ISE - service is our business

ISE way of working

We obtain our metal prices from a few hundred individual sources in order to determine a representative average price for our customers. Our sources include large suppliers, dealers, other information platforms as well as a large number of companies from mining operations to end customers. We determine the prices of highly specific metals using a simplified capital value-oriented process.

In the course of our existence, which has lasted for over ten years, a very extensive, organically grown network has formed. Our contacts to mine operators, dealers, importers, exporters, refiners, manufacturing industries, banks, end customers and other price information services ensure our customers a representative average price of their goods. Even for goods from very narrow markets, we have been able to record a few dozen indicators over the years.

All of our sources have our promise of absolute anonymity so that we do not interfere in the market.

Due to our years of experience in the international business, we work principally and without exception only after written order confirmation and advance payment.

You have a permanent contact person throughout the processing of your order.

Valuations and audits should usually be confirmed by banks, auditors, lawyers or clients as part of a due diligence process. This is always met with the utmost care, speed and secrecy.

Short: The Institute of Rare Earths and Metals is the partner you can rely on 100%.

Principles and methodology for price determination

Value and price are often used interchangeably in everyday language, but they are different in business. While the price represents the exchange value of a specific exchange between market participants, measured in monetary units, the value is understood to be the aggregated asking price of a group of market participants or a decision value. The price is an objective variable that can be observed on the market, while the value is initially subjective and an objective value can only be derived through a so-called “typification”.

Deviations between price and value are possible and usual, because "the price of a thing does not have to correspond to its value". The element of the estimate plays an essential role. A value is not a mathematically precisely determinable quantity. In this way, different experts will usually come to different results.

Market-oriented pricing is based both on the prices of competing companies and on the behavior of consumers. It usually has the goal of maximizing profits.

IFRS 13 - Fair Value Principle

IFRS 13 defines the fair value, represents the measurement of the fair value and explains the disclosure requirements.

IFRS 13 defines fair value as the price that would be received to sell an asset or pay to transfer a liability in a regular transaction between market participants on the valuation date. The valuation assumes that the transaction takes place on the primary market, i.e. the market with the largest volume and the largest number of market activities for the asset. If this is not available, the most advantageous market must be used for the design. This is understood to mean a market in which, taking into account the transaction and transport costs, the sales price for an asset would maximize or the transfer amount for a debt would minimize.

The valuation should primarily be based on the observable market prices for identical assets and liabilities. If these are not available, a three-level hierarchy is to be used:

Level 1 are price quotes on active markets for identical metals, at which the metal is quoted on the measurement date. A market price quotation on an active market is the most reliable evidence of fair value and is used wherever possible without making adjustments to fair value measurement, with limited exceptions.

Level 2 are other than the market price quotations mentioned at level 1, which can be observed for the metal either directly or indirectly.

Level 3 are unobservable input factors for the metal. A metal develops unobservable inputs using the best available information in that circumstance, which may include product-specific data. All information about the assumptions made by market participants that are reasonably available must be taken into account.

Methodological basics

For the valuation of metals, we have observed the generally accepted valuation principles. Since there is no generally applicable special valuation method for the valuation of high-purity metals in our specifications, we use a capital value-oriented valuation method that is based on researched market data.

We do not use a cost-oriented procedure due to a lack of relevant information. This results on the one hand from the high degree of specification and from the lack of relevant information regarding cost structures. In addition, as already noted, for fair value the marketing perspective takes precedence over the procurement-oriented perspective.

The assessment procedures

Process based on market prices

In the market price-oriented valuation method, the observable price for the asset or liability to be valued is to be used in an active market. However, the use of current market prices requires an active market that fulfills the following conditions:

• - the products traded on the market are homogeneous;
• - Buyers and sellers willing to contract can usually be found at any time;
• - the prices are available to the public.

In contrast to financial instruments or bulk goods, these requirements are generally not met, particularly with highly specific metals, due to their uniqueness and the lack of availability of information.

In addition, the traded goods are rarely comparable, so adjustments often have to be made to take into account the specific characteristics of the asset to be valued (analogy method).

In our case, the market price-oriented process cannot be used without restrictions, since there is no active market.

Capital value-based procedure

The capital value-oriented method is based on the assumption that the fair value of the valuation object is measured by its ability to generate future cash flows.

Against this background, planning and its premises are an essential part of the assessment and should, as far as possible, be derived from, or at least compared with, publicly available information. This also applies in particular to the assumed life or useful life of the valuation object.

To determine the fair value, the present value of the incoming and outgoing payments of the valuation object is determined. The discount rate used for this takes into account both the time value of money and the specific risk of the payments to be assessed.

With the regularly applied risk premium method, the risk-adjusted capitalization interest rate must be based on a return requirement derived from the capital market as a reference value.

The capital value-oriented method has been used in a simplified form in our valuations.

Cost-oriented procedure

The cost-oriented method determines the fair value of the relevant valuation object by determining the costs necessary for the manufacture, procurement and commissioning of the asset.

In principle, reproduction costs or replacement costs can be used in this process. Reproduction costs include the costs required to produce an exact duplicate of the asset being valued, while replacement costs include the costs of producing a utility-equivalent asset. If necessary, it must be checked to what extent discounts are to be made to take account of technical, physical and / or economic obsolescence.

The historical acquisition or production costs can be an initial indication of value. However, it can regularly be assumed that replacement costs - provided they are observable on the market - represent the upper limit.

As a rule, cost-oriented methods are only used if neither the market price-oriented nor the net present value-oriented method can be used. In our valuations, the production costs are not decisive for the fair value, since the fair value, as a hypothetical sale value, assumes a marketing (“exit”) perspective.