Mining Fleet Fair Value.

Our client, North American Construction Group (NACG), is a large mining services contractor located in Canada and listed on the Toronto and New York Stock Exchanges. NACG recently acquired the Australian based MacKellar Group. Post-acquisition, NACG required a fair value appraisal conforming to GAAP and IFRS standards.

Challenge
The challenge for Insight Valuations (Insight) was to determine the value of the extensive mining fleet on a market derived, going concern valuation basis. This opinion required further consideration of the acquired businesses extensive coal related operations, a perceived coal discount to enterprises within this market and the influence of the fair and reasonable consideration of the transaction.

Actions
To complete the assignment, Insight needed to review the fleet and business against its operating circumstances, current market conditions and to consider valuation metrics of its peers, including return on capital and cost of capital adjusted for coal exposure.

Results
Insight was able to establish the existence of economic obsolescence applicable to the tangible machinery within the going concern principally through the effect on the market of the coal focussed businesses operations.

We were able to quantify the extent of economic obsolescence by understanding the delta between fair value for a diversified commodity extraction fleet and a highest and best use judgement influenced by open market prices for individual asset types.

Insight was then able to provide confidence to the International PPA team and subsequent company auditors by producing a supportive valuation model that mapped all critical inputs to the valuation opinion.

Highlights

• Our expertise in production mining assets and value modelling provided a timely and accurate opinion.
• Our flexibility in considering economic obsolescence as it relates to the coal industry bridged the evident gap in consideration and non-coal fleet value.
• Our ability to work with a multinational team to jointly produce a complex solution for the client that also passed auditor critique.