ABSTRACTS OF PROFESSIONAL PAPERS
by Trevor Ellis

Society abbreviation definitions are listed at bottom of page.
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Ellis, Trevor R., "Development of the International Valuation Standards Committee's Best Practice Guidelines for Valuations in the Extractive Industries," for keynote speaker presentation at International Mining Forum 2008, Szczyrk, Poland, 25-29 February, 2008, and proceedings publication, 4 pages.
Abstract
In early 2008, the International Valuation Standards Committee (IVSC) will release the exposure draft of its Extractive Industries Technical Paper for public comment. The document has been in development for almost four years. Development began many months before the associated standards in the Extractive Industries Guidance Note received final approval for 2005 publication. The primary purpose of the document is to provide best practice valuation guidelines for extractive industries applications of the International Valuation Standards (IVSs). The document interprets the meaning and implications of a number of important parts of the IVSs for their application to valuations within the minerals and petroleum industries. The document describes in detail the application of the Generally Accepted Valuation Principles to extractive industries valuation. It also provides best practice guidance on many technical matters for minerals and petroleum valuations. The Technical Paper is expected to be finalized and published during 2008 by the IVSC.

Ellis, Trevor R., "International Trends in Standards and Regulations for Valuation of Mining Industry Properties and Projects," for keynote speaker presentation at International Mining Forum 2008, Szczyrk, Poland, 25-29 February, 2008, and proceedings publication, 6 pages.
Abstract
Real property valuation standards have been applied under limited circumstances to market valuations of minerals and petroleum properties for decades. Generally, these have been applied because the valuation was for use in court. This paper reviews the brief evolution of mineral valuation standards, from the 1995 publication of the first edition of The VALMIN Code in Australia, to the current edition of the International Valuation Standards. It provides a global perspective on the need for this set international standards. Recommendations are provided on the implementation of valuation standards within the extractive industries by government agencies, financial regulators, and professional societies, while advising on avoidance of conflicts between international and national standards. It addresses the shortage of valuers who are certified for valuation of minerals and petroleum industry assets using standards based on the Generally Accepted Valuation Principles (GAVP). Recommendations are made for valuer education and to solve licensing problems for working across borders.

Ellis, Trevor R., "International Trends in Valuation of Mineral Projects – Standards and Regulations," presented at China Mining 2007, Beijing, China, 13-15 November 2007. Presentation slides published in China Mining 2007 Conference Proceedings, pages 134 - 139.
Abstract
Valuation standards designed for Real Property valuation have been applied under certain circumstances to minerals and petroleum property valuation for many decades. Generally the standards have been applied because the valuation has been for use in court.

In 1995, The Australasian Institute of Mining and Metallurgy released its first edition of The VALMIN Code. This focused more on standards for technical assessment of mineral projects than valuation. The Canadian Institute of Mining and Metallurgy's CIMVal Standards, published in 2003, is the first set of mineral valuation standards to incorporate the three approaches to value of the Generally Accepted Valuation Principles (GAVP) – Cost, Sales Comparison, and Income Approaches – for market valuation.

The International Valuation Standards Committee (IVSC) published the First Edition of the International Valuation Standards (IVSs) in 1985. The IVSC is a Non-Government Organisation (NGO) member of the United Nations, having been granted Roster status with the United Nations Economic and Social Council in 1985 for consultation on valuation matters. The Seventh Edition of the IVSs, published in 2005, for the first time included a set of valuation standards specifically for valuation of minerals and petroleum industry assets. This set of standards, now in the Eighth Edition of the IVSs, is designed for worldwide use, and draws upon the full set of IVSs to provide comprehensive GAVP-based standards for market and non-market valuations of all asset types within these industries. The IVSC is now finalizing a valuation best practice technical document for the extractive industries, to supplement its standards.

