In the mining sector, valuation multiples are an essential part of the corporate finance toolkit—widely used in M&A to benchmark asset values, guide pricing negotiations and cross-check intrinsic valuation methods such as discounted cash flows (DCF). In Namibia, where the majority of mining M&A involves  exploration-stage assets, valuation multiples are prevalent. Yet despite their utility, valuation multiples have notable  limitations – particularly when applied to companies or projects with diversified mining assets profiles.

A recent valuation exercise involving a large, multi-asset gold project in South Africa highlights the challenges of applying multiples to complex mining assets, and offers relevant insight for the Namibian market. This analysis illustrates how conventional multiples can yield distorted results for projects with significant resource bases but minimal production. It further demonstrates that stage-based segmentation — splitting assets by their development maturity — can produce more accurate and defensible valuation outcomes.

1. Multiples as Market Anchors in Mining M&A

In practice, mining M&A transactions rarely rely on DCF alone.  Valuation Multiples serve as market-based sanity checks – used to  assess whether a  transaction price falls within a reasonable range relative to comparable public companies or past transactions. The most common Enterprise Value (EV) multiples include:

These multiple are widely used in both M&A and equity financing. Each captures a distinct dimension of value: in-ground potential, de-risked deliverability, and actual cash flow generation, respectively. They are not interchangeable. Applying the wrong multiple — or using several of them without proper context — can lead to materially misleading valuations.

1. When a large resource meets low production: One Project, USD 3 Billion Valuation Spread

The recent valuation of a South African gold project highlights how applying a uniform set of valuation multiples to multi-asset operation can produce extreme valuation dispersion.

The project was comprised of multiple underlying operations at different stages of development. Consequently, the project’s profile is notably unbalanced:

• 19.61 million ounces (Moz) of Measured & Indicated (M&I) resources
• 7.96 Moz of Proven & Probable (P&P) reserves
• Yet, annual production of just 30,000 ounces

To put this imbalance in context:

• Evolution Mining, with a comparable M&I resource of 23.4 Moz and P&P of 11.4 Moz, produces 700,000 oz per year—over 23x more than this project.
• In contrast, Shanta Gold and Ten SixtyFour produce 80,000–90,000 ounces annually, but have below 3 Moz in resources — far smaller than the project in question.

After applying median multiples from eight listed gold producers with operations across Africa, the project’s enterprise value ranged from:

The result is a USD 3.44 billion valuation spread from USD 47.75 million (on a production basis) to USD 3.49 billion (on a resource basis) — which sits in contrast to the USD 900 million market capitalization attributed to the diversified parent company of this project.

Importantly, this disparity is not due to flawed methodology, but rather to the project’s unusual profile: a large in-ground resource with relatively minimal production. It illustrates how applying standard multiples without adjusting for asset stage can lead to valuation signals that diverge significantly.

• Why This Happens: Multiples Reflect Asset Stage

Production multiples (e.g., EV/Production) inherently reward near-term cash flows. High-resource, low-production assets are penalized for their lower production — even if their latent geological value is significant.

Conversely, resource multiples (e.g., EV/Resource) reward scale and geological potential, but often ignore the real-world frictions of CAPEX, permitting, and other factors required to achieve production.

This dichotomy becomes problematic when both asset types are bundled into one project or company. Applying both types of multiples to a project that straddles these profiles leads to conflicting signals.

• Segmentation: A Better Path to Valuation Clarity

To resolve this, we seperated the project into two logical entities:

• A Producing Entity – assets that are in production or near-term (2.94 Moz M&I, 1.5 Moz P&P, 30,000 oz/year); and
• An Exploration Entity – assets without defined production plans (16.67 Moz M&I, 6.46 Moz P&P, zero (0) production)

Thereafter, we developed a new set of comparable companies for each entity and derived new median multiples for each. We then applied stage-appropriate multiples:

• For the Producing Entity, all three multiples (EV/Resource, EV/Reserve, EV/Production) were relevant.
• For the Exploration Entity, only EV/Resource and EV/Reserve were appropriate. Production multiples were excluded.

Applying stage-appropriate multiples to each entity and aggregating the results produced a narrower and more defensible valuation:

The above approach dropped the valuation ranges between multiples from over USD 3 billion to just under USD 300 million. Notably, this segmented approach aligned more closely with a DCF-based valuation of the assets, which estimated a present value of USD 331 million – excluding upfront capital expenditures.

(The prevailing valuation spread was driven by the relatively low annual production of the Producing Entity compared to its peers – Shanta Gold has 3x the annual production on a similarly sized resource and Ten SixtyFour has 2.6x the annual production on less than half the resource.)

5. Lessons for M&A Practitioners and Boards

5.1 Stage-Based Segmentation Is Best Practice.
Especially in multi-asset companies, production-stage assets and exploration-stage deposits should be valued using distinct peer groups and multiples.

5.2 Multiples do not derive Value, But They Benchmark It
Use multiples as a market cross-check to triangulate DCF-derived valuations and support defensible pricing arguments in transaction negotiations.

5.3 Multiples must be context-specific.
Don’t apply EV/Production to non-producing ounces/tonnes, or EV/Resource to cash-flowing assets without considering cost structure and marketability.

5.4 Production-Weighted Multiples Overlook Geological Potential
In early-stage projects with large geological footprints but limited output, resource-based multiples offer a better reflection of latent value.

5.5 Understand market signaling.
A wide spread in valuation across different multiples is not a flaw—it’s a signal. It means the asset straddles market categories, and the buyer must choose which lens to prioritize.