3/2012

VALMIN
Gold Series Supporters
Seminar Series

VALMIN Seminar Series

18 October 2011, Perth & 17 April 2012, Brisbane

Technical Session Sponsors

Proceedings

The VALMIN Seminar Series has been developed in conjunction

with MICA – The Consultants Society of The AusIMM
VALMIN SEMINAR SERIES 2011–12

18 OCTOBER 2011 17 APRIL 2012

PERTH, WESTERN AUSTRALIA BRISBANE, QUEENSLAND

The Australasian Institute of Mining and Metallurgy

Publication Series No 3/2012

The VALMIN Seminar Series has been developed in conjunction

with MICA – The Consultants Society of The AusIMM.

Published by:
The Australasian Institute of Mining and Metallurgy
Ground Floor, 204 Lygon Street, Carlton Victoria 3053, Australia
© The Australasian Institute of Mining and Metallurgy 2012

All papers published in this volume were refereed prior to publication.

The Institute is not responsible as a body for the facts and opinions advanced
in any of its publications.

ISBN 978 1 921522 61 1

Desktop published by:

Kristy Burt, Kylie McShane and Olivia Tet Fong
The Australasian Institute of Mining and Metallurgy

Compiled on CD ROM by:

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CONTENTS

Codes

Codes and Ethics P McCarthy 3

The VALMIN Code – Some Current Day User Reflections J S F Dunlop 5

Canadian Standards and Guidelines for Valuation of Mineral Properties K N Spence 11

– An Update

Historic and Current Industry Practices in Public Reporting of Mineral G Njowa, A N Clay, 17
Assets in Southern Africa – Platinum Case Studies F T Cawood and
C Musingwini

Reflections

Evolution of the VALMIN Code, 2001 - 2005 R N Lees and J J Kelly 31

– What Next?

Valuing VALMIN and the Many Convergences of the Invisible Hand H R Carmichael 35

Mining and Other Issues in Project Valuation and Independent J S McIntyre 45

Technical Assessment

Problems in the Preparation of Independent Expert Reports P Stitt 55

Metallurgical Errors – Where Things Went Wrong D Connelly 61

The Cost Experience S Browne and M Fusarelli 67

Valuation Methods
Meaningful Market-Based Valuation of Exploration Assets D Lord, P R Williams, 75
O P Kreuzer and
M A Etheridge

Metal Transaction Ratio Analysis – A Market Approach for Valuation W E Roscoe 85

of Non-Producing Properties with Mineral Resources

Considerations in Valuing Inferred Resources M J Lawrence 93

Development and Implementation of a Platinum Group Elements G Njowa, A N Clay and 103
Mineral Asset Valuation Curve at Venmyn C Musingwini

Are Traditional Property Valuation Methods Appropriate for Extractive D P Herdman 111
Industry, Industrial Mineral and Landfill Asset Valuations?

Valuing Vendor Consideration – Performance Shares and Options P Guj, A Chandra 117
and A Guj
Accounting for Risk

Equator Principles as a Risk Mitigator A Brett and J Epps 133

Sovereign Risk and Gold Deposit Values J A Bell, P Guj and 141
C A Standing

Using Dynamic Discounted Cash Flow and Real Option Methods for M Samis, L Martinez, 149
Economic Analysis in NI43-101 Technical Reports G A Davis and J B Whyte

Author Index 161

 Metal Transaction Ratio Analysis –
A Market Approach for Valuation of
Non-Producing Properties with Mineral
Resources
W E Roscoe1