This paper focuses on the implementation of valuation standards within the extractive industries by government agencies, financial regulators, and businesses, while advising on avoidance of conflicts of international and national standards. It also addresses the severe shortage of extractive industries valuers who are educated and certified in the application of the GAVP to minerals and petroleum industry assets, and their licensing problems for working across borders.
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Ellis, Trevor R., "Cost Approach for Mineral Property Valuation," presented at SME/CMA 2007 Annual Meeting, Denver, Colorado, 25-28 February 2007.
Abstract
The rarely used third approach available for mineral property valuation, is misunderstood and wrongly maligned. Most valuers believe that this approach can only be applied to buildings and other structures, plant and equipment. In this paper, the author discusses cost approach methods available for valuation of exploration properties through operating mining properties.
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Ellis, Trevor R., "The International Valuation and Financial Reporting Standards – Their Content and Effect on Us," presented at the Geological Society of Nevada Symposium, Reno, Nevada, 15-18 May 2005. Published in Symposium 2005: Window to the World, Geological Society of Nevada, Reno, Nevada, 2005, pages 1297-1302, as a peer reviewed paper.
Abstract
The 2005 Edition of the International Valuation Standards (IVS) is the first edition to include specific standards addressing the valuation of assets in the minerals and petroleum industries. This latest edition provides guidance for valuation of minerals and petroleum industry assets of all types for all valuation uses. It also provides asset valuation support to the International Financial Reporting Standards (IFRSs) for corporate reporting to the stock markets of the world. The IVS operates as a global umbrella standard that can be supplemented for local needs by institutes and regulators. This paper discusses the development of the IVS and IFRSs, their implementation within the minerals industry (especially of North America), and the implications of these standards. Potential implications for minerals industry professionals include issues of education, as well as qualifications and licensing for those wishing to appraise the value of minerals industry assets.
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Ellis, Trevor R., "Implementation of the International Valuation Standards," presented at SME 2005 Annual Meeting, Salt Lake City, Utah, 28 February - 2 March 2005, SME Paper 05-093, 4 pages. Published in Mining Engineering, Vol. 58, No. 2, February. 2006, pages 62-64, as a peer reviewed paper.
Abstract
The extractive industries addition to the International Valuation Standards (IVS) is scheduled for publication in the next edition of the IVS book in January 2005. This will provide guidance for valuation of minerals and petroleum industry assets of all types for all appraisal uses. It will provide asset valuation support to the International Financial Reporting Standards for the stock markets of the world, and a global umbrella standard which can be supplemented for local needs by institutes and regulators. This paper discusses implementation of the IVS within the minerals industry and important issues that the industry should confront.
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Ellis, Trevor R., "Violations of Market Value Standards with the Income Approach," presented at SME 2005 Annual Meeting, Salt Lake City, Utah, 28 February - 2 March 2005.
Abstract
Misuse and abuse of valuation methods based on future earnings projections, such as the much loved net present value/discounted cash flow method, is prevalent within the minerals industry. Estimates of market value of mineral properties by such methods, often by respected consultants, can reach astronomical levels. Such estimates have resulted in large losses to investors and lenders, and other inappropriate outcomes. This paper presents four real life examples that the author discusses, and provides some solutions and and concluding observations.
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Ellis, Trevor R., "New Dawn for Minerals Appraisers?", presented at SME 2005 Annual Meeting, Salt Lake City, Utah, 28 February - 2 March 2005.
Abstract
Implementation of rapidly evolving global standards for financial reporting and market valuation of mining and oil and gas industry assets may create a severe shortage of qualified and competent appraisers/valuers of minerals and petroleum properties. This paper supplies the reasons behind the developing shortage of competent minerals appraisers. It describes the current dire status globally of minerals and petroleum appraiser education that teaches market valuation principles. The author then poses many difficult questions about the possible solutions.
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Ellis, Trevor R., "History and Future of Minerals and Petroleum Valuation Standards Development Internationally," presented at SME 2004 Annual Meeting, Denver, Colorado, 23-25 February 2004.
Abstract
The development of the first comprehensive minerals and petroleum valuation standards began in Australia shortly after the AusIMM's "Mining and Petroleum Valuation 1989" conference, held in Sydney, September 1989. This paper covers the path to the release of the draft Extractive Industries addition to the International Valuation Standards in December 2003. It compares the content of the various standards and proposed standards. Then it provides the author's concept of how minerals and petroleum valuation standards should develop and be supported in the future.
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Ellis, Trevor R., "Philosophy and Application of the International Valuation Standards for Minerals and Petroleum," The Professional Geologist, AIPG, Vol. 41, No. 1, Jan.-Feb. 2004, pp 14-19. Presented at SME 2004 Annual Meeting, Denver, Colorado, 23-25 February 2004, SME Paper 04-133.
Abstract
The Task Force for the International Valuation Standards Committee has developed an Extractive Industries section for inclusion in the International Valuation Standards (IVS). The Extractive Industries Guidance Note provides comprehensive standards for valuation of all minerals and petroleum industry property types for all valuation/appraisal purposes. The document is scheduled for release as an exposure draft for public comment by December 2003, then it will be finalized for publication in the IVS in mid-2004. This paper discusses the content and philosophy of the Extractive Industries Guidance Note within the context of the framework of the IVS. It also discusses the international implications and implementation of this IVS addition.
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Ellis, Trevor R., "The Extractive Industries Addition to the International Valuation Standards," presented at The Centre for Advanced Property Economics' Minerals Appraisal Symposium, Denver, Colorado, 1-3 October 2003.
Abstract
The Extractive Industries Task Force of the International Valuation Standards Committee (IVSC) is developing an Extractive Industries section for inclusion in the International Valuation Standards (IVS). The Extractive Industries Guidance Note will provide comprehensive standards for appraisal of all minerals and petroleum industry property types for all appraisal purposes. A draft was presented to the Standards Board of the IVSC in Cape Town, South Africa, in March 2003. An exposure draft is scheduled for release to the public in October 2003, with the finalized document scheduled for publication in the 2004 edition of the IVS. This paper will briefly describe the content of the Extractive Industries Guidance Note within the context of the framework of the IVS. It will then discuss the international implications and implementation of this addition to the IVS.
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Ellis, Trevor R., "International Perspective on U.S. Minerals Appraisal Standards Development," presented at SME 2003 Annual Meeting, Cincinnati, Ohio, 24-26 February 2003, SME Paper 03-109, 5 pages. Revised in Mining Engineering, Vol. 56, No. 3, March 2004, pages 44-48, as a peer reviewed paper.
Abstract
Australia's mineral valuation code continues to evolve, while mineral valuation standards are also being written for Canada and Southern Africa. The author is leading a task force for writing the extractive industries addition to the International Valuation Standards. Meanwhile, the International Accounting Standards Board is continuing the development of an extractive industries addition to its International Financial Reporting Standards, with an emphasis on valuation reporting. This paper analyzes the need, content and ownership for a U.S. minerals appraisal standard in the context of both these developing international standards and also existing U.S. regulations and appraisal standards. The author provides many questions for research and debate.
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Ellis, Trevor R., "Reporting Standards – The USA Experience: Achieving True Globalisation – Problems and Solutions," presented at Council of Mining and Metallurgical Institutions' Congress 2002, Cairns, Australia, May 27-28, 2002, and to International Mining Professionals Society's Annual Meeting, Denver, Colorado, May 21, 2002. Published in CMMI Congress 2002 – International Codes, Technology and Sustainability for the Minerals Industry, AusIMM, Melbourne, Australia, PS No 3/2002, pages 67-77, a peer reviewed paper. Updated versions in the international journal, Minerals & Energy - Raw Material Report, Vol. 17, No. 3, 2002, pages 15-31, and CIM Bulletin, Vol 96, No. 1067, Jan. 2003, pages 37-48.
Abstract
The United States' reporting standard for the mining industry for securities purposes is contained in the Security and Exchange Commission's Industry Guide 7. It defines proven and probable Reserves using its own definitions, and prohibits the disclosure of quantitative estimates, for all mineralisation other than those two Reserve categories (though disclosure of Measured and Indicated Resources as quantitative mineralised material estimates is now informally allowed). Similarly, it restricts disclosure of value estimates to Reserves only, which SEC policy generally requires to be on an historic cost accounting basis. The SEC does not maintain a formal Competent or Qualified Person policy.

