DCF Valuations are very important to individuals
and companies involved in the mining industry. Such
valuations are critical to investment decisions in relation
to new and existing projects. In particular they provide
fundamental information to shareholders in the event
of a capital raising or takeover and to financiers
supporting mining companies and projects. Also, DCF
Valuations are often used to support asset carrying
values in the financial statements of mining companies. This paper presents a Chartered Accountant's (CA's)
perspective on the main issues to be considered in
preparing, analysing and relying upon DCF methods in
mineral valuations and provides some practical
examples relating to key issues. The paper makes the
important point that DCF methods involve making
assumptions about future events and circumstances that
inherently contain uncertainty which results in a
valuation prepared on a DCF basis providing a range
of values that are not perfect or accurate. In order that
DCF valuations provide meaningful information the underlying methodology used and assumptions made
must be consistent, sound and well supported.
Credibility of those involved in preparing mineral
valuations is vital and this paper supports the adoption
of sound practices by all concerned.