, information on the following:
(a) project risks arising from environmental, social, and health and safety issues;
(b) any non-governmental organisation impact on sustainability of mineral and/or exploration projects;
(c) compliance with host country laws, regulations and permits, and payments made to host country governments in respect of tax, royalties and other signifi cant payments on a country by country basis;
(d) suffi cient funding plans for remediation, rehabilitation and, closure and removal of facilities in a sustainable manner;
(e) environmental liabilities of its projects or properties;
(f) its historical experience of dealing with host country laws and practices, including management of differences between national and local practice;
(g) its historical experience of dealing with concerns of local governments and communities on the sites of its mines, exploration properties, and relevant management arrangements; and
(h) any claims that may exist over the land on which exploration or mining activity is being carried out, including any ancestral or native claims.

Accounting:

IFRS 6 requires entities to assess any exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount.

The recognition of impairment in respect of such assets is varied from that in IAS 36 Impairment of Assets but, once impairment has been identified, it is measured in accordance with IAS 36.

Market Approach:

A mine being valued is compared with similar items that have been transacted in the market or that are listed or offered for sale, with appropriate adjustment to reflect different properties or characteristics. Due to difference of geological and environmental condition, and hardship of adjustment, comparable transactions obtained are always not representative. Therefore, this method is only for reference use.

Income Approach:

The income approach considers the income that a mine will generate over its remaining mining life and estimates value through a capitalization process. This process applies an appropriate yield, or discount rate, to the projected cashflow to arrive at a presentl value. This approach is suitable for production mine or a mine with pre-feasibility study.

Cost Method:

It is an estimate of the costs expensed for initial work such as exploration, infrastructure, professional fees and finance charges. This method is suitable for a Greenfield mine in beginning stage.