The valuation of exploration properties which
contain no identified resources or reserves is the most
subjective of all valuation tasks likely to be carried out
by a geologist. The geoscience rating method proposed
by Kilburn (1990) recognises this inherent subjectivity
but also attempts to apply some discipline to the
valuation process. Some other methods used for
valuations of this type clearly lack discipline and are
open to misuse and abuse. The Kilburn method essentially requires the
practitioner to justify all aspects of the valuation process.
The valuer must specify and, more importantly, quantify
aspects which enhance or downgrade the intrinsic value
of each property. The intrinsic value is called the ""base
acquisition cost"" (BAC) and it represents the average cost to identify, apply for and retain a base unit of area
of title. The BAC and base unit of area both vary with
different types of exploration and mining title but remain
constant for similar types of titles in the same mineral
tenure regime. In the Kilburn Method the enhancement/
downgrading factors are determined by the geotechnical
prospectivity (Kilburn Method) within the title. A modified version of the Kilburn Method presented
here (""Modified Kilburn Method"") also focuses attention
on other real variables besides the geotechnical
attributes which influence valuations of this type, viz.,
competition for tenure and activity in the markets in
which the exploration properties are being traded. The
most active such market at present is the stock market.
By utilising uniform BACs and base units of area (for
similar titles) for all exploration properties (in practice
in Australia this is only possible within a particular
State or Territory), the method exposes the valuer's
opinions of each of these variables to the scrutiny of the
investor. The investor (or his professional adviser) is
afforded the opportunity to directly compare valuations
on different properties by different practitioners and
can assess how the final valuation is weighted in respect
of geotechnical prospectivity, competition for tenure,
and stock/financial market sentiment. No other method
currently employed in Australia to value mineral
exploration properties affords the investor this `luxury',
which some may argue is their right.