Resource Estimation and Valuation of Alluvial

Diamond Deposits

Tania R. Marshall

Abstract
As a result of multiple issues, alluvial diamond properties are often considered more difficult
to evaluate than many other deposit types. This is frequently combined with the perception
that only large-scale deposits can be evaluated professionally; that evaluations and,
subsequent, valuations of small-medium scale operations are either inherently flawed or
cannot be done at all. However, a discussion of resource estimation and valuation methods
shows that, despite both real and perceived risks, alluvial diamond projects of all scales can
be evaluated to the same international standards in a financially responsible manner. Once the
site has been established, bulk-sampling and drilling programmes can be designed to estimate
the diamond resources present on the property. It has to be appreciated that, due to the often
low, but highly variable, grades and geological inhomogeneity of these deposits, significantly
more prospecting may need to be completed to estimate resources when compared with many
other commodities, as unsubstantiated assumptions can be misleading. The resource
estimation programme is designed to identify the volume of gravel present on the property
that may be mineable, the average recoverable grade and the average sales value of the
diamonds. This can only be accomplished by the processing of significant volumes of gravel
through bulk-sampling. During trial-mining exercises, which are comparable to (pre-)
feasibility studies, considerable mining and processing data is obtained—the ‘‘modifying
factors’’ required to convert mineral resources to mineral reserves. As with any other
commodity, the value of an alluvial diamond deposit changes as market conditions change
and according to the amount of information available for the project. Consequently, different
valuation approaches will be valid at different stages of the project. Where reserves have been
identified, standard Discounted Cash Flow (‘‘DCF’’) methods of valuation apply. However,
few alluvial diamond deposits get evaluated to this stage and Income-based approaches are
not appropriate for properties without mineral resources. By contrast, Cost and Market
approaches, which are often used in early stage project valuation, are generally not good
indicators of value of alluvial diamond projects either.

Keywords
Exploration
Evaluation
Resource
Reserve
Valuation
DCF
Alluvial

T. R. Marshall (&)
Explorations Unlimited, PO Box 6578 Homestead, 1412,
Republic of South Africa
e-mail: marshall.tania@gmail.com

D. G. Pearson et al. (eds.), Proceedings of 10th International Kimberlite Conference, 281

Volume 2, Special Issue of the Journal of the Geological Society of India,
DOI: 10.1007/978-81-322-1173-0_18,  Geological Society of India 2013
282
Introduction
Over the years, a divide has developed between large,
medium, and small-scale alluvial diamond operations. What
is really often meant is a divide between projects operated
by major companies and the rest—junior companies, pro-
fessional ‘‘diggers’’ and artisanal operators. There is a
perception that medium/small-scale operations cannot be
evaluated to the same standards as large-scale operations
owned by major companies such as CAST, De Beers, Al-
rosa, Anabar GOK, Rio Tinto, etc. and that evaluations/
valuations performed by these smaller (non-major) opera-
tors are badly flawed and untrustworthy. This perception
has arisen as a result, inter alia, of some such companies
having been unprofessional in the resource estimation and/
or valuation of their projects, due to any combination of:
• A lack of appreciation of resource/reserve estimation
principles;
• A lack of geological knowledge of alluvial deposits;
• A lack of money to complete the evaluation/valuation; or
• A preference to sell the project on without doing any
significant work themselves and passing historical sam-
pling or exploration results off as resource/reserve
estimations.
At the same time, many mining/financial analysts and
advisors do not have extensive technical experience in
alluvial diamond geology. Their exposure to such deposits
has, generally, been limited to junior companies/con-
sortiums looking to raise institutional finance and their
experience in this regard has, largely, been unfavourable.
Consequently, they are naturally reticent in promoting these
types of projects, or impose disproportionate risk (or dis-
count) values on them.
