Possibly one of the most important part of the entire appraisal process because without an adequate market for the actual or potential mineral products from a mineral deposit it is not possible to have a mineral reserve. There are basically two types of "studies" that are routinely performed that would qualify for the term "market analysis" - commodity reviews and market study/evaluation/research. A commodity review is normally thought of as a study that states in broad general terms the uses, supply/demand and prices of the commodity plus some all encompassing statements on avenues of trade between states/countries and the possible future balance between production and consumption. A commodity review is basically a review of the mineral. A market study (evaluation/research), however, is a study that contains specific market information for the mineral(s) to be produced from a specific deposit beginning at a specific time and continuing through a logical mine life. A market study is a review of a particular mineral property or mining operation, its mineral products, and any direct competitors. By definition a market study would include the generalized elements of a commodity study.

Some particular items that a commodity review could be expected to address include:

- Differentiation of market extent: global, national, regional, local

- Long-term demand forecast (growth rates plus/minus 20 years)

- Long-term supply-demand balance (production v. consumption trends)

- End-use diversity (diversity of markets and/or significance for the mineral/metal)

- Relative unit value(s) (fob mine)

- Market volume (size of world industry in terms of annual production/sales)

- Discovery potential (geologic rarity or abundance) of the mineral relative to other minerals. Does the mineral have good exploration-discovery potential in the market being analyzed?

- Amenability to large volume, low unit costs for extraction and processing

- Transportation and geographic market limitations

- Threat of substitution from other minerals or other materials

- Nature of production, whether mined voluntarily or involuntarily as a coproduct or byproduct

- Health, pollution and environmental problems (and perceptions) associated with the mineral's production and consumption

- History of production, historical significance, duration of commercial importance (a new mineral or an old mineral, a new use or an old use).

- Restrictive elements in the industry (industrial structure of the mineral commodity, degree of oligopoly, monopoly or cartel characteristics of the mineral, degree of government control, etc.)

- Long term price forecasts

- Ratio of known resources and reserves to present global consumption

- Significance of secondary sources of supply (scrap and recycling)

- Amount, complexity and cost of mining, processing and marketing

- Industrial and consumer consumption v. economic growth patterns

- Present market share of producers

- Future market share of present and new producers

- Short-term price performance

- Total revenues of world consumption/economic size of industry

- Constant dollar price profile

- Profitability indexes

- Aggressiveness of research into new uses

- And of course, geological environments and classifications

Some of the particular items that a mineral market study would be expected to address include:

- Operator's mining, processing and marketing expertise in the mineral(s)

- Present supply and demand in the particular market area

- Projected supply and demand in the particular market area

- Present usage patterns and intensity/extensity of use

- Mine to market transportation, distribution and warehousing (stockpiling)

- Mineral product specifications; ASTM or certain customer (the above two items are of particular importance for industrial minerals and construction materials).

- Direct competitors in the particular market regardless of their location

- Substitutes and alternatives to the mineral products

- Present price structure and trends

- Future price projections

- Existing market structure and share

- Markets that may be fading and markets that may be emerging

- Environmental concerns related to the mine and its products

- Safety and health issues of the mine and its products

- Long-term economic projections of demographic trends

Discuss your mineral property appraisal, mining business valuation, or other mineral industry related concerns with Mineral Business Appraisal:
Michael R. Cartwright  michael@minval.com
Five Claret Court, Reno, NV  89512-4744
Tel/Fax: 775-322-9028

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