Dr. Herman Tso, Chief Geologist Mining Company & Project Valuation HASS Natural Resources Limited...

Dr. Herman Tso, Chief Geologist

Mining Company & Project Valuation

HASS Natural Resources Limited HASS group Inc

Address: Unit A, 7/F, Pico Tower, 66 Gloucester Rd., Wanchai , Hong Kong

Website: http://www.hass-group.com

http://www.hass-group.com/

Business & Intangible Assets ValuationBusiness & Intangible Assets ValuationNatural Resources ValuationNatural Resources ValuationPurchase Price AllocationPurchase Price AllocationFinancial Instruments ValuationFinancial Instruments ValuationIndustrial ValuationIndustrial ValuationCorporate AdvisoryCorporate Advisory

• Project Feasibility StudyProject Feasibility Study• Resources EstimationResources Estimation• EvaluationEvaluation• Due DiligentDue Diligent• Project FundingProject Funding• Technical ReportTechnical Report

CONNECTING YOUR BUSINESS TO THE RESOURCES YOU NEED

ArgentinaAustralia

BrazilChina

IndonesiaKazakhstan

MalaysiaMongolia

PhilippinesRussia

South AfricaUSA

CoalCopperGoldNickelLeadZinc

•Molybdenum

•Iron

•Manganese

•Oilfield

•Salt Lake

•Silver

•Tin

Petroleum Resources

Classification System

Illustrations of Resources

Project Experience

Classification and Differences Between Mineral Resources and Reserves

Resources• Inferred• Indicated• Measured

Reserves• Possible• Probable• Proved

Differences Between Mineral Resources and Reserves (con’t)

Project Experience

Technical ReportTechnical Report

• Prepared by Competent Person

- Minimum of 5 years of experience

- Professionally qualified

- Take overall responsibility

- Independent of the issuer

Reporting Standards for Technical ReportReporting Standards for Technical Report

• Mineral Resources

1. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC CodeJORC Code”) ;

2. National Instrument 43-101 (“NI 43-101NI 43-101”); or

3. South African Code for Reporting of Mineral Resources and Mineral Reserves (“SAMREC CodeSAMREC Code”)

• Petroleum Resources

1. Petroleum Resources Management System (“PRMSPRMS”)

Project Experience

JORC Code (Mineral Resources)JORC Code (Mineral Resources)

• Originally issued by the Australasian Jointed Ore Reserves Committee in 1989

• Purposes:– Establish the Minimum Standards for Public

Reporting of Mineral Resources and Ore Reserve– Set out a System for the Classification of Tonnage

and Grade Estimates– Specify the Qualification and Experience required for

Competent Person

Project Experience

NI 43-101 (Mineral Resources)NI 43-101 (Mineral Resources)

• A mineral resource classification scheme used for the information disclosure relating in Canada

• Purposes:– Ensure that misleading, erroneous or fraudulent

information is not published– Stipulate prescribed disclosure within the national

instrument (such as technical information, terminology, compliant report)

• Comparison to JORC Code– Require substantially more technical disclosure

Project Experience

SAMREC Code (Mineral Resources)SAMREC Code (Mineral Resources)

• A required minimum standard for public reporting on exploration results mineral resources or mineral reserves in South Africa

• Purposes:– Inform investors or potential investors and their advisers – Satisfy regulatory requirements

Project Experience

PRMS (Petroleum Reserves)PRMS (Petroleum Reserves)

• Approved by the Society of Petroleum Engineers (SPE) Board of Directors

• Purposes:– Provide a consistent approach to estimating

petroleum quantities– Evaluate development projects – Present results within a comprehensive

classification framework

Project Experience

Russian Code & Chinese Code Conversion Guidelines

Russian Resource/Reserve Reporting Standard

• Level of Knowledge– P3: Regional Reconnaissance– P2: Target Identification– P1: Initial Trenching and Drilling– C2: Scoping / Pre-feasibility– C1: Feasibility Study– B: Blocking out Ore Panels– A: Production