This paper outlines some of the basic principles of the
evaluation of alluvial diamond deposits, from desktop
studies and target identification through to resource and
reserve estimation. It is meant as an introduction for geol-
ogists working on such deposits, exploration managers,
persons evaluating/valuing alluvial diamond deposits as
well as for financial/mining analysts who assess such
evaluations/valuations, potential investors and their advis-
ors. It identifies some of the more useful methods used in
resource estimation and project valuation, various elements
relating to international resource/reserve classification
codes, and some of the pitfalls to be aware of during
evaluation and valuation exercises on alluvial diamond
projects. Similar geological, sampling, and valuation issues
are present, irrespective of whether the project is perceived
as large, medium or small-scale (although, due to in-house
expertise and financial resources, major companies evalu-
ating large-scale deposits deal with these issues far more
efficiently).
T. R. Marshall
Evaluation, in this paper, is used with reference to the
procedure of estimating a diamond resource and/or reserve
and does not refer specifically to geostatistical processes.
Statistical evaluations of alluvial diamond deposits have
been discussed by a number of authors (e.g. Oosterveld
1972; Phillips 1971; Rombouts 1987; Sichel 1972) and are
not considered further in this paper.
Target Identification
Practical experience indicates that the evaluation of an
alluvial diamond deposit proceeds along a curve that is
common to all commodities (Fig. 1). Similar to the steps
taken in most other commodities, the evaluation of alluvial
diamond deposits begins with a desktop study, collating as
much information as possible from historical and anecdotal
sources. Where applicable, satellite imagery and airborne
geophysical surveys may also be used to generate broad
target areas for further exploration. Ground geophysical
methods that have had relative success in alluvial diamond
prospecting include magnetic and electro-magnetic meth-
ods, gravity methods, and ground penetrating radar
(‘‘GPR’’). As with many prospecting tools, however, there
are no universally applicable techniques and the method
selected should be appropriate to the local conditions.
While such geophysical surveys can greatly assist in the
delineation of the gravel body, they cannot be used as an
indicator of diamond grade or value potential.
Absolutely indispensible to the developing prospecting
programme is a comprehension of the geology of the
deposit. Even at this early stage, an understanding of the
structural control of the deposits, sedimentology, stratigra-
phy, and post-depositional modifications is essential. Such
knowledge assists in the interpretation of the available data
and will also be critical in the planning of the drilling and
sampling parameters.
Due to the non-systematic nature of much of the his-
torical (generally artisanal) work, the background infor-
mation available is, usually, not as accurate or as reliable as
Fig. 1 Stages in the evaluation of an alluvial diamond project
Resource Estimation and Valuation of Alluvial Diamond Deposits
one would wish, and extreme caution must be employed if
such information is used in compiling even conceptual
business plans, particularly if these are to be presented to
potential investors. Any exploration data/information col-
lected at this stage of the project is, in most cases, insuffi-
cient for the deposit to be classified as a mineral (diamond)
resource or reserve and cannot be used for the purposes of
estimating the economic value of what mineralisation has
been identified. Target identification is not about resources
or reserves. It is simply a programme aimed at outlining a
mineralised area which will then have to be sampled
extensively for that purpose.
Resource Estimation
The best known resource classification codes are JORC
(Australasian Code), CIM (Canadian Code) and SAMREC
(South African Code). Other internationally recognised
codes are PERC (European Code) and SME (United States
Code).
During the resource estimation phase of an alluvial
diamond project, the three main parameters to be deter-
mined are gravel volume, diamond grade and diamond
value. Combinations of ground geophysical surveys, dril-
ling (including augering), pitting, trenching and bulk-sam-
pling are used to increase the geological knowledge and
confidence required to estimate a Resource as defined in any
of the international resource/reserve estimation codes.
