Should Discounted Cash Flow Projections for the Determination of Fair Market Value be Based Solely on Proven and Probable Reserves?


R. D. Lawrence

Suggestions have been made that the appraisal of mining assets using discounted cash flow techniques should be based solely on proven and probable reserves in reliance upon the widespread international recognition of uniform resource definitions. Following a review of general accepted valuation principles, a survey of the literature and, most importantly, a review of real transactions in the open market, it is clear that valuators should not be constrained by the growing acceptance of modern mineral resource codes. On the contrary, valuation practitioners should be encouraged to examine all classes of mineralization and, after making due allowance for risk, to utilize all mineral resources as a basis for determining fair market value.
Keywords: standards, valuation, mineral properties, appraisers, appraisals