1. Mineral exploration
Anne Harrison

2. 1993 SNA
Introduced “mineral exploration” as a category of produced fixed asset
Designated “subsoil deposits’ as a category of non-produced assets

3. Questions
Is the discovery activity separable from the value of the asset?
How to measure exploration activity?
How to value the deposit?
How to record payments by the extractor to the legal owner of the deposit?
In whose balance sheet is the deposit recorded?

4. Since 1993
SEEA examined these questions in depth and made detailed proposals
Canberra II looked at the SEEA and confirmed that the SNA needed clarification but not substantive change

5. Terminology
Replace “mineral exploration” by “mineral exploration and evaluation”
This is in line with IASB which will be the main source of information
Coverage of IASB item consistent (but more explicit) than SNA description

6. Is the discovery activity separable from the value of the asset?
Proposal to have “developed natural asset” not widely supported
Agree to maintain two types of asset as in 1993 SNA

7. How to measure exploration activity?
SNA describes exploration in terms of costs of various activities such as borings, aerial surveys etc.
Some readers have interpreted this to mean the activity is valued as “sum of costs” ie non-market
This is loose wording in the SNA. Own account exploration would be valued at the sum of costs (including return to assets used) but when exploration is carried out under contract, the whole value including the operating surplus of the contractor is included

8. How to value the deposit?
SNA gives three options
Present value of net returns from exploitation
Market prices
Owner’s valuation
Market prices seldom available

9. Net return from exploitation
Resource rent
Depends on value of exploration – the higher the value of exploration, the lower the resource rent
Value of deposit as a stock is net present value of net returns/resource rent

10. Owner’s valuation Amount paid to owner may not match resource rent
Amount agreed in advance
Owner agrees to share return with the extractor
Preferred valuation of deposit is market price (if available but unlikely) then net present value of returns to extraction

11. How to record payments by the extractor to the legal owner of the deposit?
Fundamentally is division (or entire transfer) of resource rent
Is not a tax, however it may be described

12. In whose balance sheet is the deposit recorded?
SEEA gave a number of options
One of these is partitioning the asset between the owner and the extractor in proportion to shares of resource rent
Some unease with sharing ownership of an asset
This issue is still to be decided in light of discussion on leases and licences