Mineral Appraisal Oversights in Quarries

Mineral appraisal of aggregate reserves or valuation a fully operating quarry business requires proficiency with mining, technical, marketing, and real estate factors. In quarry valuations, certified mineral appraisers generally assess the value of minerals in addition to rock quarry profitability. Lack of experience and competency can result in substantial errors. Mines and quarries are an uncommon property type. Therefore, these errors can frequently go undetected by users of the appraisal and trained appraisal reviewers. Accurate mineral rights appraisal and quarry business valuation provide fiscal transparency and protect investors from undisclosed risk.


Here are a few examples of common mistakes:


Estimate of aggregate reserves


Mineral quality and quantity are critical parameters in valuing a quarry. An appraisal that relies on buyer or seller estimates of mineral reserves can easily be driven to a biased value. Assessment of the viable units for sale is most often completed by a mining industry expert and protects financial stakeholders from receiving a flawed appraisal conclusion.


Sometimes an engineering or geologic report has been already been developed for the property. The appraiser must be able to stand against industry peers with the expertise to verify and appropriately apply the findings. Mineral and geoscience experts undergo years of education and experience to estimate mineral reserves and it is a licensed practice in most states. Third-party estimation of mineral reserves by a qualified mining expert results the most reliable and credible appraisal.


Mineral value confused with rock quarry profitability

Minerals are one of many different inputs to a mining business. Project cash flow or "developer" methodologies can often result in remarkable valuation errors. Real estate value and business value are different concepts. Problems frequently occur due to mixing these components. The most reliable and accurate mineral appraisals utilize market data and technical experience to assess businesses, and the field of viable substitute mineral properties. Reliable appraisals are clear and transparent with allocations of business value and real estate value.


Attribution of business income to the real estate value


Genuine real estate value includes the minerals, land, and improvements. The Appraisal Institute writes: “It is also important to remember that the activity of mineral extraction is a business activity and that real property interests must be separated from those of a business” (Appraisal of Real Estate, 15th Edition, Appraisal Institute (U.S.), 2020).

The Institute also writes:

“Because subsurface minerals can never be fully and absolutely quantified until they are extracted, and their extent and quality are subject to many variations, appraisers should recognize the risks and uncertainties associated with mineral properties” (Appraisal of Real Estate, 15th Edition, Appraisal Institute (U.S.), 2020).


Oversights commonly occur when a valuer is versed in one practice area such as appraisal but lacks formal education and experience in others such as mining engineering or geology. Like supporting a bridge, both ends are significant. Aggregate quarry appraisals - including mineral rights appraisal and quarry business appraisal can be accomplished with teams experienced in mining engineering, geology, and appraisal practice.