Diamond Value Estimation
Canadian Institute of Mining (CIM) best practice guidelines
(2008) indicate that parcels of at least 3,000–5,000 cts are
necessary to achieve reasonable valuation (i.e. for inclusion
in Indicated Resource classification). Important in most
alluvial diamond deposits is the caveat which notes that
‘‘caution should be expressed when an average diamond
value is based on small parcels since very large stones in the
diamond size distribution may not be represented and
insufficient stones may be present to adequately estimate the
diamond value of medium and large stones which contrib-
ute most to the average diamond value’’ (CIM 2008). Since
large stones of high value are often an integral part of
alluvial diamond deposits, it is essential to investigate the
effect that their recovery/loss will have on the potential
profitability of the deposit.
This issue is especially important where the average
grade of a deposit is based upon a small number of recov-
ered carats. In such cases, it is difficult, if not impossible, to
estimate the number of large stones that might be expected
to be recovered from the deposit. In this case,
283
explorationists often have to rely on cumulative carat fre-
quency plots. In nature, diamond size distributions are log-
normal or compound log-normal (Oosterveld 2008) and
losses in the upper or lower stone sizes can be quantified in
order to estimate expected production recovery.
Volume and Grade Estimation
In view of the fact that alluvial diamond deposits are, typ-
ically, shallow, delineation drilling could be supplemented
by pitting and trenching, which allows the explorationist a
more appropriate examination of the deposit. Drilling grid
layouts are designed to determine the geological charac-
teristics of the particular deposit and adjusted to comply
with the confidence required in the estimates.
In contrast to most other commodities, alluvial diamonds
cannot be assayed for in a laboratory setting. Alluvial dia-
mond deposits do not have micro-diamonds or kimberlitic
indicator minerals that can be utilised for preliminary grade
estimation prior to bulk-sampling, as is common with
kimberlite deposits. Likewise, they have no geochemical
signature, as might be the case with precious/base metal
deposits. The only reliable method of grade estimation is
through bulk-sampling and the direct measurement of carats
per volume processed.
Some of the factors that impact upon the number of holes
drilled and the number and size of samples taken are similar
and include the following.
Depositional Environments
Alluvial streams are highly transient environments (Ash-
worth et al. 1999). The braided channels are unstable
through time and gravel bars are formed and destroyed
continuously. Shifting bars and channels cause wide varia-
tions in local flow conditions resulting in varied deposi-
tional assemblages. Common features in braided stream
deposits include irregular bed thicknesses, restricted lateral
and vertical variations within the sediments, variations in
clast sizes and packing, as well as abundant evidence of
erosion and re-deposition (Germanoski and Schumm 1993).
On a broad scale, most deposits are complex with units of
no great lateral extent. Locally, bedrock features play an
important role in diamond concentration of the alluvial
deposits, with diamonds occurring preferentially in natural
traps such as gullies, potholes and gravel bars (Fig. 2) and,
typically, reworked through one or more post-depositional
colluvial or eluvial processes.
Low Grades
The grade of a diamond deposit is the estimated number of
carats contained in one hundred tonnes (cpht) or hundred
cubic metres (ct/100 m3) of gravel. Some alluvial deposits
284
Fig. 2 Variability of diamond
trap-site locations, both in
sedimentary and in bedrock
deposits (redrawn from Jacob
2005)
have grades measured in carats per cubic metre/tonne and
marine deposits along the South African/Namibian West
Coast are often measured in carats per square metre (ct/m2).
Typical alluvial diamond deposits have average grades that
can be some two orders of magnitude lower than a low
grade gold deposit. Consequently, single positive or nega-
tive samples may be meaningless.
Large Individual Diamond Size
Diamonds constitute discrete units of varying size (weight).
Consequently, they form discrete particle deposits as
opposed to disseminated particle deposits, also referred to
as the ‘‘nugget effect’’. Often the size and value distribution
from stone to stone is erratic and it is possible that the
majority of the value of a parcel is attributed to a single
stone. Therefore, single small samples will often results in
spurious results. Average diamond value is directly related
to the coarseness of the diamond size distribution. If sam-
pling does not yield a size-representative diamond parcel
the average diamond value derived from the parcel will not
reflect the average value in the deposit. The smaller the
sample of diamonds, the more variable will the average
value be that is derived from the parcel.
