Mineral Resource Valuation & Appraisal Flashcards
7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mineral Resource Valuation & Appraisal flashcards as text
A mineral appraiser estimating the value of a phosphate deposit uses a $12/ton in-place value. If the recoverable reserves are 5 million tons and the royalty rate is 8%, what is the approximate royalty interest value?
Answer: $4,800,000
Royalty interest value = 5,000,000 tons × $12/ton × 8% = $4,800,000 before any time-value discounting.
In mineral appraisal, 'economic life' of a deposit is best defined as:
Answer: The period during which extraction remains economically profitable
Economic life is the period during which continued extraction generates positive cash flow, ending when costs exceed revenues or reserves are exhausted.
Which of the following is an example of a 'non-participating royalty interest' (NPRI) in mineral appraisal?
Answer: A royalty interest severed from the executive rights that cannot negotiate leases
An NPRI is a fractional share of gross production free of costs, severed from the mineral estate so the NPRI owner has no executive rights to lease or negotiate terms.
When assessing environmental liabilities in mineral property appraisal, an appraiser should:
Answer: Deduct estimated remediation costs from the property value
Known or observable environmental liabilities should be estimated and deducted from value, and the appraiser should recommend an expert environmental assessment if significant issues are identified.
The 'Hotelling Rule' in mineral economics states that in an efficient market, the price of an exhaustible resource should:
Answer: Rise at a rate equal to the prevailing interest rate
Hotelling's Rule predicts that the net price (royalty) of an exhaustible resource must rise at the rate of interest for owners to be indifferent between extracting now or waiting.
A 'life-of-lease' royalty clause differs from a 'term royalty' in that a life-of-lease royalty:
Answer: Continues as long as the mineral lease remains in force
A life-of-lease royalty persists for the entire duration of the mineral lease, whereas a term royalty expires after a specified period even if the lease continues.
In appraising hard rock mineral deposits, which feasibility study level provides the highest degree of technical and economic confidence?
Answer: Bankable feasibility study
A bankable (definitive) feasibility study offers the highest confidence level, sufficient for project financing, with accuracy typically within ±10-15% of actual costs.