This paper focuses on the significant impact that geological information has in relation to the valuation, both equity market and accounting records, of mining companies. There are many different measures adopted by investors and analysts in valuing mining companies. In particular, focus is primarily on calculation of profit as it is the authors primary expertise. The importance of geological information to the calculation of profit (and to many other measures of a mining company performance) is not always understood by the geologist. The aim of this paper is to raise the awareness of geologists (particularly those who are competent persons under the JORC code) of the impact that reserve statements - and changes to - have on profits. This is the first time that this subject has been presented directly to geologists. Similar versions of this paper have been presented at other forums where other important users (directors, auditors, accountants, analysts, investors) or preparers of financial statements have been made aware of the importance of the geological information. In essence, all mining companies prepare annual financial statements, which are adopted by directors and audited. The major items that require judgement generally revolve around two areas - commodity price outlook and the accuracy of reserves and resources. Reserves and resources are important, and that there is undoubtedly a lack of understanding about the assumptions and accuracy of reserves and resources by accountants, directors and auditors, and a general lack of understanding by geologists as to how the information that they prepare is used. Across the globe the majority of mining companies are listed on stock exchanges (with the main exception being nationally controlled mining companies - eg Codelco). In a very simplistic manner, I have divided all mining companies into three types: exploration plays - these companies are still in the finding or proving mode' and typically the stock market and investors rely on geological information and remaining cash in determining their assessment of the company; single mine companies - the major items that investors and the stock market look for are reserves, inferred resources, commodity price outlook and discounted cashflow calculations; and multiple mine companies - the investment community and stock market are looking at reserves, inferred resources (generally to a lesser extent at this stage), commodity price outlook, discounted cashflow calculations and profit and loss accounts._x000D_
Regardless of the type of company, the equity markets, including analysts, try to determine appropriate valuations for mining companies. In doing this the major two areas that require judgemental consideration are the commodity price outlook and the level of reserves and resources. Generally speaking, most mining companies have a strong understanding of their cost structures - in particular their cash costs as distinct from their accounting costs of production - and therefore this area generally gets less consideration than the other two matters mentioned above.