Abstract

MASEKO, V.  and  MUSINGWINI, C.. An empirical long-term commodity price range for Mineral Reserve declarations to minimize impairments in gold and platinum mines. J. S. Afr. Inst. Min. Metall. [online]. 2019, vol.119, n.3, pp.229-242. ISSN 2411-9717.  http://dx.doi.org/10.17159/2411-9717/2019/v119n3a2.

When considered collectively, Mineral Resources and Mineral Reserves are arguably a key asset for any mining company. Mineral Reserves are the economically mineable portions of Mineral Resources. They therefore provide a good indication of the economic prospects in the short to medium term and associated non-financial impairments for mining companies, hence a focus on Mineral Reserves. An assessment of modifying factors for converting Mineral Resources to Mineral Reserves revealed that Mineral Reserves were most sensitive to long-term commodity prices, hence the focus on long-term commodity prices. The justification for selecting gold and platinum mines is that they collectively make a significant contribution to South Africa's earnings from mining. The introduction of the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC Code) in 2000 informed the basis for analysing long-term commodity price assumptions for major South African gold and platinum mining companies between 2000 and 2016. The analysis revealed that the least number of non-financial impairments occurred when long-term commodity prices were within ±5% of spot prices. This finding suggests that this range is the ideal range for long-term commodity price assumptions to improve confidence in Mineral Reserve declarations and minimize impairments.

Keywords : modifying factors; long-term commodity prices; spot prices; impairment; reporting codes.

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