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Problems of sustainable development of mineral raw material complex

Valuation of mineral assets of a mining company оn the basis of the option approach

Authors:
T. V. Ponomarenko1
I. B. Sergeev2
  • 1 — Saint Petersburg State Mining Institute (Technical University)
  • 2 — Saint Petersburg State Mining Institute (Technical University)
Date submitted:
2016-12-04
Date published:
2011-03-01

Abstract

Reliable estimation of assets valuations in mining companies play a significant role in ensuring capital accessibility as well as correct current and future company valuation. Valuation of assets can be fulfilled either by a costs or by a fair (market) value, and also should be based on the value-based approach that represents management flexibility consideration. By valuation of a mining company's assets and also assets of corporate companies which have mineral assets, it is necessary to consider mineral resources as assets and reveal their systemic and specific features. Mineral resources as assets and mining industry itself have strongly pronounced option characteristics, which determines significance of the option approach's correct application and quantitative assessment of management flexibility. Application of the real options method improves the methodology of a mining company's valuation and strategic management tools by means of an adequate allowance for risk, ensuring of flexibility and strategic decision consistency, opportunities of fast switching over and continuity of changes.

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