Metals & Mining Company Valuation Services

The BRIC road

The growth of the BRIC (Brazil Russia India China) economies over the past five years has shaken the Metals & Mining industry from its 30-year slumber.  While in 2006/2007 consolidations surged in an effort to gain market muscle, soaring raw-materials costs are now forcing a shift in strategy.

Steelmakers are expanding horizontally for capacity and vertically for raw-materials, seeking to minimize supply risk by investing in coal and iron-ore mining companies, while the BRIC mining companies continue their expansion into North America, Australia and Africa.

Demand for metals and bulk commodities is changing the nature of the mining industry.  The need for new infrastructure in the emerging economies and replacement of aging infrastructure in the G-8 is driving these markets.  Furthermore, there has been increased Chinese and Russian outbound M&A. Regardless of the direction the industry takes, issues involving valuation will follow.

American Appraisal is here for you.  We were involved in the creation of this industry practice area in 1896 – the same year our firm was established.  We understand how the Metals & Mining market evolved; its rise, its fall and rise again.  We believe no other valuation firm better understands its cycles than American Appraisal. 

We invite you to discover the American Appraisal difference.
 

Who we serve

Our global Metals & Mining team is comprised of more than 50 seasoned professionals who collectively provide valuation services for the world’s largest companies.  Our industry coverage is unprecedented and includes mines and exploration properties, steel mills and integrated steel operations, metals trading and distribution centers.

• Steel Mills
• Steel Service Centers
• Aluminum Smelters
• Sand, Gravel, Rock Extraction
• Precious Metal Mines & Refineries (Gold, Silver, Platinum)
• Mines (Iron ore, Coal, Copper, Bauxite/Alumina, Lithium, Magnesium, Uranium, Phosphates)

During the past decade, one-third of all multi-billion dollar purchase price allocations performed by American Appraisal were undertaken for its Metals & Mining Clients.  We excel at completing logistically challenging projects – often in remote areas of the world – on time and within budget.  Recent engagements have included:           

• Pre-acquisition valuation due diligence for a publicly traded North American steel company in a multi-billion dollar acquisition
• Valuation of China Shenhua Energy, the largest coal company in China, for an IPO on the Hong Kong Stock Exchange
• Valuation of iron ore and manganese reserves in South Africa for a major Japanese trading company
• Economic feasibility study to assist a Russian mining company to obtain expansion financing
• Valuation of lithium reserves and mining facilities in Chile and the western United States for financial reporting purposes
• Valuation of 2,600 facilities, including batch plants, quarries/aggregate and retail operations in 14 countries throughout North America and Europe for financial reporting purposes and Fixed Asset Management
• Impairment analysis for IAS compliance for a London Stock Exchange listed iron ore producer
• The valuation of an Australian coal mining company for financial reporting purposes
• Valuation of a coal mine in Inner Mongolia for financing purposes
• Valuation of molybdenum mine and processing plant in Russia for an initial public offering
• Valuation of bauxite mines, alumina plants and smelters in Nigeria and Guinea, for assistance in potential sale negotiations
• Valuation of $1.9 billion in assets involved in a merger of two European steel companies necessitating valuation of eight mills in various parts of Europe and the U.S. within 30 days
• Fixed Asset Management services for 12 mining and processing sites in North America, which included inventorying, tagging and asset reconciliation of 4,234 records for financial reporting purposes
• Valuation of Liberian gold exploration licenses to assist in re-negotiating the related royalty agreement
   

We are ‘glocal’

American Appraisal thinks globally, but has the ability to act locally.  We are the world’s only truly glocal valuation firm™ comprised of 900 employees, operating from cities throughout Asia-Pacific, Europe, and North and South America.  We maintain significant presence in countries with substantial mining or major steelmaking operations such as Russia & the Commonwealth of Independent States, India, Australia, China, the United States, Japan, Brazil, European Union, Canada and many countries in Africa.

South America South America continues to grow in importance to the global minerals supply, with approximately $54 billion (28% of global investments) of new projects anticipated between 2003 to 2012, more than any other part of the world.

Australia New mining towns are sprouting up throughout Western Australia.  Huge reserves of iron ore and coal are fueling M&A activity with considerable interest from Chinese and Russian metals companies as well as ‘The Big Three’ mining firms (Vale, Rio Tinto and BHP Billiton).

Africa Increasing demand for raw materials is driving interest in African mining despite the enormous political risks and taxation issues—especially in Zimbabwe where election problems could affect share prices of the region’s copper mines.  Mining companies must also work around inadequate power generation in many African countries.

North America The volatility of the U.S. dollar, rising maritime shipping costs and demand for steel continues to fuel cross border M&A activity relative to Metals & Mining companies.  New integrated mills and mini-mills are coming on-line to satisfy the demand for steel to replace aging infrastructure.

Russia & CIS Even though domestic steelmaking production has been totaling 72 million metric tons, we anticipate Russian Metals & Mining companies to continue seeking out opportunities to acquire North American steelmaking capacity.

European Union The European Union’s continuing importance in these industry sectors is evidenced by their production of 210 million metric tons of crude steel in 2007, as well as The London Stock Exchange’s global dominance of Metals & Mining companies’ IPOs.

