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EIS believes that appraisals of Market Value should be developed using data and economic factors derived from the market for mineral properties, such as through analysis of mineral property transactions. Such market derived information may most easily be reflected by appropriate methodology applied within the Sales Comparison (Market) Approach, but can also be applied to Income Approach and Cost Approach methods.
EIS’s philosophy is holistic. We need to understand all important aspects about the subject property of our valuation, from details of the mineral property itself and the property interest being valued, to the geographic, political and regulatory setting, the mineral product market, and the interactions between these factors. We also apply the same holistic philosophy to our less in-depth analysis of transactions that we adjust to the subject property interest in the Sales Comparison Approach and from which we extract other market measurement data.
We look at the property from the (assumed) seller’s and a likely buyer’s viewpoint. Our ultimate goal is to develop an opinion of how an acquisition negotiation would likely settle between seller and buyer under the mineral property market conditions on the effective date of appraisal. This in turn requires understanding the strength of the prevailing market for the type of mineral property. Some mineral property values can undergo a swing of one order of magnitude or more between a strong sellers’ market and a favorable buyers’ market.
Our Property Valuation Process
Minerals property valuation work conducted or signed by Mr. Ellis will abide by relevant standards and ethics, particularly those binding on Mr. Ellis through certification and licensing. Market and Fair Value appraisals of mineral properties located in the USA, for an intended use of the valuation report within the USA, are developed in compliance with the USA’s Uniform Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation. Valuations of mineral properties located outside the USA, for an intended use of the valuation report outside the USA, are generally developed in compliance with the International Valuation Standards (IVSs) of the International Valuation Standards Council (IVSC). The SME’s or other mineral valuation standard may also be referenced.
Codes of Ethics Ellis abides by include those of the International Institute of Minerals Appraisers (IIMA) and The American Institute of Professional Geologists (AIPG). The IIMA’s Best Practice Guidelines for minerals appraisals are also followed.
Unless a written client instruction or a prevailing standard or regulation pertaining to the intended use of the valuation require otherwise, market value appraisals are developed based on:
For most mineral property appraisals developed by EIS, analysis of transactions of properties with similar characteristics to the subject property plays an important tole in obtaining market data and deriving factors for use in the valuation approaches. The transaction adjustment methodology for indirect sales comparison, as refined by Mr. Ellis for mineral property valuation (the Market Transaction Valuation Method), generally provides estimates of value to which we give significant weighting in developing our value opinion. This method is explained in depth in Ellis’s 2011 peer reviewed paper on the Sales Comparison Approach.
How We Work With Our Clients
When conducting Market or Fair Value appraisals of mineral properties, we believe that having frequent contact with our clients during the months involved in the work, generally provides the most accurate and most useful outcome. Our clients usually have significant or in-depth knowledge of the property, some of which may be difficult or impossible to obtain from any other source. Our clients more often than not can provide or obtain most of the legal and technical documents about the property and documentation of production from it. Commonly they can provide answers, explanations and documentation as questions arise. For locating useful transactions and other market information, clients are often helpful in providing information, suggestions, and contacts.
Our informative interactions with our clients may result in a modification to our scope of work, in order for us to provide a more useful work product for our client.
While conducting our appraisals, we take care to assure that such contact does not introduce any significant bias into our results. We are careful to assure that the data and forecasts we use are representative, that risks and uncertainty are included appropriately, and that we let the numbers unemotionally tell us the answer without client influence.
Mr. Ellis’s peer reviewed 2000 paper, Ethical Dilemmas Posed During a Mineral Project Appraisal, describes how he dealt with the ethical complexities that arose during one of our appraisals.
For further reading on the philosophy, methodologies, and ethical principles of Trevor Ellis that we apply to appraisal, visit our publications page.
Contact Ellis International Services to inquire about having the value of a coal mine or any other mineral property appraised.