246 VALUATION, DEPRECIATION AND THE RATE-BASE
adjacent developed properties, recent sales of same, determina-
tion of the ‘“ normal” price of the mineral, recent sales of
metal or of ore at the property, determination of the proper
rate of interest to be used as a basis for capitalization, and the
like.
The rate of production that is properly brought under consider-
ation must be determined from consideration of the fact that
the operating costs per ton decrease as the capacity increases,
while the fixed charges increase when the cost of the installation
is increased. It may be found that the rate of production
actually in use is not that which brings out the full value of the
property and an assumption of a proper rate should be made in
determining the profits that can be expected. In the case of cer-
tain minerals having a limited market, the output is controlled
by market conditions which must be considered in determining
the rate of production.
Valuations for Owner’s Information. — Valuations made for
the purpose of informing the owner as to the condition of the
property, although made in a similar way to those for purchase
and sale purposes, may be limited by the special purpose for
which they are required.
During the operation of a property it may be desirable to
determine from time to time the present value of the property,
taking into account the new underground developments, im-
proved methods of ore treatment and changed market condi-
tions. A desire on the part of the owner to ascertain on what
basis he might, with advantage to himself, join in coSperative
operations with adjacent properties, may lead to a valuation.
This often occurs in the case of oil lands in small holdings that
for reasons of economy can only market their product by co-
operative means. The rental of coal lands and other deposits
that contain large mineral bodies to other operators requires a
determination of the “ royalty ” that should be charged and this
should be based on an actual valuation and not on the average
royalty in current use in the district although this value may
be used for a check.
