Stock Greed: you post a perfect example of someone with perfect intentions getting lost in the woods - so to speak. So let me go through some of the basics.
From drilling at any time you have an estimate of an in ground resource. Initially vague because of lack of drilling but after a while it is nearly proven.
I think you get confused between present value of that resource and it's future value.
I call furure value the amount of the resource times the price per pound or ton to get a dollar value. That value is the 'Future' value when it is dug up, processed and sold.
To bring it to present value you can use the accounting ( call it bankers method ) where by you use the expected interest rates on the capital ( future value of the resource) and calculate back to the present. I'm not a banker nor an accountant so I do not use that calculation.
I am a non mining 'engineering type' and from experience of having a few years under the belt, so I have read of this rule of thumb method of bringing that future value to the present according to the state of the resource and it's associated mine development.
( By no means is this my method, I just aquired bits and pieces from others.)
The language that I will use is deliberate so as not to use too much words such as the following that have mining meanings:
1.Reserve (Minable Economic)
Proven - minable of Measured
Probable - minable of Indicated or Inferred
2.Resource ( reasonably economic )
Measured - High confidence
Indicated - Reasonable confidence
Inferred - low confidence
3.Potential - sign of unknown presence?
A loosely defined resource can be of a few drill holes and/or spacings of about a 100 meters, of 50 meters spacings but not in a sequential or linear order, grab or trench samples or similar. Such a resource while present has loose confidence and therefore when it's dimensions and then the price are calculated it is degraded to the present based on that confidence or lack of. They are often labeled as Potential or Inferred.
These types are down graded to about a fraction of one percent of the gross 'future' value.
Next are of higher confidence having some regularly and closely spaced holes be they 50 or even 25 meters apart. They would fall into the Indicated category and would be between one and two percent of the gross value.
Finally are the National Instruments reported resources that are in the measured category because the drilling is in it's final stages of completion. When analysed and reported they are devalued by about five percent of gross.
Presumably by this stage the potential mine site has reasonable road access and some power capacity. With this basic infrastructure and a feasability study you would be applying for a mine permit and arranging financing for the mine. At this stage you derate the gross value by about ten percent.
Once you have financing arranged, permit in hand and are working on improving the basic infrastructure along with construction of the mine then the derating of the gross value is about 20%.
Once you have the mine completed and about to, or are already, producing then the derating is about 40%.
So whare does the remaining 60% go?
Note that if you are producing then any government will take somewhere around 35% of the gross value in the form of taxes and royalties. It varies from country to country so this is a generality as are the deratings mentioned above.
The remaining 25% is typical operating expense consisting of actual operating costs and salaries of the employees.
This method is very loose but quick to get a handle on the resource in present dollar terms. Per usual you take the present value and distribute over the outstanding shares.
In a buy out there is the typical 30% permium paid to you to part with your shares.
I presented here a general outline because things vary greatly when applied to specific cases.
Hope it provides some clarity. Ed.