Low Homogeneity of Diamond Distribution
Individual diamonds are not evenly or uniformly distributed
throughout an alluvial deposit; neither are they randomly
distributed. Rather, their distribution has been described as a
random distribution of clusters of points, where the clusters
are both randomly distributed in space, and the point density
of each cluster is also random (Rombouts 1987). In a single
gravel unit (or even within a few metres), diamond grades
may vary from barren to over 100 cpht, due to the devel-
opment of localised trap-sites under favourable bedrock
conditions, or hydraulic fractionation within a channel or
bar. Consequently, the diamond distribution pattern (grade)
of alluvial deposits is such that there is no repeatability of
small sample results, even from adjacent samples.
T. R. Marshall
As a result of all of these issues, it is apparent that
limited drilling can result in either the overestimation or
underestimation of available gravel volume. An important
aspect to note here is also the type of drilling—standard
percussion drilling often results in significant overestima-
tion of gravel volume, consequently Reverse Circulation
(‘‘RC’’) techniques are preferred in resource estimation
programmes. In addition, limited sampling (both numbers
of samples and volume of individual samples) can result in
spurious grade results. Consequently, extensive drilling and
systematic bulk-sampling are essential to the effective
evaluation of alluvial diamond deposits.
Since the geology can vary significantly from one allu-
vial diamond deposit to another, it is not possible to pre-
scribe drill grid parameters (for the estimation of gravel
volume) or the number or size of samples (for grade esti-
mation). It is sufficient to note that the amount of drilling,
sampling and sales of diamonds must be adequate for the
level of confidence required in the resource that is
estimated.
It is usual for an alluvial diamond project to progress
from ‘‘Exploration Results’’, through ‘‘Inferred Resource’’
to ‘‘Indicated Resource’’ classification. ‘‘Measured
Resources’’ are seldom determined, however. Measured
Resources, by definition, cover the situation where all of the
geological characteristics of the deposit can be estimated
with a high level of confidence—sufficient to confirm geo-
logical and grade continuity. Alluvial diamond deposits are
well known for their extreme low grades and inhomoge-
neity, as a result of the characteristics described above
(Fig. 3). The resulting scenario makes it extremely difficult
to estimate the required parameters to a ‘‘high level of
confidence’’ (with the exception of diamond value) without
over-capitalising the project.
The industry standard for resource estimation on alluvial
diamond mines is to estimate some two/three years of
Indicated Resources and multiple years of Inferred
Resources. As these are consumed, there is a continuous
Resource Estimation and Valuation of Alluvial Diamond Deposits
Fig. 3 The extremely low concentrations of diamonds, combined
with low homogeneity results insignificant difficulties in the evaluation
of alluvial diamond deposits (after Lock 2003)
cycle of resource rollover (where continuous prospecting
upgrades existing Inferred Resources to Indicated Resource
status to take the place of such resources which have been
mined).
Typical parameters for ‘‘Indicated Resources’’ classifi-
cation include:
• Sufficient drilling to generate a 3D model based on well
constrained geology;
• Extrapolation only within similar geological environ-
ments to distances determined by the geology of the
deposit (typically, this distance may be up to 250 m, but
may also be as low as 10 m in specific instances);
• Sufficient bulk-sampling to take account of all the key
geological variables expected from the deposit in ques-
tion (and to recover the required number of carats for
valuation or sale).
• The recovery of 3,000–5,000 cts of diamonds for valua-
tion (or sale) to estimate diamond value.