ABSTRACT
The fair market value of a non-producing mineral property can be derived using the market
approach, the income approach or the cost approach, depending on its stage of exploration or
development. The market approach, also called the sales comparison approach, can be used
for valuation of non-producing mineral properties with mineral resources. In addition to the
recognised yardstick methods of using value per unit metal contained in mineral resources and the
unit value expressed as a percentage of metal price, this paper emphasises the analysis by metal
transaction ratio (MTR) for polymetallic properties with mineral resources containing more than
one metal or other commodity. The MTR is the ratio of the transaction value to the gross dollar
metal content, expressed as a percentage.
The market approach involves identifying and analysing market transactions on non-producing
mineral properties comparable to the property subject to the valuation. Non-producing properties
with mineral resources include those at advanced stages of exploration, properties at the
prefeasibility or feasibility stage, properties with currently uneconomic mineral resources, and
past producers. The comparable transaction values, including MTRs, are analysed to determine a
reasonable range of values to apply to the mineral resources of the subject property. Examples are
used to illustrate the methodology.
Selection of comparable transactions should consider factors such as commodities, geological
setting, mineral deposit type, stage of exploration and results, quantity and quality of mineral
resources, location and geography, and political jurisdiction. The date of the market comparables
must be within a reasonable time period of the valuation date of the subject property. Although it
is difficult to find good market comparables because of the unique nature of mineral properties and
the small number of transactions, these difficulties are compensated for by analysing a number of
transactions on similar properties to develop a range of values for the subject property.

INTRODUCTION
The purpose of this paper is to describe a market approach for replacement value, salvage value, book value, assessed value,
valuation of non-producing mineral properties with mineral insured value, etc. As it pertains to a mineral property, fair
resources. The paper describes the use of metal transaction market value can be defined as the amount of money or
ratio (MTR) for valuation of polymetallic properties with equivalent for which a mineral property asset should change
mineral resources containing more than one metal or other hands on the valuation date in an open and unrestricted market
commodity. Some valuation examples are provided to between a willing buyer and a willing seller in an ‘arm’s length’
illustrate the methodology and general levels of mineral transaction, with each party acting knowledgeably, prudently
property values. and without compulsion. This is adapted from the definition
Valuations of mineral properties are needed for various of fair market value in the VALMIN Code (Definition D43).
reasons, including mergers and acquisitions, non-arm’s length As in any valuation, the effective date of the valuation is
transactions, pricing of initial public offering of securities, important because mineral property values vary over time,
support for property agreements, litigation, compensation depending on events on neighbouring properties, market
for expropriation, and insurance claims. Independence interest, commodity prices and other factors.
of the valuer is usually implicit for these applications Different types of mineral properties require different
(VALMIN, 2005). valuation approaches and methods (CIM, 2003; Roscoe,
Value and valuation in this paper refer to fair market value, 2003, 2007). This paper focuses on the market approach,
or market value. In some circumstances, other definitions also known as sales comparison approach, as applied to non-
of value may apply, such as fair value, net present value, producing properties with reported mineral resources. Non-

1. Chairman, Roscoe Postle Associates Inc, Suite 501, 55 University Avenue, Toronto ON M5J 2H7, Canada. Email: [email protected]

VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012 85
W E ROSCOE

producing properties with mineral resources include those at market conditions, market activity, commodity prices and
advanced stages of exploration, properties at the prefeasibility the like change over time. The comparable transaction dates
or feasibility stage, properties with currently uneconomic should be within a reasonable time period of the valuation
mineral resources, and past producers. date of the subject property and in a time of similar market
Dollars used in the examples in this paper are US dollars conditions. Typical time periods are in the range of two to
(US$), but could be considered as Australian or Canadian three years prior to the valuation date, in order to have similar
dollars. The abbreviation M is used for millions of dollars or market conditions and commodity prices, and to ensure that a
other units. sufficient number of transactions are available for meaningful
analysis. When the value per unit metal is normalised as a
This paper deals with valuation of mineral properties as
percentage of metal price or through the use of MTR, a longer
assets rather than valuation of companies or business entities
time period can be justified, provided market conditions do
that hold such properties. In many cases, the value of mineral
not change substantially during the period.
properties may be the major component of the value of
exploration and mining companies; however, there are other
Mineral resources
components to the value of a company, including other assets
and liabilities (cash and debt), quality of management, market Mineral resources as used in this paper generally refer to
recognition and liquidity. those compatible with the JORC Code (2004), CIM Definition
Standards (2010) and equivalent definitions. Measured,
indicated and inferred resources are totalled together for
MARKET APPROACH the analysis of comparable transactions and the application
General of value factors to the subject property. There may be some
justification to derive different values for different categories of
The market approach, or sales comparison approach, is one
mineral resource, but in the writer’s experience it is difficult to
of the three generally accepted valuation approaches, the
derive separate values because of the variability in transaction
other two being the income approach and the cost approach
value data and the relative scarcity of transactions with only
(International Valuation Standards, 2011; CIM, 2003).
one category of mineral resource. In general, mineral reserves
Comparable transactions analysis is a market approach that
have higher unit values than mineral resources, however, only
uses a number of market transactions on similar properties
mineral resources are considered in this paper and in the
to define a reasonable range of values to apply to the subject
examples used.
property.
Two difficulties with comparable transactions analysis are Analysis of comparable transactions
that there are no truly comparable mineral properties and Once a suitable set of comparable transactions is selected,
there are few market transactions on mineral properties, the value of each mineral property transacted can be
compared to the real estate market (Lawrence, 2001; Roscoe, derived. In most cases for non-producing properties with
2007). Another difficulty is the large amount of variability mineral resources, transactions consist of cash, securities
in market transaction values. These difficulties can be or a combination of the two, and may include a royalty in
largely overcome by identifying and analysing a number favour of the vendor. The total property value can be readily
of transactions to develop a range of values to apply to the determined with an appropriate allowance for any royalty.
subject property. A further difficulty is that mineral property In some cases, transactions may consist of option, farm-in
transaction agreements are often complex and need analysis or joint venture agreements which require some analysis to
of the agreement terms to derive a transaction value. derive the total property value. More detail on analysis of
The value of a non-producing mineral property depends on such agreements can be found in Lawrence (2001) under
its perceived potential for the existence and discovery of an Joint Venture Terms Methods and in Roscoe (2007) under
economic mineral deposit (Roscoe, 2007). For non-producing Option Agreement Terms Analysis. The analysis essentially
properties with mineral resources, the value lies in the consists of including firm financial commitments, assigning a
potential for the mineral resources to be economically viable probability of realisation to future optional commitments, and
or to be enhanced to an economically viable level. In order making an appropriate allowance for any royalty.
to choose suitable market comparable properties, a number The value of the mineral resources of each transacted
of factors must be considered. For non-producing properties property can be calculated and expressed in one or more of
with mineral resources, these comparability factors include: the following three ways:
•• commodity or group of commodities, eg gold, uranium, 1. value per unit metal or other commodity contained in the
nickel-copper, diamonds mineral resource
•• political jurisdiction 2. value per unit metal or other commodity as a percent of
•• location, access, infrastructure the metal or commodity price
•• geological setting 3. metal transaction ratio for polymetallic mineral resources.
•• mineralisation type The value per unit metal contained in the resource (Yardstick
•• stage of exploration or development Method in Lawrence, 2001) is derived from the total value of
•• general magnitude and quality of mineral resources the property divided by the units of metal or other commodity
•• potential to increase mineral resources contained in the mineral resource. A simplistic example is
•• activity on neighbouring properties given below for illustrative purposes:
•• location in a ‘hot’ area with new mineral discoveries •• 50 per cent interest purchased for $10 M: value of
•• environmental, social or political issues as potential 100 per cent property interest is $20 M
liabilities. •• mineral resources total 5 Mt at 3.1 g/t Au: contained gold
Another consideration in choosing market comparable is 500 000 oz
transactions is the date of the comparable transactions since •• unit value is $40 per ounce gold.