Project Experience

Russian Code to JORC Code Conversion Guidelines

Project Experience

Definition of the New Chinese Resource Category Scheme

Chinese Code to JORC Code Conversion Guidelines

Project Experience

Part 1 Chapter 18Part 1 Chapter 181.11.1 Introduction to the Mining IndustryIntroduction to the Mining Industry1.21.2 Key Changes and New Requirements Key Changes and New Requirements

of HKEx Listing Rule on Mineral of HKEx Listing Rule on Mineral Companies - Chapter 18/18ACompanies - Chapter 18/18A

1.31.3 Important IssuesImportant Issues- Listing Requirements- Listing Requirements- Disclosure Requirements- Disclosure Requirements- Preparation of Reports- Preparation of Reports

1.41.4 Recent Technical Advisory and Recent Technical Advisory and Valuation Projects of ROMAValuation Projects of ROMA

AGENDA

Part 2 ValuationPart 2 Valuation

2.12.1 Reporting Standards for ValuationReporting Standards for Valuation

2.22.2 Determination of the Value of Determination of the Value of Mineral/Petroleum AssetsMineral/Petroleum Assets

Project Experience

Part 1- Chapter 18

• Mining Industies - Definte Life - Limited resouces• Other Industries - Going comcern - Terminal value(DCF)

Key Changes and New Requirements of Chapter 18/18A

• Purpose of Rule Change:– Increase shareholders

and investors’ confidence in junior mining companies listed in the HKEx

Project Experience

Chapter 18/18A

• New Rules - Effective on 3 June 2010

1. Exclude early stage exploration companies from listing

2. Industry experience requirement of Competent Person has been increased from 3 to 5 years

3. Disclose specific risks and general risks

Chapter 18/18A (con’t)

4. Allow mineral and exploration companies to list without needing the financial track record of Listing Rule 8.05

5. Mineral resources and mineral reserves must be reported separately

Project Experience

Chapter 18/18A (con’t)

Allow companies to list only if they have a minimum of the following resources:

Petroleum Companies - At Least a meaningful portfolio of Contingent Resources

Minernal Companies - At least meaniful portfolio of Indicated Resource

Project Experience

• All Mineral Companies

- Companies that only have Inferred or Prospective Resources will not be eligible for an IPO listing under the new Chapter 18 rule

- Demonstrate working capital for 125% of budgeted needs for at least the next 12 months ( 13 months)

Disclosure Requirements

• Interim and Annual Reports have to include:

Details of its exploration, development and mining production activities

A summary of expenditure incurred on these activities during the period under review

Listing Requirements

Project Experience

Preparation of Reports

Important Issues – Preparation of

Reports

Project Experience

Important Issues• Early Stage Exploration Companies

– Must outline their plans to proceed to production, supported by an independent Scoping Study

– Mineral companies which do not satisfy Rule 8.05(1) (Profit Test), but are applying to list under Listing Rule 18.04 must demonstrate a clear path to commercial production

– Pre-feasibility studies are required

• All Mineral Companies

- Must demonstrate that they have adequate rights to participate actively in the exploration or exploration and extraction of resources, either by:

Having controlling interests in a majority (by value) of the assets in which they have invested; or

Through other rights, which give them significant

influence in decisions over the extraction of those resources

Project Experience

Insights from Our Recent Project Experiences

In order to smoothen the listing and transaction transaction process, we suggest:•Make sure that both the technical and valuation reports are prepared in accordance with the reporting standards accepted by the HKEx•Have sufficient due diligence conducted•Show that you have conducted sufficient researches on the involved market and mineral resources•Have sufficient disclosure of information required by the HKEx in the circular (Do not try to hide anything)

Project Experience

1. CIMVAL

- Set out in Canada

- Outline the sections to be included in the Valuation Report

2. SAMVAL

- Set out in South Africa

- Relatively less restrictive compared to the VALMIN Code and the CIMVAL Code

- Necessary to carry out a site visit by a Competent Valuator or by a Competent Person or an expert

Project Experience

Technical 　　　　　

　 Stock Code Report Nature Mine Type Remarks

Internal Reference Purpose

　　　　　

Issued Report Date &

Purpose　　　　　

March-11 Yorkshire Capital Limited -

Technical Due

Diligence Report

Petroleum ROMA

March-11 EPI (Holdings) Limited 689Resources Estimation

ReportPetroleum ROMA

March-11 Bao Yuan Holdings Limited 692Resources

Review Report

Iron & Titanium dioxide

ROMA

Recent Technical Advisory – Natural Resources Industry

Technical 　　　　　


Public Documentation


　　　　　　