Reserve Estimation
A Mineral Reserve (SAMREC 2009) is the economically
mineable material derived from a Measured or Indicated
Resource. Appropriate assessments to a minimum of a Pre-
Feasibility Study must have been completed, including
consideration of and modification by realistically assumed
mining, metallurgical, economic, marketing, legal, envi-
ronmental, social and governmental factors (the modifying
factors). Since most, if not all, of these modifying factors
are addressed during trial-mining, Indicated Resources on
285
alluvial diamond deposits can be routinely converted into
Probable Reserves.
All of the major international classification codes state
that only Indicated and Measured Resources can be con-
verted to Reserves (and be included in the mine plan and
DCF). Inferred Resources can be included only as part of
the mine plan where reserves exist and only if full disclo-
sure is made regarding the amount of Inferred Resources
and the rationale behind their inclusion is made. Inferred
Resources cannot be converted to mineral reserves and must
not be stated as part of the mineral reserve. Nevertheless,
subject to certain qualifications and cautions, Inferred
Resources may be included in Preliminary Economic
Assessments of projects. However, exploration targets are
too subjective to be included in economic assessments,
mine plans or project valuations.
Valuation
The three basic approaches to valuation (of any commodity
or property) are Cost, Market and Income (Spence 2002).
Within the broad approaches, there are several methods
which can be used—which methods are associated with
various stages in the mineral property life-cycle (Table 1).
Valuation of alluvial diamond deposits, typically, occurs at
the early stages of the project life-cycle, where resources
have not yet been identified.
The Cost Approach is based on the principle of contri-
bution to value. The Appraised Value method is one com-
monly used method where exploration expenditures are
analysed for their contribution to the exploration potential
of the Mineral Property. Relevant exploration expenditure
may be subject to premiums or discounts based on previous
results. The multiples, typically, range from 0 to 3, with
zero representing a complete write-off and values greater
than 1 applying where exploration had successfully upgra-
ded the property. This method is extensively used in early
stage (exploration) property valuation. One of the draw-
backs of these cost approaches is that they tend to be sub-
jective, especially in the identification of exploration
expenditure that is deemed relevant for the exercise
(Thompson 2002).
With specific reference to alluvial diamond projects,
historical expenditure is often incurred by artisanals and
little is available to substantiate expenditure. In addition,
these projects have often been prospected ‘‘on the cheap’’
by concession owners lacking in funds and so, these
methods often undervalue the properties significantly.
The Market Approach is based primarily on the principle
of substitution. The Mineral Property being valued is
compared with prior transactions for the property or the
transaction value of similar Mineral Properties, transacted
286
Table 1 Valuation approaches appropriate for different stages of a
project (Roscoe 2002)
Valuation Exploration Mineral Development/
approach property resource production
property property
Income No In some cases Yes
Market Yes Yes Yes
Cost Yes In some cases No
in an open market. Methods include comparable transac-
tions and option, farm-in or earn-in agreement analyses
(Lawrence 2002).
Realistic results of Comparable Transaction methods
rely upon the presence of public valuations of similar
deposits. Such documentation on alluvial diamond deposits
are limited (since relatively few public companies explore/
mine alluvial diamond deposits) and, consequently, com-
parable transaction methods are often difficult to apply and
can be distorted by incomplete analysis.
The Farm-In or Joint Venture Terms method may be
useful when valuing a large exploration concession, where
there is significant exploration potential, but where little
exploration has been carried out. Typically, equity in a
property is earned by an incoming participant agreeing to
make payments and to undertake exploration generally
within a certain time frame. As a rule, such commitments
are firm only for a year or two. Only those commitments
met or firmly budgeted and approved by a board of directors
should be used in establishing a minimum value for the
property (Lawrence 2002). This evaluation method applies
multiples of early stage expenditure based on the premise
that further project exploration and development costs
materially escalate with time, as commonly encountered in
base- or precious-metals projects. Application of similar
multiples to alluvial diamond projects is prone to signifi-
cantly over-estimate actual project value because early
stage JV/farm-in costs are necessarily inflated by the
(equipment and logistical) requirements of extracting and
processing on-site large quantities of low-grade alluvial
material. It is additionally observed that further alluvial
diamond project development requires sustaining-level
financial commitments that are fractions of early stage JV/
farm-in valuations and may actually decrease with time.
