Assessing the Challlenges in the Valuation of Early-Stage Secondary Diamond Deposits

Abstract

Diamond mining is a fundamentally important part of the economy in many countries. Globally, some of these countries are home to early-stage alluvial diamond projects that attract significant interest from investors. Often, these investors need to understand the project’s value to make informed decisions. However, valuing early-stage alluvial projects is a complex and challenging process. This research report identifies and assesses the challenges associated with the valuation of early-stage alluvial projects through a case study of a project in Angola. For the case study, a valuation exercise was conducted using both the Cost Approach and the Market Approach. The research identified challenges specific to the Cost Approach, such as data availability and compliance with internationally recognised Resources and Reserves reporting codes. Likewise, challenges specific to the Market Approach included estimating current commodity prices and checking the performance of alluvial diamond properties on an applicable stock exchange. Additionally, it became clear that complications related to both approaches, such as experience and resource estimation methodologies, need to be addressed before a final valuation range can be determined. Although there are several difficulties, the valuation of early-stage alluvial projects is still possible. Nonetheless, these challenges impact the accuracy, consistency, and interpretation of the valuation results. Therefore, becoming familiar with these challenges and the recommendations made in the report will help valuators avoid potential pitfalls and contribute significantly to the field by guiding more informed decision-making in the valuation of early-stage alluvial diamond projects.