• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 37 mins Trump cancels Denmark visit amid spat over sale of Greenland
  • 35 mins Iran Is Winning Big In The Middle East
  • 53 mins Nor Chicago, nor Detroit: Killings By Police Divide Rio De Janeiro Weary Of Crime
  • 7 hours Not The Onion: Vivienne Westwood Says Greta Thunberg Should Run the World
  • 19 hours Danish Royal Palace ‘Surprised’ By Trump Canceling Trip
  • 2 hours Strong, the Strongest: Audi To Join Mercedes, BMW Development Alliance
  • 9 hours OPEC will consider all options. What options do they have ?
  • 19 hours A legitimate Request: France Wants Progress In Ukraine Before Russia Returns To G7
  • 23 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 22 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 5 hours With Global Warming Greenland is Prime Real Estate
  • 10 hours Gretta Thunbergs zero carbon voyage carbon foot print of carbon fibre manufacture
  • 14 hours What to tell my students
Dave Forest

Dave Forest

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

More Info

Premium Content

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:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play