In March 1999, the US-based Society for Mining, Metallurgy and Exploration (SME) released an update of its 1991 guidelines for definitions to be used in reporting of Mineral Resources, Reserves and Exploration Information, closely abiding by the 1997 CMMI recommendations. However, without SEC recognition, reporting under the SME and CMMI definitions is effectively barred for US companies.

The SEC intends to adopt the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB). This will occur within just a few years, when the convergence project for development of the IFRS has reached a satisfactory point. The US is the largest financial supporter and participator in IASB. The Extractive Industries Standard of the IFRS will likely terminate Industry Guide 7. However, the effect of this international replacement will likely be equally restrictive. This could possibly neutralise the benefit of a CMMI-based global reporting standard.

SME, the US society encompassing the widest range of mining industry professionals, does not have a Code of Ethics. It has no mechanism for requiring members to abide by a professional standard. SME is presently looking into possible solutions for this deficiency. US-based professional societies that do have a binding Code of Ethics, generally cater to a single profession, and are not just mining industry related. The American Institute of Professional Geologists (AIPG) and the American Institute of Minerals Appraisers (AIMA) are examples. The SME is considering creating a subsidiary body with an enforceable Code of Ethics.

To support a CMMI-based global reporting standard, competent persons will need to work across international borders. A standardised mechanism for qualifying and registering competent persons will be needed. National rules and laws must allow competent persons to easily enter countries to perform their work.

State issued licenses are increasingly required for much of the work performed in the US mining industry by engineers, geologists and minerals appraisers (valuers). Such licenses are not required by the SEC for Reserve reporting in the US, may not be required for valuation of mineral properties under certain circumstances, and except for real property valuer licenses, they generally do not have a binding code of conduct. However, state licensing of professionals forms a substantial and increasing barrier to interstate trade in professional services, and can be a prohibitive barrier to professionals from outside the US. Any rationalisation of this confusing patchwork of regulations confronting US minerals industry practitioners will only occur as part of larger, national change, hopefully aimed at compliance with international standards and protocols.

The US does not have a valuation standard aimed specifically at the mining industry. The Uniform Standards of Professional Appraisal Practice, the national valuation standards, often must be applied to mineral property valuation, but contains no specific instructions for minerals. The author has campaigned against development of minerals valuation standards proposed by US minerals institutes. Instead he encourages the mining industry worldwide to place its support behind the initiative of the International Valuation Standards Committee (IVSC) to include an extractive industries section in its International Valuation Standards (IVS). This should provide a global set of valuation standards for the mining and petroleum industry within two years. This addition to IVS will provide essential valuation standards reference support for the extractive industries financial reporting standard of the International Accounting Standards Board.

The IVS has achieved a high level of acceptance in the developed and lesser developed countries of the world. It provides a comprehensive framework of Generally Accepted Valuation Principles for the valuation profession internationally, for valuation of all property or asset types. IVSC is effectively a sister organisation to IASB. The IASB's International Financial Reporting Standards (IFRS), previously known as the International Accounting Standards (IAS), reference and quote IVS in some instructions for determination of fair value. IVSC is a Non-Governmental Organisation (NGO) member of the United Nations and maintains liaison with many important international economic, accounting and financial agencies, such as the OECD, IMF and WTO.
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Ellis, Trevor R., "Mineral Property Valuation Standards – A US Perspective: Marching with the International Valuation and International Financial Reporting Standards," presented at the South African Institute of Mining and Metallurgy's Valuation Code Colloquium, Johannesburg, South Africa, 19-20 March 2002; in Valuation of Mineral Projects and Properties: an African Perspective, SAIMM, Johannesburg, 2002, 17 pages. Also in The Professional Geologist, AIPG, Vol. 39, No. 5, May 2002, pages 5-13.
Abstract
The author opposes the presently developing movement of national minerals institutes, such as SAIMM, towards drafting comprehensive standards for mineral property valuation following the model of the development of the Reserve-Resource reporting standards. He has campaigned against such undertakings proposed for U.S. minerals institutes such as AIMA and SME. Unlike Reserve-Resource estimation, few valuation issues are unique to the minerals industry.

