3. Electronic Theses and Dissertations (ETDs) - All submissions

Permanent URI for this communityhttps://wiredspace.wits.ac.za/handle/10539/45

Browse

Search Results

Now showing 1 - 2 of 2
  • Item
    A framework to harmonise mineral asset valuation methodologies with existing and emerging financial reporting requirements
    (2017) Njowa, Godknows
    One of the consequences of globalisation in the extractive industries is the necessity to apply uniform accounting and valuation standards that are clearly understood and consistently applied by the global stakeholder community. At the beginning of the 20th century it was realised, mainly by the major mining countries that the extractive industries is one of the biggest sectors globally. In the extractive industries the single most important asset is the Mineral Resources and Mineral Reserves, yet this is not reflected anywhere in the financial statements. The major mining countries, through their mining institutes, realised that there was a need to develop standards and guidelines to align and standardise the definitions of Exploration Results, Mineral Resources and Mineral Reserves, which was achieved through the CRIRSCO template. From the accounting fraternity, several organisations also realised the need for an accounting standard specific to the extractive industries, specifically for financial reporting. Attempts by the IVSC and IASB to develop a global accounting standard for the extractive industry attests to the global requirement to develop internationally recognised valuation guidelines or a global framework for the valuation of mineral assets. Both the mining institutions and accounting standards setting boards have been working in isolation to develop a globally acceptable standard or guideline for the extractive industries, and neither has been successful due to the inherent complexities. The harmonisation of the national codes for reporting of Mineral Resources and Mineral Reserves through the CRIRSCO template, provides global common understanding. However, the national mineral asset valuation (MAV) codes, are needed to develop a similar international template. The CRIRSCO template provided a strong foundation on which the IMVAL template was developed. As part of this research a framework was developed to harmonise the national MAV Codes. Various authors have argued that there is no globally accepted standard or guideline for the valuation of extractive industries assets, nor is there a specific accounting standard for extractive industries. MAV is still an emerging discipline, coupled with the fact that financial reporting in the mineral industry is not yet fully developed, as IFRS 6 appears to be the only mineral specific financial reporting standard. This is supported by the fact that currently there is a lack of a comprehensive accounting standard for the extractive industries to guide the accounting, recognising and presenting these assets in the primary financial statements. This thesis argues that there is a gap between reflecting and accounting for Mineral Resources and Mineral Reserves in the financial reporting systems, and how these mineral assets are valued and reported. These identified gaps between MAV methodologies and financial reporting requirements formed the basis of this work. Hence this thesis develops a framework to harmonise the existing and emerging financial reporting requirements and MAV methodologies. This framework is applicable to developmental projects and operating mines, and was validated by applying the framework to a real life case study. Turquoise Hill Resources (Turquoise), which owns Oyu Tolgoi copper-gold mine in Mongolia, was selected as a good case study, due to the fact that Turquoise owns and operates this single multicommodity mineral asset, with information available in the public domain. Hence the value of Turquoise on the stock exchange is driven by the fundamental value of the mineral asset only. The results of the proposed framework showed the highest correlation coefficient of 0.77, meaning that there is a strong correlation between proposed framework and the proxy company value selected. It is concluded that the proposed framework to harmonise MAV methodologies and the emerging financial reporting requirements can be applied to estimate values for companies in the mineral industries.
  • Item
    Historical perspective, current industry practices and the latest developments in public reporting of mineral assests and properties for the extractive industry in South Africa.
    (2008-03-04T07:46:25Z) Njowa, Godknows
    ABSTRACT South Africa had its first democratic elections in 1994. This give rise to a new dimension in social, economic, political and legal fraternities. As result, a number of new rules governing the extractive industry being introduced over the last ten years. The regulatory environment, which affects the public reporting of exploration information, mineral resources and mineral reserves, has undergone major changes. These include:- · The impact of the effects of globalization on the mining industry since many large and small operating mining companies have been listed in more than one country; · Increased regulations introduced by the local JSE as revised listing requirements for reporting and internal controls, not only over financial reporting, but also over the preparation of supplementary information, including mineral resources and mineral reserves statements; and · Development of new international definitions and standards for the estimation and reporting of exploration information, mineral resources and mineral reserves. This due to the international competition for mineral exploration and development projects by global mining companies, which have lead to proactive jurisdictions to establish regulatory regimes with common fabric.. Mineral resource and mineral reserve classification methods, standards and reporting have undergone many changes since the discovery and commercial exploration of minerals as early as the 18th century. To a certain extent, even today there is still ongoing debate regarding the classification systems, definitions and the public reporting of these assets for internal and external use. Over the years, different interpretation, understanding and classification has led to confusion and misunderstanding which resulted in world class reporting scandals including, but not limited to, Bre-X, Shell and Enron. These scandals have highlighted the necessity of standardising the definitions, classification and reporting of mineral assets. The regulators and investors in the mineral industry have also been awakened and have become biggest stakeholders in the development and implementation of these rules in the industry. The concept of “competent person” was introduced and accountability of reporting was moved to the individuals and directors that report these results into the public domain. In this research report the mineral resource and mineral reserve definitions and their developments, historical developments in the minerals industry, current standards and their use in the public reporting of exploration results and mineral assets in the South African context are considered and reviewed in some detail. Included in this report were also areas of possible misconception in the interpretation of categorisation of mineral assets. A practical case study on the Harmony proposal of a hostile take over bid on Goldfields was studied. Information in the public domain on this potential transaction was reviewed during the study, facts were then analysed and formed the basis of an independent opinion. It was concluded that the reporting of mineral assets held by Harmony did not comply with the general reporting principles; hence the report was considered misleading, confusing and materially inconsistent. Hence, in the author’s opinion, Harmony’s offer to Goldfields shareholders was unfair and unreasonable. Given that Goldfields held quality assets compared to Harmony, they should have offered a greater premium for these assets.To be clear and unambiguous, technical and financial information should be published on a comparable basis by all companies operating in the same industry sector, making the same basic assumptions. Public disclosure of mineral resources and mineral reserves is a logical step towards full disclosure of material information because:- 1) mineral resources and mineral reserves are material to all investors; 2) residency or nationality of an investor should not determine what information is disclosed by a company (need for internationally recognised standards); and 3) mineral resources and mineral reserves are required to be considered in impairment and purchase price allocation in accordance with IFRS. Lastly stakeholders in the mining industry should be reminded that the codes and rules are written for guidance of professionals in pursuit of their professional work and it was recommended that large mining firms should establish a mineral resource committee at board level to help and advise the board of directors in decision making.
Copyright Ownership Is Guided By The University's

Intellectual Property policy

Students submitting a Thesis or Dissertation must be aware of current copyright issues. Both for the protection of your original work as well as the protection of another's copyrighted work, you should follow all current copyright law.