• 8 minutes U.S. Shale Oil Debt: Deep the Denial
  • 13 minutes WTI @ $75.75, headed for $64 - 67
  • 16 minutes Trump vs. MbS
  • 56 mins Knoema: Crude Oil Price Forecast: 2018, 2019 and Long Term to 2030
  • 9 hours Nuclear Pact/Cold War: Moscow Wants U.S. To Explain Planned Exit From Arms Treaty
  • 9 hours Why I Think Natural Gas is the Logical Future of Energy
  • 9 hours Merkel Aims To Ward Off Diesel Car Ban In Germany
  • 1 hour Get on Those Bicycles to Save the World
  • 8 hours A $2 Trillion Saudi Aramco IPO Keeps Getting Less Realistic
  • 5 hours Iraq war and Possible Lies
  • 1 day Satellite Moons to Replace Streetlamps?!
  • 1 day Closing the circle around Saudi Arabia: Where did Khashoggi disappear?
  • 1 day Can “Renewables” Dent the World’s need for Electricity?
  • 15 hours Long-Awaited Slowdown in China Exports Still Isn’t Happening
  • 2 hours EU to Splash Billions on Battery Factories
  • 19 hours Can the World Survive without Saudi Oil?
Alt Text

Are Coal-Fired Power Plants Set For A Boost?

Rick Perry has announced a…

Alt Text

Why China’s Shale Boom Is Struggling

China’s shale revolution has received…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Trending Discussions

The SEC Wants To Know How $3 Billion Disappeared At This Coal Mine

Valuation of resource projects is becoming a hot topic in regulatory circles. With the U.S. Securities and Exchange Commission (SEC) earlier this year investigating ExxonMobil’s practices around estimating the worth of in-ground oil reserves.

And this week, the official inquiry is spreading to valuations in the mining sector.

Familiar persons tipped news services this week that the SEC has launched an investigation into financial practices at major miner Rio Tinto. Specifically looking at how the company valued a massive acquisition – and subsequent failure – in the east African nation of Mozambique.

Sources told the Australian Financial Review that the SEC wants to know what led to a massive writedown on Rio Tinto’s Mozambique coal projects in 2013. When the company booked a $3 billion charge on the assets.

The history here is, Rio purchased Mozambique coal development junior Riversdale Mining in 2011 – paying $2.9 billion cash for the company.

The major then began developing the coal assets. With the idea that coal supply could be transported by river barge to sale points near the coast. Related: Does The OPEC Deal Herald Higher U.S. Gasoline Prices?

That plan however, ended up unfeasible. With the planned river route turning out to be much less navigable than originally planned.

And with no way to move mined coal to market, the project was essentially rendered worthless.

With Rio finally selling the assets for a mere $50 million after booking the massive impairment charge.

On the one hand, it makes sense the SEC would want to look at this. After all, having $3 billion disappear in just two years seems improbable.

But the case also illustrates some peculiarities of the resource business. Where identical deposits could be worth billions or worth nothing, depending on where they’re located in relation to critical infrastructure.

Such “soft” considerations introduce a lot of uncertainty into resource project valuations. Watch to see if the SEC tries to put more rules around the numbers in cases like this – or if they will continue to allow miners to use their own internal standards for project assessment.

Here’s to a box black as coal,

By Dave Forest

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News