Module II· Multiples & Sector SpecificsIntermediate
Question
How do you use EV/Reserves or EV/Production in mining and energy valuations?
Answer
Mechanics
EV/Reserves measures the value per proven reserve unit (ton of coal, barrel of oil, cubic foot of gas).
Logic
Value comes from the asset base, not from the current production margin.
Application
- Oil & gas: EV/2P reserves.
- Mining: EV/resource tons.
- Forestry: EV/hectare.
EV/Production
value per unit produced per year, useful for mature assets with no further reserve expansion. Oil & gas example: typically $30k–80k per barrel of production per day.
Reserve classification
1P proven, 2P proven+probable, 3P plus possible. Lower categories mean a lower multiple.
Deep diveShow more details
Pitch tip
For mining / O&G valuations, use NAV (net asset value) as the primary method and EV/Reserves as a sanity check — a DCF-based NAV is the clean method for resource-extractive businesses.