Mining Company Value
Ore reserve and production rate together determine mine life, which is a key driver of company value.
A mine’s initial Ore Reserve is estimated by experienced Geologists and represents that part of a measured and indicated resource that is economically mineable at some point in the future.
The economic value of a mining company primarily hinges on how long it can maintain and/or grow production which is a function of Ore Reserves and production rate. Ore Reserves can change over time based on many factors (including forecast commodity prices, operating costs, and exploration success) but just how representative is the initial Ore Reserve estimate for a project’s future, and it is just the tip of the iceberg?
Analysis of 167 gold mines that commenced operations from the year 2000, and maintained production for at least 3 years, shows that 44% processed more ore during operations than was declared in the initial Ore Reserve estimate (Growth Factor > 1). Importantly, the average Ore Reserve growth was 1.35 due to the positively skewed distribution of values (see Figure 1) and over 15% of mines realised more than double their initial Ore Reserve (Reserve Growth Factor of 2).
- 1.3xOre reserve upsidetypically available for gold mines
RCF has built a dedicated team of in-house technical experts who use proprietary analysis techniques to better understand technical upside in resource projects to enhance value over time.
Sources: SNL: Metals and Mining data, JORC Code (2012) available http://www.jorc.org/docs/JORC_code_2012.pdf
Ore Reserve Growth Factor
All information in this insight is as of December 17, 2019, unless otherwise noted, and is based on information available at a certain point in time. All information should be assumed as subject to change; updated information will not be provided.
None of the information constitutes a recommendation by RCF, or an offer to sell, or a solicitation of any offer to buy or sell any securities, product or service. The information is not intended to provide investment advice. RCF does not guarantee the suitability or potential value of any particular investment. The information contained herein may not be relied upon by you in evaluating the merits of investing in any investment.
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