RE: Approaches29 Nov 2025 08:49
Valuation before PFS remains highly speculative and dependent on variables from jurisdiction to commodity trends; from Google AI:
A mining company with only inferred resources is in a very early, high-risk stage, and its valuation is highly subjective, often based on potential and market comparisons rather than a definitive dollar figure. There is no single "worth" as it is largely dependent on the specific mineral, location, market sentiment, and potential for upgrading the resource.
Key Valuation Factors and Methods
Because there's a low level of geological confidence in inferred resources, they cannot be used to estimate proven or probable reserves, nor can they be the sole basis for definitive economic studies like feasibility reports.
Valuation at this stage generally relies on the following approaches:
Market Approach (Comparables): This is a widely used method at the inferred stage, where the company is valued by comparing it to similar publicly traded companies or recent transactions involving projects at a similar stage. Metrics like Enterprise Value per Resource ounce or pound (EV/Resource) are used as benchmarks. For example, studies have shown that for gold projects, the median price paid for "gold in the ground" in early stages was around $39 per ounce, but this can vary widely.
Cost Approach: This method considers the historical costs incurred to acquire the asset and conduct exploration to date. This often forms a baseline for valuation, but it doesn't account for the potential upside if a large, viable deposit is eventually confirmed.
Income Approach (Discounted Cash Flow - DCF) (Less Common): The income approach, which involves calculating the Net Present Value (NPV) of future cash flows, is generally not used for projects with only inferred resources due to the high level of uncertainty. While a preliminary economic assessment (PEA) might include inferred resources, a robust, bankable DCF model requires a much higher confidence level (indicated and measured resources).
Optionality and Strategic Value: A large portion of the value may be tied to the "optionality"—the potential for a major discovery or the strategic value of the land package to a larger mining company. A strong management team can also add value.
Summary of Value
A company at the inferred stage is a highly speculative investment. Its value is essentially a reflection of the market's belief in its potential to prove up a commercially viable deposit through further exploration, rather than a quantifiable, guaranteed return on existing assets. The actual worth could range from a few million dollars (based on exploration costs and market comparisons) to potentially hundreds of millions if the market is bullish on the commodity and the project shows promising early results.
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