Mining, Quarry and Oil and Gas Valuation
29 valuation methods · 43 industries · Results in under 10 minutes
In short
A mine, well or other depleting asset is valued on its reserves: the after-tax margin on each unit, discounted over the years the reserves last and then stopping, less the cost of closing the site. Market cross-checks on reserves and production carry a small weight.
Who this is for
Owners of small mines, producing oil or gas assets and other depleting resources who are selling or financing, and buyers who need a depleting asset valued as one rather than capitalised as though production ran forever. Quarries have their own guide.
How is a mining or oil and gas asset valued?
An extractive asset is valued as something that liquidates itself. A finite, year-by-year after-tax netback stream is discounted over exactly the reserve life and ends at zero, with no terminal growth and no perpetuity, and the present value of abandonment and reclamation is subtracted; when no figure is entered, VA estimates it from lifetime revenue. The result is floored at the salvage value of net plant and equipment. Value per unit of proven reserves and per unit of annual production are blended in at low weight as market cross-checks. In a full report this reserve reading carries the most weight, with comparable companies and precedent transactions alongside. A perpetuity growth model or an EBITDA multiple is deliberately avoided here, because both assume production continues forever and overstate a depleting asset. This tool is informational only. Output is driven by your inputs and does not constitute a formal appraisal or certified valuation.
What drives the value of a mining or oil and gas asset?
- Proven reserves, independently audited, in the physical unit the asset actually sells
- Annual production, which together with reserves sets the reserve life
- Reserve life in years, since a longer life supports a materially better price
- Realised price per unit after hedges, quality and location differentials, not the headline screen price
- Lifting or cash cost per unit, since the netback is the whole margin
- Abandonment and reclamation liability, a real present-value cost of closing the site
What lowers the value of a mining or oil and gas asset?
- Reserves that run out within a few years
- Lifting costs rising faster than prices
- A realised price well below the headline price
- Closure costs larger than the bonds behind them
How much is a mining or oil and gas asset worth? A worked example
An oil field as a depleting reserve
An oil producer holds 3 million barrels of proven reserves and produces 300,000 barrels a year, selling at $70 a barrel with a lifting cost of $32, so each barrel leaves $38 before tax. VA's reserve model discounts the after-tax margin over the ten years the reserves last at 18%, the lowest rate VA uses for a company this size, about $38.4 M. With no closure figure entered, it sets aside four percent of lifetime revenue, $8.4 M due when the field is abandoned and worth $1.6 M today, which leaves about $36.8 M. Cross-checks on the reserves in the ground ($21 M) and on production ($38.5 M) carry an eighth of the weight each, bringing the reading to about $35 M before debt. After $10 M of debt and $2 M of cash, the equity is about $27 M. At $60 a barrel, the reserve value falls to about $26.9 M and the equity to about $18 M.
Illustrative figures from the industry model alone. A full report blends it with a discounted cash flow, comparable companies and precedent transactions.
Value your mining or oil and gas asset in under 10 minutes
- 1.Upload your financial statements, or type the figures in.
- 2.Confirm the add-backs and the industry details the model asks for.
- 3.Get a valuation range, the methods behind it and a PDF memorandum.
Which numbers matter most?
Proven reserves
Recoverable reserves with high certainty, in barrels, tonnes or ounces. Independently audited reserves are the anchor of the whole valuation.
Annual production
Physical volume extracted per year in the same unit as reserves. It drives revenue and, with reserves, sets the reserve life.
Reserve life
Proven reserves divided by annual production. Nothing is valued beyond it, so a longer life raises the value and a short one compresses it sharply.
Realised price per unit
Average price actually received after hedges, quality and location differentials. Usually below the headline spot price.
Lifting cost per unit
Cash cost to extract one unit, excluding depreciation and capital. The gap between realised price and lifting cost is the netback, and the netback is the value.
What do you need to value a mining or oil and gas asset?
- Profit and loss statements and balance sheets, ideally for the last three years
- Figures for the current year to date
- A list of add-backs: the owner's pay and perks, and any one-off costs
- Loan and lease balances
- An independent reserve report
- Production, realised price and lifting cost per unit over recent years
- Abandonment and reclamation estimates, and the bonds that secure them
Example scenarios
A lower realised price
When the price falls, the netback falls faster, because the lifting cost stays. The worked example shows what a lower price does to the reserve value and to the equity.
A short reserve life
An asset with only a few years of reserves left has little stream to discount, however good this year's earnings look. Buyers pay for reserves that extend the life, and the model values only the ones in the report.
Guides by type of business
Further reading
Business Valuation Methods Explained: DCF vs. Comps vs. Precedent Transactions
The five business valuation methods professionals actually use (DCF, comparable companies, precedent transactions, SDE/EBITDA multiples, and asset-based), when each wins, and how they combine into one defensible number.
WACC Explained: Why Your Discount Rate Can Make or Break a Valuation
WACC is one of the most misunderstood terms in business valuation. Here's what it is, why it matters, and how it directly affects what your business is worth.
DCF Analysis Explained for Private Companies
A clear, practical guide to discounted cash flow analysis for private companies. Learn the five key steps, how to estimate WACC without public market data, terminal value approaches, and common pitfalls to avoid.
Frequently asked questions
Why not use an EBITDA multiple for a mine?
Because an EBITDA multiple assumes the earnings continue indefinitely. A mine or a well stops when the reserves run out, so capitalising current earnings on a depleting asset commonly overstates it by a wide margin.
How much does reserve life change the value?
A great deal. The same yearly cash flow over a long life is worth far more than over a short one, because the stream is summed over a finite number of years and then stops. Reserve life is effectively the length of the annuity.
Do I need audited reserves?
For a transaction, effectively yes. Reserve estimates are the anchor of the valuation, and a buyer or a lender will require an independent report prepared to a recognised standard before relying on them.
How is site closure treated?
As a real cost. The present value of abandonment and reclamation is subtracted from the discounted netback stream, because the obligation transfers with the asset. Without a figure, VA estimates it from lifetime revenue.
What discount rate does the model use?
The rate VA uses for the company's cash flows. For a smaller company, that is at least the lowest rate VA uses for any company that size, which the worked example shows.
Is this a certified appraisal?
No. This is an informational estimate. A resource transaction requires an independent technical report on reserves alongside a formal valuation.
Terms used on this page
- Discounted cash flow (DCF)
- A valuation that projects the cash a business will generate over the coming years and discounts it to today at a rate that reflects the risk of receiving it.
- Discount rate
- The yearly return a buyer requires for the risk of owning the business. A higher rate lowers what future cash is worth today.
- Enterprise value
- The value of the business itself, before debt is subtracted and cash added. The owner's proceeds come from what is left.
- Comparable companies
- A method that values a business at the multiples of earnings or revenue at which similar companies are valued.
- Precedent transactions
- A method that values a business at the multiples paid in past sales of similar companies.
- Asset floor
- The value of the company's own assets, such as equipment and inventory, net of what it owes. VA does not let a valuation fall below it.
As featured in
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Last reviewed September 26, 2026 against VA's valuation models.