Valuation of Alluvial Diamond Deposits

Transcription

1 EXPLORATIONS UNLIMITED Valuatin f Alluvial Diamnd Depsits Tania R Marshall marshall.tania@gmail.cm SAMCODES Cmpanin Vlume Cnference, May 2016

2 2 Valuatin Listed Envirnment SAMVAL-cmpliant dcuments required by JSE fr Mineral Asset Valuatin Unlisted Envirnment Private deals t determine equity fr BEE partnerships Private cmpanies and small-medium scale alluvial diamnd peratrs lking fr finance IDC, banks, mining funds High-wealth individuals Diamantaires Mre and mre private entities requiring CPR and valuatin reprts Deserve/demand the same standards f prfessinalism as JSE

3 3 Valuatin Diamnds are different The widely differing nature f diamndiferus depsits and their assciated frms f mineralisatin and the estimatin relevant t these. Diamnd depsits can be subdivided int: Igneus-hsted (primary) depsits Marine and alluvial placers Tailings depsits The lw diamnd cntent f primary and placer diamnd depsits and their variability Quality cannt be as a substitute fr grade. The nugget effect n diamnd grade The relatinship between average diamnd value and the underlying diamnd size distributin The specialised field f diamnd valuatin. The individual physical characteristics, which have a significant impact n diamnd value. These characteristics are size and assrtment, the latter being cmprised f mdel (shape r mrphlgy), quality and clur.

4 4 Valuatin Valuatin Reprt In terms f the SAMVAL Cde Based n a CRIRSCO Resurce/Reserve estimatin cde (SAMREC) Valuatin is date specific Must be cmpleted by registered Cmpetent Valuatr Three generally accepted appraches CV must apply at least tw appraches and explain differences in results, where applicable Different appraches may be mre applicable at different stages f explratin/mining prgramme Imprtant t state the basis f valuatin Intrinsic value, fair value, market value, etc. Imprtant t state the reasn fr valuatin Buying, selling, merger, financing, legal dispute, etc.

5 5 Valuatin Nt different frm ther cmmdities Same driving principles Same basic appraches cst, market, incme Nt different in standard S why s many prblems with valuatin reprts dne n alluvial diamnd depsits? Typically dne n early stages f the peratin, befre Diamnd Reserves have been identified Des nt mean that they can t be valued prperly Des mean that there are sme peculiarities invlved in their valuatin

6 6 Valuatin Valuatin Apprach Explratin Prperties Develpment Prperties Prductin Prperties Drmant Prperties Defunct Prperties Ecnmically Viable Nt Viable Cash Flw Nt generally Widely Widely Widely Nt generally Nt generally Market Widely Less widely Quite widely Quite widely Widely Widely Cst Quite widely Nt generally Nt generally Nt generally Less widely Quite widely

7 7 Valuatin Cst Apprach Variatins f: Relevant explratin expenditure multiplied by a factr greater r less than 1 that reflects previus psitive r negative explratin results. Extremely subjective in what cnstitutes relevant explratin expenditure Extremely subjective in what cnstitutes psitive r negative explratin results Artisanal Operatins / Prfessinal Diggers Little/n infrmatin is available t substantiate expenditure Prspecting ften dne n the cheap by wners wh lack funds Cst appraches ften significantly undervalue prperties

8 8 Valuatin Market Apprach Market based appraches are based n the premise that similar prperties shuld have similar values. Histrically, very few public alluvial diamnd prject transactins utside f the listed envirnment Listed prjects generally significantly larger than average Cmparable Transactins Gelgy (bedrck and depsitinal envirnments) f prjects is unique, varying even between adjacent prperties SFD, grades and values dependent n depsitinal envirnments Terms generally nt nly fr cash Shares, ptins, ryalties, cutting/plishing agreements Diamnd market very fickle.

