Researches in Earth Sciences

Researches in Earth Sciences

Economic analysis of mining concession rights valuation using an expert-based multi-criteria approach: A case study of Kouh-e-Kamar copper mine

Document Type : Original Article

Authors
Nematollah Nazari
Majid Noorian-Bidgoli
Department of Mining Engineering, Faculty of Engineering, University of Kashan, Kashan, Iran
10.48308/esrj.2026.107333
Abstract
Introduction
Mine valuation is one of the most important disciplines within mineral economics and resource management, serving as a fundamental basis for investment decisions, mine acquisition and transfer, financing, taxation, royalty determination, privatization, and dispute resolution (Hellewell, 1987; Guarnera and Martin, 1992). The valuation of mining assets is considerably more complex than the valuation of conventional industrial assets because mining projects are characterized by geological uncertainty, fluctuating commodity prices, technical risks, environmental obligations, regulatory constraints, and long project lifecycles (Savolainen, 2016; Ali and Rafique, 2024; You, 2025). Consequently, determining the true economic value of a mining property requires a comprehensive assessment of numerous interrelated factors (Kreuzer and Etheridge, 2010; Haque et al, 2014; Patton et al, 2025). Traditionally, three major valuation approaches have been employed in the mining industry: the market approach, the cost approach, and the income approach (Lilford and Minnitt, 2002). The market approach estimates value by comparison with similar transactions and market benchmarks. The cost approach evaluates assets based on replacement or reproduction costs, while the income approach, particularly discounted cash flow (DCF) analysis, determines value according to projected future cash flows (Palm et al, 1987; Hall and Nicholls, 2007; Dias, 2004). Although these methods are widely accepted and extensively applied, they often fail to adequately address the multidimensional nature of mining projects and the uncertainties associated with geological and operational conditions (Miranda and Brandão, 2013; Aminrostamkolaee et al, 2017; Chandra and Hartley, 2024). The mining sector has experienced significant changes in recent decades. Increased volatility in global commodity markets, growing environmental concerns, evolving regulatory frameworks, and heightened investor expectations have intensified the need for more comprehensive valuation methodologies. Decision-makers increasingly require approaches capable of integrating both quantitative and qualitative information to better reflect the actual conditions of mining projects. As a result, multi-criteria evaluation frameworks have gained considerable attention as practical tools for addressing the complexity inherent in mine valuation. In Iran, the valuation of mining usufruct rights is generally conducted through executive regulations, expert assessments, and coefficient-based procedures (Raeesi, 2015). Existing valuation frameworks primarily emphasize technical and operational aspects of mining activities and often rely on predetermined adjustment coefficients. While these methods provide practical guidance, they may not fully capture the effects of economic uncertainty, infrastructure conditions, environmental constraints, legal considerations, and professional judgment. Consequently, there remains a need for a more comprehensive framework capable of integrating all relevant dimensions affecting mining usufruct value (Jalali et al, 2023; You, 2025; Royalties, 2026). The present study aims to develop a multi-criteria framework for the valuation of mining usufruct rights by incorporating expert knowledge and a broad spectrum of technical, economic, environmental, legal, and managerial factors. The proposed model seeks to improve the transparency, consistency, and reliability of mine valuation practices. To evaluate its practical applicability, the framework is applied to the Kouh-Kamar Copper Mine as a representative case study.
Materials and Methods