86 VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012
 METAL TRANSACTION RATIO ANALYSIS

Value per unit metal as a percent of the metal price uses the is applied to the mineral resources of the subject property.
gold price as of the date of the market transaction. This ties the The transactions were sourced from proprietary databases
value per unit metal in to the metal price at a particular time compiled by Intierra Resource Intelligence (2011) and Metals
and may allow analysis of comparable transactions covering a Economics Group (2011) Acquisitions Service.
longer time period since it accounts for the variation of gold
price over time. Using the above example and a gold price of Example 1 – gold property in West Africa
$1000 per ounce, a value of four per cent of the gold price is For valuation of a non-producing gold property in West Africa
derived. with mineral resources, 13 comparable gold properties were
Metal transaction ratio can be calculated for mineral identified for which market transactions had taken place.
resources that contain more than one metal (Roscoe, 2007). None of the 13 comparable transactions were in production
The gross dollar content of metals contained in the mineral and none contained mineral reserves; all contained mineral
resource is calculated using metal prices as of the date of the resources. The valuation date of the subject property is late
market transaction. The MTR is the property value divided by 2009 and the comparable transactions were within the
the gross dollar metal content. The MTR is analogous to the previous three years. Table 1 lists information on the market
ratio of unit metal value to metal price. An example is given comparable transactions.
below: Value of each transaction is expressed in $/oz gold, which
•• property value is $55 M is the property value divided by the contained ounces, and as
•• mineral resource is 50 Mt at five per cent Zn, four per cent $/oz as a percentage of the gold price as of the date of the
Pb and 20 g/t Ag transaction. MTR, if calculated, would be the same as $/oz as
•• contained metal is 5512 M lbs Zn, 4409 M lbs Pb and a percentage of the gold price.
32 M oz Ag The lower part of Table 1 shows statistics of the transaction
•• metal prices $1/lb Zn, $0.95 Pb and $20/oz Ag values for all 13 transactions, and for subsets of the
•• gross dollar content of metals $5512 M Zn, $4189 M Pb transaction value data. The transaction values range over two
and $1286 M Ag – total $10 986 M orders of magnitude from $1.36/oz - $125.55/oz and from
•• MTR = $55 M/$10 986 M = 0.50 per cent. 0.17 - 16.76 per cent of the gold price. The highest and lowest
Note that the gross dollar metal content cannot be considered values are considered to be outliers, and when they are
to be a value and is used here only for the purpose of deriving removed, the range is reduced by an order of magnitude to
the MTR. Reporting of such numbers as ‘gross in situ value’ $6.17/oz - $49.53/oz and 0.69 - 4.20 per cent of the gold
and the like is not allowed under JORC or CIM Definition price. The standard deviation of the values is also reduced
Standards. substantially. Without the outliers, the average transaction
values are $22.84/oz and 2.37 per cent of the gold price, and
The market comparable transactions are analysed to derive the median values are $19.64/oz and 2.17 per cent of the gold
an appropriate value or range of values to apply to the mineral price.
resources of the subject property in terms of value per unit
metal, unit value as a percent of metal price and/or MTR. Table 1 also shows statistics for two different time periods:
Considerations in choosing an appropriate range of market 2007 and 2008 - 2009. It can be seen that the 2008 - 2009
values include: mean and median values are significantly higher than those
of 2007, presumably due to the impact of the global financial
•• examine mean and median values as well as overall crisis in late 2008. The $/oz and per cent of gold price values
variability and range of values for 2008 - 2009 are therefore relied on more than the 2007
•• consider eliminating outliers at the high and low end of values for derivation of an appropriate range of values to
the value range apply to the subject property with a late 2009 valuation date.
•• examine possible relation of values to transaction date,
The recommended ranges to apply to the subject property
size or grade of mineral resource, size of transaction,
are $24/oz to $30/oz and 2.2 - 3.0 per cent of the gold price.
political jurisdiction or other factors
If the subject property has a mineral resource containing
•• consider which properties are more similar to the subject
1.5 million ounces and the gold price at the late 2009 valuation
property.
date is $1100/oz, the subject property can be valued as follows:

EXAMPLES OF MARKET APPROACH •• $36 M - $45 M using $24/oz - $30/oz

•• comparables range using 2.2 - 3.0 per cent of the $1100
TO VALUATION OF NON-PRODUCING gold price is $24.20/oz - $33/oz
PROPERTIES WITH MINERAL RESOURCES •• this results in $36.3 M - $49.5 M as per cent of gold price
Three examples follow of comparable transactions analysis •• value range for the subject property is $36 M - $47 M in
using yardstick methods and MTR. One is for a single metal late 2009 weighting the two equally.
resource property and the other two are for properties with
polymetallic resources. For each of the examples, the value Example 2 – polymetallic property in eastern
of each property was derived from published details of the Canada
transaction. If the transaction was for less than 100 per cent
For valuation of a non-producing Ni-Cu-Co-Pt-Pd-Au property
of the property, the transaction value has been adjusted to a in eastern Canada with mineral resources, ten comparable
100 per cent interest in the property. Contained metals have polymetallic properties with a similar mix of metals were
been calculated from the published mineral resources with identified for which market transactions had taken place and
all categories added together, with no allowance for process for which mineral resources were reported. The valuation
recoveries. date of the subject property is early 2011 and the comparable
First, market transactions are analysed to derive an transactions were within the previous 26 months. Table 2 lists
appropriate range of values and, second, the range of values information on the market comparable transactions.

VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012 87
W E ROSCOE

TABLE 1
Comparable transactions analysis for a non-producing gold property in West Africa.

Transaction date Property value $ M Contained gold M oz $/oz gold Price on transaction $/oz as % of Au price
date $/oz Au
2007 333.3 2.66 125.55 749 16.76
2009 200.0 4.04 49.53 1180 4.20
2008 54.5 1.26 43.19 960 4.50
2008 31.3 0.92 33.98 864 3.93
2009 240.0 8.41 28.54 1062 2.69
2009 565.0 22.57 25.03 1040 2.41
2009 4.8 0.25 19.64 917 2.14
2007 346.0 19.09 18.13 834 2.17
2008 31.5 2.74 11.48 915 1.26
2007 4.7 0.55 8.57 749 1.14
2007 6.4 0.92 7.00 719 0.97
2009 2.0 0.32 6.17 889 0.69
2008 1.5 1.08 1.36 804 0.17
All transactions
Mean 29.09 3.31
Median 19.64 2.17
Standard deviation 32.51 4.27
Without highest and lowest values/oz
Mean 22.84 2.37
Median 19.64 2.17
Standard deviation 14.77 1.34
2008 and 2009 transactions without lowest value/oz
Mean 27.19 2.73
Median 26.79 2.55
Standard deviation 14.89 1.39
2007 transactions without highest value/oz
Mean 11.23 1.43
Median 8.57 1.14
Standard deviation 6.02 0.65
Recommended comparables ranges for late 2009 valuation date
$24 - $30/oz 2.2 - 3.0 per cent of price

The gross dollar metal content of the resources for each The lower part of Table 2 shows statistics of the MTR values
property has been derived from the published mineral for all ten transactions. The transaction values range from
resources with all categories added together. The contained 0.15 - 0.99 per cent and the average and median MTR values
quantities of copper, nickel and cobalt have been calculated are 0.46 per cent and 0.35 per cent respectively. Without the
in pounds and multiplied by the published metal prices on highest and lowest values, which are not considered to be
the transaction date. Similarly, the contained quantities of outliers, the average and median MTR values are essentially
precious metals (platinum, palladium, gold, silver, and in the same and the standard deviation decreases slightly.
one case rhodium) have been calculated in troy ounces and The range of MTR values recommended to apply to the
multiplied by the published prices on the transaction date. No subject property is 0.35 - 0.45 per cent. If the subject property
allowance has been made for potential recovery of the various has mineral resources containing 40 M lbs of nickel, 100 M lbs
metals. The contained dollar metal contents are summed to of copper, 50 000 oz of platinum and 100 000 oz of palladium,
obtain the gross dollar metal content of resources listed in the gross dollar metal content of the mineral resources and
Table 2. the property value are derived as follows, using metal prices
The MTR is the value of the transacted property divided as of the early 2011 valuation date and the MTR range derived
by the gross dollar metal content of the resources and is above:
expressed as a percentage. Metal prices are those as of the •• gross dollar content of nickel – 40 M lbs at $12/lb =
transaction date. $480 M

88 VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012
 METAL TRANSACTION RATIO ANALYSIS

TABLE 2
Comparable transactions analysis for a polymetallic property in eastern Canada.