9 9 Valuatin Market Apprach Optin Agreement (JV) Terms Mst useful fr large explratin cncessin where there is significant explratin ptential, but very little wrk cmpleted. Based n the premise that prject explratin and develpment csts materially escalate with time. On alluvial diamnd prjects, much f ttal expenditure is in early stages Resurce estimatin based n n-site bulk-sampling Requires EMV and prcessing plant PFS/FS based n trial-mining Requires EMV and prcessing plant After PFS/FS, csts can remain static/decrease Tends t verestimate actual prject values

10 10 Valuatin Market Apprach Net mineral value (r value per unit f mineral) All diamnds are nt brn equal. Market capitalisatin This methd has effectively been applied t the valuatin f single prperty asset listed cmpanies. Mst Suth African alluvial diamnd prperties are nt wned by listed cmpanies

11 11 Valuatin Market Apprach Value per unit area Size f an alluvial diamnd prperty is nt always the mst significant variable. A situatin culd ccur where the bedrck influence n ne stretch f river culd be far mre cnducive t the frmatin f trapsites (ptentially higher grades and higher diamnd values) than n the cmparisn prperty.

12 12 Valuatin Incme Apprach Discunted Cash Flw ( DCF ) Requires Prbable Diamnd Reserves Mst f the Capex is spent prir t, r during, the PFS and nly minr sustaining capital is, generally, required thrughut the life f the mine. This feature results in difficulty in determining Internal Rates f Return (IRR) Althugh the peratin may have multiple years f identified Diamnd Resurces, the industry standard is t determine nly limited amunts f Diamnd Reserves ahead f mining. This, typically, results in lw NPV and IRR values that might nt reflect the true value f the prperty. Mnte Carl Analysis Optin Pricing CPR issues with Diamnd Resurce estimatin

13 13 Valuatin CPR CV shuld have mre than a passing familiarity with Diamnd Resurce/Reserve estimatin issues peculiar t alluvial diamnd prjects Figure 3 is specific t diamnd depsits Sectin 11 f Table 1 SAMREC Diamnds Guideline dcument

14 Valuatin Diamnd Guidelines 1 INTRODUCTION 2 DIAMOND EXPLORATION RESULTS 2.1 DIAMOND EXPLORATION TARGETS Kimberlitic Indicatr Mineral Chemistry Diamnd Mineralisatin 3 DIAMOND RESOURCE ESTIMATION 3.1 DIAMOND RESOURCE ESTIMATION PRINCIPLES 3.2 REASONABLE PROSPECTS FOR EVENTUAL ECONOMIC EXTRACTION Eventual Ecnmic Extractin 3.3 DIAMOND RESOURCE CLASSIFICATION Inferred Diamnd Resurce Indicated Diamnd Resurce Measured Diamnd Resurce 3.4 DIAMOND VALUE (REVENUE ESTIMATE) Parcel Size and Representivity 3.5 MICRODIAMONDS 4 TECHNICAL STUDIES 4.1 BULK-SAMPLING VS TRIAL MINING ON ALLUVIAL DIAMOND DEPOSITS 5 DIAMOND RESERVES 5.1 PROBABLE DIAMOND RESERVE 5.2 PROVED DIAMOND RESERVE 6 MISCELLANEOUS

15 15 Case Study Midamines Prject Lcated n Kwanza River Alng brder between Angla and DRC Cncessin 200km 2 55km f stream length Only artisanal activity Prject in early-stage explratin Desktp Study Limited initial explratin t identify Explratin Targets N RPEEE demnstrated N Diamnd Resurces

16 16 Case Study Midamines Prject Cst Apprach Verifiable relevant expenditure f USD925,000 Subjective premium f 1.2 Ttal estimated value f USD1.1M Expected t under-value the prject

17 17 Case Study Midamines Prject Market Apprach Market Cmparable Methd Tw existing CPR s and valuatins fr public cmpanies n alluvial diamnd prperties within 100km Based n these dcuments, prject estimated at USD100,000 Expected t be significantly undervalued JV Terms Methd Cst f explratin was estimated at USD10-12M Cst t bring t full prductin estimated at USD4M The cst f the explratin prgramme was significantly higher than the cst f bringing the prperty int prductin which belies the whle premise f the JV terms valuatin methd. Expected t have ver-valued the prject.

18 18 Case Study Midamines Prject At the end f this exercise, the prject was left with a range f valuatins frm USD Millin, bth f which were deemed unreliable. Recgnising the issues that made these results undependable is fundamental t assisting the CV in applying glbal valuatin principles t depsits with very specific requirements and cming up with results that will be mre useful t bth listed and private cmpanies.

19 19 THANK YOU