The International Valuation Standards (IVS) of the International Valuation Standards Committee (IVSC) have achieved a high level of acceptance in the developed and lesser developed countries of the world since release of the 2000 edition. IVS provides a comprehensive framework of Generally Accepted Valuation Principles for the Valuation profession internationally, for valuation of all property or asset types, including real property, personal property, businesses and financial interests. IVSC is effectively a sister organisation to the International Accounting Standards Board (IASB). The International Accounting Standards (IAS) references and quotes IVS in some instructions for determination of Fair Value. IVSC is a Non-Governmental Organisation (NGO) member of the United Nations and maintains liaison with many important international economic, accounting and financial agencies, such as the OECD, IMF and WTO.

In February 2001, IVSC convened an Extractive Industries Task Force to respond to minerals and petroleum valuation issues raised during the planned development of an International Accounting Standard for the extractive industries. The author led the task force in developing IVSC's initial input to the IASB. IVSC has proposed reconvening the Extractive Industries Task Force in 2002 to rapidly draft a mining and petroleum section for inclusion in IVS, with particular attention given to addressing IASB concerns. The Task Force will likely expand its membership, and draw from the principles included in The AusIMM's VALMIN Code and the Canadian CIMVal Standard now being finalised.

IVSC hopes to have the draft extractive industries section ready by the end of 2002 for distribution in the next edition of IVS as an Exposure Draft for public comment. The section will be concise, since it will be a supplement to the existing valuation framework supplied by IVS, addressing only the essential elements that are specific to minerals and petroleum valuation. The author proposes that the Council of Mining and Metallurgical Institutions (CMMI) then consider developing supplementary guidance and qualifications requirements, with that document incorporating IVS by reference. The mining institutes of individual countries should then adopt IVS and CMMI's supplementary document by reference. They could supplement those with their own document containing guidance unique to their country's situation, and incorporate their own binding instructions and enforcement provisions.

This paper provides the author's preliminary suggestions of how extractive industries guidance should be incorporated into the IVS. It concludes by recommending that SAIMM avoid the difficult, lengthy and contentious process of developing its own valuation code, and instead adopt the IVS and put its full support behind IVSC's development of an extractive industries section for the IVS. It can then adopt a standard that will have the highest level of international recognition and distribution.
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Ellis, Trevor R., "Recent Developments in International Valuation Standards," presented at SME 2002 Annual Meeting, Phoenix, Arizona, Feb 25-27, 2002, SME Paper 02-168, 5 pages. Revised in SME Transactions 2002, Vol. 312, pages 148-152, a peer reviewed paper.
Abstract
A number of important international events took place in 2001 in the development and evolution of mineral valuation standards internationally. In Canada, the CIMVal Committee released a draft discussion paper for public and industry comment on principles to guide the development of the planned Canadian mineral property valuation standard. The International Accounting Standards Board (IASB) received comments on its Extractive Industries Issues Paper. IASB will decide whether the financial statements of public mining and petroleum companies will be allowed to provide the value of mineral and petroleum assets on a current value basis instead of an historic cost basis. The author led the Extractive Industries Task Force of the International Valuation Standards Committee (IVSC) in developing its submission to IASB. IVSC intends to develop an extractive industries valuation section for its International Valuation Standards, which could support the planned IASB standard. In Australia, AusIMM has carried out an in-depth review of its highly regarded VALMIN Code. The AusIMM's MICA subdivision organized the VALMIN '01 Conference in Sydney, Australia, with a range of international and current issues papers published in the VALMIN '01 book. Considerable support for the IVSC initiative was evident at this conference. The results of the review of the extractive industries submissions to the IASB are expected to be released in early 2002. The CMMI Congress in Cairns, Australia in May 2002 is likely to prove to be an important forum for continued discussion of the development and implementation of international standards and qualifications for mineral valuation. The outcomes and implications of these events are discussed.
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Ellis, Trevor R., "US Views on Valuation Methodology," presented at VALMIN 2001, Sydney, Australia, Oct 25-26, 2001; in VALMIN '01 – Mineral Asset Valuation Issues 2001, AusIMM, Carlton, Victoria 2001, PS No 5/01, pages 1-23, a peer reviewed paper. Also in The Professional Geologist, AIPG, June-Aug 2002 as a 3-part series.
Abstract
This paper mainly addresses mineral asset Valuation from a US perspective. The structure and operation of the primary US Valuation (‘Appraisal' in USA) Standards and regulations are described from the practitioner perspective of the mineral asset valuer ('Appraiser' in USA) working with them. Attention is also directed to areas of difference between the US Standards and their jurisdictional setting and the VALMIN Code and the Australian regulatory setting, both positive and negative.

This paper outlines why the author believes it is now the right time to review and enhance The Australasian Institute of Mining and Metallurgy's (AusIMM's) VALMIN Code (1998) for its use globally. For this to occur, he contends that the Code would need to undergo dramatic restructuring to abide by the Generally Accepted Valuation Principles expressed in the International Valuation Standards (IVS) of the International Valuation Standards Committee (IVSC) and the US Uniform Standards of Professional Appraisal Practice (USPAP), especially since the US is the world's biggest market economy. To achieve this aim, the author recommends that an international team of mineral valuation experts be assembled by the IVSC, using the existing cooperative framework, to work on developing a comprehensive addition to the IVS for the Minerals (including petroleum) Industry, that recognises the special characteristics of mineral assets.