The Income Approach is based on the principle of
anticipation of benefits and includes all methods that are
based on the income or cash flow generation potential of the
Mineral Property. These methods are the most accurate
measures of value, but they also require the most input.
Discounted Cash Flows (‘‘DCF’’) based on the net present
value (‘‘NPV’’) of a stream of cash flows, typically, require
that a minimum of a PFS has been completed on the project
and that reserves have been estimated. Preliminary
T. R. Marshall
Economic Assessments (‘‘PEA’s’’) are admissible in public
reporting only under very specific circumstances. Such
assessments consider the potential viability of mineral
resources (including inferred resources) and are extremely
useful for in-house planning purposes. Care should be taken
to prevent the creation of unrealistic expectations in the
public domain.
Two peculiarities of alluvial diamond deposits that make
DCF construction difficult are:
• Most of the Capex is spent prior to the PFS and only
minor sustaining capital is, generally, required through-
out the life of the mine. This feature results in difficulty in
determining Internal Rates of Return (‘‘IRR’’)
• Although the operation may have multiple years of
identified resources, the industry standard is to determine
only some 2–3 years worth of reserves ahead of mining.
This, typically, results in low NPV and IRR values that
might not reflect the true value of the property.
The DCF, based on identified reserves and (pre-) feasi-
bility studies, is the preferred method of valuation for an
alluvial diamond project. Even where such can be con-
structed, however, the inherent distrust of alluvial diamond
deposits coupled with an imperfect understanding of the
resource estimation procedure may result in the application
of incorrect NPV discount rates.
A simple discount rate for a mineral project, typically,
comprises three principal components namely, the Risk-
Free Interest Rate, the Country Risk and the Mineral Project
Risk (Lilford and Minnit 2002; Smith 2002; Baurens 2010).
Risk-Free Interest Rate
Usually a long-term government bond is used for the risk-
free interest rate, with the 10-year bond rate being preferred
on cash flows for valuation purposes (Damodaran 2008).
The rate used would not be expected to be any different for
alluvial diamond deposits than it would be for any other
commodity. However, since diamond sales are always
denominated in US Dollars, the risk-free rate selected is
often the US Treasury bond rate, irrespective of where the
project is located.
Country Risk
The application of country risk discounts are especially
relevant in alluvial diamond projects, given that such pro-
jects are often located in areas where sovereign risk,
political risk, risk of resource nationalism, uncertainty in
tax, royalty and licence regimes, as well as fraud and cor-
ruption are widespread (PWC 2011; McMahon and Cer-
vantes 2011). Measures of country risk can be obtained
Resource Estimation and Valuation of Alluvial Diamond Deposits 287

from a number of standard sources (for example Sterns Under such circumstances it is difficult to identify the most
School of Business (NY), Moody’s, S&P). appropriate discount rate for the whole project.
Another way of dealing with mining project risk is
through the use of contingencies, with higher percentage
contingencies applied where the level of confidence in the
Mining Project Risk Components diamond resource/reserve is lower than at a PFS. For
example, in a project where probable reserves, indicated
Mineral project risks include risks associated with reserves/
resources and inferred resources are all present in the pre-
resources (tonnage, mine life, grade), mining (mining
liminary economic assessment, different contingency fac-
method, mining recovery, dilution, mine layout), process
tors might be placed upon the projected costs and volume
(labour factors, plant availability, metallurgy, recoveries,
figures, which reflect the different levels of uncertainty
material balances), construction (costs, schedules, delays),
involved.
environmental compliance, new technology, cost estimation
Irrespective of which methods are used to ascribe risk to
(capital and operating), and sales values and market.
a project, care needs to be taken so as not to ‘‘double
The knowledge of a mining project at the feasibility
account’’, especially where diligent risk assessment and
study stage describes a certain comfort level and a degree of
mitigation has already been done on key input variables
certainty as to the outcome of the project, and therefore a
(McFarlane 2002) during the resource estimation phase.
measure of risk that is then reflected in the selection of the
mining project risk component of the discount rate (Smith
2002). The feasibility study will typically have a Capital
Conclusions
and Operating cost assessment in the 10 % accuracy range.