This research is an applied study conducted using a descriptive-analytical approach. The methodology consisted of several sequential stages. Initially, an extensive review of scientific literature, valuation standards, mining regulations, expert reports, and previous studies related to mine appraisal was carried out. This review facilitated the identification of factors potentially influencing the valuation of mining usufruct rights. Following the literature review, a preliminary list of criteria and sub-criteria was prepared. The identified factors were subsequently evaluated and refined through consultation with specialists possessing substantial expertise in mining engineering, mineral economics, mine management, valuation, and legal assessment. This process enabled the develop0ment of a conceptual framework encompassing the most relevant variables affecting mine value. The statistical population included mining experts, official valuation specialists, university academics, consultants, and professionals actively involved in mine assessment and economic evaluation. Forty-nine experts participated in the study and provided their opinions regarding the relative importance of the identified criteria. Data collection was conducted through a structured questionnaire based on a five-point Likert scale. Respondents were asked to evaluate the significance of each criterion and sub-criterion in determining mining usufruct value. The questionnaire was designed to capture expert perceptions regarding geological, technical, economic, legal, environmental, and managerial aspects of mine valuation. The collected data were analyzed using SPSS software. Descriptive statistical indicators, including mean, median, mode, and standard deviation, were calculated to determine the relative importance of the identified factors. Based on the statistical analysis and expert evaluations, the final framework was organized into nine principal criteria and forty-four sub-criteria. The principal criteria included geological characteristics and reserve conditions, economic indicators, technical and productivity factors, engineering judgment and professional experience, infrastructure conditions, risks and uncertainties, operational and legal history, environmental considerations, and valuation objectives. Together, these criteria represent a comprehensive set of variables influencing the economic value of mining rights. To assess the applicability of the proposed framework, the Kouh-Kamar Copper Mine was selected as a case study. The mine is located southwest of Shahroud in Semnan Province, Iran, and contains economically significant copper mineralization. Geological information, reserve data, mining plans, operational characteristics, infrastructure conditions, and economic records were collected from official reports, mining licenses, technical documentation, and field observations. The mine is currently exploited through open-pit mining operations and contains both oxide and sulfide copper mineralization. Favorable accessibility, existing infrastructure, and continuous mining activity make it a suitable case for evaluating the effectiveness of the proposed valuation framework.
Results and Discussion
The findings demonstrate that mining usufruct valuation is inherently a multi-dimensional process that requires consideration of numerous interrelated factors. The results obtained from expert evaluations indicate that geological characteristics and reserve conditions constitute the most influential category affecting mine value. Ore grade, reserve quantity, reserve confidence, and geological continuity were identified as the most important sub-criteria within this category. These findings are consistent with the fundamental principles of mineral economics, according to which the economic potential of a mining project is strongly dependent on the quantity and quality of its mineral resources. Deposits characterized by larger reserves, higher grades, and greater geological confidence generally exhibit lower investment risk and higher economic attractiveness. Economic indicators emerged as another highly influential group of criteria. Market conditions, production costs, profitability potential, commodity price trends, and macroeconomic stability were recognized as critical determinants of mine value. The results highlight the importance of incorporating broader economic considerations into valuation procedures rather than relying exclusively on geological and technical information. Technical and productivity-related factors also received substantial importance. Elements such as mining method, stripping ratio, operational efficiency, production planning, equipment utilization, and technological capability directly influence production costs and long-term profitability. Consequently, these factors play a significant role in determining the overall value of mining usufruct rights. One of the notable findings of the study is the importance of engineering judgment and professional experience. While quantitative methods provide valuable analytical support, expert knowledge remains essential for interpreting geological uncertainty, operational complexity, and project-specific conditions. The results indicate that experienced professionals contribute significantly to the reliability of valuation outcomes, particularly in situations where available information is incomplete or uncertain. Risk and uncertainty factors were also identified as major contributors to valuation decisions. Geological uncertainty, grade variability, technical challenges, financial risks, regulatory changes, and market fluctuations all influence the expected economic performance of mining projects. The findings emphasize that valuation
frameworks should explicitly account for uncertainty in order to provide realistic and defensible estimates of mine value. Infrastructure conditions represent another important component of the valuation process. Accessibility, transportation networks, availability of water and electricity, communication facilities, and proximity to processing plants can substantially influence operating costs and project feasibility. Mines benefiting from well-developed infrastructure generally demonstrate improved economic performance and lower operational risks. Environmental and legal considerations were also incorporated into the proposed framework. Although these factors received relatively lower rankings compared with geological and economic criteria, they remain significant because environmental liabilities, regulatory compliance requirements, and legal constraints may directly affect project sustainability and profitability. Increasing attention to environmental governance in the mining industry further reinforces the need to incorporate these dimensions into valuation methodologies. Comparison of the proposed framework with traditional valuation approaches reveals several advantages. Conventional procedures often focus on a limited set of technical and economic variables and may overlook qualitative factors affecting project performance. In contrast, the proposed model provides a structured mechanism for integrating quantitative information with expert judgment and contextual considerations. This comprehensive perspective contributes to a more balanced and realistic assessment of mining usufruct value. Another important advantage of the framework is its flexibility. The model can be applied under various data availability conditions and is therefore suitable not only for producing mines but also for exploration-stage and development-stage projects. Furthermore, the framework can support legal valuation assignments, governmental assessments, privatization procedures, and investment analyses where conventional financial data may be incomplete. Application of the framework to the Kouh-Kamar Copper Mine confirmed its practical effectiveness. The mine exhibits several positive characteristics, including substantial reserves, favorable mineral grades, active mining operations, multiple extraction zones, and adequate infrastructure. These features contribute positively to the overall value of the mining usufruct rights. The case study also demonstrated the ability of the model to systematically integrate geological, technical, economic, environmental, and legal information into a unified valuation process. From a managerial perspective, the framework offers a transparent basis for decision-making and may contribute to improved governance of mineral resources. Regulatory agencies, investors, mining companies, financial institutions, and valuation professionals can utilize the model to enhance consistency and reduce subjectivity in valuation procedures.
Conclusion
The results of this study demonstrate that the valuation of mining usufruct rights requires a comprehensive and multidimensional approach capable of incorporating geological, economic, technical, environmental, legal, and managerial considerations. Traditional valuation methods, while useful, may not adequately capture the complexity and uncertainty associated with modern mining projects. The proposed multi-criteria framework provides a systematic methodology for integrating diverse valuation factors into a coherent assessment model. The findings indicate that geological characteristics and economic indicators are the most influential determinants of mine value, while technical performance, infrastructure conditions, risk factors, environmental issues, legal considerations, and professional judgment also play important roles. Application of the framework to the Kouh-Kamar Copper Mine confirmed its practical applicability and demonstrated its capacity to generate a comprehensive evaluation of mining usufruct rights. By incorporating both quantitative and qualitative information, the model contributes to greater transparency, consistency, and reliability in valuation practices. The framework may support a wide range of applications, including investment decision-making, mine transactions, privatization processes, royalty assessments, taxation, financing activities, and dispute resolution. Furthermore, its structured approach can facilitate communication among stakeholders and improve confidence in valuation outcomes. Future research may focus on integrating advanced multi-criteria decision-making techniques, fuzzy logic approaches, probabilistic modeling, and uncertainty analysis into the proposed framework. Application of the model to different metallic and non-metallic deposits may also provide valuable insights regarding its adaptability and robustness under varying geological and economic conditions.
Overall, the integration of expert knowledge with multi-criteria evaluation principles represents a promising direction for improving mine valuation methodologies and supporting more effective management of mineral resources.
Keywords
Mining concession rights
Mining valuation
Economic analysis
Multi-Criteria Decision Making
Expert opinions
Subjects
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