The Mining Valuation Handbook: Mining and Energy Valuation for Investors and Management, 4th Edition

Chapter 12: Takeovers and fair value allocation

A considerable amount of effort may be put into determining what we believe, based on the available information, is the correct valuation for a mining company and on that basis decide whether a stock is a buy or a sell. Valuations are also often critical in takeovers and mergers, where experts are required to give an opinion on the relative merits of such proposals. In general they will also use a bottom-up approach by valuing different components and combining them to come up with a net asset value. Control premium may also have to be added to reflect the additional benefits an acquirer might get with 100 per cent control.

However, if we assume that the bid price from an acquirer is a good indicator ...