• 5 minutes Malaysia's Petronas vs. Sarawak Court Case - Will It End Up In London Courts?
  • 9 minutes Sell out now or hold on?
  • 16 minutes Oil prices going down
  • 55 mins Oil prices going down
  • 17 hours We Need A Lasting Solution To The Lies Told By Big Oil and API
  • 17 hours Another WTH? Example of Cheap Renewables
  • 5 hours What If Canada Had Wind and Not Oilsands?
  • 56 mins After Three Decade Macedonia End Dispute With Greece, new name: the Republic of Northern Macedonia
  • 17 mins Two Koreas Agree To March Together At Asian Games
  • 1 hour Sell out now or hold on?
  • 17 hours The Wonderful U.S. Oil Trade Deficit with Canada
  • 2 days When will oil demand start declining due to EVs?
  • 10 hours No LNG Pipelines? Let the Trucks Roll In
  • 42 mins Geopolitical and Political Risks make their strong comeback to global oil and gas markets
  • 16 hours The Permian Mystery
  • 5 hours Australia mulls LNG import
  • 10 hours China & India in talks to form anti-OPEC
  • 2 days Russia's Rosneft 'Comfortable' With $70-$80 Oil Ahead of OPEC Talks
  • 1 day Gazprom Exports to EU Hit Record
Alt Text

North Korea Hit Hard As Coal Exports To China Fall 71%

Chinese coal imports from North…

Alt Text

The (Only) Culprit Of Coal’s Demise

Cheap and abundant natural gas…

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

Coal

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