USPAP was introduced in 1987 as the US national set of Standards for Valuation of all types of properties and businesses, and is updated annually. Mineral property valuations for use by banks and the Federal Government must comply with USPAP, despite it containing no instructions specific to the minerals industry. Valuations of mineral properties for use by companies in litigation must now generally comply with USPAP to be considered credible evidence. USPAP's main principles closely match those expressed in IVS. It has separate Standards for the Valuation of Real Property (such as a mineral property), Business and Intangibles (such as a mining company and its financing), and Personal Property (such as mining equipment). Its Real Property valuation Standards require that for a Complete Appraisal all three valuation Approaches (Sales Comparison, Income and Cost) be used wherever reasonably possible, then be reconciled. Market Value must be based on the Highest and Best Use of the property. A set of rules provides a framework for the process of the Valuation development, while a second set of rules provides the framework for the content of the Valuation Report.

When the Federal Government is acquiring or exchanging land, the Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA) provides additional Real Property valuation guidelines to those of USPAP. Significant coverage of mineral properties is included. Lessons from Court rulings are the basis of much of the document, and they are used to instruct the valuer on preparation of the report for Court and how to present expert opinions. Primary reliance on the Sales Comparison Approach is emphasised for use in Court. Nevertheless, Minerals Industry valuation practitioners often view the application of UASFLA guidelines as being unfair to the holders of minerals assets and interests in them. Federal agencies that manage public land containing significant mineral and petroleum property specify the qualifications of the responsible Real Estate Appraiser (valuer).

The Securities and Exchange Commission (SEC) has valuation restrictions embedded in its mining industry reporting rules, Industry Guide 7. It generally limits the reporting of mineral deposit value to the value of Reserves only. Much of the document is now out-of-step, in the author's view, with internationally accepted Reserve-Resource reporting Standards and valuation best practice.

It is difficult to discuss valuation methodology without discussing regulation of qualifications. States in the US continue to increase the barriers to professionals attempting to work across state boundaries. This is in the guise of regulating professionals for the welfare of the public. All US States regulate engineers and Real Property valuers, and most regulate Geologists by State testing and licensing. Many US States have exemptions in their statutes for minerals or mining work. However, strict legal interpretation can make those exemptions much narrower than they first appear. A significant percentage of minerals industry professionals frequently ignore some of these restrictive rules, whether due to ignorance or perceived necessity. From the author's observations, strict interpretation of regulations often leaves the contract bidding to those who are merely qualified by licensing (and often of questionable competence), rather than to those with appropriate qualifications and demonstrable experience in mineral asset valuation.

Conflicting state and international pressures are now at play in the US. Licensing of professionals in general at the State level is fundamentally incompatible with the internationalisation of standards of professional practice and international agreements on trade in professional services. States rights advocates and professionals who benefit from state level guild-like protection, continue to promote the restrictive practice of State licensing. Any rationalisation of the patchwork of standards and regulations confronting the US minerals valuation practitioner will only occur as part of larger, national change, hopefully aimed at compliance with International standards and protocols.
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Ellis, Trevor R., "U.S. and International Valuation Standards – The Future," presented at SME 2001 Annual Meeting, Denver, Colorado, Feb 26-28, 2001, SME Preprint 01-161, 10 pages. Revised as, "United States and international valuation standards – the future," in SME Transactions 2002, Vol. 312, pages 141-147, a peer reviewed paper.
Abstract
Considerable movement is afoot internationally to rationalize standards and regulations relating to valuations and the qualifications for valuation professionals. In July 2000 the International Valuation Standards Committee released expanded standards, and additional important improvements are planned by 2003. Possible updates to the International Accounting Standards (IAS) and potential adoption of IAS by the U.S. could significantly impact minerals appraisers. Standards designed specifically for mineral asset valuation are under development in Canada and the U.S., with Australia’s internationally respected VALMIN Code providing the benchmark. In the U.S., the all-encompassing Uniform Standards of Professional Appraisal Practice (USPAP) is annually modified and continues to gain deeper acceptance, while the SEC holds fast to its antiquated rule prohibiting reporting of a quantitative estimate and value for non-reserve mineralization.

Some important international trade agreements are driving actions to free the trade in professional services. In July 2000, an international workshop was held to initiate discussion on minimum qualifications for appraisers to work internationally. Pressure for uniform minimum qualifications and rules for professionals internationally will continue to build. The U.S. is historically among the slowest countries to implement such initiatives, with its state level licensure barriers having the potential to cause some of its professionals to be stranded in an international backwater.

Structural change is needed in Australia’s VALMIN Code to remove conflict with the latest International Valuation Standards. The mineral valuation standards developers of Australia, Canada and the U.S. should work jointly on updating VALMIN for global use.
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Ellis, Trevor R., "Funding Dangers Posed by Extractive Industries International Accounting Standard," Denver, Colorado, March 2001, 8 pages
Abstract
Rapid implementation of the International Accounting Standards (IAS) for public financial reporting is taking place globally. European companies are required to convert to IAS by 2005. The author expects substantial acceptance of IAS in the U.S. and Canada by near that date. IAS provides for the current value of assets to be reported in the primary financial reports of companies.

In November 2000, the Extractive Industries Steering Committee of the International Accounting Standards Committee (IASC) released an Issues Paper seeking replies by 30 June 2001. Based on the responses received, the committee is scheduled to develop an accounting standard for the mining and petroleum industries for release in the fourth quarter of 2002 as part of IAS.

The tentative views expressed by the IASC steering committee have a deja vu resemblance to the U.S. Securities and Exchange Commission's perspective expressed in its highly restrictive and antiquated Industry Guide 7. The question of whether to allow quantitative reporting of resources that are not reserves, as supplemental information, appears to have only barely remained on the edge of the table for discussion. The possibility of reporting an estimate of the current value of any category of such resources did not even reach the table. Disclosure of the current value of reserves would be restricted to a supplemental information section. If the standard is finalized with this perspective, the restriction to an historic cost accounting basis for reserves and resources will greatly handicap the financial abilities of the mining and petroleum industries relative to other industries allowed current value accounting of assets.

