The ""multiple of exploration expenditure"" method
of mineral valuation is applicable to exploration
properties from the earliest stage of exploration to a
moderately advanced stage but for which no resources
have been delineated. While not recommended as a
primary valuation method by some workers, others
believe it to be the most satisfactory method of valuing
exploration properties until it is possible to employ a
DCF technique. In many situations facing the
professional valuer, the method may represent the only
semi-quantitative option available and is frequently
used. Significantly it often forms the starting point in
discussions to farm-in on an exploration tenement. The paper briefly reviews the definition of value as
applied to mineral valuation and in particular examines
the relationship between fair value and market clearing
price in ""fair"", bull and bear markets. The multiple of exploration expenditure method uses
previous exploration expenditure and/or future
committed exploration expenditure to derive a base
value for the tenements. This base value is multiplied
by a prospectivity enhancement multiplier (PEM) with
adjustments for market premium or discount and
consideration of the quality of the exploration team to
derive a fair value for the tenements. The paper will
demonstrate that there is no necessary nexus between
fair value derived from the method and present book
Values.