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On Using Current Information to Value Hard-Rock Mineral Properties

Robert D. Cairns1; Graham A. Davis2

1 McGill University · 2 Colorado School of Mines

The Review of Economics and Statistics 1998

We reformulate the “Hotelling valuation principle” to take into account the special production characteristics of hard-rock minerals. The data requirements of the revised model are still parsimonious, but the resultant valuations are some 40% below those produced by the Hotelling valuation principle. Our valuation equations are also “user-friendly,” allowing the valuer to specify price and cost expectations that need not comply with the Hotelling rule. Empirically, our model provides estimates of market value for producing mineral properties that are more accurate than those produced by the Hotelling valuation principle.

DOI
10.1162/003465398557744
Volume
80 (4)
Pages
658-663
Language
en
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