VALUATION FEVER

 The Hassalls valuation team have carried out over $500million of valuations in the last eight weeks. From global fleets to complete mine operations with a strong bias of yellow iron — it’s been a huge couple of months!

What’s been very noticeable is the upswing in values compared to 18 months ago. The majority of these half-a-billion values have been using the market comparison approach, which means many flags on mining assets have risen.

These include:

  1. Lead times for new equipment in some models of Haul Trucks and Excavator demand has spiked. The latter supports the view that high demand drags the used prices up.
  2. Minimal numbers of the Cat 793’s, D11T’s and 657E’s are available domestically and globally. This means lead times are increasing.
  3. We expect this position to continue as we see user behaviours changing. Users now ‘run to fail’ and ‘run longer than total life expectancy’. Using gear in this manner has caused a very pronounced change in the remanufacturing and parts sector. We’re now seeing the parts departments challenged to meet supply.
  4. Last year the global market was awash with 777’s (100T trucks), but these have slowly been absorbed, and the market is slowly correcting itself. Whilst we haven’t seen a pronounced movement in values, we do suggest these values may lift as the surplus D’s have left the market.

As we look forward, there are some outliers, and their effect on asset values is yet to be quantified. Some include:

  1. The AUD$ exchange rate, where our major currencies (USD, EURO and JPY) have become considerably stronger against the AUD(10% +/- stronger in the past 12 months)
  2. The US Trade Tariffs with China

Numerous completed valuations have been for Private Equity companies from Asia and the USA suggesting our domestic market is again buoyant —or at a minimum, Australia is now viewed as an investment opportunity.

With the valuations being used by the US and offshore banks, one thing that did come to the forefront was the application or use of the differing appraisal methodologies, governing bodies, regulatory authorities, certifications and accreditation; U.S. Standards (http://www.uspap.org/) vs International Standards (https://www.ivsonline.org/), which are all influential factors in our appraisal reports.

Hassalls is a specialist resource sector valuation practice with a willingness to meet our clients' timetables/needs. We deliver on appraisal projects of any size. We aim to provide balanced, independent valuations and reviews focused on identifying and mitigating risks, on time. See more at Hassalls Valuation Services

 

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