The author is the U.S. representative to the Extractive Industries Task Force of the International Valuation Standards Committee (IVSC), a sister organization to the International Accounting Standards Board (IASB), which replaced the IASC through restructuring in December 2000. The task force members are assisting the IVSC in developing its input to the IASB. The author seeks active minerals industry support and sponsorship for his and the task force's initiative to modify the outcome to an appropriate current value standard for the extractive industries, based on an international minerals valuation standard, the urgent development of which he expects the task force will need to undertake.
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Ellis, Trevor R., "International Challenges will Confront State Licensure," The Professional Geologist, AIPG, Vol. 37, No. 11, December 2000, pages 10-13
Abstract
Geologists are following a US trend to state licensure of professionals. These state statutes form barriers to free trade in professional services, and hobble the careers of many geologists. A growing number of international trade agreements, some signed by the US, are designed to remove such barriers and free the international trade in professional services. Australia has removed state licensure of professionals and increased the responsibility of national professional institutes, providing the lead to other countries. AIPG should grasp this unique opportunity to represent US geologists in international negotiations. Reciprocity agreements are being negotiated internationally by such institutes, not state bureaucrats. The US will have difficulty participating in international negotiations until state licensure statutes are removed or made nationally uniform and transparent. Studies by economists seeking to document public benefits from regulation of professionals indicate that the dubious benefits do not justify the increased costs. Geologists could use these studies and international trade agreements in a campaign to remove state licensure.
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Ellis, Trevor R., and Abbott, David M., Jr., "Regulatory Trends in Mineral Property Valuation – an International Perspective," Valuation 2000: papers and proceedings, sponsored by ASA, AI, and ASFMRA, July 2000, pages 27-41, a peer reviewed paper for which Mr. Ellis received the award for 3rd best professional paper at the Valuation 2000 convention
Abstract
International regulation of the valuation process and reporting for mineral properties is increasing. Australia, the USA, and Canada are the leading countries in developing regulations. The primary driving forces have been prevention of securities frauds and improvement of investor understanding and confidence. The starting point for regulation has been the definition and application of the terms reserves, resources, and competent person. Concerns about regulation particularly relate to the valuation of mineralization not classified as reserves. This paper outlines the development of regulation of mineral property valuation, and then discusses the application of the various approaches to valuation of mineral properties.
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Ellis, Trevor R., "Appraisals of a Gold Property – A Case Study of Reserve Additions," 2000 Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, Denver, Colorado, pages 44-53, a peer reviewed paper
Abstract
The author has appraised an interest in a set of mining claims at a major Nevada gold mine five times in four years. The claims are leased to the mining company, which pays the owners a royalty of five percent of sale of minerals mined from the claims. The gold reserves defined at the time of the first appraisal, were mined out by the time of the last appraisal. During this period, the price of gold also fell from $380 per ounce to $285. However, those reserves were more than replaced by reserves newly defined through continuing exploration of the deposit. The value of the mining claims was maintained even though much of the gold deposit was removed and the price of gold fell substantially. This paper addresses the concepts of value of exploration potential and mineral reserve replacement, and their application in the appraisal of mineral properties.
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Ellis, Trevor R., "The U.S. Mineral Property Valuation Patchwork of Regulations and Standards," Mineral Property Valuation Proceedings - Papers presented at Mining Millennium 2000, CIM, Toronto, Canada, March 8, 2000, pages 25-40. Revised version in CIM Bulletin, Vol. 95, No. 1059, March 2002, pages 110-118, a peer reviewed paper.
Abstract
The valuation of mineral properties in the U.S. is only partially regulated. The regulations which have jurisdiction or impact appear to have such mainly as a consequence of unintended fallout, since the regulations were designed for other purposes. Court case history can also be important. The combined results are a mixture of bad and good, with important lessons to be learned.

Since 1981, the Securities and Exchange Commission has prohibited U.S. listed companies from reporting quantitative estimates of mineralization and the value of mineralization, other than proven and probable reserves. This results in the minerals appraiser (valuator) working with a shortage of data in his everyday work, both on the subject property and in sales analysis.

