CLASSIFICATION AND VALUATION
OF MINERAL AND ENERGY
RESOURCES IN NATIONAL
ACCOUNTS’ BALANCE SHEETS
Advisory Expert Group on National Accounts
Paris, France, April 13 – 15, 2016
Pierre-Alain Pionnier
National Accounts Division
OECD
Introduction
• The SEEA 2012 was adopted as an international
statistical standard by the UNSC in March 2012
• SEEA provide a link between national accounts and
environmental statistics
• SEEA wants to ensure, to the extent possible,
consistency with the 2008 SNA
• Focus of this presentation on mineral and energy
resources
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Current treatment in the 2008 SNA
• Two conditions for defining economic assets (see §3.18 to §3.49):
– be owned by an institutional unit, and
– provide economic benefits to their owner.
• However, the 2008 SNA adds a specific criterion for mineral and
energy resources (see §10.179):
– resources are “economically exploitable given current
technology and relative prices”
• We argue that this treatment:
– is imprecise and prone to diverging interpretations by countries
– is not fully consistent with SEEA 2012
– lacks economic justification
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A clearer identification of mineral and
energy resources in the 2008 SNA (1/5)
• Convergence between the main classification systems for mineral
and energy resources is now well advanced
• Overarching classification relevant for all types of mineral and
energy resources, which can be mapped with the main other
classification systems: United Nations Framework Classification2009 (UNFC-2009)
• General principle of the UNFC-2009: classification follows three
dimensions: socio-economic viability, project feasibility and
geological knowledge.
• SEEA 2012 already makes reference to UNFC-2009, and defines
three classes of resources, covering all known resources:
– Class A: Commercially recoverable resources
– Class B: Potentially commercially recoverable resources
– Class C: Non-commercial and other known deposits
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A clearer identification of mineral and
energy resources in the 2008 SNA (2/5)
• Contrary to the SEEA 2012, the 2008 SNA does not
make reference to any internationally-agreed
classification of mineral and energy resources
• As a consequence, the delineation of mineral and
energy resources in the 2008 SNA is prone to diverging
interpretations by countries
• See Australian and Canadian examples, for which we
use the UNFC-2009 and the SEEA-2012 classes in
order to identify which resources are covered in national
accounts’ balance sheets
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A clearer identification of mineral and
energy resources in the 2008 SNA (3/5)
Coverage of mineral and energy resources in the Australian balance sheets
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A clearer identification of mineral and
energy resources in the 2008 SNA (4/5)
Coverage of mineral and energy resources in the Canadian balance sheets
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A clearer identification of mineral and
energy resources in the 2008 SNA (5/5)
• Recommendation #1: The 2008 SNA should explicitly
refer to the SEEA 2012 and rely on the same three
resource classes, based on the UNFC-2009, in order to
delineate mineral and energy resources
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Which resource classes to include in
national accounts’ balance sheets? (1/3)
• Economic point of view: It makes perfect sense to attribute a nonzero value to deposits that are not economically viable under current
resource prices, e.g. if price volatility is high enough to make future
extraction profitable with a positive probability
• Practical point of view:
– Problems related to valuation of deposits that are currently nonprofitable => not a reason to exclude them as a matter of
principle
– Currently non-profitable deposits may have a significant value on
the market => should be an incentive to improve valuation
techniques.
– At a minimum, the same position could apply for these deposits
as for goodwill and marketing assets in the 2008 SNA, i.e.
provide the possibility to include them in the balance sheets as
soon as reliable information on their value exists (e.g. evidence
provided by sales/purchases of deposits)
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Which resource classes to include in
national accounts’ balance sheets? (2/3)
• The SEEA 2012 already allows to include all three classes of
mineral and energy resources, i.e. all known resources, in the
monetary asset accounts, contrary to the 2008 SNA
• The SEEA 2012 only recommends to keep separate accounts for
these three classes:
– because valuation is more uncertain for Classes B and C
– because Classes B and C are not available for immediate
extraction
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Which resource classes to include in
national accounts’ balance sheets? (3/3)
• Recommendation #2: The 2008 SNA should allow to
include the three classes of mineral and energy
resources in national accounts’ balance sheets when
reliable information on their value exists, with the
additional requirement (also found in the SEEA 2012)
that separate accounts for the different classes are
distinguished
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Valuation of mineral and energy
resources in balance sheets (1/5)
• Very limited guidance in the 2008 SNA, even for deposits
that are profitable under current conditions
• Both the 2008 SNA and the SEEA 2012 recommend to rely
on Net Present Value (NPV) computations
• SEEA 2012, chapter 5, provides more guidance on how
monetary accounts relate to physical accounts, how to
compute resource rents based on national accounts’
aggregates, and how to choose discount rates for the
computation of NPVs
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Valuation of mineral and energy
resources in balance sheets (2/5)
• The OECD Task Force on SEEA Implementation recently
worked on 4 additional issues:
– the valuation of currently non-profitable deposits
– the impact of ore-reserve and extraction cost heterogeneity on
valuation calculations
– the distortions resulting from the constraints imposed on mineral
production by associated capital
– the volatility in the value of mineral assets introduced by short-run
price fluctuations
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Valuation of mineral and energy
resources in balance sheets (3/5)
• Heterogeneity of extraction costs across deposits:
– Identified as an important issue for valuation by the OECD Task
Force
– As working at the mine (i.e. establishment) level is the best way
to take this heterogeneity into consideration, the possibility to do
so in practice is currently being explored with national statistical
offices
– According to the mining engineering literature, output at the mine
level remains broadly constant due to constraints imposed by
initial investments in fixed capital, thus simplifying NPV
computations
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Valuation of mineral and energy
resources in balance sheets (4/5)
• Volatility of commodity prices:
– In the financial literature, assets are commonly valued taking into
account not only the expectation of future revenues, including
their statistical distribution
– Could also be applied for the valuation of currently non-profitable
deposits, thus eliminating the part of the volatility in balance
sheets related to the switch of assets from currently nonprofitable to currently profitable, and vice-versa
– Trying to implement such valuation techniques is not being
considered as a priority, because it would require high quality
data on how mining revenues, investments and extraction costs
are determined at the micro level
– In the short run, using long-term averages of resource prices
seems to be the easiest way forward to tackle the volatility issue
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Valuation of mineral and energy
resources in balance sheets (5/5)
• Recommendation #3: When it comes to the computation
of net present values of mineral and energy deposits, the
2008 SNA should refer to the SEEA 2012, thereby
underlining that the aim of the SNA (and the SEEA) is to
compute market values, not social values, of mineral and
energy deposits, and emphasising issues to which
national accountants should pay particular attention:
– sensitivity of final results to the choice of the discount rate
– heterogeneity of extraction costs across deposits
– constraints imposed on mineral production at the micro level by
initial investments in physical capital
– volatility in the value of mineral assets introduced by short-run
price fluctuations of commodity prices
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Thank you for your attention!
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