CRM does not provide valuations of your assets. We are not professional appraisers and accordingly cannot provide a fair market value of the fund’s interests upon which you could rely for tax or estate valuation purposes.
As indicated in Treas. Regs. 1.611-2(d) and (e), the determination of fair market value of a mineral interest for federal tax purposes requires the evaluation of numerous factors. An evaluation of these factors generally requires the services of a qualified professional appraiser with access to substantial amounts of market data.
There are, however, analytical methods that can be used for reaching a logical estimate of the value of a mineral interest that may be helpful to you. A commonly used method for estimating value of a mineral interest is the reserve-based method. Under this method, an estimate of the current value of a royalty interest is based on the value of the remaining reserves in the mineral property discounted to present value.
The reserves for the properties are identified at the end of each year in a third party reserve report prepared by Netherland, Sewell & Associates, Inc. ("NSAI”), a copy of which can be purchased for a $50 fee. The NSAI report is conducted utilizing SEC rules for the purpose of determining oil, gas, and other product volumes on which the cost depletion calculation is based.
The reserve report is not a "market value appraisal" and relies on many parameters and assumptions as reported in the NSAI letter, which may not be representative of current market conditions. The reserve report indicates the remaining estimated proved, probable and possible reserves in the properties, and an estimated value can then be calculated using a present value discount rate of 10%.
This result, multiplied by the % interest in the royalty interests owned by the investor, could provide a reserve method value for the royalty interest. Since interests in our funds are not frequently traded, it is difficult to provide a comparative valuation.