The Specific Value of Junior Mining Companies: Are Common Valuation Methods Appropriate?

Klossek Polina () and Klossek Andreas ()
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Klossek Polina: Helmholtz Institute Freiberg for Resource Technology, Freiberg, Germany
Klossek Andreas: Helmholtz Institute Freiberg for Resource Technology, Freiberg, Germany

Journal of Business Valuation and Economic Loss Analysis, 2014, vol. 9, issue 1, 105-144

Abstract: Taking into account the recent worldwide strive for raw materials, the emergence of start-ups in the mining sector for rare metals, and tendencies of financial and strategic investors to invest in such companies, the paper critically evaluates the suitability of common methods widely used to value mining companies. Building on the deficiencies of single methods to capture the specificities of rare earth junior mining companies, which are generally single-project companies, the paper suggests using a combined approach including discounted cash flow, real options, and multipliers methods. Compared to the value obtained using singular methods, the resulting specific value is argued to better reflect the value of a specific early stage mining company within the rare earth junior mining industry.

Keywords: junior mining company; start-up; valuation method; rare earths (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1515/jbvela-2013-0014

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