Understanding the value differential attached to early-stage exploration projects

IMVAL Workshop: Perspectives on mineral valuation

May 13, 2021

Greenfield exploration projects almost always have a significant value differential between the value stated in the economic analysis of the project’s NI43-101 report and the junior exploration company’s market capitalization.  This differential may be used to attack the validity of the NI43-101 report and the junior exploration company.  However, these criticisms demonstrate the lack of insight into the value creation structure of the exploration and design study sequence and the purpose of the NI43-101 report’s economic analysis. 

This presentation provides an overview of how exploration and design-study sequence moderate risk and creates value through staged investment even at the scoping study stage.  It shows why the value differential is entirely consistent with a well-functioning junior exploration company.  For an industry in which early-stage investments are viewed suspiciously, mining professionals need a framework to understand why value differentials exist so that exploration and technical risk are managed in a manner that creates value rather than inadvertently destroys it.

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