When it comes to plant, machinery, equipment, buildings and infrastructure assets it is essential for companies to seek Mining, Oil & Gas valuations advice, from valuers with a deep knowledge of their physical assets and a sound understanding of the assets operational & economic valuation drivers. Valuation advice plays a critical role in these businesses, including mergers and acquisitions, tax and accounting, insurance, and risk management. In this article, we will discuss the reasons why Mining, Oil and Gas valuations are necessary and how asset valuers calculate physical asset values.
Key Reasons for Valuations in Mining, Oil & Gas Sectors
Mergers and Acquisitions – Accounting and Taxation Requirements
If businesses merge or acquire another company, it is essential to determine the fair value for the acquired assets for accounting purposes and the assets market value for tax purposes. Valuing plant, machinery, equipment, buildings and infrastructure assets, provides businesses with accurate and independent advice which is compliant with local/international valuation, accounting and taxation legislation. Mining, Oil and Gas Valuations are also a very useful tool in allowing asset owners to make informed decisions on the level of capital necessary to sustain their assets economic remaining lives.
Insurance and Risk Management
In the Mining, Oil and Gas sectors, capital equipment is costly, and the risk of loss or damage can be high. Mining, Oil and Gas Valuations can ensure businesses determine their appropriate sums insured to allow them to rebuild or reinstate the assets post a total or partial loss.
Calculating Physical Asset Values
To accurately value Gas, Oil or Mining equipment for accounting and taxation requirements, two primary approaches i.e., cost and market are available to the valuer.
Due to the high degree of asset speciality the cost approach is the most commonly used in these sectors. The cost approach represents the cost a market participant would incur to acquire or construct a substitute asset of comparable utility, adjusted for physical, functional and economic obsolescence.
The market approach involves determining comparability between the asset being valued and a similar asset that has either recently sold or is advertised for sale. Valuers should undertake research into the circumstances behind the sale as part of establishing comparability to the asset being valued.
A third approach known as the income approach is commonly used in assessing the overall valuation of a business. However, its specific use for tangible asset valuations is not recommended as estimating future income streams from individual assets is highly subjective and by default will include intangible asset value associated with mining rights, goodwill etc.
Mitchell & Taylors team of asset valuers will use the most appropriate valuation methodology for the physical asset requiring valuation. Key considerations in determining value are factors, such as the age and condition of the asset, its utilisation, the standard of maintenance, level of sustaining capex investment and any improvements or upgrades.
Robust Valuation Reporting to Clients
Once an asset valuation is complete, Mitchell & Taylor will provide a report to their clients. The report will typically include a detailed description of the asset, the valuation methods used, and the results of the valuation. The report will also identify any assumptions or limitations that were made or relied upon during the valuation process. Reports are typically customised to reflect the client’s specific valuation requirement, the nature of its business and how the asset valuations have considered utilisation, maintenance, sustaining capex and technological trends.
A robust valuation report should provide clients with a clear understanding of the value of their assets and the factors that were considered in arriving at that value. The report should also provide clients with the information they need to make informed decisions about their assets and their business.
Mining, Oil & Gas Valuations Conclusion
The team at Mitchell & Taylor Valuations proudly support existing and new clients with comprehensive Physical Asset Valuation, Data Reconstruction and Due Diligence advice. We have a combined knowledge of over 100 years in Mining, Gas & Oil Valuations and are trusted by Resource Companies across Australia.
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Mitchell & Taylor Valuations … converting experience into expertise in Plant, Machinery & Equipment Valuations across your sectors.