CIM updates mineral property valuation code

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) recently released its updated Canadian standards and guidelines for the valuation of mineral properties (CIMVAL 2019).

Its new code is the result of a multi-year process by CIM’s Special Committee on the Valuation of Mineral Properties (CIMVAL), and underwent rigorous internal and external review prior to its adoption by the CIM Council on Nov. 29, 2019.

The CIMVAL Code 2019 revises and supersedes the CIMVAL 2003 valuation standards and guidelines, which is now widely recognized both nationally and internationally.

CIMVAL 2003 was a consequence of the 1997 Bre-X fiasco. The standards and guidelines were part of many initiatives taken at the time to address negative perceptions about the mining sector; including the introduction of the Qualified Person (QP) concept, mineral reserve and mineral resource classifications, exploration best practices, and Canadian securities administrators’ standards of disclosure for mineral projects (National Instrument 43-101).

The CIMVAL committee is comprised of ten experts, including mining executives, investment bankers, valuation consultants, as well as a business valuator, mining analyst, and mining lawyer.

The committee’s co-chairs are its original founders, Keith Spence and Dr. William Roscoe, and its secretary is Eden Oliver.

Mineral property valuations are important in mergers and acquisitions, IPO pricing, support of audited financial statements, litigation and arbitration, government expropriations, tax disputes, and insurance claims.

In 2012, CIMVAL was a founding member of the International Minerals Valuation Committee (IMVAL), along with VALMIN of Australia, SAMVAL of South Africa, the International Institute of Mineral Appraisers, and the Valuation Committee of the U.S.-based Society of Mining and Exploration (SME).

The IMVAL committee developed a template of valuation standards and guidelines that harmonizes best practices of CIMVAL, VALMIN, and SAMVAL, with general valuation input from the International Valuation Standards (IVS).

The IMVAL template is available for adoption by any national valuation organization and the 2019 CIMVAL Code follows its structure and draws heavily on its content. CIMVAL 2019 is therefore more aligned with other national standards and IVS than the CIMVAL 2003 version.

In addition, other important changes were made to improve alignment with valuation practice. CIMVAL 2003 only allowed individuals called Qualified Valuators (QVs) to sign valuation reports, but CIMVAL 2019 now recognizes that a QV can also be a corporation or a partnership.

CIMVAL 2003 provided for only a comprehensive type of valuation report with technical content along the lines of that required in a National Instrument 43-101 technical report. In practice, that requirement is too onerous and too expensive for many valuation applications. As a result, CIMVAL 2019 now recognizes the need for a shorter type of report and provides for a Short Form Valuation Report as well as a Comprehensive Valuation Report.

CIMVAL 2019 also updates, clarifies, and improves the 2003 CIMVAL Standards and Guidelines in other key areas:

• CIMVAL 2019 is organized into four parts: Background, Standards, Guidelines, and Definitions. This is aligned with the IMVAL template and is considered to be an improvement over CIMVAL 2003.
• The principles of competence, materiality, reasonableness, transparency, and independence have been retained, and their descriptions and guidance have been expanded in the 2019 CIMVAL Code.
• The principle of objectivity, which means acting impartially and without bias, has been added to CIMVAL 2019, along with further explanation and guidance.
• In CIMVAL 2019, mineral resource and mineral reserve estimates used in a valuation should be in keeping with CIM resource and reserve definition standards, or with other similar national reporting standards that are in accordance with the template of the Committee for Mineral Reserves International Reporting Standards (CRIRSCO). Other estimates or historical estimates may be used provided that a QP comments on the relevance, reliability, and level of assurance of the estimate and reconciles the categories with those of the CIM definition standards. This is similar to the CIMVAL 2003 treatment, but the addition of other national reporting standards in CIMVAL 2019 is an improvement and adds clarity.
• Sections on scope of work and limitations of the standards, commissioning a valuation, valuation approaches, responsibilities of the qualified valuator, and valuation report requirements have been updated in CIMVAL 2019, and a section called identification of the property being valued has been added.
• Table 1, Valuation Approaches for Different Types of Mineral Properties, is unchanged from CIMVAL 2003, but Table 2, Valuation Methods, is updated in CIMVAL 2019 to reflect current industry practice. Generally unacceptable methods, such as probabilistic methods and gross in situ value, have been removed from Table 2. These two tables are widely referenced in mineral property valuations.

CIMVAL 2019 has a more extensive set of definitions than CIMVAL 2003, and includes many from NI 43-101, IVS, and CIM resource and reserve definition standards.

Through industry initiatives such as the 2019 CIMVAL Code, Canada continues to play a leading global role in establishing internationally recognized mining best practice standards and regulations.

The 2019 CIMVAL Code is available at the CIM website, www.cim.org.

— Keith Spence is an investment banker with Global Mining Capital and is based in Toronto and Beijing. William Roscoe is a principal geologist and co-founder of RPA Inc., now part of SLR Consulting, and is based in Toronto. Eden Oliver is a mining lawyer and entrepreneur based in Toronto.