Introduction to Natural Resources

What you will learn to do: Account for natural resources

Resources supplied by nature, such as ore deposits, mineral deposits, oil reserves, gas deposits, and timber stands, are natural resources or wasting assets. Natural resources represent inventories of raw materials that can be consumed (exhausted) through extraction or removal from their natural setting (e.g. removing oil from the ground).

Take a look at Note 9 of the Albemarle Corporation (ALB:NYSE) financials for the fiscal year ended December 31, 2019, from page 72 of the SEC form 10-K:

NOTE 9 – Property, Plant and Equipment:
     Property, plant and equipment, at cost, consist of the following at December 31, 2019 and 2018 (in thousands):
Useful Lives (Years) December 31,
Description 2019 2018
Land $     116,728 $     123,518
Land imporvements 10-30 83,256 63,349
Building and improvements 10-50 337,728 251,980
Machinery and equipment(a) 2-45 3,355,518 2,780,478
Mineral rights and reserves 7-60 1,764,067 696,033
Construction in progress 1,160,545 883,705
Total Single line
$     6,817,843
Double line
Single line
$     4,799,063
Double line
(a) Consists primarily of (1) short-lived production equipment components, office and building equipment and other equipment with estimated lives ranging 2-7 years, (2) production process equipment (intermediate components) with estimated lives ranging 8-19 years, (3) production process equipment (major unit components) with estimated lives ranging from 20-29 years, and (4) production process equipment (infrastructure and other) with estimated lives ranging 30-45 years.
The cost of property, plant and equipment is depreciated generally by the straight-line method. Depletion of mineral rights is based on the units-of-production method. Depreciation expense, including depletion, amounted to $183.3 million, $170.0 million and $169.5 million during the years ended December 39, 2019, 2018 and 2017, respectively. Interest capitalized on significant capital projects in 2019. 2018, and 2017 was $30.2 million, $19.3 million and $7.4 million, respectively.


Notice a couple of things:

  1. You are already familiar with land, land improvements, buildings, equipment, and construction in progress.
  2. There is a new item: mineral rights and reserves (depletable assets).
  3. In the text of the note, the company mentions straight-line depreciation, with which you are familiar.
  4. Also in the text of the note, the company mentions depletion using the units-of-production method.

Albemarle Corporation develops, manufactures, and markets a wide variety of chemicals and reports operations based on three segments: Lithium, Bromine Specialties, and Catalysts. The company is based in North Carolina but operates research and development facilities around the world. The mineral rights they refer to include things like lithium brine ponds in places like Salar de Atacama, Chile, and Silver Peak, Nevada, USA, and bromine brine in Arkansas and the Dead Sea.