A framework for interfacing mineral asset valuation and financial reporting

Abstract

Mineral Resources and Mineral Reserves are collectively the single most significant asset or among the most significant assets for any company in the minerals industry, yet their value is often not reflected on primary financial statements of the company. This challenge arises from the misalignment between financial reporting and mineral asset valuation (MAV). Mineral Resources and Mineral Reserves can be valued using MAV methodologies that generally have a forward-looking perspective, while financial reporting on the other hand is conducted based on a generally historical performance perspective of the company in compliance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP) depending on the jurisdiction.In addition, financial reporting in the minerals industry is not yet fully developed as IFRS 6 appears to be the only available mineral-specific financial reporting standard. There is also currently a lack of a comprehensive accounting standards for the minerals industry to guide the accounting, recognition and presentation of these assets on the primary financial statements. In order to bridge the gap between MAV and financial reporting, this paper presents a framework applicable to developmental properties and operating mines. The framework was validated by applying it to a real life case study and can be used to estimate values for companies in the minerals industry by linking back to the fundamental asset which is the Mineral Resources and Mineral Reserves.