However, economic studies are often made at much earlier
Alluvial diamond properties of any scale can be evaluated
stages of project development than the feasibility study
to conform to any of the internationally accepted resource
(especially in respect of alluvial diamond projects). For
estimation codes. A complete understanding of the geology
example, a broad order-of-magnitude study is usually
and sedimentological features of the deposit is required to
undertaken to assess potential projects in the early stages. A
determine an appropriate sampling strategy for diamond
pre-feasibility study is undertaken when more data are
content estimation.
available, and is generally used to justify continuing
Well planned and executed bulk-sampling and trial-
expenditures towards a final feasibility study. Because these
mining programmes provide robust (pre-) feasibility level
studies are made at much earlier stages of development,
data to convert Indicated Resources into Probable Reserves,
there is less data, the degree of uncertainty is higher so the
which can then be valued through standard DCF methods.
risk level is higher and the discount rate will, accordingly,
Cost and Market valuation approaches are generally not
be higher.
good indicators of value of alluvial diamond projects due, in
As with any other commodity, alluvial diamond prop-
part, to the lack of publically available data. In addition, the
erties with operating mines or projects at pre-feasibility
fact that the majority of capital is spent during the early
study levels might be expected to support discount factors
stages of resource estimation (bulk-sampling) often over-
of 10–15 % (Lattanzi 2002; Smith 2002). At earlier stage
values projects based on JV-terms/farm-in methods.
assessments, discount rates might be expected to be +20 %,
Although Income-based valuation approaches are by far the
depending upon the level of geological knowledge of the
most satisfactory appraisals of value, they are not appro-
specific alluvial diamond field. For example, the applicable
priate for properties without mineral resources and financial
discount rate for an early stage project situated along the
valuations of alluvial diamond deposits, typically, occur at
Middle Orange River, South Arica (where other properties
the early stages of the project life cycle, where resources
are being mined commercially and where the geology is
have not yet been identified.
reasonably well understood and where audited diamond
This does not imply, however, that such early stage
sales and production data are available from adjacent/
projects do not have value and good results have been
nearby properties), would be expected to be significantly
obtained by inventive combinations of accepted valuation
lower than that for an early stage project in the DRC, for
methods. Further, recognition of the limitations of the
example, situated along a river for which only anecdotal
approaches and the reasons for such inconsistencies will
information is available from nearby artisanal operations.
assist the competent valuator in applying the necessary
As has been noted previously, the industry standard is to
project values.
delineate only a few years of Reserves, with multiple years
of Inferred Resources. This results in most projects being a Acknowledgments The author would like to express appreciation for
combination of reserves, resources and exploration targets. the comments by Dr M C J de Wit, an anonymous referee and Dr H
288
Grütter (10IKC Guest Editor), which greatly improved the manuscript.
Further, I would like to acknowledge the many formal and informal
discussions with prospectors, miners, legislators, academics and other
Competent/Qualified Persons held over the years in an attempt to bring
the alluvial diamond industry kicking and screaming into the twenty-
first century. Finally, many thanks are also due to Mrs Di du Toit
(DuoDraft CC) for drafting the diagrams.