Between 1989 and 1995, all 50 states and essentially all federal agencies adopted the Uniform Standards of Professional Appraisal Practice (USPAP) for real property appraisals (valuations). The major national appraisal societies also require their members to abide by USPAP. A significant portion of minerals appraisals must now follow these standards. This paper will discuss the content of USPAP. It provides a very good framework for the valuation of a minerals property or a mine, both as real property and as a business. However, the credentialing standards for real property appraisers are now prohibitive for minerals appraisers.
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Ellis, Trevor R., "The Difference Between a Value Estimate and an Appraisal," presented at SME Annual Meeting, Salt Lake City, Utah, Feb 28-Mar 1, 2000, SME Preprint 00-119, 15 pages. Also presented at Denver Mining Club, August 3, 2000. Revised version published as "Difference between a value estimate and an appraisal" in SME Transactions 2001, Vol. 310, pages 25-35, a peer reviewed paper.
Abstract
The vast majority of valuations produced for mineral properties using the net present value method provide an estimate of investment value or use value. Such an estimate can be a long way from the price that the property would actually sell for if placed on the market. Indicators from the market need to be used to validate or modify the net present value calculation if market value is being appraised. The comparable sales and replacement cost methods used in the appraisal of urban buildings generally fail when used in the appraisal of mineral properties. Other methods of sales analysis are introduced. Guidelines for what a minerals appraisal report should contain are presented.
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Ellis, Trevor R., "Lessons Learned about Standards from Applying both VALMIN and USPAP on a Complex Appraisal Project," presented at SME Annual Meeting, Salt Lake City, Feb 28-Mar 1, 2000, SME Preprint 00-129, 9 pages. Revised and updated, published under same title in SME Transactions 2000, Vol. 308, pages 116-122, a peer reviewed paper.
Abstract
The author attempted to concurrently apply the US Uniform Standards of Professional Appraisal Practice (USPAP) and the Australian VALMIN Code to a complex mineral property appraisal assignment and previously to some modest assignments. This led the author into many severe difficulties. These difficulties included the high standards needed in the work of others and information and statements required from the client under the VALMIN Code. The exercises highlighted many positive features of both sets of standards. However, the author concluded that, without modification, VALMIN is incompatible with USPAP and the US regulatory environment. He found that VALMIN violates US legal decisions regarding real property appraisal, due to its requirement to include many items of business value. The US Securities and Exchange Commission’s prohibition on reporting quantitative resource estimates proved to be a severe problem under VALMIN. Some VALMIN requirements could not be met due to the extent and quality of documents specified. Implications and thoughts regarding the development of a set of US minerals appraisal standards are discussed. Management considerations for complex mineral-property appraisal assignments are also presented.
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Ellis, Trevor R., "Ethical Dilemmas Posed During a Mineral Project Appraisal," The Professional Geologist, February 2000, AIPG, Denver, pages 7-11, a peer reviewed paper. Presented as the Don Yardley Lecture, Mackay School of Mines, Department of Geological Sciences, University of Nevada, Reno, February 16, 2001.
Abstract
The author carried out an assignment in 1998 to develop two appraised value reports on a “proven reserve” of an industrial mineral that were to be used in financing. One report was on an as is basis and the other follows guidelines provided by the lending institution to support its proposed loan. The partner companies developing the reserves contracted directly with the author’s one-person consulting corporation for the work. Unforeseen complexities and dubious arrangements were uncovered during the assignment. The relationship between the partners soured as did their relationship with the author. As the assignment progressed, the author received specific directives for determining the product selling price, which the client expected would result in the favorable appraised value required to obtain the loan. This paper addresses many ethical issues which confronted the author during this assignment, including the issue of his own areas of competency; the level of reasonable due diligence; obligations to the contracting partners versus the lender; the issue of independence and whether he could resign from the project or not follow his client’s instructions; and his strong desire to get paid.
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Ellis, Trevor R., Abbott, David M., Jr., and Sandri, H.J., "Trends in the Regulation of Mineral Deposit Valuation," presented at SME Annual Convention, Denver, March 1-3, 1999, SME Preprint 99-29, 8 pages
Abstract
Regulation of mineral property valuation methodology by governments and others is due to frauds, condemnation and takings, banking industry problems, and litigation. Definitions of "reserves," "resources," and "qualified person" continue to evolve, along with guidelines to the data and disclosure required to support valuations. A less recognized but vital issue relates to the regulatory acceptability of alternatives to the comparable sales method. Comparable sales generally works well for surface real estate, and sometimes for precious metal deposits, but not at all for most industrial mineral properties. Alternative methods, such as net present value, or a geoscience rating system, often provide better valuations. Yet US regulations dictate comparable sales as the preferred method. The task of convincing regulators of the inapplicability of comparable sales to mineral properties, particularly those lacking reserves, may be as important as the valuation itself.
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Ellis, Trevor R., "Application of Economic Risk Assessment to Hazardous Waste Remediation Projects," presented at the APCA Annual Meeting, Dallas, Texas, June 19-24, 1988, Preprint 88-35.4, 13 pages
Introduction
The early stages of planning or conducting hazardous waste remediation projects generally involve considerable uncertainty in many factors. Most of these factors will eventually have an impact on the overall cost of the project, which may result in large cost overruns. While attempts can be made to estimate the potential range of cost outcomes, it is difficult given the complexity of many projects. The economic risk assessment methodology presented in this paper quantifies risks and uncertain factors into dollar amounts, thus providing a range for the financial liability associated with the project. It also allows selection of the optimum remediation technique and remediation path for each technique based upon expected cost, risk aversion criteria, taxation implications, and net present value costs. Economic risk assessment techniques have been used for more than 20 years for evaluation of large petroleum exploration and development projects to quantify risks and uncertainties in determination of expected cost and profitability outcomes. Data from actual case studies and hypothetical examples are presented to illustrate the methodology and its potential benefits.

An economic risk assessment can be used for a number of purposes. it can be used to provide a realistic range of expected cost outcomes to the owners or principal responsible parties (PRP's) for the site. This allows for informed financial planning and decision making, while also averting the potential of large cost overruns at a later date in the project. The assessment also allows concerned parties to identify areas that may prove of greater liability than originally anticipated as the project progresses. It may also aid in the selection of options or approaches which will minimize some of the potential liability or uncertainty.

With an expected cost and net present value cost outcome at hand based upon probability analysis, settlements can be negotiated at an early stage with minor liable parties in order to simplify project management. For example, at one industrial waste contamination site presently in the early stages of remediation planning, the major responsible parties want to settle as soon as possible with more than 300 minor responsible parties in order to simplify project management. However, cost estimates for the remediation project range from below $40 million to close to $300 million. An economic risk assessment is being conducted to determine the mean cost estimate to be used for settlement negotiations.

