Review of appraisal reports prepared by other minerals appraisers is a relatively common practice when the size of an investment or loan is relatively large or when the investor or lender may not have an adequate understanding of the mineral product, its mining and processing, or the markets for its sale. Review of previously prepared mineral appraisal reports for litigation is very commonly performed for both sides of the case.

The need to review mineral property appraisals and mining business valuations is emphasized by the facts: that the geologic conditions of the mineral deposit may be difficult and complex to evaluate; the mining and mineral processing methods may not be well understood by the client; or, the mix of mineral products and their individual markets and prices may not be clearly described in the report. No individual can be totally competent to correctly employ all of the techniques and tools available to the geologic, mining, processing, mineral marketing, and minerals appraisal professions. An experienced minerals appraisal reviewer can often identify critical deficiencies of an appraisal merely by closely examining a minerals appraisal report. It is important to note that many consultants who prepare minerals appraisal reports may see themselves, to varying degrees, as proponents for their clients. By providing a different perspective the minerals appraisal reviewer is able to protect the interests of the client by helping the client develop a better understanding of the value of a mineral property or mining business interest.

The minerals appraiser performing a technical review will normally prepare a separate report setting forth the results of the review. The review of a minerals appraisal report is expected to go beyond merely checking for a level of completeness and consistency in that the reviewer will also be providing comments on the content and conclusions of the report. Due to the wide variety of specific mineral properties and mining businesses the review minerals appraiser may not have first-hand knowledge of the subject mineral property or mining business. Depending upon the client's needs it may or may not be necessary for the reviewing minerals appraiser to personally examine the mineral property or mining business.

The reviewing minerals appraiser is expected to precisely define and explain the extent of the review that was conducted. Specific items that a review minerals appraiser must perform are outlined in the steps below.

Identify the mineral appraisal report under review, the real estate (fee or mining claims), real property,  mineral interest, and/or the mining business interest that was appraised, the effective dates of the opinion of value and the report itself, and the date that the mineral appraisal review is occurring. Mineral property and mining business valuation reports are normally reviewed in the context of general economic, and mineral market conditions as of the effective date of of the opinion of value in the report being reviewed. Information that could not have been available to the original minerals appraiser on the reviewing date is not normally used by a review minerals appraiser in developing the review.

A reviewing minerals appraiser should also identify and consider the client's intended use of the review report in order to be aware of any special client requirements and to properly define the types of problems that may be of critical importance. This allows the reviewing minerals appraiser to better understand his development and reporting responsibilities for the client's benefit as well as for USPAP requirements.

The reviewing minerals appraiser is required by USPAP to: form an opinion as to the completeness of the report under review in light of the USPAP reporting standards for real property, consulting, or business valuation reports; form an opinion as to the apparent adequacy and relevance of the data that was relied on and the propriety of any adjustments to that data; form an opinion as to the appropriateness of the minerals appraisal-valuation methods and techniques that were used and develop and explain any reasons for disagreement; and, form an opinion as to whether the analyses, opinions, and conclusions in the minerals appraisal report under review were appropriate and reasonable, and develop and explain any reasons for disagreement.

After a client completes an administrative review, or has a qualified minerals appraiser perform a technical review, the client can gain an improved understanding of the strengths and weaknesses of the information and minerals appraisal processes that led to the opinion of value in the original report. With this and other information that may be possessed by the client, the client is in a better position to make decisions on issues such as: whether or not to pursue litigation; what book value to establish for a mineral property asset; whether to make or accept an offer to purchase or sell; whether additional and more specific due diligence may be required; etc.

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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