References
Ashworth PJ, Best JL, Peakall J, Lorsong JA (1999) The influence of
aggradation rate on braided alluvial architecture: field study and
physical scale-modelling of the Ashburton River gravels, Canter-
bury Plains, New Zealand. Spec Publs Int Assoc Sediment
28:333–346
Baurens S (2010) Valuation of metals and mining companies. A
document produced in collaboration with the University of Zurich,
Swiss Banking Institute and Prof T Hens, 81 pp
CIM (2008) Estimation of mineral resources and mineral reserves best
practice guidelines. Canadian Institute of Mining and Metal-
lurgy,Westmount, May 4, 2008
Damodaran A (2008) What is the risk-free rate? A search for the basic
building block. Stern School of Business, New York University,
New York
Germanoski D, Schumm SA (1993) Changes in braided river
morphology resulting from aggradation and degradation. J Geol
101:451–466
Jacob RJ (2005) The erosional and cainozoic depositional history of
the lower orange river, south-western Africa. Ph.D. thesis,
University of Glasgow, 167 pp
Lattanzi CR (2002) Discounted cash flow analysis input parameters
and sensitivity. Mining millennium valuation 2000, Special session
on valuation of mineral properties, Mar 8, 2000, Toronto, Canada,
13 pp
Lawrence RD (2002) Valuation of mineral properties without mineral
resources: a review of market-based approaches. Mining millen-
nium valuation 2000, Special session on valuation of mineral
properties, Mar 8, 2000, Toronto, Canada, 7 pp
Lilford EV, Minnit RCA (2002) Methodologies in the valuation of
mineral rights. J SAIMM 105:369–384
View publication stats
T. R. Marshall
Lock N (2003) Comparing carats to kilograms. Mining Mirror, Oct
2003, pp 36–38
Macfarlane AS (2002) A Code for the valuation of mineral properties
and projects in South Africa. J SAIMM 12:37–48
MCmahon F, Cervantes M (2011) Survey of mining companies 2010/
2011. Fraser Institute Annual, p 100. www.fraserinstitute.org
Oosterveld MM (1972) Ore reserve estimation and depletion planning
for a beach diamond deposits. In: Proceedings of tenth international
symposium on the application of computers in the mineral industry,
Johannesburg, 7 pp
Oosterveld MM (2008) Wouterspan, Holpan and Klipdam, Saxen-
drift—size frequency and large stones for 2005–2008 period.
Internal report for Rockwell Ventures Inc (2008)
Phillips R (1971) A method for estimating the grade of diamond
deposits. Inst Min Metall B3:57–362
PWC (2011) Mine 2011. The Game has changed. Review of global
trends in the mining industry, p 52. www.pwc.com/mining
Rombouts L (1987) Evaluation of low grade/high value diamond
deposits. Mining Magazine, pp 217–220
Roscoe WE (2002) Valuation of mineral exploration properties using
the cost approach. Mining millennium valuation 2000, Special
session on valuation of mineral properties, Mar 8, 2000, Toronto,
Canada, p 11
SAMREC (2009) South African code for reporting of mineral
resources and mineral reserves. Prepared by the South African
Mineral Resources Committee (SAMREC), under the auspices of
the South African Institute of Mining and Metallurgy (SAIMM).
2007 Edition, as amended Jul 2009
Sichel HS (1972) Statistical valuation of diamondiferous deposits. In:
Proceedings of tenth international symposium on the application of
computers in the mineral industry, Johannesburg, p 9
Smith LD (2002) Discounted cash flow analysis methodology and
discount rates. Mining millennium valuation 2000, Special session
on valuation of mineral properties, Mar 8, 2000, Toronto, Canada,
p9
Spence K (2002) An overview of valuation practice and the
development of a Canadian code for the valuation of mineral
properties. Mining millennium valuation 2000, Special session on
valuation of mineral properties, Mar 8, 2000, Toronto, Canada, p 9
Thompson IS (2002) A critique of valuation methods for exploration
properties and undeveloped mineral resources. Mining millennium
valuation 2000, Special session on valuation of mineral properties,
Mar 8, 2000, Toronto, Canada, p 12