CMA CMA Due Diligence & Risk Assessment 1

Question 1

Which category of risk specifically refers to the possibility that actual production from a mineral property falls short of reserve estimates?

Accepted Answer

Reservoir risk

Answer

Commodity price risk

Answer

Regulatory risk

Answer

Title risk

Question 2

During due diligence on a mineral acquisition, what is the primary purpose of reviewing a 'chain of title'?

Accepted Answer

To confirm the seller has clear, unencumbered ownership of the mineral interest being conveyed

Answer

To verify production history matches operator-reported volumes

Answer

To ensure environmental permits are current

Answer

To confirm the lease bonus was properly paid at execution

Question 3

What does a 'title opinion' from an attorney provide in a mineral acquisition due diligence process?

Accepted Answer

A legal professional's assessment of ownership validity and identification of any title defects or encumbrances

Answer

A financial opinion on the fair market value of the mineral interest

Answer

A geological opinion on the quality of the mineral deposit

Answer

An environmental assessment of contamination risk

Question 4

In mineral due diligence, what is the significance of a 'lis pendens' filing on a property?

Accepted Answer

It indicates active litigation involving the property that could affect title or ownership

Answer

It signifies that a lien has been placed by a creditor on mineral production

Answer

It confirms the property has been certified as productive by a state agency

Answer

It shows the property is subject to a pending lease renewal

Question 5

Which type of insurance is commonly obtained in mineral acquisitions to protect the buyer against pre-existing but undiscovered title defects?

Accepted Answer

Title insurance

Answer

Production insurance

Answer

Environmental liability insurance

Answer

Errors and omissions insurance

Question 6

When assessing commodity price risk during mineral appraisal, which analytical tool best helps quantify the impact of price volatility on value?

Accepted Answer

Sensitivity analysis or Monte Carlo simulation

Answer

Comparable sales regression analysis

Answer

Historical cost recovery analysis

Answer

Net present value at a single price scenario