The Specific Value of Early Stage Mining Projects: Are Common Valuation Methods Appropriate?

Taking into account the recent worldwide strive for raw materials, the emergence of start-ups in the mining sector for rare metals, and tendencies of financial and strategic investors to invest in such companies, the paper critically evaluates the suitability of common methods widely used to valuate mining projects and start-ups. Building on the deficiencies of single methods to capture the specificities of rare earth junior mining companies, which are assumed to be single-project companies, the paper suggests using a combined approach including discounted cash flow, real options, and multipliers methods. Compared to the value obtained by using singular methods, the resulting specific value is argued to better reflect the value of a specific company and project, respectively, within the rare earth junior mining industry.