There appears to be an increasing trend to have contractors negotiate a fixed price for their site remediation work, as compared to commonly used "cost plus" contracts. A fixed price passes much of the project risk onto the contractor. To quantify risks and uncertainties for their bids, contractors could use economic risk assessment techniques. Of a similar nature, major oil companies have used these techniques for at least 20 years to quantify risks and uncertainties in developing fixed bids for offshore petroleum leases. To minimize the time and cost involved in the assessment, it may be necessary to include only a few major risk or uncertainty items.

An economic risk assessment could also be used by the site owners or PRP's when evaluating fixed price bids from contractors for the remediation work. The assessment will provide a probability distribution curve for the range of remediation costs which can be expected. A bid falling near the low cost end of the distribution indicates that the contractor will absorb a lot of risk unless he is unexpectedly efficient. In deciding whether to accept the low cost bid, the financial strength of the contractor to absorb this risk can be evaluated. If the contractor's financial strength is inadequate, he may fail to complete the work, or attempt to cut corners in order to save costs.

Bryan, Rex C.,and Ellis, Trevor R., "Economic Sensitivity Analysis Using Geostatistics," 17th Application of Computers and Operations Research in the Mineral Industry, SME-AIME, 1982, pages 101-108
Abstract
An application of geostatistics to financial decision analysis is the linking of reserve parameters’ estimation precisions to a mine economics computer program calculating profitability. The estimates of economic reserve parameters are obtained by the kriging method, while precision is calculated by a technique more akin to the polygon method. To indicate the effect of the variables probability distribution on a distribution of profitability, their values are sampled by a Monte Carlo technique and entered into a mine economics modeling program developed by T. R. Ellis. The distribution of profitability calculations are in essence, a superior method of sensitivity analysis. The method is applied to a roll-front uranium deposit in the Powder River Basin, Wyoming.

Ellis, Trevor R., "Appraisal of Sandstone-Type Uranium Prospects using Computer Modeling," presented at the 1979 SME-AIME Annual Meeting, New Orleans, February 18-22, 1979, SME Preprint 79-5, 5 pages
Abstract
In this paper a method is presented for estimating the specifications of sandstone-type uranium deposits which will be the minimum that can meet a company's economic requirements for investment. The method interpolates and extrapolates from available cost data for typical mines to provide the costs for a wide range of possible deposits. The range of deposits achieving the company's required discounted cash flow rate of return on investment at an estimated uranium oxide selling price is then calculated, thus giving the complete range of deposits which meet the minimum required specifications. Prospects are then evaluated by comparison with these minimum requirements.

Ellis, Trevor R., "Estimation of Minimum Specifications for Economically Explorable Sandstone-Type Uranium Deposits," Colorado School of Mines Quarterly, Vol. 74, No. 1, January 1979, 71 pages, a peer reviewed publication
Abstract
Much valuable exploration time and funds are often wasted on exhaustive examination of noneconomic mineral deposits. If exploration teams were provided with some guidelines as to the required specifications for deposits to be workable, those deposits that obviously cannot meet the specifications would be left after a minimum amount of examination.

In this paper a method is developed for estimating the specifications of sandstone-type uranium deposits which will be the minimum that can meet a company's economic requirements for investment. The method is based on net present value analysis. From available cost data and deposit specifications for typical mines, the method involves calculating the uranium oxide selling price necessary for a mining project based on the deposit to achieve the company's required discounted cash flow rate of return on investment. The deposit is assumed to have been drilled to only a minor extent during exploration drilling. The range of deposits achieving the company's required discounted cash flow rate of return on investment at the selected selling price is then graphed. The graphs provide the complete range of deposits with the minimum required specifications. A FORTRAN computer program capable of accepting a wide variety of inputs was written by the author to perform the necessary calculations.

A major portion of the paper is devoted to discussion of the variations of costs with the depth and thickness of uranium ore deposits. A large amount of unpublished data was collected for this purpose. From this discussion is developed the use of an ore depth to thickness ratio for simplifying the method.

In developing this method, the author assumed that the deposits would be mined by either standard open pit or room and pillar underground techniques. In situ leaching is briefly discussed and some comparative data presented. However, a lack of comprehensive cost data for this latter technique prevented the method from being expanded to include it.

The accuracy of the results derived from the method is limited to a major extent by the accuracy of available cost data. The author therefore believes that the best procedure for application will be to calculate upper and lower limits for the minimum range of economic deposits. Deposits falling below the lower limit would be left immediately, those above the upper limit would be almost certain to prove viable, while the marginal deposits between the limits would warrant further prudent examination and evaluation.

Abbreviations used above:

AI - Appraisal Institute
AIMA - American Insitute of Minerals Appraisers
AIME - American Institute of Mining, Metallurgical and Petroleum Engineers
AIPG - American Insitute of Professional Geologists
ASA - American Society of Appraisers
ASFMRA - American Society of Farm Managers and Rural Appraisers
AusIMM - Australasian Institute of Mining and Metallurgy
CIM - Canadian Institute of Mining, Metallurgy and Petroleum
CMA - Colorado Mining Association
CMMI - Council of Mining and Metallurgical Institutions
IAEE - International Association of Energy Economics
IASB - International Accounting Standards Board
IVSC - International Valuation Standards Committee
PDAC - Prospectors and Developers Association of Canada
SAIMM - South African Institute of Mining and Metallurgy
SME - Society for Mining, Metallurgy, and Exploration

To request a copy of a paper listed above, e-mail your request to Trevor Ellis.

e-mail: ellis@minevaluation.com