Transaction date Property value $M Metals in mineral Gross dollar metal content Metal transaction ratio %
resources of resources $M
2009 1.0 Cu, Co, Au 101 0.99
2011 90.0 Ni, Cu, Pt, Pd 10 075 0.89
2011 7.5 Ni, Cu, Co, Pt, Pd 1107 0.68
2010 14.4 Cu, Pt, Pd, Au, Ag, Rh 2173 0.66
2010 12.6 Ni, Cu, Pt, Pd 3269 0.39
2010 5.3 Ni, Cu, Pt, Pd, Au, Ag 1683 0.31
2011 5.3 Ni, Cu, Pd, Au, Ag 2423 0.22
2009 0.6 Ni, Cu, Co, Pd 337 0.17
2009 6.2 Ni, Cu 3952 0.16
2011 3.1 Ni, Cu, Pt, Pd, Au 2037 0.15
All transactions
Mean 0.46
Median 0.35
Standard deviation 0.32
All transactions without highest and lowest metal transaction ratio
Mean 0.44
Median 0.35
Standard deviation 0.28
Recommended metal transaction ratio range for early 2011 valuation date 0.3 - 0.5

•• gross dollar content of copper – 100 M lbs at $4.30/lb = 0.31 - 1.30 per cent MTR. Note that the MTR values are all
$430 M lower than the per cent of Cu price values because the latter
•• gross dollar content of platinum – 50 000 oz at do not account for the other metals in the mineral resources.
$1800/oz = $90 M The 2009 - 2011 transactions show generally lower average
•• gross dollar content of palladium – 100 000 oz at and median values than the 2007 transactions, presumably
$770/oz = $77 M due to the impact of the global financial crisis in late 2008. For
•• total gross dollar metal content of mineral resources in the 2009 - 2011 transactions without the highest and lowest
early 2011 = $1077 M values, average and median values are as follows:
•• value range is $3.8 M - $4.8 M in early 2011 based on an •• average 2.11 cents/lb copper and median 2.16 cents/lb
MTR range of 0.35 - 0.45 per cent. copper
•• average and median both 0.71 per cent of copper price
Example 3 – porphyry copper property in •• average MTR 0.56 per cent and median MTR 0.63 per cent.
South America The recommended ranges to apply to the subject property
For valuation of a non-producing porphyry copper property are 1.8 - 2.4 cents/lb Cu, 0.6 - 0.8 per cent of the copper
in South America with mineral resources, nine comparable price, and 0.5 - 0.7 per cent MTR. These ranges rely on the
gold properties were identified for which market transactions 2009 - 2011 transactions without the highest and lowest
had taken place. The valuation date of the subject property is values and are based on the average and median values
early 2011 and the comparable transactions were within the as well as the variability of the data. If the subject property
previous four years. Table 3 lists information on the market has mineral resources containing 8000 M lbs of copper,
comparable transactions. 400 M lbs of molybdenum and 4 M oz of gold, the gross dollar
metal content of the mineral resources is derived as follows,
Value of each transaction is expressed in three ways: as using metal prices as of the early 2011 valuation date:
cents/lb copper, which is the property value divided by the
•• gross dollar content of copper – 8000 M lbs at $4.30/lb
contained pounds of copper and converted to cents; as $/lb = $34 400 M
copper as a percentage of the copper price on the transaction
•• gross dollar content of molybdenum – 400 M lbs at
date; and as MTR. $16/lb = $6400 M
The lower part of Table 3 shows statistics of the cents/ •• gross dollar content of gold – 4 M oz at $1500/oz =
lb Cu, the per cent of Cu price and the MTR values for all $6000 M
nine transactions. The highest value/lb and possibly the •• total gross dollar metal content of mineral resources in
lowest value/lb are considered to be outliers and, when they early 2011 = $46 800 M.
are excluded, the average values decrease and the standard For the three valuation parameters derived from the
deviation is reduced substantially. Without the highest and comparable transactions, the subject property which has
lowest values/lb, the value ranges are from 1.24 - 4.87 cents/ mineral resources containing 8000 M lbs of copper plus other
lb Cu, from 0.52 - 1.37 per cent of the copper price and from metals is valued as follows:

VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012 89
W E ROSCOE

TABLE 3
Comparable transactions analysis for a non-producing porphyry copper property in South America.