Issued Report Date & Purpose 　　　　　

March-10Bao Yuan Holdings Limited (formerly

known as Ching Hing (Holdings) Limited)

692 Technical ReportIron &

Titanium dioxide

BMI Technical Consulting

April-10 Solartech International Holdings Limited 1166 Technical Report

Copper, Gold & Silver

BMI Technical Consulting

May-10Mongolia Investment Group Limited

(formerly known as Ming Hing Waterworks Holdings Limited)

402 Technical Report Coal BMI Technical Consulting

August-10 China Properties Investment Holdings Limited 736

Competent Person’s Report, Feasibility

Study

Copper & Molybden

umROMA

June-11 eForce Holdings Limited 943Competent Person’s

Report, Feasibility Study

Coal ROMA

Valuation 　　　　　


Public Documentation


Issued Report Date &


July-10 China Precious Metal Resources Holdings Co., Ltd. 1194 Natural Resources

ValuationGold & Nickel ROMA

August-10 China Properties Investment Holdings Limited 736 Natural Resources

Valuation

Copper & Molybden

umROMA

October-10 China Precious Metal Resources Holdings Co., Ltd. 1194 Natural Resources

Valuation Gold ROMA

November-10 Honbridge Holdings Limited 8137 Natural Resources Valuation Iron ROMA

February-11 King Stone Energy Group Limited 663 Natural Resources Valuation Coal ROMA

June-11 eForce Holdings Limited 943 Natural Resources Valuation Coal ROMA

June-11 China Precious Metal Resources Holdings Co., Ltd. 1194 Natural Resources

Valuation Gold ROMA

Valuation 　　　　　


Accounting Reference Purpose 　　　　　

Issued Report Date & Purpose 　　　　　

October-10 G-Resources Group Limited 1051 Intangible Assets Valuation

Gold & Silver

Greater China (Roma as

Consultant)

January-11 Ming Fung Jewellery Group Limited 860 Intangible Assets Valuation Gold ROMA

January-11 Ming Fung Jewellery Group Limited 860 Intangible Assets Valuation Gold ROMA

March-11 China Mining Resources Group Limited 340Intangible

Assets/Business Valuation

Molybdenum


Consultant)

March-11 North Mining Shares Co. Ltd. 433 Intangible Assets Valuation Gold & Iron

Ascent Partners (Roma as

Consultant)

March-11 North Mining Shares Co. Ltd. 433 Intangible Assets Valuation

Molybdenum


Consultant)

March-11 North Mining Shares Co. Ltd. 433 Intangible Assets Valuation Iron


Consultant)

March-11 North Mining Shares Co. Ltd. 433 Intangible Assets Valuation

Molybdenum


Consultant)

March-11 China Precious Metal Resources Holdings Co., Ltd. 1194 Intangible Assets

ValuationGold & Nickel ROMA


Valuation Gold ROMA


Valuation Gold ROMA


Valuation Gold ROMA


Valuation Gold ROMA

June-11 G-Resources Group Limited 1051 Intangible Assets Valuation

Gold & Silver


Consultant)

Part 2 Part 2 ValuationValuation

Reporting Standards for Valuation

1. Standards and Guidelines for Valuation of Mineral Properties (“CIMVALCIMVAL” code);

2. South African Code for the Reporting of Mineral Asset Valuation (“SAMVALSAMVAL” code); or

3. Code for the Technical Assessment and Valuation Mineral and Petroleum Assets and Securities for Independent Expert Reports (“VALMINVALMIN” code)

Determination of the Value of Mineral/Petroleum Assets

Market-Based Approach

- Comparing prices of business entities in a similar nature

- e.g. Using price-to-sales ratio (P/S ratio)

- Estimate the price using information of similar transactions

Income-Based Approach

- Economic benefits due to the income producing capability

- Estimation of value depends on cost structure of companies

- Adopt discount cash flow (DCF) method

Cost-Based Approach- Aggregating the costs of developing the asset to its

current condition, or replacing that asset

Determination of the Value of Mineral/Petroleum Assets

Dr. Herman Tso, Chief Geologist Mining Company & Project Valuation HASS Natural Resources Limited...

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