Asia Currently, the largest steelmaking country, China produces approximately 36% of the global steel production.  While it lacks iron ore deposits, the industry is fueling increases in seaborne trade of iron ore, accounting for nearly half of worldwide shipments.  Increasing raw material prices is compelling smaller Chinese firms to consolidate and larger ones to look abroad for supply.  Japan continues as the world’s second largest steelmaking country, while India is the third largest iron ore exporter.
 

What we do

American Appraisal provides expertise in all classifications of tangible and intangible assets.  Our portfolio of services focuses on three key competencies:

Valuation
What are costs of replacement for new mills per ton of capacity?  What is the customer attrition rate in valuing customer relationships?  How do you measure property tax values during different levels of industry profitability?  Where is global convergence heading regarding the various standards for valuing reserves, including JORC, CIM, SAMREC and SEGC-IG7?  If any of these questions give you pause, it’s time to talk to us.

Leveraging our knowledge from over a thousand Metals & Mining projects, American Appraisal possesses the expertise and resources to provide a nimble and highly organized response to any engagement, regardless of size or complexity.  This deep experience, together with our unrivalled industry database, enables us to provide pre-closing estimates of fair values for modeling cash flows, depreciation and amortization.  Our valuation services include:

Financial reporting for Business Combinations (IFRS and GAAP)

• Land, specialty plants, mining equipment and mineral reserves
• Customer relationships, trademarks and trade names, licenses, water rights and technology
• Leasehold interests
• Impairment reviews (IFRS and GAAP)

Bankruptcies and reorganizations

Business and project modeling

Asset-based financing

Tax related valuations

• Property tax valuation and negotiation
• Foreign Investment Real Property Tax Act (FIRPTA) analysis
• Income tax related valuation of shares and options issued as remuneration
• Restructuring and reorganization of business units
• Intellectual property restructuring and portfolio management
• Sale and leaseback

Transaction Consulting
Competition is fierce.  Economic pressures loom.  No matter what sector of the Metals & Mining industry you are in, a merger or acquisition, divestiture or financial restructuring may be in your future.  Significant business transactions like these present challenges, risks and rewards.

American Appraisal can help you minimize and manage the risk component – cross enterprise and cross-border.  Our objective analysis of property economics, market drivers and valuation will provide you with insights and guidance that are often difficult to obtain.  Services include:

• Valuation due diligence
• Fairness and solvency opinions
• M&A valuation advisory
• Buy-side consulting
• Sell-side consulting

Fixed Asset Management
The price of building new steel mills and process plants has increased approximately 30% in the past year, following the recent increases of steel prices and energy costs.  Are you adequately insured?  American Appraisal has continued to grow this area of expertise.  Today, we employ one of the world’s largest teams of fixed asset Consultants.  Services include: 

• Insurable values for insurance placement, including provision of annual updates
• Advice on management of post-loss claims
• Valuations for asset-based financing
• Physical inventory and reconciliation of fixed asset accounting records
• Guidance regarding SOX and IFRS compliance procedures
• Assisting with identification and valuation of surplus assets
• Property tax studies
• Cost segregation analyses

American Appraisal annually opines on billions of dollars of value as expert witnesses in property tax disputes.

Why us?

If you’re contemplating the engagement of a valuation firm, ask yourself, which one brings over 100 years of Metals & Mining experience to the table?  Where can I find a single-source for all my valuation and related services needs?  Which firm regularly consults with geologists, engineering firms and financial institutions?  Once you have considered your options, the answer should come as no surprise…it’s American Appraisal.

In recognition of the Hong Kong Stock Exchange’s initiative to attract foreign mining companies to list on the HKEx, our Consultants have traveled extensively throughout Europe and Asia discussing IPO valuation requirements.  Today, American Appraisal is actively involved in some of the HKEx’s first mining IPOs.

We are experienced.
Our Metals & Mining Consultants are immersed in the intricacies and interdependencies within these industries; they understand the competitive, geo-political and economic issues our Clients battle daily.

• American Appraisal has performed work on every major continent for most major Metals & Mining companies.
• Our global Metals & Mining valuation team is comprised of more than 50 seasoned professionals who annually perform valuations aggregating tens of billions of dollars.

We are independent.
American Appraisal focuses exclusively on valuation and related solutions.  We are independent of other attest, rating agency, investment banking or other conflicts.  That independence guarantees our greater objectivity.

We are valuation experts.
Breadth and depth of expertise eliminates the need to rely on subcontractors.  Our Metals & Mining Consultants, who have been with us an average of more than twelve years, have the experience necessary to value virtually any business interest, tangible or intangible asset.

• Focused on and committed to valuation since 1896
• Professional Chairmanships have included the Appraisal Issues Task Force and the Appraisal Standards Board (the “FASB” of our profession)
• Unrivalled interaction with key valuation standard setting agencies ASA, FASB, IASB, IVSC, AITF and PCAOB
• Regular participation at industry conferences such as Commodities Research Unit (CRU) Adam Smith, Steel Business Briefing, Mines and Money, and MINExpo Credentials include PE, CPA, CFA, ASA, ABV, MAI, ASA and MBA
• Rounded exposure through working with “Big 4” audit/valuation teams as well as leading investment banks and P/E firms

We are focused on client needs. 
American Appraisal is employee owned.  We are not merely involved in valuation; we are unequivocally committed to meeting Client needs.  On every engagement, direct client access to the firm’s senior management is always the norm, never an exception.