Transaction Property Metals in Contained Cents/lb Price on Cents/lb as Gross dollar Metal transaction
date value $M mineral copper M lb copper transaction per cent of metal ratio %
resources date $/lb Cu Cu price vontent of
resources $M
2010 733 Cu, Au 7116 10.30 2.83 3.64% 29 638 2.47
2007 403 Cu, Au, Ag 8275 4.87 3.55 1.37% 31 073 1.30
2007 791 Cu, Mo, Ag 22 088 3.58 3.35 1.07% 123 026 0.64
2011 80 Cu, Au, Ag 2927 2.73 4.54 0.60% 14 594 0.55
2010 72 Cu, Au 2627 2.73 3.33 0.82% 9952 0.72
2010 350 Cu, Mo, Au 21 996 1.59 3.25 0.49% 155 868 0.22
2009 31 Cu, Au 2188 1.40 1.48 0.94% 4175 0.73
2007 194 Cu, Mo 15 657 1.24 2.40 0.52% 61 832 0.31
2009 26 Cu, Mo 2422 1.07 3.14 0.34% 11 596 0.22
All transactions
Average 3.28 1.09% 0.80%
Median 2.73 0.82% 0.64%
Standard deviation 2.91 1.01% 0.71%
All transactions without highest and lowest values/lb
Average 2.59 0.83% 0.64%
Median 2.73 0.82% 0.64%
Standard deviation 1.32 0.32% 0.35%
2009 - 2011 transactions without highest and lowest values/lb
Average 2.11 0.71% 0.56%
Median 2.16 0.71% 0.63%
Standard deviation 0.72 0.21% 0.24%
2007 transactions
Average 3.23 0.99% 0.75%
Median 3.58 1.07% 0.64%
Standard deviation 1.84 0.43% 0.50%
Recommended comparables ranges for early 2011 valuation date
1.8 - 2.4 cents/lb 0.6 - 0.8 per cent of price 0.5 - 0.7 per cent metal transaction ratio

•• $144 M - $192 M based on 1.8 - 2.4 cents/lb copper normalising values as a percentage of metal price or through
•• $206 M - $275 M based on 0.6 - 0.8 per cent of copper the use of MTR.
price of $4.30 lb Comparable transactions should have similarity to the
•• $234 M - $328 M based on MTR of 0.5 - 0.7 per cent property being valued in terms of commodities in the mineral
•• value range for the subject property is $205 M - $281 M resource, political jurisdiction, infrastructure, geological
in early 2011 weighting the MTR value range 50 per cent setting, mineralisation type and the like.
and the other two 25 per cent each, because the MTR MTR analysis is a useful tool for market approach valuation
recognises the contribution of other metals in addition to of properties with polymetallic mineral resources, in addition
copper. to the recognised yardstick methods involving value per unit
metal and unit value as a percentage of metal price.
CONCLUSIONS The value of the subject property is estimated by applying
A non-producing mineral property with mineral resources the range of values per unit metal or other commodity,
can be valued by analysing transaction and mineral resource per cent of price and/or MTR to the mineral resources of
data from comparable mineral properties on which market the subject property. A single value can be selected from the
transactions have taken place. range of values if required.
A number of comparable transactions should be used in the
analysis to compensate for a small market and variability in ACKNOWLEDGEMENTS
the values. Comparable transaction dates should be within The writer acknowledges the assistance of R B Cook and
a two to three year period prior to the valuation date of the P Chamois in compiling comparable transactions data and
subject property, although a longer period can be justified by D A McCombe for reviewing this paper.

90 VALMIN SEMINAR SERIES / PERTH, WA, 18 OCTOBER 2011 / BRISBANE, QLD, 17 APRIL 2012
 METAL TRANSACTION RATIO ANALYSIS

REFERENCES Metals Economics Group, 2011. Acquisitions service [online].

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Canadian Institute of Mining, Metallurgy and Petroleum,
services/acquisitions-service> [Accessed: 3 January 2012].
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