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Inaccurate valuations can be costly - The Valuator - valuations

Inaccurate valuations can be costly

The resources industry worldwide has been hit by a drop in demand for related products. The effects of the loss in listed shares in the mining industry over the last two years are noticeable in the workshops and machinery yards of some of the biggest mines in South Africa. Although there is talk about pockets of growth in certain sectors, some forward-thinking groups have taken stock of their strategies and in many cases sold off many of their non-core assets.

 

Gavin Commins, Group CEO of The Valuator Group, says that they have been inundated over the last few months with enquiries from mining companies who are literally taking stock and valuing their key assets for market and insurance purposes and ultimately for a correct reflection on their balance sheets.

 

The dangers of inaccurate valuations can be far-reaching, and none more serious than in the mining industry. Commins explains: “Not only is there a need for accurate valuations for balance sheet and funding purposes, but insurers have become rigorous with insurance claims.” According to Commins, mining valuations are specialised and much more complex and therefore should be far more comprehensive than regular valuations, as seen in the iron ore mine flood disaster in Bento Rodrigues, Brazil where the companies are suffering financially due to  insurance claim issues. Companies need to be sure that their replacement costs are correct, should any claim be questioned by an insurer.

 

For this to be achieved, valuators need specific skills and expertise in building, blasting and excavating structures, plant, machinery and all technical mining assets. For peace of mind, many mining-related companies are opting for cost effective options offered by valuation companies over specified terms. For example, The Valuator Group offer a five-year Long Term Assistance Plan, renewed thereafter, which gives their clients full site visits and valuations in year 1,  updates in years two, three and four, with another full valuation provided in year 5. “We are finding it interesting how the relationship with our clients in this sector has developed. There have been a few cases of late that have negatively affected companies financially, which has resulted in executives taking heed. In this economic climate, it seems that clients prefer to have peace of mind, knowing that their assets are correctly valued,” reports Commins.